May I ask for your assistance, Mr. Grant-Ferris? I wish to address the Committee on the subject of the word "resident" which occurs several times in the Clause, and particularly in connection with this Amendment. I do not know whether I should be in order in doing so now or whether I should be better advised to wait till the Question, That the Clause stand part of the Bill.
I beg to move Amendment No. 125, in page 14, line 40, to leave out from "acquired" to the first "for" in line 41.
This is designed to improve the wording of the Clause, and, as it is a little more than a drafting Amendment, perhaps I should explain it briefly. The purpose of subsection (2,b) is to impose a charge on gains realised on the disposal of assets situated in the United Kingdom and used or held for the purposes of the branch or agency or assets acquired for use by or for the purposes of the branch or agency.
As it stands, paragraph (b) relates only to assets
acquired by the principal of the branch or agency".
On reconsideration, it is thought that these words ought to be excluded because it is not really relevant whether the assets are acquired by the principal of the branch, who may well be no more than an employee of the overseas person, or by the principal of the agency. What matters is that the assets were held and used for the purposes of the branch or agency or were acquired for that purpose. It is not relevant or material by whom they were acquired. The Amendment will achieve this result.
I beg to move, Amendment No. 43, in page 15, line 8, to leave out "thirty" and to insert "twenty-five".
This Amendment concerns a difference of 5 per cent. It is a case of the amount of the Capital Gains Tax which might be reasonable. We are not discussing the tax itself, for which we in the Liberal Party have always stated that there was a very strong case in equity as between managerial staffs getting high salaries and being taxed to the full and the shareholders who in many cases have been untaxed on very large gains. There is, as I have said, a good case for the tax itself, but we feel that the rate is all important. After all, a diet is very good for one and moderation is an excellent thing, as the Committee can see by looking at me.
If the Government found it necessary to impose a 30 per cent. tax as against the suggested 25 per cent. tax and to use the extra 5 per cent. to pay the agricultural subsidies, would the hon. Gentleman be in favour of the rate of 30 per cent. then?
That argument has not been put forward by the Government. Their case is that of equity in taxation in order to help towards the creation of an incomes policy. I do not think that agricultural subsidies enter into this.
The other essential thing—and I hope the Government wish to stimulate it—is a vigorous economy. For this, it is essential that the rate be set at a figure which will secure the co-operation of industrialists and of others in business, whether they be investors or owner-managers. As the Chancellor can see in the Press and by statements in this Committee on both sides, the Finance Bill is failing to do that at the moment. It is vital, however, that an acceptable rate should be set and that is why we suggest 25 per cent. as a much fairer figure than 30 per cent. There are many reasons for this. The Liberal Party, when advocating a Capital Gains Tax, has always allied it with a reduction in personal taxation when the tax started to bite.
I do not think the Government themselves know how much revenue they will gain. What I am concerned with is not the revenue. This tax is not supposed to raise revenue. It is imposed to re-introduce a feeling of cooperation into the economy, and it is because of this that we suggest that the fair figure is 25 per cent.
I have given way several times without seeing subsequently why I should have done so.
I would tax betting. I would tax large winnings. Nevertheless, that point is still not valid and, as far as I know, the Government themselves have not tried to say how much they will gain from Capital Gains Tax. Furthermore, it is not at all sure that a high rate of tax would raise more money. Many clever people look for ways around unfair taxes and, in the main, are successful, as witness the amount of legislation we are continually introducing in order to circumvent the efforts of hundreds of thousands trying to do down the Revenue.
It is high time that we had taxes which people can pay and feel proud of paying, introducing an element of respectability in paying taxes instead of putting them so high that it becomes a matter a doubt in people's minds as to whether it makes sense. But I have been led off the point. I had a serious argument before I was interrupted.
The Government are taxing an element of inflation in taxing capital gains. Between this country and the United States there is a considerable difference in the amount of inflation. Here, under both Tories and Labour, it has been running at about 4 per cent. per annum. There is no Government advice and nothing in the Bill which allows for this element of inflation. When considering the rate of taxation that one should set in a new system, one should look at practical examples in other countries which are using the Capital Gains Tax to collect money for social purposes. In this case there are plenty of examples, and one must tie them to the amount of personal taxation in those countries.
It is interesting to take the most vigorous and successful capitalist or free enterprise economies, which far outweigh the Socialist ones. Britain is proposing the Capital Gains Tax as a flat rate of 30 per cent. with the top rate of personal Income Tax at 91¼ per cent. on very large incomes. In the United States the Capital Gains Tax top rate is 25 per cent. as against 77 per cent. top rate Income Tax on personal incomes of over 300,000 dollars.
Japan has had a phenomenal rate of growth. Half of the capital gain is taxed as income, which comes to a great deal less than 30 per cent., and the top rate of personal Income Tax is 75 per cent. In West Germany—frequently held up as an example of the sort of expansion we require—only substantial interests are taxed and the rate is at half the income rate with a maximum of 30 per cent. The top rate of personal Income Tax is 53 per cent.
There are other examples. I have quoted examples of vigorous, go-ahead economies which far exceed our rate of growth. That sort of practical example should be considered by the Government when introducing a tax of this character. There are many other factors, and one is the movement of capital around the economy. Let me take a simple example. There are many vigorous people who build up a business, but who, when the business is running at top level, want to move into something else. The rate of Capital Gains Tax is very important to them, for there is a point at which they will not consider it worth taking their money and putting it into some new venture, and yet that is the process which creates new wealth. There are plenty of examples throughout the countries I have mentioned of the vigorous movement of capital which would otherwise be restricted by too high taxes.
I rise to support the Amendments of the hon. Member for Caithness and Sutherland (Mr. George Y. Mackie), although I am inclined to think that his proposed rate is somewhat high. I entirely accept his arguments, but I note that the Amendment in the name of my right hon. Friend the Member for Harrogate (Mr. Ramsden) suggests a rate of 15 per cent. I am not absolutely sure what the right figure should be, but, in order to speed up our consideration of the Bill, I would be prepared to accept a compromise of 20 per cent. if the Government would.
Obviously, the rate proposed in the Bill is too high. I fully agree with the comment of the hon. Member for Caithness and Sutherland, which rather follows something I said earlier, when he spoke of fairness and having a rate which would be relatively acceptable in all circumstances. I am not at all sure that in the long run, going a year or two ahead, the same result would not be achieved if the rate were a good deal lower. A great deal of thought is being given to this matter in the United States where it is thought that the rate may be somewhat too high, but where there are also far more of what we know as disregards. The American authorities do not try to get all the mice in the same trap, which is the peculiar habit of the Treasury under Socialist rule, but recognise that there are many other considerations and that if the rate is fixed at a reasonable figure, people will pay, while not willingly, at least with a reasonable sense of justice, not holding up the economy in the process.
If we are to be progressive and have modernisation and proper growth—and we argue only about the means to the end and not about the need—we have to have mobility of capital in the same way as we need mobility of labour. There must be a willingness to move. This will not happen if the rate of tax is too high. Hon. Members can take it from me that it is considered to be too high. I am always sorry for Treasury Ministers, on whatever side of the Chamber I happen to be sitting. They always have a rotten time because they always have to stick to a brief. The unfortunate part of the arrangement is that the brief is always marked "Reject" before the arguments are heard. That is my feeling after some years of experience.
I hope that that will not be the case on this occasion, because in this Budget so much is being tried out, so much is unknown. As I said earlier, this is because the Government have not given themselves enough time for proper consideration. I hope that there will be more fluidity than is generally experienced on these occasions. It is vitally important in exercises like these that errors should be corrected before too much damage is done, but a great deal of damage can be done to that atmosphere in industry which is required for modernisation and growth.
I cannot think of any tax at this rate—and it is the rate which we are discussing and not the principle—which can do more damage in the sense of making people hang on because of their decision not to pay 30 per cent. when that is regarded as too high a rate. The result is that capital is frozen in pockets all over the place.
Do not let it be imagined that all this is big money. Much financing today comes from relatively small sums. Every company of any size abounds with thousands of small shareholders, and we all know it. Tremendous investment is taking place in unit trusts and investment trusts, all of it going into the capital of industry, There is thus that amount of concern with this proposal and unless we get the Bill changed for this type of investment, great damage will be done.
Fundamentally, the proposal is wrong and we have the right to ask the Government and the country to recognise what is happening and to understand that too high a rate can do nothing but great damage to the economy. I ask for a better answer than merely the "Reject" which the Financial Secretary may have in his hands, and we will excuse him from the Chamber if he is prepared to go and get a better answer.
I am disturbed that when we are dealing with this important factor in our economy we see no sign of the First Secretary or any of the other Economic Ministers in these debates. I do not know what thinking the right hon. Gentleman is doing— perhaps it is "Buster Brown's biggest bluff", but whatever he is thinking about, he ought to be here to listen to our debates and to get the sound the Committee on a subject which will play no mean tune in the country's economy. I make a firm protest that we are ignored day after day and hour after hour by the First Secretary and the other Economic Ministers who ought to be here, because the Bill's proposal will strike a heavy blow at all they presumably stand for. I cannot understand why there should be a conflict in the Cabinet, unless it is that the First Secretary does not understand these things at all. There must be some sense in these proposals if the country is to receive them at all.
I have been disappointed by the irresponsible attitude of the hon. Member for Caithness and Sutherland (Mr. George Y. Mackie). He is a Highland Member and presumably knows that the Highlands of Scotland require more expenditure on roads and schools and the reclamation of land and other aspects of capital development. On every possible occasion he has pressed on the Chancellor of the Exchequer demands for greater expenditure on the Highlands, and then, when the Chancellor comes along with a reasonable proposal for getting the money, expresses his opposition to it.
Precisely, but I am pointing out that we expect some contribution from the Liberal Party.
Yes I quite agree, but I want to know from where the Highlands will get the money. The Chancellor of the Exchequer comes along with a series of proposals for raising money, small enough, and to give the Highlands the things it needs. Yet we get no constructive proposals at all from the Liberal Party except one to reduce the money available for expenditure in the Highlands. When I ask where the money is to come from the hon. Member suggests taxing betting.
We cannot discuss how the money is to be used. All we can discuss is the actual rate of taxation.
I quite understand. The hon. Member talks about getting money from whisky, and as far as I can gather the programme of the Liberal Party is more whisky and more betting. There will be consternation and discussion around the blacksmiths' smithies in the Highlands when they see that they want to have money and make no constructive proposals.
Order. We cannot discuss constructive proposals. Hon. Gentlemen must deal with what the rate of tax is to be.
The hon. Gentleman must not use his imagination on this occasion.
The hon. Member for South Ayrshire (Mr. Emrys Hughes) is very worried as to how the Chancellor would have raised this money which would be taken from him if the rate were reduced. The Chancellor is not under an obligation to raise this money. He has already put £400 million extra on taxation. He is budgeting for a very substantial surplus and he is not introducing this tax in order to raise money, but is for other reasons. I support my hon. Friend the Member for Shipley (Mr. Hirst), who said that he was opposed to the high rate of Capital Gains Tax because he was afraid it would lead to evasion. I do not want to breed a race of tax dodgers. I said during the Budget debate that 30 per cent. Capital Gains Tax was a very high rate, far higher than the rest of the world. I said that in my view people would try to find legal ways to avoid it.
Do I understand the hon. Gentleman to be saying that if this tax is imposed at 30 per cent. it will mean business people will become tax dodgers?
I am talking of the individual who is going to suffer this rate and I used "tax dodgers" in the generic sense. Many people will not want to pay 30 per cent. and will find ways and means of avoiding it. Once they have acquired something they will make sure they do not sell it in the first year when they will have to pay a very high rate of taxation. There are many other ways by which they can avoid the tax. For instance, they could attach a tangible movable object to an historic vintage car, to a mechanically-propelled vehicle for the carriage of passengers. If one had a beautiful pair of lamps and wanted to sell them, all one would have to do would be to attach them to a mechanically-propelled road vehicle constructed or adapted for the carriage of passengers and presumably one could avoid the tax.
The American rate is said to be 25 per cent. But the American citizen does not reach that rate until his income is at least 40,000 dollars a year. The average family man in America earning 5,000 to 10,000 dollars a year pays Capital Gains Tax at the rate of 7 per cent. or 8 per cent. In Sweden, as my right hon. and learned Friend the Member for Chertsey (Sir L. Heald) will explain a little later, there is a reducing Capital Gains Tax. Here we have a solid 30 per cent. going on year after year, starting in the first year at the very high rate of personal taxation.
People are going to try to find ways to mitigate the full effects of the tax on tangible moveable objects. If they have a set of silver they will try to break it up before selling it. They may not be able to do it with furniture, but this is going to be ordinary cocktail conversation: "I have got some beautiful pieces of silver upon which I do not want to pay the full rate. How can I get out of doing so?" This high rate of taxation will prevent the small man from accumulating capital. If he buys something he will not sell it, certainly, during the first year of acquisition. It is all very well to say that we shall never have another Lord Nuffield again. That is so and I am not talking of big capitalists but of the small man who is not now going to turn over his capital at a quick rate. This rate of 30 per cent. is too high. We could come down much more, to the American scale, starting at 25 per cent. at the top rate and going down according to one's earnings. If we do not do this I am afraid the tax will be a real disincentive to the small man to make small profits from which he can accumulate capital year after year.
I have heard reports that there may be some valuable concessions during the next few days and I would have thought this was an opportunity for the Government to make most useful and valuable concessions. The Amendment moved effectively and clearly by the right hon. Gentleman the Member for Caithness and Sutherland (Mr. George Y. Mackie) merely calls for a fairly reasonable reduction in the rate. I should have thought this would be attractive not only to the Financial Secretary but to Ministers in general. This is a new tax and we can all derive some idea of how it may operate from the fact that there are similar taxes in other countries. In the United Kingdom this is an entirely new form of impost and it would seem reasonable when embarking upon a new tax of this kind to start cautiously.
I doubt whether the Financial Secretary, or indeed the Chancellor of the Exchequer, can possibly forecast the ultimate effect of this kind of tax on our economy in the years ahead. It would seem that while there is a measure of agreement that we should tax capital as well as income in some form, that measure of agreement only extends on this side of the Committee, in so far as we feel this may be a fair tax, a tax which is reliable in its incidence and a tax which will have no permanent and deeply injurious effects upon the British public.
If the Government really believe that this is not merely a window dressing tax but something which will make a positive contribution to the effectiveness of our general taxation system, surely it would be far better if it were to start at a relatively low level. Like others, I should have preferred the first experiment with this tax to be at an even lower figure than the one which the Amendment proposes. Nevertheless, I hope that all of my hon. Friends and some hon. Members opposite will feel able to accept and support the Amendment.
Although the Financial Secretary may not credit it, there is a great deal of anxiety about the impact of this tax. If he is doubtful about this, I can tell him that I have discovered this anxiety in my constituency, not in the minds of the directors of large companies—
Or the miners.
—but in the mind, for example, of a small shopkeeper who supported the Labour Party at the last General Election. He told me on Saturday that he is extremely anxious about this matter. He has put many years into building up a modest business and livelihood for himself and his family. This argument can be extended from retail distribution to small industry.
Would the hon. Gentleman extend it to land?
I could do that, but I am much more concerned about the effect of this tax on industry and the economy. The hon. Gentleman will agree, I think, that this is the paramount consideration in estimating the importance of this tax.
Would the hon. Gentleman say how this tax will harm the local shopkeeper to whom he has referred?
I am merely saying that a particular shopkeeper displayed a great deal of anxiety about it. I can assure the hon. Gentleman that this anxiety extends to quite small people on an industrial trading estate not very far from my constituency who, through hard work and in very competitive conditions and under a severe taxation system, have built up small industries. Like ourselves, they are uncertain about what the impact of this new tax will be on those industries.
I think that the Financial Secretary could lessen this deep anxiety by accepting this fairly reasonable Amendment. The hon. Member for Caithness and Sutherland (Mr. George Y. Mackie), who moved it forcibly and effectively, pointed out that the rate of this tax is lower in countries which have advanced most dynamically in recent years. This should commend itself to the Chancellor of the Exchequer and to the Government. If a dynamic economy in West Germany and Japan can be reconciled with a lower rate of Capital Gains Tax, I do not think that the Government should allow the example to pass unnoticed. I hope that the Financial Secretary will be able to say that he will make one of these important concessions, and a very valuable one, by accepting this most reasonable Amendment.
The hon. Member for Caithness and Sutherland (Mr. George Y. Mackie) made a sound point when he said that the yield of this tax might be better if the rate were lower. I think that that is the case, not so much because of the reason given by my hon. Friend the Member for Twickenham (Mr. Gresham Cooke), although there will certainly be evasion if the rate is too high, but because if there were a lower rate there would be a greater willingness on the part of people to sell their property and to change their investments. That is something which we should not discourage. No doubt the rate of 30 per cent. given in the Bill is variable in the sense that it can be changed from year to year, and no doubt future Chancellors will change it.
Presumably the rate of 30 per cent. applies not only to gains but to losses. If so, can the Government say what will happen when the rate is changed? If a person makes a gain this year and is charged at 30 per cent. and a loss next year and is charged at 30 per cent. or perhaps 40 per cent., how will the two be set off against one another? We should know what the Government have in mind and how it is intended that the Bill should work in that respect before we put any figure in the Bill.
I wish first to take a point made by the hon. Member for Caithness and Sutherland (Mr. George Y. Mackie) and which has been repeated by following speakers, notably the hon. Member for Barry (Mr. Gower). They expressed concern for the small businessman who has built up his business as a result of many years of toil and who is now concerned about a possible penal rate of taxation on his labours. I think that I can fairly say that there is no one on these benches who does not share that concern. However, I say with all respect to those hon. Members that this is not the way to go about the matter. If they were concerned for the small businessman, they might have framed an Amendment to distinguish between earned capital gain and unearned capital gain. We cannot alleviate the anxiety of small businessmen by a blanket Amendment of this kind.
I have no intention of giving way to the hon. Member for Weston-super-Mare.
The major point to which I wish to address myself—and I think that it was the main point made by the hon. Member for Caithness and Sutherland—concerns his statement that there was nothing in the Bill which allowed for the element of inflation. I am surprised that the hon. Gentleman should take this view, because I thought that most of us agreed that one of the purposes of the Bill—some people would think that it was certainly the main social purpose of the Bill, apart from the fiscal purposes—was to provide the conditions for an incomes policy. I hope that the hon. Member does not seriously believe that all those workers who are being asked to accept wage restraint and to forgo the possibility of capitalising on their skill and, above all, their youth, must do so when people who have an opportunity to make capital gains are being asked to pay a rate of tax less than that which workers are being asked to bear. We are in an age when more workers are taxed at the standard rate.
All that we seek to do through this Clause is to tax capital gains at the rate of about 6s. in the £, whereas the hon. Member for Caithness and Sutherland and those who support him want to tax them at about 5s. in the £. Do hon. Members who support the Amendment believe that the organised workers of this country will accept this discrepancy?
Is the hon. Gentleman suggesting that because this is part of an incomes policy there will be no inflation? If he is, it is rather like saying that presumably he does not want to die, but this does not stop him insuring his life.
I did not suggest that. I cannot recall what I said which prompted the hon. Gentleman to ask me that. While on the subject of inflation, let me remind the hon. Gentleman that all the countries to which he referred, including North America, suffer from varying rates of inflation. The economy of the Western world is inseparable from an inflationary rate, and we are trying to do something to check the rate of inflation in our society.
Does the hon. Gentleman seriously contend that the organised workers of this country, as he described them, faced with increased costs on their part, and having put in a claim for increased wages, will forgo their claim because the rate of the Capital Gains Tax is 30 per cent. and not 25 per cent.? Is the hon. Gentleman making such a case?
I did not say that. The hon. Member for Caithness and Sutherland said that the beneficiaries from capital gains should be taxed at a lower rate than workers are taxed on their earnings. I am saying that this will be unacceptable to the working man. I wonder whether hon. Gentlemen opposite realise that the economies of Western countries cannot free themselves from a rate of inflation? We are trying to do something about it.
Hitherto the holders of capital have been able partly to shield themselves against inflation, while the workers have not been able to do so. Several hon. Members who took part in the discussions on Clause 12 and Clause 16 agreed that to date capital had been treated lightly compared with income. The hon. Member for Shipley (Mr. Hirst) referred to this. There is now widespread acceptance of the need for a Capital Gains Tax, and the hon. Gentleman posed the question, what is a fair rate? I am rebutting the idea put abroad by hon. Gentlemen opposite that 25 per cent. is fair.
The hon. Gentleman is very intelligent and well-informed. Is he arguing that for the past 15 years wages have risen less than prices in this country? In the western world generally that is quite untrue. Wages have outstripped prices, and therefore real incomes have been rising.
The right hon. Gentleman, too, has not been listening to what I have been saying. I did not say that. I said that workers had no protection. In the free-for-all, which is all that is left to them, some have managed to get some protection, but only at the expense, not of those who hold capital, or who stand to benefit from capital gains, but of other workers.
I should have thought that we were agreed on the need for an incomes policy, and on the need to check inflation. I should have thought, too, that we were all agreed on the need to make a fresh start in dealing with capital gains. There has been agreement on this so far in this Committee. The hon. Member for Shipley asked what was a fair rate. I cannot believe that the organised workers of this country will accept that they should be taxed at the standard rate, while those who benefit from capital gains are taxed at a lower rate. There are many people, quite apart from Mr. Kaldor, who believe that capital gains should be taxed at the standard rate. Then there are those who believe that they should be taxed at the marginal rate, and certainly not at 25 per cent., much less at 30 per cent.
My right hon. Friend the First Secretary has been working hard to bring in an incomes policy. All he asks is that we provide the conditions in which he can succeed. The Amendment will have precisely the opposite effect. It will undermine the work done by my right hon. Friend. I have tried to carry both sides of the Committee with me. If hon. Gentlemen opposite do not want a bipartisan approach, we do not mind. What we are trying to do is to push forward the tax frontiers from the incomes arena into the area of capital gains.
I am sorry to see Liberal Members joining forces with the Conservatives to push back this tax frontier, especially when I look at the Liberal benches and see there four or five Members who represent constituencies which depend more than most on public funds.
I wonder whether the hon. Gentleman would care to correct one statement? He said that the Amendment represented Liberals joining forces with the Conservatives. The hon. Gentleman will be aware that the Amendment is in the name of my right hon. Friend the Member for Orkney and Shetland (Mr. Grimond) and five of my hon. Friends.
In that case, I correct my statement and say that Conservative Members have joined forces with the Liberals. I hope that the hon. Gentleman is just as uncomfortable. The point is that we would have expected Liberal Members to join us in pushing the tax frontier forward into the area of capital gains.
Would not the hon. Gentleman agree that on 11th March of last year, the present Chancellor of the Exchequer, when he was in Opposition, said that increased taxes meant increased prices, and, therefore, that the taxes which we are now discussing must mean increased prices? Increased prices, as the Chancellor has indicated, mean inflation, and therefore is it not the Government who are creating conditions in which an incomes policy cannot, and will not work?
I do not accept that. We are trying to slow up the rate of inflation, and get down prices. This will eventually get down costs. We are trying to do precisely the opposite to that suggested by the hon. Gentleman.
For years, hon. Members on both sides of the Committee have had to accept the position described by the hon. Gentleman. Now, by this Clause, and by Part III of the Bill, we are trying to create a different situation. We are trying to create conditions to enable a new start to be made, and my main concern is that a Liberal Member above all should have been responsible for introducing an Amendment such as this.
One of the ironies of this debate is that the hon. Member for Colne Valley (Mr. Duffy), of all hon. Members, should talk about a bi-partisan approach when his whole argument and the way in which he presented it was more certain than anything to split the Committee into splinters. Hon. Members of the Liberal Party and of the official Opposition have been trying to argue in the interests of the prosperity of the country. If the hon. Member wishes to advance good conditions for working people and small businessmen he must know that the general prosperity of the country must be maintained and allowed to grow.
It is the belief of those of us on this side of the Committee— on this occasion both of the official Opposition and of the Liberal Party—that this rate of Capital Gains Tax will interfere with the prosperity of the country. That is an argument which can be well sustained. Perhaps the most significant part of the debate is that the hon. Member for South Ayrshire (Mr. Emrys Hughes) a past master at producing alibis to create a diversion when his right hon. Friends are in trouble, could not produce an answer to our plea. Even he had to be called to order and to resume his seat rather sooner than we would have expected.
The hon. Member for Caithness and Sutherland (Mr. George Y. Mackie), who moved this Amendment, had a first- class case. The Treasury Bench could use this as an opportunity to make one of the concessions which were hinted at last night. It would be in the interests of the Government for them to do so. I support the hon. Member who moved the Amendment. I do not think we can divorce the rate of Capital Gains Tax from the general rate of tax at the highest level. Those on the Treasury Bench should take into account the most significant point, that if they are thinking of putting up the tax to the highest possible level that should not be done without bearing in mind that the same sort of people are already taxed at the highest level in the world. The fact that the existing tax is so high ought to cause the Treasury Bench to be more reasonable when inserting a figure for the rate of the new Capital Gains Tax.
We are not at the moment arguing the principle of a Capital Gains Tax. Some of us could do so, but that is not the point of the present Amendment. That is the rate and that is in the hands of those on the Treasury Bench. I hope they will take advantage of the opportunity to alter it. I said that the prosperity of the country was involved, and I believe it is. The continued growth of the country depends on the credit of this country remaining high in the world. For good or bad reasons—there may be different views on how we arrived at this position—our credit in the eyes of the world is pretty low. One of the reasons why the credit of the country has fallen in the eyes of the world is that the Government have given the impression that they are extreme in putting penalties on private enterprise.
One hon. Member has said that he is prejudiced against private landlords. Others have given a hint that they have to be careful about the hands which feed them and that there is a special obligation on private enterprise to agree with the Government when their own experience tells them that they should not agree. I think that everyone would agree that 30 per cent. is undoubtedly the highest possible figure that could be thought of for this tax rate. If the Government want to give the impression that they value the country's credit in the world and have not a prejudice against private enterprise or an extremist approach, they ought to retreat from the highest possible figure that can be thought of.
Whether or not 25 per cent. is the right answer, or 15 per cent. which has been suggested in another Amendment, I should not be prepared to be adamant about at the moment, but I am certain that 30 per cent. will give the impression to the world and to people on whom we rely for credit that the Government have a prejudice against private enterprise. The existence of this figure in this Clause will add fuel to that fire and undermine the confidence which we need so much. I wish to make a bipartisan appeal which perhaps has a better chance of succeeding than that made by the hon. Member for Colne Valley. Now that the general principle of a Capital Gains Tax has been accepted, we ought to get together to see what figure would disabuse people of the idea that this Government are prejudiced in this way. I think they should agree that 30 per cent. is wrong. I urge the Government, in their own interest, in the interests of their image and the great efforts they are making, to re-establish the credit of this country following the mistakes they made earlier, to accept the Amendment.
I have listened to many speeches, but the one which I have just heard beats them all. The hon. Member for Peterborough (Sir Harmar Nicholls) suggested that a good case could be made for having no Capital Gains Tax. That point has been put forward by a great many hon. Members opposite. They are extremist in a matter such as this, for very few people believe that there should not be a Capital Gains Tax. The right hon. and learned Member for Wirral (Mr. Selwyn Lloyd) originally introduced a Capital Gains Tax and he was greatly criticised by many members of the Conservative Party, but members of the public thought that he was doing a good job.
The hon. Member for Peterborough congratulated Liberal hon. Members on being so sensible as to suggest that the tax rate should be reduced from 30 per cent. to 25 per cent. I counsel the Liberals that they would be well advised to consider very carefully praise coming from such a source. It is better that they should look at themselves in the mirror before they accept that praise at its face value. The Liberal Party, I understood, were motivated from time to time—
The hon. Member for Peterborough made the point that he was more or less in agreement with the sentiments expressed by the Liberal Party and I think I am entitled to reply to his remarks. He went on to congratulate on his sensibility the hon. Member who moved the Amendment. That hon. Member referred especially to Germany, Japan and America. I do not think a great deal of historical background is needed to understand the reasons why America, that great country of untold wealth, is able to keep its capital gains tax at a rate of 25 per cent. It is not difficult to appreciate why America can do that instead of having a rate of 30 per cent. It has had great advantages over this country in the last 50 or 60 years. Hon. Members opposite fail to recognise the reasons why heavy taxation is essential in this country. Perhaps I ought not to tell them, if they are so stupid as not know—but I will mention it in case they can derive some interest from it.
The hon. Member for Caithness and Sutherland (Mr. George Y. Mackie) and the hon. Member for Peterborough spoke about comparisons with Japan and Germany. They introduced the question, to which the Chair took no exception. I am only explaining the reason why this is so.
I mentioned expenditure. That is the very word I mentioned. At any rate, I have said sufficient to convey the purport of my argument.
The hon. Member has made his point quite clearly. He was suggesting that it was wrong, for all all sorts of reasons, to compare the growth that has taken place in Germany and Japan with the situation here. He should remember that for two years before the election, and during the election, his party was quoting the improvements that had taken place in those countries as compared with what had happened here. One reason for the improvements is the fact that those countries acted more sensibly in matters such as this.
The reason why they are acting more sensibly than we are is that they do not have the defence expenditure that we have. That is the simple explanation—but I do not want to go into that because I do not want to come into conflict with the Chair. I would direct the attention of the hon. Member to a matter which has caused some concern among hon. Members opposite, relating to workers paying their share, and to inflation being caused by their receiving increases in wages. My hon. Friend the Member for Colne Valley (Mr. Duffy) tried to show that in the matter of capital gains, businesses have received more than their share. Why is that? It is because whenever prices rise the assets of businesses increase in value—and over the last 20 years they have increased in value more than wages have increased. That is why so many capital gains have been made. The assets of businesses have risen owning to the inflationary nature of business operations throughout the world. More than one company—and I am sure that many hon. Members know the names of some of them—has given away considerable amounts in bonus shares, and has made considerable capital gains. Am I to understand that those capital gains are the only forms of revenue or money which should not be taxed?
I have a considerable experience of people who are subject to P.A.Y.E. There is no method by which they can "do" the inspector of taxes and become the sort of tax dodger that a business man can become. There is no method by which the smaller employee in a firm, or the ordinary worker in a firm, can dodge the inspector of taxes through P.A.Y.E.
I would tell hon. Members who speak about the tax dodgers in the business world, and the fact that there will be a greater temptation for them to dodge if this tax is levied at 30 per cent., that they are doing a disservice to their business colleagues and to British industry—a greater disservice than they appreciate, because the workers of this country are getting it straight from the horse's mouth—the business men's representatives—that ways and means will be found for business men to dodge this tax if the rate is 30 per cent.
The hon. Member has said that in the building industry it would not be possible for the employees to dodge paying taxes. Is not he aware of the Report of the Public Accounts Committee which said that a considerable amount of tax evasion was practised by people employed in that industry by registering themselves falsely as self-employed, thereby avoiding P.A.Y.E.?
If that should happen[HON. MEMBERS: "It does."]—I will concede the point, if it satisfies everybody—only a very small percentage is involved. I employ more than 500 men, and this sort of tax avoidance has taken place only to a minor degree, in my experience. The cases concerned are in the bricklaying industry. I know a little about this matter. I do not condone the practice, but I can say that only a very small percentage is involved. I repeat that hon. Members who talk in this way are doing a great disservice to the business community. I will now give way to the hon. Member for Roxburgh, Selkirk and Peebles (Mr. David Steel).
The hon. Member has gone so far past the point that I wanted to tackle him on that I have no wish to interrupt him now.
I have come across one or two cases. These people carry out jobs on the "grip" principle. Those people are always reported to the inspector of taxes. The grip principle is almost a sub-contract to build a complete house for £X. It is true that some of these people can dodge the inspector of taxes for a short time, but in the long run he catches up with them.
Order. I find it extremely difficult to appreciate the point which the hon. Member is making. The Amendment relates to the rate of Capital Gains Tax and the question whether it should be reduced from 30 per cent. to 25 per cent. I ask the hon. Member to confine himself to the terms of the Amendment.
I hope that I am a reasonable man. If I give way to hon. Members in order to allow them to ask me questions, and in replying depart from the strict rules of order, I hope that I may have your indulgence, Mr. McInnes, at least in replying. It would not be fair to the general public if it should get about that a question was asked of me and I failed to answer it. I do not want to delay the Committee further than to say that I deprecate party capital being made out of such an important subject.
I have as great an interest in capital gains as anybody else. I have as great an interest in business as anybody else. But I have a greater interest in justice than in anything else. It is the justice of the case which should rule the motive behind the Amendments. I suggest for the consideration of Liberal Members that they should not get bogged down in trivialities about a shilling in the £; if they get bogged down at all they should get bogged down in the principles on which the Liberal Party was built in the past. The Liberals have given a great deal to this nation, but they are being hoodwinked for a little "pot of potash"—[Interruption.] That is a braw Scots expression. That is how we use the expression in Scotland, but I will use the proper term—a "mess of pottage." I apologise if I used a Latin phrase—or whatever it may be—with a Scottish accent, or a Scottish emphasis.
The facts, irrespective of how one says it, cannot be denied. It is a regrettable fact that the members of the Liberal Party should be so closely associated with the Tory Party on a simple question of justice. The justice of the case is that all tax on income, be it income subject to a Capital Gains Tax, or income subject to Pay-As-You-Earn, should be paid in an equitable and fair manner. It is our belief that 30 per cent. is not too much to impose on money which has not been earned by the sweat of the brow or the exercise of the muscles of the arms.
I do not think, with respect to him, that the hon. Member for West Stirlingshire (Mr. W. Baxter) has read the Amendment at all. We were vastly entertained by his speech and I am sure everyone enjoyed listening to him, but may I point out to him that in this Amendment we are not proposing to evade charging a Capital Gains Tax altogether. Most of his remarks seemed to be addressed to that proposition, that is when he was in order—which was not very often during his speech, if you, Mr. McInnes, will allow me to say so.
We propose a moderate reduction from 30 per cent. to 25 per cent. and I cannot imagine how it can be said that we are trying to make party capital out of that. The hon. Member advised us to be careful about the Amendment which had the support of the hon. Member for Peterborough (Sir Harmar Nicholls). The hon. Member seemed to think that in some way this support should make us think again about the Amendment. I might have taken his advice, had it not been for the intemperate opposition of the hon. Member for Colne Valley (Mr. Duffy). That made me hold even more fast to the Amendment than otherwise. I thought that the speech of the hon. Member for Colne Valley was absolutely disgraceful, particularly when he condemned the constituencies of my hon. Friends for being the recipients of public funds. He said that in some way this should inhibit us from talking about the machinery of taxation of the whole country. If the hon. Gentleman thinks carefully I am sure that he would like to take back that remark. Like the rest of us, surely, he is a supporter of the Government's regional policy of encouragement to industry to go to areas such as the north of Scotland where are the constituencies represented by my hon. Friends.
I am surprised at the hon. Gentleman. What I said I can remember clearly and I am sure that I have the support of my hon. Friend. I said that four of the five hon. Members of the Liberal Party who occupy the benches opposite at this moment represent constituencies which are largely dependent on public funds. That is no reflection on the constituencies, it is no reflection on the hon. Members. It only bears out—
Order. I have already ruled the hon. Member out of order for mentioning the question of public funds. We are not discussing public funds.
I am grateful to you, Mr. McInnes, for pointing to the irrelevance of the remark. I wish to point out to the hon. Gentleman that his constituency will have one thing in common with those of my hon. Friends—at the next election it will be represented by a Liberal Member.
The hon. Gentleman made great play with the comparison between rates of tax on capital gains and those on income. He spoke of the workers paying direct taxation on their incomes at higher rates even than the 30 per cent. provided for under the Bill. I invite the hon. Gentleman to think again about this. The maximum rate of direct taxation, even after the increase imposed by the present Government, is, as he knows, 8s. 3d. in the £. The people to whom he was alluding would be entitled to the earned income relief of two-ninths which would make their marginal rate of taxation at the top end of their income 31·9 per cent., and I suppose that the hon. Gentleman is just right in saying that their marginal rate is higher than the actual rate of the new Capital Gains Tax.
Has he considered—as his hon. Friend the Chief Secretary has not—the effect of double taxation on many people who are to pay this Capital Gains Tax? I do not wish to return to the Amendment which we have already discussed, except to say that I think it relevant, in considering the rate we are going to impose, that some of the capital gains will have already incurred tax at the rate of 35 per cent. I am not certain whether the Chief Secretary was being obtuse or whether he did not want to understand the point. I think he is a highly intelligent person and probably did not want to understand that if a person is the owner of shares in a business, and the business realises a capital gain, on the disposal of assets the tax would be at 35 per cent.; and that if the shares were subsequently disposed of or the gains realised in some other manner, or were deemed to have been realised by reason of provisions with regard to trusts which we have not yet discussed, taxation would be paid on those shares realised, or deemed to have been realised, at the rate of 30 per cent. which we are discussing. Therefore, the maximum rate of taxation which may be paid by the individual is 54½ per cent. and not 30 per cent. at all. I do not suppose that many of the workers to whom the hon. Gentleman was referring are paying super tax at a high enough rate to bring up their marginal rate to 54½ per cent.
I am very interested in the argument which the hon. Member is advancing. If the Chancellor is to acquire a given sum of money to pay for the services that everyone demands, and if there is a reduction of 5 per cent. in this respect presumably someone will have to find the difference. Can the hon. Gentleman suggest who should pay the difference?
The right hon. Member for Clackmannan and East Stirlingshire (Mr. Woodburn) has been a Member of the House long enough to know that I should be absolutely out of order in referring to what other taxes might be adjusted in order to compensate for the loss of revenue which the acceptance of this proposal would entail. Perhaps the right hon. Gentleman might like to consider the taxation of betting, if I may be allowed just to mention that. I will not go into it in more detail.
The other point I wish to make concerns the effect of inflation. I have pointed out that it is possible for a person to pay 54½ per cent. tax on capital gains whereas the marginal rate at the top end of income, unless a person pays Surtax, is only 31·9 per cent. If assets are held over a period of time the 30 per cent. will be paid—[Interruption.]—if the hon. Member for Colne Valley wishes to intervene I shall be only too happy to allow him to do so, but I wish that he would not keep interrupting from a sitting position.
I was merely saying that the hon. Member's argument, so far, has been conducted on his own assumptions which I certainly do not accept.
I do not know what the hon. Gentleman means. Perhaps he would care to listen to me, instead of muttering under his breath.
I am talking about the effect of inflation. I hope that the hon. Gentleman understands what inflation is. It is something that we have experienced ever since the war, and before the war. I do not think that the Chief Secretary will tell me that suddenly in the Socialist millennium into which we have advanced inflation will cease abruptly. Therefore, suppose one acquired an asset today and disposed of it after 10 years. Obviously, it would be worth more in terms of £ notes. That might represent no increase in the real value of the asset on which 30 per cent. tax is to be paid. I wish to point out to the Chief Secretary, it may well occur to him, that the increase in the value of the asset in money terms is exactly the same as would be necessary to bring that value up to the terms of the 1965 £.
Will the hon. Gentleman repeat that? I have not gathered what he meant.
I will try to put it into other words. Let us take some figures. Let us consider an asset worth £1,000 today which is disposed of in 1975. Then the asset is worth £2,000. That is what the holder would actually get for it. Let us say, for the sake of argument, that the £ has decreased in value to 10s. during the intervening period. Although the holder may have made a gain of £1,000 in money terms, the real purchasing power of the cash which he receives when he disposes of his asset is no greater than it was in 1965. He will have to pay £300 in tax on the disposal of this asset. I do not think that the Financial Secretary will seriously dispute my arithmetic. This is one reason that we say that the 30 per cent. rate is much too high. If the Financial Secretary can assure us that the rate will be modified to take into account the effects of inflation—we shall be dealing with Amendments on that sub- ject later on—it would make a great deal of difference to my thinking and that of my hon. Friends on this subject.
I would point out to the hon. Member for Colne Valley that inflation hits the worker as well as the capitalist. The trade unions have large funds invested in equities, on which they will pay Capital Gains Tax. I am not talking about pension funds. I am talking about their reserves, the balances which they hold against contingencies. They will pay 30 per cent. Capital Gains Tax on any realisation of those funds, even though they do not on the pension funds. [An HON. MEMBER: "They are not grumbling."] Naturally, they are not grumbling, as the hon. Member says. If they are grumbling, it is behind the scenes. For all we know, they may have gone to the Chancellor of the Exchequer and pointed out to him the effects of this tax on their funds, but I think that it is obvious that we should not expect them to come forward and make these points in public.
The hon. Member for Peterborough asked whether the Government were prejudiced against private enterprise, and several hon. Gentlemen opposite said, "Of course not: this is rubbish." I say to those hon. Gentleman that this is a chance for them to match their deeds with their words. If they are not prejudiced against private enterprise and believe in the expanding economy which they say they want to see, let them accompany us into the Lobby on this Amendment.
We have had a very full debate on these Amendments, lasting over an hour and a half. Perhaps it would be helpful if I were to state the Government's position. The question which we are considering is what should be the flat rate, as we have accepted that there should be a flat rate, of a Capital Gains Tax. We are all agreed, I think, that it should be a reasonable figure, but that does not get us much further. The hon. Member for Peterborough (Sir Harmar Nicholls) who, I am sorry to say, is not here, suggested that the figure which we have chosen of 30 per cent. is the highest possible figure which could have been thought of. I assure him that that is not the case. Higher figures were thought of. There are very strong arguments and very good economic arguments for saying that the flat rate of Capital Gains Tax should be—that there would be advantages if it were—approximately the same as the flat rate of Income Tax or Corporation Tax.
There are balancing factors and considerations here, and very few hon. Members who have spoken have attempted to weigh up what the different considerations are which one should have regard to in deciding the right level of tax. When one accepts the principle, which I think is now basically accepted—it is accepted by the Opposition—that one should have a long-term capital gains tax, and if one accepts that the reason is that it is not right for some sections of the community to increase their wealth free of tax, whereas others have to pay tax on all increases which they receive, in principle there is an argument for saying that the flat rate should be related closely to the standard rate. That is not what we have done, and there are good reasons for it.
While the hon. Gentleman is dealing with that point, is he referring to real wealth or to notional wealth?
I am referring to spending power as between different sectins of the community, judged in terms of money. If people increase their money incomes, whether they do so in the form of wages or capital gains, they have an increase in spending power. That is the basis of their taxable capacity. It is not right that one group of people should be able to increase their spending power and go free of tax, and that principle is accepted now by hon. and right hon. Gentlemen opposite—
The hon. Gentleman is talking about spending power and he says that that means money. Of course, it means money as at a given date. Will he accept that and deal with the point about the change in the value of money over a period?
It is because I intend to come to the points—including that made by the hon. Member for Orpington (Mr. Lubbock)—and deal with all the arguments which have been put that I am not anxious to give way. If the hon. Member will have a little patience and see whether I meet the various points first, I suggest that it would save time. I am not one who tends to shirk giving way. I give way a great deal, but I find that I tend to waste time by giving way as much as I do—[HON. MEMBERS: "Hear, hear."]. At least there is one point on which the whole Committee seems to agree with me.
I suggest that, when we are approaching the question of rate, we have to see that the rate is not so low that it would give an undue concession to the wealthier taxpayer and defeat the object of achieving greater social equity, which is one of the main objects of the tax. Let us bear in mind that, for the person in the higher Surtax brackets, the rate of 30 per cent. is a very low rate and is a very great concession.
Perhaps the hon. Member for Worcester (Mr. Peter Walker) will listen to the figures. The rate of tax for a person at the highest rate of Surtax on an investment income of over £15,000 is 91¼ per cent. It is those people who make the largest and most regular capital gains. They will be taxed on those capital gains at a rate of only 30 per cent. If that is not a valuable concession, if that is not a low rate for them, I do not know what is. If this is not to be a contemptible, ridiculous and derisory rate, it has to be one which does not give an undue concession to people of that kind.
I suggest that we must see that there is not too great a disparity between the rate of the Capital Gains Tax and the standard rate of Income Tax, so as to reduce the inducement which always exists to dress up income as capital. That again, hon. Members will remember, is one of the main objects of the introduction of a Capital Gains Tax.
There are arguments put forward the other way, for not setting the rate of tax too high. One referred to by my right hon. Friend in his Budget speech was that one must bear in mind that there will be cases where people of moderate income will be realising in one year gains which have been accumulated over many years. Therefore, if they are to pay taxes in that one year at a rate which is too high, this could have a penal effect. The hon. Member for Barry (Mr. Gower) called attention to one case in which this could obviously operate more harshly. I shall not deal with it at any length, because it is the subject of a later Amendment. That is the case of the small businessman who, at the time of retirement, disposes of a business which he has built up largely by gains over a long period, and into which he has put a good deal of his own work. He is not comparable with somebody who receives a gain which is a purely passive matter, an investment which has appreciated in value without his making any contribution. I would ask the Committee to wait with patience—I hope that we do not have to be too patient—until we reach the appropriate Amendment.
There is also the argument which was put forward by the hon. Member for Shipley (Mr. Hirst) that if we have a higher rate, it will be a discentive to switching. I do not feel very impressed by these arguments, because unless the motive is tax avoidance, as Capital Gains Tax should have no effect on the volume of switching.
Some switching of course takes place for that reason, but the reason is that the tax takes only a proportion of the gain. If a man wants to sell a security he does so because the price of it has fallen or because he wishes to buy another. If it pays him to do that without there being a tax it will equally pay him to do it if there is a tax. The tax can only reduce the net gain from the switching. It cannot convert it into a loss or remove the incentive to switch.
A lot has been said about examples in America. In the American Capital Gains Tax system there is what is known as the "death gap". It means, in effect, that death is not an occasion for tax. It is an inducement, which will not operate here, to lock in securities so that at death there can be a realisation without any liability to tax. Despite that, the amount of switching in Wall Street in proportion to the value of outstanding issues is larger than in London—that despite the fact that the Americans have always had a Capital Gains Tax of this type.
But not at this rate.
I will be coming to that. I suggest that there is not a great deal in this argument about locking in and switching, although it is an argument which has been put forward for not having too high a rate.
Then there is the argument of inflation. It is said that the inflation element in long-term capital gains is another reason for not having too high a rate. I do not for a moment suggest that there is no force in that argument. I agree that it is a factor which must be taken into account when having regard to the rate, but let us remember, when considering the inflation argument, that it ignores the fact that holders of ordinary shares and real property are bound to gain at the expense of other classes of the community from the very process of inflation.
This happens because in times of inflation the share of profits in the national income is greater as the real value of contractual debts and incomes is gradually wiped out. So wealth is transferred from the owners of contractual debts to the owners of real property and equity capital. Thus, while it is true to say that in times of inflation the real gain is less than it is otherwise, an offset factor is that the real gain itself is enhanced as a result of the inflation.
Inflation causes a redistribution of wealth in favour of equity owners, so it is a poor argument to say that equity owners are treated harshly if they are taxed on their capital gains. It is the people with contractual incomes who lose in the process of inflation, including old-age pensioners, other pensioners and wage earners. Even those whose wages may keep pace with rising prices have to pay a larger part of those wage increases in taxation if personal allowances and reduced rates are not adequately adjusted. If we are to start making allowances for the effects of inflation, I suggest that, on any reasonable scale of social priorities, that process should snot begin with the owners of equity capital.
What the Financial Secretary says may be true of equities in general, but it is not true of particular equities. It cannot be true of the holders of dated gilt-edged securities—for example, the person who buys a security for redemption in 1970 and on which there may be a money gain completely inadequate to compensate for the fall in the value of money.
The hon. Gentleman is arguing from a different standpoint, on something which is the subject of a separate Amendment, to which we will be coming. What I am saying applies broadly over the whole sphere of capital gains. As I said on Second Reading, we could not accept the idea of inserting into the tax system a built-in hedge against inflation, nor do we think that it would be desirable to do so. Balancing these factors together, we feel that 30 per cent. as a basic flat rate is about right.
There remains the argument, about which we have not heard a great deal, that the 30 per cent. rate could, in certain circumstances, bear harshly on the small man. Perhaps we tend to talk too much about the "small man". We should also include in our consideration the man of moderate means who is, perhaps, a small investor, including the young manager, the young executive, the young technologist and the young professional man. These are men of moderate means who, from time to time, make some capital gains and for whom it might be thought the rate of 30 per cent. is too high.
I remind the Committee that 30 per cent. is only the flat rate and that for the vast majority of taxpayers, when they have occasion to pay tax on a capital gain, they will not pay at that flat rate. It will be to their benefit to adopt the alternative basis of charge. That will be a lower rate; in some cases considerably lower than 30 per cent. What the rate will be on the size of the gain will depend on the individual's marginal rate of tax.
Several things are quite clear. Consider the effect of the alternative basis of charge for anyone who is liable at less than the 45 per cent. rate on his marginal rate of tax, including Surtax if he is a Surtax payer. On the top slice of his income it will be to his advantage to adopt the alternative basis. He will pay at a lower rate than 30 per cent. on capital gains.
I gave the example on Second Reading of the way in which this would work. I spoke of a married man earning £5,000 a year with two children and with an unearned income of £200 a year. The alternative basis would be to his advantage if his gains did not exceed £600 in any year. That is an example of the extent to which advantage could be taken of the alternative basis.
If someone pays the standard rate of Income Tax this concession will, I take it, reduce the amount from 30 per cent. to 27½ per cent.
If the person's marginal rate of tax is the standard rate, then what the hon. Gentleman says is correct.
In dealing with the really small man, who gets brought into these arguments so much, I remind the Committee of the effect of the alternative basis and the fact that there cannot be a situation in which an individual will be paying tax on a realised gain while at the same time having any unused balance of his Income Tax allowances. To the extent that those allowances are not allowed against his other income, they will go in relief of his liability to pay tax on his capital gains.
We were urged to start at a low level. I remind the Committee that this will operate at a low level for a considerable time to come because we are taxing gains as from Budget day. The result is that the gains which will fall liable to tax for some time to come will themselves be small gains. This is another factor which must be taken into account in assessing the right rate. If the gloomy prognostications of hon. Gentlemen opposite are proved right, then there will be plenty of time in which to adjust the rate. We have had to fix our judgment on what we think—not just in the immediate future, but on what we have been advised from the long-term point of view—is about a right, balanced and fair rate.
As to the cost of the concessions which have been suggested, the Liberal Amendment, which calls for the relatively modest reduction from 30 per cent. to 25 per cent., would, by the time the tax builds up to the full yield, cost about £20 million. That is the estimated cost of a reduction of 5 per cent. as proposed in that Amendment. The Opposition Amendment, which suggests a rate as low as 15 per cent. would, at the time of full yield, mean a reduction of £45 million in the yield of the tax.
How many years ahead is the full yield?
I do not have an estimate of when that is expected to be achieved, but I will ascertain it and let the right hon. Gentleman know. As the tax is only starting from Budget day, it is expected that the yield in the immediate future will be small, so the cost will be very small. It is estimated that the cost of the 15 per cent. rate in 1966–67 would be about £3 million—
The hon. and learned Gentleman is getting on to the question of yield, but he is missing out my main and substantial point that this is the highest rate in the world.
Perhaps hon. Members will have patience.
I come finally to the argument that we are advocating a high rate compared with that in other countries. I suggest that the only country with which it is reasonable to try to make any fair comparisons at all is the United States of America, because the other countries that have been mentioned have such very different capital gains system from ours that no comparison is helpful. In Western Germany, for example, capital gains arising in the course of business are taxed as normal business income, and this is the position in very many other countries. Therefore, the burden on business incomes in most of those countries is very much higher than the 30 per cent. rate. In Germany, there is, in addition, a wealth tax of, I think, 1 per cent. That is on the wealth of individuals. I therefore do not think that the hon. Member for Caithness and Sutherland (Mr. George Y. Mackie) will find much comfort from the experience of West Germany in arguing that this is a very high rate of tax.
In Japan, individuals are taxed on normal rules at one-half on capital gains, and a special deduction of about £150. The top rate is 75 per cent. on excess over £60,000. It is quite a different system from ours. The rate reaches 60 per cent. on excess over about £20,000. Corporations usually pay at normal rates on the full gain, and their top rate is 38 per cent. There, again, it would appear that businesses pay a higher rate. Sweden has a different system—a flat-rate system is not worked there.
It was mistakenly suggested in our debate yesterday that the Americans have a tapering system, but they do not. They tried it in the 'twenties, and abandoned it. Their rate is 25 per cent., but I would remind the Committee of what I said at the outset about how we must relate our capital gains tax rate to our general rates of personal taxation. American rates of personal taxation are lower than ours. Their maximum rate is 70 per cent. on the top slice of investment income exceeding £35,700 a year. That compares with the figure I gave of 91¼ per cent. for investment income exceeding £15,000.
When we bear in mind that the alternative rate exists for people of moderate means—and exists under both the American system and our system—and when we consider that the chief beneficiary of the low flat-rate tax is the Surtax payer, I suggest that if 25 per cent. is fair and reasonable in relation to the American maximum of 70 per cent., a rate of 30 per cent. is very moderate in relation to our maximum of 91¼ per cent. —
This is such an important point that I hope that the hon. and learned Gentleman can reiterate it, and clarify it. What he says is that because we have a very much higher maximum level of personal taxation than have the Americans it is only fitting that we should also have a higher rate of Capital Gains Tax.
Of course it is—[HON. MEMBERS: "Oh."] Hon. Members can laugh as much as they like, but if the purpose of this tax is to secure social justice, to secure some equity, and to see that one lot of people do not get away with vast and regular increases of wealth, and if the second objective is to prevent incentive to tax avoidance by people dressing income as capital, neither of these objects will be achieved if we make too great a discrepancy between the rate of tax that wealthy people pay on their income and the rate of tax which wealthy people pay on their capital.
We shall not forget it.
—that the flat rate of tax will, by and large, only be paid by the Surtax payer. So before hon. Members go round frightening their constituents by saying, "These wicked Socialists think that because there is a high rate of taxation there must be a high rate of Capital Gains Tax," let them remind their constituents that what they call a right rate of Capital Gains Tax is something that will bite on the Surtax payers, for whom it may be a very low rate of tax—
I gave way because I thought that the hon. Gentleman had a serious question to raise.
I was asked how long it is expected to be before the full yield will be realised. The answer is 15 or 20 years.
The hon. and learned Gentleman is invariably courteous to the House and is a very honest man. In our debate on the vehicle excise duty we had the clearest possible indication that he would like to see a very considerable rise in that duty for the private motor car, particularly the heavier car. Today I got the impression that he would also like to see a very considerable rise in the long-term Capital Gains Tax, if that is the correct expression. We have had a lot of stories about social justice as between shareholders and wage earners, but if we were to compare the percentage rise in wages over the last ten years with the percentage rise in 2½ per cent. Daltons we would see where the social justice lay. I am concerned to know how the Financial Secretary works out his assessment of what the total yield of the long-term Capital Gains Tax will be, because it seems quite clear that he takes the view that there will be a long-term inflation if the Socialist Party remains in office. We know that the Financial Times Industrial Index has not gone up nearly as much over, say, ten years as has the cost-of-living index, the wages index or the National Insurance pensions index, so it is in the interests of accuracy and justice that we should try to get the matter fully into perspective.
The hon. and learned Gentleman spoke of the cost of the Liberal Amendment and of the Amendment tabled by my hon. Friends, but I just do not know how he can make an assessment over a period of 15 or 20 years, and how much inflation there will be, because, on the short term of, say, the first 12 months after this Budget, I should think that there would be practically no net yield at all because there would be no capital gains, because there will be progressively, as the Budget and as this Finance Bill will show, a declining profitability in industry. There will be inflation and, eventually, unemployment. There will certainly be a decline in employment.
It seems to me that the principle we have to get at here on a long-term case of capital gains is that the higher it is the greater the built-in interest of any Government to inflate the economy. We hear a lot of stories now about declarations of intent. We have heard a little less about declarations of intent during the last few weeks. The best way to ensure that there is a declaration of intent is to have as small a long-term Capital Gains Tax as possible.
One of my jobs is to advise on investment. I did not dissent from the short-term Capital Gains Tax. I thought that it caught the speculator and the stag, who in many cases is a bit of a menace, although he does perform a service. At the same time, it improves investment techniques. If the value of equities, goods or chattels rises over a period when there has been a 100 per cent. or 50 per cent. rise in the cost of living and the owner, because of reduced circumstances, is forced to sell them, he has at the time of realisation to suffer a 32 per cent. Capital Gains Tax.
We tend sometimes to misname my hon. Friend the Member for Barry (Mr. Gower) and refer to him by his own name because there is a peninsula so-called not far from his own constituency. My hon. Friend spoke about the shopkeeper. We had a few crocodile tears from the hon. Member for South Ayrshire (Mr. Emrys Hughes), who asked how many shopkeepers were involved. Obviously the hon. Member has failed to listen to the debate on a previous Amendment, when attention was drawn to the situation in which a shopkeeper has to sell his shop and he has to pay a 30 per cent. Capital Gains Tax. If he forms himself into a company and has two shops, he must pay 30 per cent. and 35 per cent. This penalises the shopkeeper who profits, who does well and who saves his earnings, because, after all, that is what capital is. Hon. Members opposite are apt to forget that all capital is earnings which have been saved.
We heard a good deal from the hon. Member for West Stirlingshire (Mr. W. Baxter) about P.A.Y.E. evasion. I was interested in that discussion. Later we shall discuss an Amendment on that subject. The hon. Member, speaking of evasion, said that he sought to assist the person who earns by the sweat of his brow. Whether it is by the sweat of one's brow or by the ingenuity of one's brain, it is hard work. Those who earn and save are the people whom we on this side, whether we are Liberals or Conservatives, are trying to protect. The best way to run the country is for every member of it to have a stake in it by having sound earnings, by being encouraged to save, and by being encouraged to invest in the companies in which they work, which is what is happening in the most enlightened companies. It is in this way that the people have a stake in the country. We believe in building a capitalist society—capital for all, not class war. Hon. Members opposite believe in the erosion of capital, in the withering away of capital. This is what will happen if there is a 30 per cent. tax on capital gains.
I had not intended to intervene at this stage in the debate, but I have been moved to do so by the Financial Secretary's extraordinary speech. The hon. and learned Gentleman told the Committee a few moments ago that it was a great concession to the Committee that the rate of Capital Gains Tax should run at only 30 per cent. The presumption behind that extraordinary statement is that we should be grateful that we are left with 70 per cent. of our property.
I am sure that the hon. Gentleman does not want to misrepresent me. I did not say that it was a concession to the Committee. I said that to the Surtax payer at a top rate of Surtax who is paying regular capital gains it is a great concession that he is being taxed at only 30 per cent. on those gains.
I shall deal in a few moments with the question whether this is in fact taxing capital gains. The idea that it is a concession to anyone to have a rate of taxation of 30 per cent. imposed upon him suddenly shows a basic philosophy of confiscation which sheds the light of truth for a few moments on the philosophy behind the whole Budget. Some argument can be advanced for a confiscatory tax, but the idea that one should be grateful for a confiscatory tax is a montrous piece of Socialist impertinence.
The second point in the Financial Secretary's speech which struck me as being extraordinary was his logic when he stated that, because we had a high rate of Income Tax, we should have a high rate of capital tax as well. This is a complete non sequitur, unless one thinks of high taxation as a good in itself. If one thinks of taxation, as we on this side do, as a necessary evil, the higher the rate of personal tax the lower the rate of capital tax should be if indeed there should be one at all. One can only conclude from the Financial Secretary's argument that the Labour Party is in favour of high taxation for its own sake. I hope that that will be noted by every potential saver, large or small, and particularly by those, especially young married couples who are starting out on life and who hope to save something in the course of it.
The premise behind the Financial Secretary's argument seemed to be that capital and income should be equally taxed. This is called a Capital Gains Tax. As has been demonstrated by the hon. Member for Orpington (Mr. Lubbock), it is a capital tax, because the capital gain is a purely notional thing in the vast majority of cases, owing to inflation. In the past, inflation has averaged about 2 per cent. a year. We have every expectation that in the future it will be higher, at any rate as long as the present Government are in power. It has been higher since they came to power. This so-called Capital Gains Tax is a tax on capital as such, although it is concealed as a Capital Gains Tax.
The Financial Secretary said that he would advance some economic argument for the tax being at the rate of 30 per cent. I listened to his speech carefully, but I did not hear that argument. There are some arguments for having the tax at this penal rate. They are doctrinal Socialist arguments. They are certainly not economic arguments. Applying the principle of economics here, a basic Conservative principle which is also a good economic principle is that capital and income should not be equally taxed. This is because the capital accumulation in the country constitutes the assets of the nation as a whole. These assets may be held in private hands or in public hands, or there may be a mixed economy, as we have here, in which they are spread between the two. Whoever holds them, the nation as a whole benefits.
On the whole, the nation benefits much more if capital assets are held in private hands than if they are held in public hands. What this tax at this high rate proposes to do is to convert the nation's capital assets into income which will be frittered away in current expenditure. If the record of past Labour Governments is anything to go by, the rate of frittering is likely to increase, rather than diminish, in the period of this Government. Therefore, I am opposed to this high rate of tax, because it is a tax which will penalise saving.
The Amendment moved on behalf of the Liberal Party would to some extent limit the impact of the tax. Therefore, the Amendment is desirable up to a point. The hon. Member for Orpington demonstrated very convincingly why it was undesirable to have a tax at the rate of 30 per cent. He did not prove in any way that a tax at the rate of 25 per cent. was desirable. It seemed to me that every argument he produced against having a Capital Gains Tax at a rate of 30 per cent. applied equally against having a Capital Gains Tax of 25 per cent. For technical reasons, we are discussing the issue of principle on that Amendment. There is an Amendment which has not been called which would seek to reduce the rate of tax to 15 per cent.
Amendment No. 199 is a more desirable Amendment, because it is at least 10 per cent better than the Amendment which has been moved, but although I consider this Amendment an imperfect one it is at least a step in the right direction and I hope that the Committee will support it. I hope that we shall have the support in the Lobby not only of Conservative and Liberal Members but of perhaps some hon. Members opposite, including the hon. Member for Manchester, Cheetham (Mr. Harold Lever), who I know takes exactly the same view as I do on the principle of this tax. Unfortunately the hon. Member is not now in his place, but I hope that he will be back later to vote for the Amendment.
I hope that the Committee will be prepared to bring this long, extremely interesting and important debate to a close. Everything that the Financial Secretary has said in reply to the Committee has reinforced what I said on Second Reading about the rate of tax. I said then that this tax, taking its rate and its comprehensiveness together, is the most severe of any long-term capital gains tax in the Western world. This is undeniably the case, and nothing said today has in any way altered that.
We have to take the rate in the context of its comprehensiveness. We have to accept for the purpose of debate that the tax remains as it is in the Bill and that there are no exemptions therefore for chattels, as there are, for example, in West Germany and in practice in the United States. There is no tapering off as there is over 10 years in Sweden, as the Financial Secretary indicated. There is no exemption for gifts or transfer on death as there is in the United States, as again the Financial Secretary indicated. There is no allowance for inflation as there is in Denmark for real property. There is none of these things in the structure of the tax here. This is why, taking just the rate with its comprehensiveness alone, I believe that this tax is the most severe in the Western world.
In addition, we have the phenomenon of the double taxation of companies. The Chief Secretary tried to argue that there was complete separation of the company and the individual. The whole Committee found this entirely unconvincing. One of the problems that we are up against in discussing the Bill is that there is a complete difference of approach and analysis on the whole nature of Corporation Tax. This will make the last stage of the Bill even more difficult than the one which we are now going through. The Chief Secretary's premise has been undermined in that under the Bill special arrangements have had to be made to deal with such things as unit trusts and life policies, and in the indications in the Press, and from the Chancellor of the Exchequer when he moved to report Progress last night, that further special provisions may be made. If there is this distinction between the two, as the Chief Secretary argued, these special arrangements would not be necessary. It is because there is not a distinction that these special arrangements have been made and I believe that more will be necessary.
Again, returning to the context of this tax, we have the special difficulty of the discretionary trust, the valuation every 10 years and the possible break-up of the trust to meet the Capital Gains Tax. This again makes it a more severe tax than it is elsewhere. Again, on death, apart from the death gap which the Financial Secretary indicated, we have the deduction from the capital of the estate before the estate pays death duties.
And the £5,000.
I accept that correction—plus the mount of the capital gains before Estate Duty is paid on the whole of the remainder of the estate. These are all aspects of the severity of the application of the tax and this makes the rate of 30 per cent. all the more important.
When it comes to the special case mentioned earlier of an owner of a small business, we have a specific example of double taxation on the realisation of assets in the company and then by the owner when he himself realises the company. Again therefore the 30 per cent. rate is of particular importance. The Financial Secretary kindly indicated that one of the concessions may possibly come on this point. We shall be delighted if it does. We have the necessary Amendments ready now. But this again makes the point that a special concession has had to be made because of the effect of the Corporation Tax and the Capital Gains Tax when one comes to the individual who builds up his own business and wants to retire on the proceeds when he sells. This is a genuine case and only proves our earlier point. The Chief Secretary was not obtuse, as the hon. Member for Orpington (Mr. Lubbock) suggested, but was very ingenuous, again probably influenced by the Financial Secretary who was not here when that point was made.
The rate of company taxation is moving to 64 per cent. Estate Duty is up to 80 per cent. Personal taxation goes up to 91 per cent. All of this is extremely heavy taxation—arguing at the maximum; because the Financial Secretary was arguing at the maximum—and to that must be added the 30 per cent. Capital Gains Tax. This makes it an extraordinarily severe tax in the context of these other figures, and this is how we should look at it.
If one takes international comparisons, apart from the exemptions which I have already mentioned and which make a great deal of difference to the actual burden of the tax, in the United States the maximum rate is 25 per cent. In addition, the individual has the option of only 50 per cent. and not 75 per cent., which is the figure in the Bill. This for the individual is a great advantage. In addition, for all practical purposes chattels are excluded in the United States and transfers on death are excluded.
We had this statement about chattels made yesterday with no evidence to support it. My information from our investigations is that all chattels there are subject to tax. The suggestion that the United States is ceasing to levy tax on chattels, which appeared in a leading article in one newspaper, is quite untrue according to my information.
We did not take this from newspapers. We had a study made of the capital gains tax in a large number of Western countries. This provided a detailed examination of the operation of the tax in the United States. It is the best information that we have been able to obtain. This makes to the general burden a difference of 25 per cent., and only 50 per cent. as far as the individual option on Income Tax is concerned.
The Financial Secretary repeatedly says that we must tell our friends that this tax applies only to the Surtax payer. Apart from the question whether the Surtax payer does not also demand some consideration, is it not true as we said yesterday—and we were not contradicted—that this becomes operative at the unearned Surtax level which is £2,000 after adjustment for allowances? This is not a question of operating at the normal Surtax level as one thinks of the Surtax payer, but at £2,000 after making the necessary adjustments for allowances.
It is quite right. It operates at Surtax level in the sense that it is treated as unearned income and the taxpayer earning £2,000 pays on unearned income. But many Surtax payers will still find it to their advantage to adopt the alternative basis, and I gave the example of the man with £5,000 earned income and £200 unearned income. He will be paying Surtax and it will still be to his advantage to adopt the alternative basis for gains up to the extent of £600 a year every year.
It may be that it will be to the advantage of the person who is paying Surtax on earned income to adopt this procedure—
And unearned—yes, that may be; but it does not alter the fact that the level comes down to £2,000 and is not the normal Surtax level that one thinks of when the hon. and learned Gentleman refers to the Surtax payer.
It is still to his advantage.
It may be, but it still does not alter the fact which I have emphasised, and the hon. and learned Gentleman's suggestion that it will not be of any significance until one comes to the normal Surtax payer is, I suggest, not really accurate.
As regards the international comparisons, what is important from the point of view of taxation as a whole is that no longer do people look only at the results of taxation in their own countries in considering their future employment. When they were in Opposition, we heard a good deal from the Chancellor and his hon. Friends about the brain drain, about the movement of young executives, professional men, and so on. There is no doubt whatever that those who are trained and educated as executives and technicians, a very large number of people in this country or in any country of the Western world, will compare circumstances in different countries. In this respect, the level of this tax and its relationship to other taxes are of very great importance because they will affect the decisions of those who have technical abilities, degrees and specialised training in considering in which country they choose to make their future.
It seemed to me—I put a question to the Financial Secretary and he was kind enough to refer to it—that his general approach is that, if one realises something which is normally regarded as an investment or an item of property, whatever it may be, there is no difference whatever between the proceeds of that and income. It is all spending power, and the main thing must be to tax spending power. Indeed, the hon. and learned Gentleman said quite frankly that he had considered taxing it at normal Income and Surtax rates as a long-term gain. He had examined that as a possibility.
We cannot accept the view that, if one realises a particular item of property, a chattel or a security, the proceeds become spending power and they must be dealt with fairly severely. The Chancellor decided on 30 per cent., not as severe as Income Tax or Surtax, but this is not a general philosophy which we can accept. The Financial Secretary said that one must not give undue advantage to the rich. On the other side of the Committee, the whole of the debate has really been dominated by the person who is paying 91 per cent. and who is, apparently, making enormous capital gains every year. It cannot be good law to govern one's general decisions on the maximum case, yet this is what the Treasury Bench has done for so much of the time. When the Financial Secretary was dealing with Surtax levels, he spoke in terms suggesting that the whole of this was income. Again, I cannot accept that.
On the question of switching, the hon. and learned Gentleman tried to prove that having to pay 30 per cent. on a switch of security would not affect one's conduct at all. Not even his hon. Friend the Member for Manchester, Cheetham (Mr. Harold Lever) who, I assure the Government, is doing his utmost to be loyal, could possibly accept the Financial Secretary's argument when he said that it would not affect switching. It is bound to affect one's judgment on whether to change from one security to another, and, if it affects the judgment of investors in this way, it will affect the capital structure and investment of industry as a whole. It is bound to do so.
This has been the effect in the United States. United States industrialists or bankers will immediately tell one that a capital gains tax, even though it averages only 8 to 9 per cent. in the United States undoubtedly has an effect on switching and on the volume of investment in different securities, industries and companies. Plainly, a tax at 30 per cent., or much nearer 30 per cent. than 8 to 9 per cent., will have a considerable effect.
The Financial Secretary made a point which was not really worthy of him when he gave the figure of £45 million in respect of my hon. Friend's Amendment and £25 million for the Liberal Amendment. When I challenged him, he said that this would not come about for 15 years. I do not think that he will pretend that we are being irresponsible in supporting the Liberal Amendment, having regard to a figure of £45 million in 15 to 20 years. In any case, it would be a very bold prophet who would try to foresee that far.
The hon. and learned Gentleman's next argument will really come up on the Amendment which deals with inflation. I say only in passing that I do not accept the argument that, at times of inflation, it is the wage-earners and old-age pensioners who suffer and that those with investments gain. This is obviously much too broad a generalisation. Broadly speaking, State pensioners in this country, under the insurance scheme, have not suffered through inflation because the increases in pension under the last Administration—I take it that the hon. and learned Gentleman would argue even more strongly on what his Administration have done—have been greater than the
When the hon. and learned Gentleman says that contractual recipients suffer. I can only say that I think that those in receipt of controlled rents have probably suffered most since 1945, and some of those in receipt of contractual pensions from firms which have not been able to make them up have suffered. The great majority in the other categories have kept pace, and wage earners have more than kept pace.
One comes back to the question which is really the crux of the matter, with which the hon. and learned Gentleman did not deal. If one has an investment of any kind which one has earned and saved and it keeps pace exactly with inflation, is it right that, if one exchanges it for another one, or in any of the circumstances visualised in the Bill, on death and so on, one should immediately lose 30 per cent.? I know of no intellectual argument to justify it. The hon. Member for West Stirlingshire (Mr. W. Baxter) said that the point on which he wanted to finish was justice. Where does justice lie in that case? We cannot go on talking about justice to wage earners when they have managed to maintain a position against inflation and when it is said, at the same time, that justice to a person who has property for which he has worked and saved and which maintains its position in relation to inflation requires that he shall lose 30 per cent. if he changes it or an event occurs in any of the circumstances covered by the Bill.
This is the crux of the matter, and it is in this connection that the rate of 30 per cent. is so important. I hope that I have explained to the Committee why I believe that, in the context of the taxation system of this country as a whole, the comprehensiveness of this tax and its importance, this rate is too high and why I urge my right hon. Friends to support the Amendment put forward by the Liberal Party.
|Division No. 130.]||AYES||[8.29 p.m.|
|Abse, Leo||Allen, Scholefield (Crewe)||Baxter, William|
|Albu, Austen||Armstrong, Ernest||Bence, Cyril|
|Allaun, Frank (Salford, E.)||Barnett, Joel||Bennett, J. (Glasgow, Bridgeton)|
|Bishop, E. S.||Hill, J. (Midlothian)||Probert, Arthur|
|Blackburn, F.||Hobden, Dennis (Brighton, K'town.)||Pursey, Cmdr. Harry|
|Blenkinsop, Arthur||Holman, Percy||Randall, Harry|
|Boardman, H.||Howarth, Robert L. (Bolton, E.)||Redhead, Edward|
|Boston, T. G.||Howell, Denis (Small Heath)||Rees, Merlyn|
|Bowden, Rt. Hn. H. W. (Leics S.W.)||Howie, W.||Reynolds, G. W.|
|Braddock, Mrs. E. M.||Hoy, James||Rhodes, Geoffrey|
|Bray, Dr. Jeremy||Hughes, Cledwyn (Anglesey)||Richard, Ivor|
|Broughton, Dr. A. D. D.||Hughes, Emrys (S. Ayrshire)||Roberts, Goronwy (Caernarvon)|
|Brown, Hugh D. (Glasgow, Provan)||Hunter, A. E. (Feltham)||Robertson, John (Paisley)|
|Buchan, Norman (Renfrewshire, W.)||Hynd, John (Attercliffe)||Rodgers, William (Stockton)|
|Buchanan, Richard||Irvine, A. J. (Edge Hill)||Rogers, George (Kensington, N.)|
|Butler, Herbert (Hackney, C.)||Jones, Dan (Burnley)||Rose, Paul B.|
|Callaghan, Rt. Hn. James||Jones, J. Idwal (Wrexham)||Ross, Rt. Hn. William|
|Carmichael, Neil||Jones, T. W. (Merioneth)||Sheldon, Robert|
|Carter-Jones, Lewis||Kerr, Mrs. Anne (R'ter & Chatham)||Shinwell, Rt. Hn. E.|
|Castle, Rt. Hn. Barbara||Kerr, Dr, David (W'worth, Central)||Short,Rt.Hn.E.(N'c'tle-on-Tyne,C.)|
|Chapman, Donald||Lawson, George||Short, Mrs. Renée (W'hampton,N.E.)|
|Craddock, George (Bradford, S.)||Lee, Rt. Hn. Frederick (Newton)||Silkin, John (Deptford)|
|Crawshaw, Richard||Lee, Miss Jennie (Cannock)||Silkin, S. C. (Camberwell, Dulwich)|
|Cullen, Mrs. Alice||Lever, Harold (Cheetham)||Silverman, Julius (Aston)|
|Dalyell, Tam||Lever, L. M. (Ardwick)||Skeffington, Arthur|
|Davies, G. Elfed (Rhondda, E.)||Lewis, Arthur (West Ham, N.)||Slater, Mrs. Harriet (Stoke, N.)|
|Davies, S. O. (Merthyr)||Lewis, Ron (Carlisle)||Small, William|
|Delargy, Hugh||McBride, Neil||Smith, Ellis (Stoke, S.)|
|Dell, Edmund||MacDermot, Niall||Snow, Julian|
|Dempsey, James||McKay, Mrs. Margaret||Stewart, Rt. Hn. Michael|
|Diamond, John||Mackie, John (Enfield, E.)||Stones, William|
|Doig, Peter||McLeavy, Frank||Summerskill, Hn. Dr. Shirley|
|Duffy, Dr. A. E. P.||MacMillan, Malcolm||Swingler, Stephen|
|Dunn, James A.||MacPherson, Malcolm||Taylor, Bernard (Mansfield)|
|Dunnett, Jack||Mahon, Simon (Bootle)||Thomas, George (Cardiff, W.)|
|Edelman, Maurice||Manuel, Archie||Thomas, Iorwerth (Rhondda, W.)|
|Edwards, Rt. Hn. Ness (Caerphilly)||Mapp, Charles||Thomson, George (Dundee, E.)|
|Edwards, Robert (Bilston)||Mason, Roy||Thornton, Ernest|
|Ennals, David||Mayhew, Christopher||Tinn, James|
|Evans Ioan (Birmingham, Yardley)||Mellish, Robert||Urwin, T. W.|
|Fernyhough, E.||Millan, Bruce||Walden, Brian (All Saints)|
|Fletcher, Sir Eric (Islington, E.)||Miller, Dr. M. S.||Walker, Harold (Doncaster)|
|Fletcher, Raymond (Ilkeston)||Milne, Edward (Blyth)||Wallace, George|
|Foley, Maurice||Morris, Charles (Openshaw)||Weitzman, David|
|Fraser, Rt. Hn. Tom (Hamilton)||Morris, John (Aberavon)||Wells, William (Walsall, N.)|
|Freeson, Reginald||Murray, Albert||White, Mrs. Eirene|
|Galpern, Sir Myer||Neal, Harold||Whitlock, William|
|Garrett, W. E.||Noel-Baker, Francis (Swindon)||Wilkins, W. A.|
|Garrow, A.||Norwood, Christopher||Willey, Rt. Hn. Frederick|
|George, Lady Megan Lloyd||Ogden, Eric||Williams, Alan (Swansea, W.)|
|Gourlay, Harry||O'Malley, Brian||Willis, George (Edinburgh,E.)|
|Griffiths, Will (M'Chester, Exchange)||Orme, Stanley||Wilson, Rt. Hn. Harold (Huyton)|
|Gunter, Rt. Hn. R. J.||Oswald, Thomas||Wilson, William (Coventry, S.)|
|Hamilton, William (West Fife)||Palmer, Arthur||Woodburn, Rt. Hn. A.|
|Hannan, William||Pannell, Rt. Hn. Charles||Woof, Robert|
|Hart, Mrs. Judith||Park, Trevor (Derbyshire, S.E.)||Zilliacus, K.|
|Hattersley, Roy||Pearson, Arthur (Pontypridd)|
|Hazell, Bert||Peart, Rt. Hn. Fred||TELLERS FOR THE AYES:|
|Heffer, Eric S.||Pentland, Norman||Mr. Harper and Mr. Grey.|
|Henderson, Rt. Hn. Arthur||Prentice, R. E.|
|Herbison, Rt. Hn. Margaret||Price, J. T. (Westhoughton)|
|Agnew, Commander Sir Peter||Carlisle, Mark||Fletcher-Cooke, Charles (Darwen)|
|Alison, Michael (Barkston Ash)||Carr, Rt. Hn. Robert||Fletcher-Cooke, Sir John (S'pton)|
|Allason, James (Hemel Hempstead)||Chichester-Clark, R.||Foster, Sir John|
|Anstruther-Gray, Rt. Hn. Sir W.||Clark, William (Nottingham, S.)||Fraser, Rt Hn Hugh(St'fford&Stone)|
|Awdry, Daniel||Cooke, Robert||Fraser, Ian (Plymouth, Sutton)|
|Barber, Rt. Hn. Anthony||Cooper-Key, Sir Neill||Gibson-Watt, David|
|Barlow, Sir John||Craddock, Sir Beresford (Spelthorne)||Giles, Rear-Admiral Morgan|
|Batsford, Brian||Cunningham, Sir Knox||Gilmour, Ian (Norfolk, Central)|
|Bennett, Dr. Reginald (Gos & Fhm)||Curran, Charles||Gilmour, Sir John (East Fife)|
|Berry, Hn. Anthony||Dalkeith, Earl of||Glover, Sir Douglas|
|Birch, Rt. Hn. Nigel||Dance, James||Goodhew, Victor|
|Black, Sir Cyril||Davies, Dr. Wyndham (Perry Barr)||Gower, Raymond|
|Bossom, Hn. Clive||d'Avigdor-Goldsmid, Sir Henry||Grant, Anthony|
|Box, Donald||Dean, Paul||Griffiths, Peter (Smethwick)|
|Boyd-Carpenter, Rt. Hn. J.||Digby, Simon Wingfield||Grimond, Rt. Hn. J.|
|Boyle, Rt. Hn. Sir Edward||Dodds-Parker, Douglas||Gurden, Harold|
|Brinton, Sir Tatton||Doughty, Charles||Hall, John (Wycombe)|
|Bromley-Davenport, Lt.-Col. Sir Walter||Douglas-Home, Rt. Hn. Sir Alec||Hall-Davis, A. G. F.|
|Brooke, Rt. Hn. Henry||du Cann, Rt. Hn. Edward||Hamilton, M. (Salisbury)|
|Bruce-Gardyne, J.||Elliott, R. W. (N'c'tle-upon-Tyne,N.)||Harris, Frederic (Croydon, N.W.)|
|Bryan, Paul||Emery, Peter||Harvey, John (Walthamstow, E.)|
|Buchanan-Smith, Alick||Errington, Sir Eric||Harvie Anderson, Miss|
|Burden, F. A.||Eyre, Reginald||Hawkins, Paul|
|Buxton, Ronald||Fisher, Nigel||Hay, John|
|Heald, Rt. Hn. Sir Lionel||Maude, Angus||Spearman, Sir Alexander|
|Heath, Rt. Hn. Edward||Maudling, Rt. Hn. Reginald||Stainton, Keith|
|Hendry, Forbes||Maydon, Lt.-Cmdr. S. L. C.||Stanley, Hn. Richard|
|Hill, J. E. B. (S. Norfolk)||Mills, Peter (Torrington)||Steel, David (Roxburgh)|
|Hirst, Geoffrey||Monro, Hector||Stodart, Anthony|
|Hogg, Rt. Hn. Quintin||More, Jasper||Studholme, Sir Henry|
|Hopkins, Alan||Morrison, Charles (Devizes)||Summers, Sir Spencer|
|Hordern, Peter||Mott-Radclyffe, Sir Charles||Taylor, Sir Charles (Eastbourne)|
|Hornby, Richard||Munro-Lucas-Tooth, Sir Hugh||Taylor, Edward M. (G'gow,Cathcart)|
|Howe, Geoffrey (Bebington)||Neave, Airey||Taylor, Frank (Moss Side)|
|Hunt, John (Bromley)||Nicholls, Sir Harmar||Thatcher, Mrs. Margaret|
|Hutchison, Michael Clark||Noble, Rt. Hn. Michael||Thomas, Sir Leslie (Canterbury)|
|Irvine, Bryant Godman (Rye)||Nugent, Rt. Hn. Sir Richard||Thompson, Sir Richard (Croydon,S.)|
|Jenkin, Patrick (Woodford)||Onslow, Cranley||Thorpe, Jeremy|
|Johnson Smith, G. (East Grinstead)||Osborne, Sir Cyril (Louth)||Tiley, Arthur (Bradford, W.)|
|Johnston, Russell (Inverness)||Page, R. Graham (Crosby)||Turton, Rt. Hn. R. H.|
|Jopling, Michael||Pearson, Sir Frank (Clitheroe)||Tweedsmuir, Lady|
|Joseph, Rt. Hn. Sir Keith||Percival, Ian||van Straubenzee, W. R.|
|Kerr, Sir Hamilton (Cambridge)||Pitt, Dame Edith||Vaughan-Morgan, Rt. Hn. Sir John|
|Kilfedder, James A.||Pounder, Rafton||Walder, David (High Peak)|
|King, Evelyn (Dorset, S.)||Powell, Rt. Hn. J. Enoch||Walker, Peter (Worcester)|
|Kirk, Peter||Pym, Francis||Walker-Smith, Rt. Hn. Derek|
|Kitson, Timothy||Ramsden, Rt. Hn. James||Ward, Dame Irene|
|Langford-Holt, Sir John||Redmayne, Rt. Hn. Sir Martin||Weatherill, Bernard|
|Legge-Bourke, Sir Harry||Rees-Davies, W. R.||Webster, David|
|Lloyd, Rt. Hn. Geoffrey(Sut'nC'dfield)||Renton, Rt. Hn. Sir David||Whitelaw, William|
|Lloyd, Rt. Hn. Selwyn (Wirral)||Ridley, Hn. Nicholas||Wills, Sir Gerald (Bridgwater)|
|Loveys, Walter H.||Roberts, Sir Peter (Heeley)||Wilson, Geoffrey (Truro)|
|McAdden, Sir Stephen||Robson Brown, Sir William||Wise, A. R.|
|MacArthur, Ian||St. John-Stevas, Norman|
|Mackenzie, Alasdair (Ross&Crom'ty)||Scott-Hopkins, James||TELLERS FOR THE NOES:|
|McLaren, Martin||Sharples, Richard||Mr. Lubbock and|
|McMaster, Stanley||Smith, Dudley (Br'ntf'd & Chiswick)||Mr. George Y. Mackie.|
|Maginnis, John E.||Smyth, Rt. Hn. Brig. Sir John|
I beg to move Amendment No. 296, in page 15, line 17, to leave out from first "a" to "any" in line 18 and to insert:
husband and wife living together in a year of assessment".
This Amendment is intended to clarify the meaning of subsection (5). On page 8 of the White Paper on the Taxation of Capital Gains, it is said that subsection (5) means:
Allowable losses of husband or wife are to be set against gains of the other spouse, unless they claim otherwise.
Those are twenty simple words which, I imagine, not a lawyer nor an accountant could fail to understand.
Unfortunately, in the Bill itself, we have more than four times as many words which succeed simply in reducing the whole matter to complete obscurity. As I read it, subsection (5) means that whereas a woman's losses can be overspilled against her husband's gains, it does not make clear that the husband's losses can be overspilled against his wife's gains.
Because of this apparent obscurity, my hon. Friends and I wish to have it made clear that the subsection means what the White Paper says and why it is necessary to have what is perfectly clearly stated in the White Paper, stated so clearly that even I as a layman can understand it, put in words of such complexity as to put it beyond the understanding of even an accountant or a lawyer.
I can assure my hon. Friend that the wording of the Clause as now drafted will achieve the object which he wants and the wording of his Amendment, which on the face of it looks so much plainer and clearer, would not. I confess when I first read the Clause I had rather the same reaction as he had, but such are the intricacies and mysteries of draftsmanship that, as I have explained, the words he is suggesting would achieve a different object. I assure him that the effect of subsection (5) of the Clause is that the losses of a husband would be allowed to be set off against the gains of a wife or vice versa. The trouble about the wording which he proposes is that the words "married women living with their husband" have a precise meaning which has been laid down by Section 361(1) and (2) of the Income Tax Act, 1952. This is imported into this Clause by Clause 41(3) of the Bill. These technical words include also couples not actually living together, for example because the husband is working away from home. That is the reason why this form of wording has been chosen.
I beg to move Amendment No. 349, in page 15, line 46, at end add:
(8) A gain accruing from the disposal of an asset which was acquired by a person more than ten years prior to the disposal shall not be a chargeable gain and a loss accruing on such an asset shall not be allowable under this Part of this Act.
(9) A gain or loss accruing from the disposal of an asset which was acquired less than ten years but more than five years prior to the disposal shall be abated for the purposes of this Part of this Act—
|the Deduction||The sum allowable as a deduction under paragraph 4 of this Schedule.|
|the Index||The Index of Retail Prices prepared for each month by the Ministry of Labour.|
|X||The Index for the month in which falls the date of the disposal of the asset.|
|Y||The Index for the month in which fall the date on which the expenditure comprising the deduction was made.|
|basis figure||The Index which in arriving at any subsequent Index is treated by the Ministry of Labour as the standard by reference to which any change in the Index as between one month and another is measured.|
The Amendment is designed to secure that the Capital Gains Tax will not be chargeable on assets held for more than ten years and will be chargeable on a sliding scale on assets held between five and ten years, abatement being given in this Amendment by reducing the proportion of the gain which is chargeable for tax. This Amendment follows quite logically from the discussions we have had.
The right hon. Gentleman the Member for Orpington (Mr. Lubbock) described very clearly and briefly the effect of inflation in connection with the matter with which we are now concerned, and I would not add any more detail in this respect except for this one case. There are a number of small people who put their money into equity shares—they might be shares of Shell or something of that kind—and leave it there, intending to draw upon it during their retirement or at some future date if the time comes when they require sums of money. In perhaps 15 years the value of the £ may have depreciated to such an extent that the value of the equity has even doubled in order to catch up. But, in real terms, that investor will have exactly the same money as he had at the beginning.
Under the proposed tax system the investor will be called upon to pay Capital Gains Tax on the nominal value, not on the real increase in the value of his holding. Unless provided against in some way, that is clearly an injustice. We must assume that, however much we dislike things, once they are decided we must go forward in a logical way, and the logical consequence of the decision on the last Amendment but one must be that provision should be made in that way. The Capital Gains Tax should be based on money value and not on face value.
Amendment No. 349 starts with the proposal that if more than ten years have elapsed before the disposal there shall not be a chargeable gain. In subsection (9) of the Amendment we say:
A gain or loss accruing from the disposal of an asset which was acquired less than ten years but more than five years prior to the disposal shall be abated"…
by 20 per cent. if the assets have been held for more than five years but less than six years; by 35 per cent. if they have been held for more than six years but less than seven years; by 50 per cent. if they have been held for more than seven years but less than eight years; by 65 per cent. if they have been held for more than eight years but less than nine years; and by 80 per cent. of they have been held for more than nine years but less than ten years.
I understand that this method has been applied in Sweden. I believe that hon. Members opposite have a great respect for what goes on there, and that may be a matter of some interest. But we may come to the conclusion that if this is to be done there is another way of doing it which I must not deal with but which for clarity I would say is the method described in Amendment No. 117 which will be moved later. This would be a more accurate way of dealing with it on a mathematical formula.
I did not want to tread on the toes of my hon. Friend the Member for Worcester (Mr. Peter Walker), but I thought it right to point out that there was an alternative method of a more scientific character. It is arrived at by comparing the index at the time of disposal and the index at the time of disposition. There are two possibilities.
I do not believe that anybody could seriously suggest that the way suggested in the Bill is a just way of dealing with the matter. We may be told that for some extraordinary reason social justice requires that it should be done in this way. "Social justice" is an expression about which we hear a great deal. It covers a multitude of things. I have always wanted to have the opportunity, perhaps this is it, of proposing that, instead of social justice, it should be called Socialist justice, that is to say justice which is justice to a Socialist but to no one else.
I rise to speak to the Amendment, and also to draw the attention of the Committee to Amendment No. 452. It would be a national disaster if the Government were to weaken or to destroy the motive power and the driving force behind the country's economy. I should like to draw the attention of the Committee to the effect which these proposals will have on smaller businesses. If one looks at the breakdown of businesses in this country, one discovers that an extraordinary number of them are small ones, and they are the ones which will be seriously affected by these proposals. The figures show that 91 per cent. of farms are small businesses, 35 per cent. of manufacturers are small businessmen, and 77 per cent. of the distributive firms belong to small businessmen. These people will be picked out and seriously affected by the proposals.
What do the Government consider to be the driving force behind our economy? What makes people tick? Why do people go out and sweat to build up a business? Why do businessmen seek to make their businesses more efficient? Is it love? It certainly is not love of the Chancellor of the Exchequer, with all due respect to him.
I think that hon. Members will agree there are four main driving forces at work. First, those concerned desire a higher standard of living for themselves. Though not all of them seek to eat at Prunier's as a result, this is a factor, but I believe that it can be exaggerated. The second and more important factor is the desire to build up a business to provide security for themselves in their old age, and for their wives or widows. The third factor is the desire to give their sons and heirs a better start in life, and better opportunities than they themselves had. Hon. Gentlemen opposite may not approve of this, but, whether they do or not, it is a major factor in a man's desire to build up a business which he can pass on to the next generation. There are also those family businesses which have been passed down from generation to generation. Those who inherit them feel that, as trustees, they are bound to pass on to the next generation something at least as good as that which they inherited.
Those are the four major reasons which drive the small business man forward in the building up of his business. They are the reasons why he uses his skill, his energy, his ingenuity, and his enterprise, and they are the things which have built this country into the great trading nation that it is.
I think that the hon. Gentleman ought to be fair about this. It is not only members of the Conservative Party who have built up businesses and have tried to do well for their families. Ordinary working people, even though they are not in business, are motivated by similar desires. The hon. Gentleman should not imply that as members of the Labour Party we do not want to do well for our families.
I am grateful to the hon. Gentleman for that intervention. I did not suggest that the Conservative Party was the party of business, and that the Labour Party was not. I said that I did not believe hon. Gentlemen opposite knew what they were doing in including these proposals in the Bill.
The enterprise, the energy, the skill, and the ingenuity to which I have referred are important for the nation, and they are important when one realises that it is the small businesses which will be seriously affected by these provisions. If this proposal goes through and a 30 per cent. rate of Capital Gains Tax is imposed, there will be a drastic weakening in the motive power and the driving power behind these firms and businesses.
Earlier in the debate an hon. Member asked what harm this would do to the shopkeeper. I wish to take that up, because I am quite convinced that the shopkeeper, the small farmer, and the small businessman will be seriously affected. I shall give one or two examples. Suppose a man has started a business and worked it up to provide a reasonable standard of living. He may ask himself, "Should I expand the business or not?" Why should he bother to expand it when, if he works and strives to expand his business, he will not be working for himself and for benefit in his old age but for the Chancellor of the Exchequer? [HON. MEMBERS: "Oh"] Hon. Members get very heated about this, but these are the sort of things which businessmen say to themselves when they are deciding whether to expand businesses.
I am not sure whether the hon. Member was in the Chamber when I gave an answer to the hon. Member for Barry (Mr. Gower) in an earlier debate. I indicated that we are alive to the problem to which the hon. Member is now referring of the small businessman who, from time to time, will realise the value of assets he has built up. As the hon. Member is no doubt aware, there is another Amendment to be considered later when we shall deal with that specific problem.
I hope that means that the comments which my hon. Friends and I have been making are falling on certain receptive ground and that a concession will be made. At the moment there is no such concession, so I shall continue to press the case that there should be such a concession. Look at the case of the businessman deciding whether to expand his business or not.
If the hon. Member refers what he is saying to inflation, it will be in order.
This Gentleman opposite is getting very heated. Shall I allow him to interrupt, and get that out of the way?
The hon. Member must not refer to another hon. Member as "this Gentleman".
I am grateful to the hon. Member for Basingstoke (Mr. Mitchell) for giving way. I am sure that he wants to be fair. He referred a great deal to the effect of inflation on the small investor providing for the future. In this country in the last 40 years 15 million people have been saving by means of facilities provided by the National Debt Commissioners, trustee savings banks, building societies and the Post Office Savings Bank. We have all seen the value of the £ which we saved in 1920 fall to 1s. 4d. Does the hon. Member suggest that the artisan and those in the lower middle-class who have saved through saving institutions have not made as great a contribution to the economy and the thrift of the nation as the small businessman, and what compensation are they to get?
I think it is quite clear that that interjection bears no reference to the point I am making.
Those who save irredeemable securities will have to pay tax on top of that.
I think I am right in saying that to discuss that matter would be out of order on this Amendment. It would be a flagrant denial of justice and of the word of the Government if, having issued gilt-edged securities redeemable at a later date, the Government ratted and charged people a Capital Gains Tax. If one spelled the words "gilt-edged" in a different way, one could understand why.
I come back to my original remarks. Here we have a businessman—a shopkeeper, a small farmer, or whoever it may be—who says to himself, "Shall I put money into my business to expand it? Shall I put more effort and more work into it?" He sees that if he does this he will, in his old age, pay back to the Chancellor 30 per cent. of all the extra effort that he has put in. It will obviously pay him more to say, "No, I will put the money into a swimming pool in my house, or into central heating, because that will be free of tax, and it will represent 5 per cent. a year added value. It will be far better to do that than to put the money into the business." He will ask himself, "Shall I be more efficient; shall I modernise my firm, and bring in new methods and new machinery?" He will say, "Why should I bother?" What will it be worth for him to do it? He would do far better to sit back and take a personal assistant or an extra secretary, and spend his time playing golf.
There is no driving force if a man is not allowed to profit from the efficiency that he brings to his business. The more we weaken the profit motive which drives a man to become more efficient the less people will be prepared to make their businesses efficient. We should hardly be surprised if people who are considering the effect of the Capital Gains Tax on small businesses say, "This is a tax which says, 'Eat, drink and be merry now, for tomorrow we pay capital gains'", rather than, "We should build up our business for future generations". If we consider the problems that will arise in the case of those people who have family businesses and who are seeking to pass them on from generation to generation, we appreciate how impossible is the situation that will develop if this Amendment or a similar one is not accepted.
I am not the only Member to be bewildered by reading the Bill. I have come to the conclusion that it was probably easier to understand in its original Hungarian. Be that as it may; I want to ask three direct questions which I hope will be answered directly by the Financial Secretary.
First, is it proposed that every farmer, every garage proprietor, every country solicitor, every grocer, every village shopkeeper, and the like, who finds himself paying 30 per cent. of the increased value of his business—whether the increase has arisen because of inflation or because of the amount of capital which has been sunk back into the business after hours of sweat and toil have been put into it—should realise that all the time he is building up his business 30 per cent. of what he is putting into it will be taken away by the Chancellor at a later date?
Secondly, what happens if a man decides to change his trade or business? If a hairdresser in Basingstoke decides to become a grocer in Andover will he, on the sale of his first business, have to pay 30 per cent. of its value, including the goodwill and all the work that he has put into it, so that he is unable to find the money with which to purchase his second business? This is the very serious effect of the tax, which we have to consider in the light of our endeavours to get some mobility not only in labour but also in business.
Thirdly, if such a person decides to retire and leave the business, will he pay to the Chancellor 30 per cent. of all that he has put into it? Finally, what happens if, as is the case with so many men who have built up businesses during their lifetimes, a man wants to pass on his business to his son? Does he pass on the business and then have to find 30 per cent. of its value in cash? If so, I can tell the Government that such men as these have not got the money. It may be the case that the value of the land owned by farmers in my constituency has risen, but they have not got that much cash in the bank—
Does my hon. Friend agree that his constituents will probably call this tax an "Andover" tax?
I think that the point I am making is very important. The farmer who is passing on his farm to his son has not got much in the bank. He has to pay up to 30 per cent. increase in the value of his land but he has no more money. He has to pay cash and he will have to sell off a large part of the land and so break up the farm. This sort of thing would have a disastrous effect on the farming community. The whole effect of the provision in this Clause will be to reduce and to remove the motive power and the driving force behind the business community. This would apply to the one-man or the two-men family businesses and especially to the farming industry in which there is such a high proportion of one-man or two-men businesses. I can only say that the running form will be prescription for sluggish economy out of Socialist dogma leading to disaster.
I wish to support what has been said by my right hon. and learned Friend the Member for Chertsey (Sir L. Heald) and by my hon. Friend the Member for Basingstoke (Mr. Mitchell). I believe that the inflation argument is very important particularly for the man with a small investment. I wish to draw the attention of the Committee to another Amendment, in my name and that of a number of my hon. Friends, in which we seek to present a rather different aspect of the picture. We desire to remove the first £400 of income from the imposition of the Capital Gains Tax. I believe this to be of great importance to the small investor about whom we have heard so much.
I speak in support of the Amendment first from the notion that we should believe that increases in savings and investments are absolutely vital in this country if our economy is to expand rather than stagnate. Secondly—I hope in this I carry some hon. Members opposite with me—it is important that increased savings should be made by an ever—increasing number of people, by the broad mass of the community. If one accepts this premise it is with sorrow rather than anger, but not entirely with surprise that one finds that the Finance Bill generally and particularly the Clauses relating to capital gains, so far from helping the concept, are a direct and positive disincentive. They attack saving directly.
The real defect is that in attempting to hit the rich investor, which has been the tenor of the Government action—
they have been trying to hit the rich man who is usually able to duck the blow—they have in this Finance Bill delivered a great thumping whack at the small man who cannot duck. He has been affected by the Corporation Tax, the increase in Income Tax and now we come to the Capital Gains Tax. It is a staggering blow which the small investor has had to suffer at the very moment when he should be encouraged. The real difficulty is, as we have seen earlier, that the Government have been completely obsessed with the problem of catching someone. We have continually heard remarks about getting away with tax evasion and trying to catch the rich man. During the Second Reading of the Finance Bill the Financial Secretary said:
The introduction of the Capital Gains Tax is an attempt to achieve social justice in a considerable measure by ensuring that a lot of people who have been escaping the tax net will be caught by it."—[OFFICIAL REPORT, 20th May, 1965; Vol. 712, c. 1777.]
This indicates the thought which has gone into the Finance Bill, and also, in my submission, indicates the entirely wrong sense of priorities of the Government, the desire to catch, whereas I believe that the test should be what is in the best interests of the country as a whole.
The trend ought to be towards the spreading of wealth and the increasing of savings. At a time when we should be channelling the surplus income away from bingo and gambling into savings and investment, it is extremely ironic that the Government have introduce a Bill which taxes savings while letting gambling go scot-free. The argument advanced is that it is much too difficult and complicated and that much more thought is wanted before gambling can be taxed. I should have thought that that precise argument should be advanced about capital gains. The taxation of savings should receive much more thought than the taxation of gambling.
I take it from the hon. Member's remarks that he deprecates the amount of gambling which is going on at the moment. I hope that he is under no misapprehension about the complexion of the Government which introduced the Measures which permitted this excessive amount of gambling
I do not see what relevance that has. If it is any consolation to the hon. Member, I have nothing against gambling; nor do I have anything against capital gains.
The Amendment which stands in my name is designed, to a large degree, to lessen the burden of Capital Gains Tax on the small investor. The Wider Share Ownership Council has estimated that there are approximately 4 million investors in this country, many of them very small holders. Perhaps a more dramatic figure is that, according to its survey, about two out of every three adults in this country have an interest, either direct or indirect, in the stock markets, through pensions funds, insurance, direct investment or unit trusts. These people go into investment with a view to making a capital gain. I should like to hear a little less about the apparently implied immorality of capital gains. I see nothing particularly moral in going into an investment with a view to making a capital loss, though that is usually my fortune. It is right, proper and sensible to make a capital gain and there is nothing immoral about it.
It is also right that there should be a hedge against inflation, on the lines laid down in the other Amendments. Speaking on the Second Reading of the Finance Bill, the Chancellor seemed to advance the theory that the Government have been terribly generous over the Capital Gains Tax, that because this is below the standard rate of Income Tax, because it is 30 per cent.—27½ per cent. in some cases—and the standard rate of Income Tax is 41¼ per cent., they are being very generous. What they have overlooked is that, in Income Tax, there is a level up to which no tax is charged at all, whereas, if I understand the Bill aright, the smallest investor with the smallest of gains will attract Capital Gains Tax. To rectify that is the purpose of my Amendment. I think that it has received wide support throughout the country, and I believe that it is something on which the Government should think very carefully.
That is the first argument which I advance in its favour. The second is the administrative one. In 1952, the Inland Revenue submitted a memorandum to the Government indicating some of the things which would have to be done in that Department in order to collect Capital Gains Tax. It said that the Department would be concerned with searching through all cases of liability or prospective liability, obtaining returns from the persons concerned, examining returns, testing their reliability by all means in its power, making estimates or causing them to be made, and dealing with appeals against rating to the appellate body. An enormous amount of work would be involved and the conclusion at that time was that it would be too big a burden for the Department to bear.
I should have thought that the position is even more complex today, because at that time it was estimated that there were about 2,500,000 transactions on the Stock Exchange alone to be investigated. I should have thought that there would be a far greater number of transactions to be investigated today. It seems ludicrous that if I make a capital gain of a couple of pounds or so a year the whole weight of the Inland Revenue should descend on me, with new departments to go into valuations, arguments and counter-arguments, followed by appeals if necessary, and all the rest of the machinery, just for that small amount. It is so absurd that it is a strong argument for excluding amounts up to a certain sum. Perhaps £400 would be a reasonable minimum. I call in aid the theory of no less an authority than the minority Report of the Royal Commission. Signed by no less an authority than Mr. Kaldor, it said:
We are in accord with the view that for an initial period the tax should be limited to gains arising from the sale of businesses and securities of all kinds and … that there should be an exemption limit of £50 or less on any sale when the annual gain is £400 or less to reduce the administrative costs involved".
It would indeed reduce administrative costs if such a step were taken, although I do not rest my case solely on the administrative argument, however powerful it may be. It is vital that the Government should give a concession for the small investor, for they should do something to encourage share ownership in this country.
Being a naive man, I take at face value some of the remarks hon. Gentle-
men opposite made prior to the last election. I completely agreed with the words of the President of the Board of Trade who, writing in the Stock Exchange Journal in September, 1963, stated:
… I would like to see private ownership of the 'growth' types of property, which give rise to capital gains, far more evenly spread among our population".
He went on later:
It must, therefore, also include share ownership".
I agreed and I still agree with every word of that, but the Government do not help share ownership and encourage savings by introducing a tax of this sort. There must be incentive on the lines indicated by the Chief Secretary, who I am pleased to see in his place, for speaking to an Investors Chronicle conference last year he said:
… may I say that it is perfectly understood by every intelligent Member of my Party"—
at which point there appears in brackets the word "laughter"
that it is the profit motive which makes the private sector tick … you would be a complete lunatic to try and do anything to detract from the incentive capacity of the profit motive and, therefore, the profit motive is understood. The private sector will be encouraged, will be fostered, and everything will be done to make it as successful and useful as is possible.
I agreed, and I still do, with every word of that, although I am not so sure about the intelligence of hon. Gentlemen opposite. Although only a few hon. Gentlemen opposite at present appear to be taking an interest in this discussion, I hope that the Chief Secretary will draw their attention to that quotation.
I detect mounting enthusiasm, not only on this side of the Committee but also on the Liberal benches and by at least one hon. Gentleman opposite—the hon. Member for Manchester, Cheetham (Mr. Harold Lever), who is no longer in his place—for the concept of spreading ownership and encouraging investment. I am prepared to accept that the Chancellor meant what he said and that we may expect a small chink of concession on this occasion. The spread of ownership and encouragment of savings is not only economically and socially desirable, but I believe that it is the cornerstone of freedom in our society, providing a bulwark against the ever-increasing power of the State.
The Chief Secretary having been put on the spot by my hon. Friend the Member for Harrow, Central (Mr. Grant) in an excellent speech, I want to turn my attention, not for the first time, to the Financial Secretary. I support the Amendment moved by my right hon. and learned Friend the Member for Chertsey (Sir L. Heald)—as I do Amendment No. 117, which I can only call a brilliant composition, and one that might be described as a variation on a theme by Chertsey.
The Financial Secretary has been very naughty, and I shall be very cross with him. It is very bad for the reputation of the Government that on the last Amendment he should have said that the Government cannot accept in any way whatsoever the inflation argument that we are now discussing. That is not the right way to proceed in this Committee, either for harmony or for the constructive development of our work. The Financial Secretary should not make that sort of statement before he has even listened to one argument on this extremely important range of Amendments. It is wrong—and the public's attention must be drawn to anything that is wrong—that a Minister should so prejudge an issue before it has even been discussed in the slightest outline. I hope that the hon. and learned Gentleman will realise, too, that it is rather offensive to the Committee that that should happen. I am somewhat surprised that he, of all people, should have acted in that way.
My right hon. and learned Friend was perfectly right in developing the case of inflation with that economy of words and wisdom that is natural to him. Inflation is nothing new. Has the Committee realised what has been happening right through the pages of history? I shall not go too far back—only to Queen Anne. Where would we have been if the argument had then been adduced that capital gains were immoral, and that everything had to be creamed off in the way suggested? Where would have been the development of industry and commerce? Where would we have been in this race against other nations? Nowhere.
I am surprised that, having set this sort of theme, members of the party opposite should have blanked their minds to the consequences of their mundane arguments. Inflation has gone on at different rates throughout the ages, with one particular exception that will be in mind, and it is now rapidly getting back to the phenomenally high rate we associated with the Labour Government in the 'forties and 'fifties. The fact of inflation is just the same—it is only a question of the rate. If any regard had been taken of that, where would the incentive and capacity to develop our industrial life have come from?
Does not my hon. Friend agree that it is an extraordinarily naïve and unrealistic attitude on the part of the Government to argue as they have done?
Certainly. That is absolutely standard. They are naïve. All that they have done is to accept a certain theme. I do not want to go back all over this. I said all this on the first Finance Bill. The Government took certain political decisions without any regard to any other factor and said, "This, according to Socialist ideas, is wholly writ. This is what will be. Everything has been bent towards it". Surprisingly enough, the Labour Government have even discarded their arch-adviser Kaldor in the matter of exemptions. I cannot fathom what is working in their minds. What I can fathom is the effect of the decisions which they are trying to place on the country as a whole.
The effect will be precisely on the lines developed by my hon. Friend the Member for Basingstoke (Mr. Mitchell). In a very good speech, my hon. Friend outlined the effect of this in perfectly simple language which anyone outside the House of Commons, as well as anyone in it, even someone on the Government Benches, could understand. It will obviously be a disincentive if people are to be robbed of the reasonable standardisation and maintenance of their money in real terms. Money terms do not mean an awful lot. People will soon begin to ask themselves these questions; "Am I to put my back into it? Am I to do this saving? Am I to sweat hour after hour, week after week? Am I to take my books home at weekends?" People do that. I spent most of my early life sweating at the weekends. I did not just work at the office. But I had an incentive to do it. I know many people who say that it is not worth while. This is the factor which breeds effort in this country. If it is killed, there cannot be a Socialist paradise on the basis of social equality, on bottom domination. It is human nature. Human nature cannot be bent to political wills. Political wills must dictate in the last analysis the politics of the country. They will.
This is what right hon. and hon. Members opposite fail to see. There is no doubt about it whatever. If the Labour Party pursues this line with the present generation, with the growing conditionings of our people and the inspiration which opportunities are giving them, it will knock itself for six. There is nothing I want more. I want much less than that, in fact. I do not want the country to suffer in the process. I shall stand here and argue that this should not happen, although if the Labour Party goes on as it is doing it will cut its own throat. We have a public duty to do all we can to protect the people and also to ensure that our country can grow in stature, in stability and in progress. Whatever our political views may be, we must put this consideration first.
I ask the Financial Secretary to address himself to this argument. I ask him not to prejudge the argument before he even enters the Chamber, because that is not up to his stature. He is being overworked. We forgive him much, but to prejudge a matter is an insult to the Committee. We will not be insulted and take it lying down. In the last analysis, the Government will take it. The hon. and learned Gentleman must be true to himself. He is an intelligent man. He is a decent chap. Let him be true to himself. If he is not true to himself, he has no rightful place in his party. I ask him to be honourable to the Committee and not prejudge an issue before he has heard one argument. It was terrible that he should have said on the last Amendment that the Government are not interested on the question of inflation. That was before we had been allowed to develop it, except for a general remark en passant which was strictly out of order. Is that in character with the present Government? I am beginning to think that it is. It will be their death knell. What is much more serious, it will undermine confidence and enterprise. No man, whatever position he holds in the Government, has the right to do anything which will bring about that state of affairs.
I very much agree with the concluding remarks of the hon. Member for Shipley (Mr. Hirst). I do not think that the Financial Secretary or the Chief Secretary or any member of the Labour Party appreciates how seriously the question of inflation is taken in relation to the Capital Gains Tax outside the Committee in the country as a whole. They must address their minds to this great objection to the Capital Gains Tax in its present form which many people who are sympathetic to the idea of the Capital Gains Tax hold. For a long time I have been one of those who are so sympathetic. I have always thought that it was quite wrong that capital gains should go scot free when we have taxation at the present level on incomes. But one has to make a distinction in one's mind between the taxation of real capital gains and the taxation of money gains which have been swallowed up by the effects of inflation.
The Chief Secretary may be about to tell the Committee that under a Labour Government inflation will not continue. We find that difficult to believe in the light of the experience of the last six months, but that is the proposition which he might seek to advance. If he does, I urge upon him that there can be nothing lost by accepting one or other of the Amendments. I think in particular of Amendments Nos. 428 or 429 in the names of my hon. Friends, my right hon. Friend and myself, but I think that Amendment No. 117, as far as I understand it, is designed to meet the same point. I am sure that if he wishes to do so the hon. Gentleman can put these matters to the draftsmen and come up with something to deal with the points that we have in mind, which is that people should not be required to pay tax on gains which do not represent a real increase in the purchasing power of the assets.
I do not want the hon. Gentleman to say that this will be dealt with in later Amendments, whether it is a matter of the small businessman or the holder of gilt-edged securities or any other type of capital assets. To take the holder of gilt-edged securities, if he buys medium-term fixed-interest stocks with a redemption date of 1970 or 1975, as part of the total yield he gets a capital appreciation of perhaps 2 per cent. or 2½ per cent. a year. In the light of our experience since the war, we know perfectly well that that small percentage of 2½, or 3 at the most, will be inevitably swallowed by the effects of inflation. Will the Chief Secretary say that the Government will tax these people on 2½ per cent. per annum which does not represent a gain to them at all? It will be quite contrary to the principles of our taxation system and the principles of British justice.
Would the hon. Gentleman say that if a person did not receive income in a year, that should be deemed to be taxable? It is tantamount to saying that if my income is £3,250 I am going to be taxed on £4,000 or £4,500 and the Income Tax will be levied at rates applicable to a much higher rate of income than I have actually received. This is what the Government are saying. To put the example which I mentioned on the last Amendment, one can easily have a case where a person acquires an asset for £1,000 and after 10 years or 15 years disposes of it for £2,000. Under this Capital Gains Tax he is deemed to have made a profit of £1,000, and he will pay £300 in tax on that. But suppose that in the intervening period the purchasing power of the £ has fallen to 10s. He is still left with an asset not more valuable than it was at the beginning. This might apply to many types of assets and not only to gilt-edged securities which I quoted.
It might apply to the holders of units in unit trusts, or shares in investment trusts. Whilst the Chief Secretary may say that equities as a whole have increased faster than the rise in the cost of living, that may not be true of a particular investment into which the small investor might have put his money. One cannot, therefore, say that because this tax will be generally-speaking fair to the body of taxpayers one has to be inequitable to a taxpayer who may not be in that position. This argument applies to the owner of property of any kind, not only gilt-edged securities but equities of all sorts, holdings in unit trusts, in investment trusts and in real property.
The Treasury Bench must address themselves seriously to this argument if they are to satisfy not this side of the Committee, whether the Conservatives or the Liberals, but people in this country as a whole, who are very anxious about the effect of the Capital Gains Tax and the inflation which we shall inevitably see in the immediate future.
I am delighted to have the opportunity to support the case so persuasively put by several of my hon. Friends in urging this group of Amendments on the Government. I shall argue the case for a sliding scale of Capital Gains Tax liability on two main counts. First, it is necessary in order to maintain a high level of private investment in this country and to protect long-term equity shareholders from the penal effects of the proposed tax. Second—this point has not yet been made in the Committee—it is necessary in order to prevent what I believe could happen, that is, a contraction of turnover on the London Stock Exchange on such a scale as to jeopardise its continued existence as one of the great financial centres of the world.
Although the Chancellor implied yesterday that we on this side had been exaggerating the extent of his unpopularity in financial and business circles, I can only say that, if he will come with me tomorrow on to the floor of the London Stock Exchange, he will be surprised at the kind of reception he receives. Perhaps that invitation will be conveyed to him.
The Chancellor has promised us many concessions, which we are still breathlessly awaiting. Perhaps they will come, in the famous words of my hon. Friend the Member for Worcester (Mr. Peter Walker), tomorrow. I must warn the Financial Secretary that, unless he is prepared to give way to us on this group of Amendments, he and his right hon. Friends will be branded not only as anti-business but as anti-investment as well. As the Committee knows, we are in this Clause dealing not with gains from short-term speculative activity but with gains resulting from genuine prudent investment over a period of years, just the kind of activity which hon. Members on both sides should be anxious to encourage in the country's interest.
Anyone who sat through the Chancellor's Budget speech will recall that the section which received the loudest cheers from his hon. Friends behind him, apart from that dealing with business expenses, was the one dealing with capital gains. There is an almost pathological hatred on the part of hon. Members opposite towards anyone who has any connection with the City of London and its activities. Time and again, this is reflected in the speeches of hon. Members opposite and the proposals in the Finance Bill itself. Yet this hatred and antagonism springs from a fundamental misunderstanding of the part which the City of London plays in the successful functioning of our free enterprise economy. Hon. Members opposite invariably choose to ignore the vital rôle which the Stock Exchange plays in the channelling of new investment to assist the growth and expansion of British industry, and with it, of course, the employment and prosperity of those who work in it. The total market value of securities quoted on the London Stock Exchange amounts to £50,000 million. This gives some idea of the great scope and importance of London as an international market in stocks and shares.
My great fear and foreboding is that London's position in this sphere will be prejudiced and undermined by the Chancellor's proposals to impose a flat rate 30 per cent. Capital Gains Tax ad infinitum. The decision to impose a flat rate tax is bound to act as a disincentive to savings and to lead to substantially restricting the turnover and status of the London stock market. Perhaps I should disclose the fact that, in my spare time, of which I have not had a great deal in the last few months, I am a member of the London Stock Exchange, but I hasten to add that, contrary to what some hon. Members opposite seem to imagine, those who work on the Stock Exchange are not sharks or get-rich-quick operators and that the speculation we heard so much about yesterday is only the froth on the top of the great mass of genuine investment business transacted there every day.
The men who follow careers in the City are charged with a very heavy responsibility for handling investment decisions on behalf of pension funds, unit trusts, banks, investment trusts and discount houses as well as individual clients. I hope that hon. Members opposite will not underestimate the number of people in the country who are directly or indirectly affected by what goes on in the City and the way in which it is treated by the Government.
I am sure that the proceedings of this Committee, the proposals of the Chancellor and the way in which he reacts to our recommendations will be watched very closely by a very large section of the community. Quite apart from the four million or so people who invest directly in stocks and shares or unit trusts, two out of three adults have some kind of direct or indirect interest in the stock market through life assurance, private pension funds or as members of a trade union or a co-operative society. This should be borne in mind.
The Government would be well advised to take note of these figures, because I believe that the effect of a flat-rat Capital Gains Tax will be not only to penalise those now investing for the future but also to restrict turnover and gravely damage the operations of stock market upon which so many people directly depend.
Perhaps the most powerful argument against the Chancellor's proposal and in favour of the Amendment is that a Capital Gains Tax in the flat-rate form is a positive disincentive to savings. I understand that the Financial Times index of share prices today stands at about three and a half times the level it was 30 years ago. This means, as has been said, that if we take into account the inflation during this period those who have held shares throughout those 30 years are no better off today in real terms than when they originally purchased the shares. All they have managed to do is just keep pace with the general rise in living costs.
In common with my right hon. Friend the Member for Bexley (Mr. Heath), I was not impressed with the validity of the argument put on this point by the Financial Secretary in our earlier debate. From now on, under the Chancellor's proposals, if these people want to maintain the value of their savings it will not be enough merely to keep pace with inflation. They will have to do 30 per cent. better than that if they are to offset the penal and damaging effect of the Capital Gains Tax.
This is a very grave penalty and injustice upon an important and valuable section of the community and the purpose of our Amendment is to restore some equity and common sense to the treatment of these long-term investors. For all the very cogent and powerful reasons which have been advanced from this side of the Committee, I shall support the Amendment.
I may be wrong, but I sense a feeling that the Committee does not want to go on too much longer on this group of Amendments, although it will want to deal with others which are following. For that reason, I shall be brief and confine myself to certain arguments.
My hon. Friend the Member for Harrow, Central (Mr. Grant) is quite right to say that there must be some measure of tolerance inserted after the word "gains". I will not develop this argument at great length, but if the Financial Secretary will read what I said last night alone about valuation for Capital Gains Tax purposes, he will see the large margin of error which can be taken up. When my hon. Friend spoke of a person engaged in making small capital gains arising from income trusts or unit trusts, or other small matters of that kind, I could not fail to observe, although he was not directing it to the Financial Secretary's attention, the vigorous nodding of my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) when it was said that it was vital to discount a small measure of gain before capital gains began to be taxed.
My hon. Friends have been arguing that the figure should be £400. I care not whether it is £400, £300 or £250, but even with Income Tax the taxpayer is allowed £120 or £150 free and there is then a further amount which is taxed at a lower rate before the standard rate is reached. I would have thought that it was plain beyond peradventure that in a Capital Gains Tax there must be some figure disregarded before the tax is applied. I should have thought that it was the plainest possible argument that the figure ought to be fairly substantial when it was likely to be difficult to evaluate the capital gains.
As I said last night, tax inspectors one and all dislike the idea of the Capital Gains Tax generally when the gains are calculable and when they are incalculable the Inland Revenue recognises the many extra difficulties, especially when there are capital gains across the board, not only in shares, but in racehorses.
Hon. Members should think of the sort of position which may arise for some people. Somebody may own a couple of racehorses and a few pictures and may have done some property dealing and may own some stocks and shares. All these will be related one against the other. In such an example, it will be extremely difficult to calculate what the tax should be. Whether the small investor is investing in stocks and shares or across the board, even on the grounds of administrative convenience, if they are not attracted by the other arguments, the Government should agree that there ought to be some tolerance.
There is one other matter which has not been adverted to. The Amendment of my right hon. and learned Friend the Member for Chertsey (Sir L. Heald), Amendment No. 349, deals with the position when someone has bought an asset and held it for a period of ten years or more. My right hon. and learned Friend was arguing that in such an event it ought not to be a chargeable gain nor a computable loss. [Interruption.] I wonder whether the birdcage opposite could keep quiet for a moment, or go out for a smoke, when we will have only two or three in the Chamber and it would be rather easier to hear. [HON. MEMBERS: "We are buying racehorses."] Perhaps they can take their ponies to the East End.
They can more easily hear you, Dr. King, than me, but comments tend to disturb the chain of thought and I do not want to be too long.
The Government have still not applied their minds to the basic argument on capital gains. The reason why one should not pay capital gain in respect of an asset held for more than ten years is that it is not part of your trading asset. These things were not bought for trade and there is a world of difference between what is acquired for a hobby and what is acquired as income. This is an intellectual argument and is not concerned with general taxation. What I am trying to explain is that whether a person is a professional man or engaged in a trade or some form of commerce he will have to pay on his income.
I am for a Capital Gains Tax. I believe in it, and I would like to have one in respect of income howsoever earned in the course of trade or profession. I tried to say this last night, and it is beginning to have some effect, because, like Alice in Wonderland, I believe that what is said three times is true. When a man has purchased something, say, a picture, and held it for many years, he has purchased it in the course of his hobby and not because it was part of the living he earned.
For example, it has been known for a great many years that if a person engages in the breeding of racehorses then he has to pay, very naturally, for that occupation. If he purchases a racehorse it is regarded as a hobby and he is not able to lay off the expenses on the basis that he is engaged in an occupation. It is the same in the case of a picture, or an asset owned for a period of about ten years. These are not things which are taxable on the basis of income or trade and this is what has not been got across. The whole of the argument for the exclusion of so many of these categories is based upon this. I hope the hon. Gentlemen opposite have the point.
There are three main points. The first is the inflationary argument, and that has been well developed on these benches. The second is that whatever the amount shall be some tolerance must be given in respect of capital gains. An allowance must be given on a very much lower rate, but I should think that a certain amount, whether for administrative convenience or to deal with casual capital gains which might come about, should be made.
The third point is that there are certain spheres which are unattractive for the purposes of capital gains. These are usually not those in which people are seeking to earn their living. If this principle is adhered to, I think we may be able to get some way in what is, after all, a highly experimental Measure in which it might be advisable to go slowly. As this debate deals with the question of incomes and economic policy, I think it is about time we had some Minister from the Ministry of Economic Affairs participating in the discussions instead of leaving the right hon. and hon. Gentleman to have to carry the burden in the heat of the day. I hope that they will join in and not leave the Treasury to paddle its canoe as best it can.
The debate is running rather wide of the Amendments. I should bear that in mind when I consider what to do about the debate on the Question, "That the Clause stand part of the Bill". I will not allow hon. Member's to repeat on that Question the arguments which they have advanced in this debate.
I take the hint of the hon. Member for the Isle of Thanet (Mr. Rees-Davies) that perhaps the sense of the Committee is that we have had a very full debate on these Amendments. It is almost exactly one-and-a-half hours since we moved to this interesting and important group of Amendments. May I seek to deal with them as briefly as I can.
The right hon. and learned Member for Chertsey (Sir L. Heald) moved Amendment No. 349 which proposes a system of abatement in our Capital Gains Tax system. The possibility of writing into our system of Capital Gains Tax a system of abatement was, naturally, considered by my right hon. Friend the Chancellor of the Exchequer, but certainly never in anything like the form in which it is proposed in the Amendment, which is, in fact, a wrecking Amendment because this abatement system is tied to something which starts by being a flat-rate system of taxation.
All the countries which adopted the abatement system—and they have not been many—linked it to capital gains which at the outset and in the initial years were treated like normal income and were taxed as ordinary income and the equivalent to Surtax rates, and then that was abated in later years. To have an abatement system such as is proposed in the Amendment linked to our 30 per cent. Capital Gains Tax would mean that something like four-fifths of the yield of this tax would be lost. That is why I call this a wrecking Amendment. The Capital Gains Tax would become absolutely derisory.
That does not alter the fact that I must meet and answer the arguments about why we rejected the abatement solution, because, as has been said, other countries have adopted it. The Americans adopted it. They started it in the 1920s, and they abandoned it and adopted a system of the kind which we are introducing. Sweden, it is said, has this system. They have two systems of abatement—one for real property and one for other assets. But this is something which has been much criticised in Sweden and I am advised that the Swedish Government have set up a committee to investigate the whole of the Swedish capital gains tax system. One of the things which it is considering is the possibility of going over from the abatement system to a system of the kind which we propose.
I suggest that the experience of the countries which have tried an abatement system is not very happy. Let me try to explain why. The main and all-important reason is that it has a very adverse effect on the market for shares and securities. If anything is likely to have a locking-in effect, it is an abatement system under which there is an obvious inducement to hold and hang on. This was the paramount reason why the Americans abandoned the abatement system. All the advice which my right hon. Friend the Chancellor of the Exchequer has had from those very responsible persons whose duty it is to advise him on the effect of measures on the market for securities has been unanimous and emphatic against introducing an abatement system and in favour of a permanent flat-rate system.
The smooth functioning of the market depends, amongst other things, on the ability of analysts to compare the yelds of different kinds of stocks, including comparing the yields on Government stocks with those on other fixed interest securities, and if there was a variable rate of tax according to the length of time for which a person held a security, an investment analyst would have to study the individual position of each potential investor before he was in a position to offer any advice.
The investor himself would not know for how long he was going to hold on to the security, so it would not be possible to calculate what would be the rate and degree of abatement which would be taking effect at the time of his disposal, and if, as I suggest must be the case, any abatement scheme was linked to the basic rate of Income Tax and Surtax, he would not know what would be his own personal effective rate of tax during the year of disposal.
It is for those reasons, which appeared to my right hon. Friend to be quite overwhelming, and in accordance with the advice which he received, that he rejected the abatement solution.
One of the arguments put forward in favour of the abatement solution, as indeed of this group of Amendments which we are considering, is the desire by hon. Gentlemen opposite to build into our Capital Gains Tax system a hedge against inflation. I know that the Committee wearies of listening to me, and does not want me to repeat the arguments which I put forward when considering the last Amendment. The hon. Member for Shipley (Mr. Hirst) criticised me for having dealt with it on the last Amendment, but the argument was raised there, and I thought it right to deal with it. But, as the right hon. Member for Bexley (Mr. Heath) pointed out in reply, this is obviously a relevant argument in considering this Amendment, so I ask hon. Gentlemen to take, as part of my argument on this group of Amendments, what I said in giving our reasons for rejecting the idea that it would be right or proper to build into a Capital Gains Tax system a hedge against inflation.
We have heard a lot about the position of the investor who makes a gain in money terms which does not reflect the real gain in terms of purchasing power. To put it the other way round, there is not a real gain in purchasing power because it is posited that the monetary gain is only sufficient to maintain the value in terms of purchasing power of the original investment. But in that situation, which is one of inflation, one must also look at the position of investors who do not make gains, investors who have invested in other forms of investment where they do not make gains.
If one is going to take the idea of building into the tax system this hedge against inflation, is there to be some kind of rebate for those people, and, if so, where is it to stop? I suggest to hon. Members that if they think about this for a little they will see that it would be unworkable to build in, in any way which would be fair, and which would produce equity between different classes of taxpayer, a hedge against inflation. As I said on the last Amendment, if one was going to try to do so, the place to start would not be with the equity investor.
The right hon. and learned Member for Chertsey derided the idea of social justice, and said that it appeared to him as Socialist justice. I should be very glad to accept the description, because this is what we mean by Socialism. The object is to achieve social justice, and we do not think that it is social justice to build in a hedge against inflation in favour of one class of taxpayer.
The hon. Member for the Isle of Thanet, in support of the abatement argument, and in support of the whole group of Amendments, put forward again an argument that he put forward last night, and urged me to accept, in the words of Alice, that what he says three times is true. It was not Alice, it was the Bellman who said, "What I say three times is true", but however many times the hon. Gentleman says it, it will not convince me or my hon. Friends. His argument is that the theoretical basis for a Capital Gains Tax is that the capital gain to be taxed is part of the trading assets, but that is exactly what it is not.
If it is something which one sets out by way of trade to gain and one is successful, generally it gets taxed as part of income as in the example the hon. Member gave of the racehorse breeder who breeds horses by way of occupation. If the individual owner does it by way of a hobby that is not part of his trade. The horse is a capital asset and is not liable to tax. If that person has had a successful racing season and sells at a profit, up to now he would escape tax, but in future he will not. If one accepted the argument of the hon. Member the result would be no Capital Gains Tax at all because his description would exclude virtually every type of capital gain.
The hon. Member for Basingstoke (Mr. Mitchell), who moved the first of the group of Amendments directed quite specifically to the built-in hedge against inflation having an offset against the decline in purchasing power, supported his argument with the case of the small businessman. He referred to the shopkeeper and many other examples of a man who by his own efforts has built up a business and then realises his business and retires. I quite see the force of the argument in this instance and I do not propose to deal further with it, because there is another Amendment on the Notice Paper dealing with that situation which we shall discuss later on.
The hon. Member asked what would be the effect on the gentleman who moved from Basingstoke to Andover. If he were pursuing the same occupation and trade he could postpone paying the tax on capital gains, but if he changed his occupation completely and moved to another business, having completely wound up the first and realised the capital gain on it, he would be liable to tax.
I thank the hon. and learned Gentleman for his explanation. If the man were a shopkeeper, a chemist in the one case and a grocer in the other, would that mean that he would be charged for capital gains?
I do not think that people often change their occupation from that of a chemist to that of a grocer, but if one did so he would not be pursuing the same trade or occupation.
The Amendment put forward by the hon. Member for Harrow, Central (Mr. Grant) proposes an exemption of the first £400 on capital gains. That was something which we considered when we were considering the form of this tax. If I may say so to people inexperienced in these matters, as I myself was when approaching the subject—hon. Members may think I still am—this was an obvious idea which we considered straight away. Should we exempt the first slice of capital gains? But one sees at once that that would be a highly inequitable thing to do. One might think that this was helping the small man about whom we hear so often. If I may use a somewhat Irish expression, being of a suspicious nature when I hear hon. Members opposite pleading the cause of the small man, I suspect that there is a Surtax payer lurking behind the skirts of the small man.
In any event, whatever may be the purpose of the Amendment, if this concession were made it would give most benefit to the wealthiest taxpayers. It would give the greatest amount of benefit to those who pay the tax at the full flat rate of 30 per cent. on their gains and, by comparison, it would be worth little or nothing to the person living on a small investment income and who realises a small gain when he changes his investments, and who would be liable to pay tax at less than the standard rate of Income Tax on only two-thirds of his gain.
Thirdly, it would operate unfairly as between the person who realises exactly £400 in each of two years and the person who realises no gain in the first year and a gain of £800 in the second, of which £400 would be taxed. In other words, the person who is able to realise gains at or below the level of £400, at whatever level, if he realises them each year, will enjoy the benefit of the exemption each year. On the other hand, the person who only occasionally realises a gain, and perhaps not a very substantial one—who is probably the person with whom we would have more sympathy, and would like to help—will derive less benefit from the exemption.
Finally, there would have to be a special provision for losses. It would be over-generous to exempt the first £400 of gains in a year when there were no gains and then, in a year when there were net losses, to allow them to be carried forward to be set against the first gains which were not covered by the exemption. This leads on to the argument about the great administrative advantage and convenience that would be derived from an exemption of this kind. The advice that we have is quite firm and clear on this; it is that there is not much, if any, substance in this point, because unless the £400 of net gains in a year were exempt but the net losses were to be carried forward against the first net gains liable to tax, gains and losses would still have to be returned to the Inland Revenue and as carefully recorded, whether or not the gains were exempted, so that the work of calculating the gains would have to continue. It would only be the final stage of charging the tax which would be omitted.
In connection with this matter the minority Report was cited. We have frequently been chided with having followed blindly the minority Report—with references to the hand that is guiding the hand of my right hon. Friend. Here is an occasion when we have come to the conclusion, on looking into the matter, that the minority Report was plainly wrong.
We do not propose to follow it. I was surprised to hear the hon. Member say that our motive in trying to catch people who were escaping the tax net showed a sense of wrong social priorities. I can only say that it is perhaps because the country at large does not accept that view of social priorities that hon. Members opposite now find themselves on that side of the Committee and not on this.
I am sorry to interrupt the hon. Member. He has been very kind in giving answers to two of the three questions that I have put to him. He has omitted to answer the third, concerning the farmer who passes on his farm to his son. Does he have to pay 30 per cent. in Capital Gains Tax on the increased capital value of the farm in cash? He does not have that sort of money. [Interruption.] I know that that is the case. No less than 91 per cent. of farmers of this country are small businessmen. A farmer's land may increase in value, but there is no more of it. The land is no greater in area than it was when he started. Will he have to break the farm up—
I did not deal with the hon. Gentleman's question separately, because I thought that it was included in the argument he was making in general about the transfer of surplus on retirement—[Interruption.]—the answer is that—[HON. MEMBERS: "Answer."]—I have answered. Hon. Gentlemen may not like the answer, but we shall have plenty—
I did not hear that answer, Dr. King.
Order. The hon. Member for Basingstoke (Mr. Mitchell) must not seek to intervene through the Chair. He can only intervene if the hon. Member who has the Floor gives him permission.
Thank you for your guidance, Dr. King.
The hon. Gentleman will have plenty of opportunity to pursue the specific points when we come to deal with the Amendments raising these specific matters. I am not going to be led off the main path of what is a very general argument on general principles by interventions of that kind.
I wish finally to deal with one other main argument which was adduced in support of this group of Amendments. It was the argument that without some abatement or allowance for inflation of the kind suggested, this tax would be a disincentive to saving, a disincentive to capital formation. I suggest that this is a very dubious argument. People do not derive their incentive to save from the hope of making capital gains, they derive—[HON. MEMBERS: "Oh."]—it is interesting to hear the reaction to that assertion. Shall I say that the vast majority of people in this country do not find their incentive to save from the hope of making capital gains. They save because they need to save to provide for their own future, to provide for their retirement and so on.
The form in which they save, the mood in which they are saving may of course, and will be, influenced by considerations of whether or not they make a capital gain. But we are talking about the incentive to save. In fact it is highly questionable whether taxation on capital gains reduces the incentive to risk investment—which I think is what the hon. Gentleman who advanced this argument really had in mind—or whether on balance it increases it. There are many authorities in the field of economic theory who would argue that, on the contrary, providing a tax is framed so as to make a reasonable allowance for losses, a tax on capital gains will enhance the incentive to put money into risk capital because the prospect of reduced risk and no loss bears more heavily in the mind of the investor than the prospect of increase. What stops people putting money in risk is the fear of loss not the fact that in case of success the size of the gain is higher in one set of circumstances than another.
Hon. Gentlemen may not agree with this but I am pointing out that not all human beings are influenced by the same motives and certain hon. Gentlemen who have been doing certain special pleading on behalf of certain people who would be affected in a particular way by this tax need not think that their experience is shared by the common run of humanity which is influenced by quite different motives.
Would not the hon. and learned Gentleman agree that people are deterred from saving by the fear of inflation and they are not deterred so much by the fear of inflation if they think they can have capital gains to offset that inflation?
The answer is, "No, I do not agree".
I wish to add my support to these Amendments, and I can do so in a dozen or so words. The Government, in their Capital Gains Tax, have made quite clear that they are determined to ignore the effect of inflation on values. The people of this country will not lightly forgive the Government for that action. They think it unjust and immoral to ignore the effect of inflation in this tax. I think they are right, and that is the reason why I wish to support my hon. and right hon. Friends.
The Earl of Dalkeith:
I should like to ask one short, simple and straightforward question of the Financial Secretary. Will he come clean with the Committee and with the country and admit that, so far as this Capital Gains Tax is a tax on the appreciation of an asset which is necessary to enable it to maintain its value in a period of inflation, it is not a Capital Gains Tax, but a capital levy? Will he be honest and admit that this is so? This is the only thing which I am asking him to do. At present, as we know only too well, when we have a Socialist Government in power, the chances are that we have a period of inflation. The Government are thereby living on ill-gotten gains. Will he be bold and honest enough to admit this?
If the hon. Member for Edinburgh, North (The Earl of Dalkeith) wants a direct answer to his question, the answer is "no". The Capital Gains Tax in these circumstances is not a capital levy. The confusion, I think, in the hon. Member's mind is this. Of course, during a period of inflation persons who hold capital suffer the effect of a levy on their capital, but this is produced not by the taxation system but by the inflation.
We have had a very interesting debate this evening. If I may say so, the Financial Secretary has achieved a triumph. He has at last convinced me by his arguments, he has overwhelmed me with his logic. Whereas, when the Finance Bill came in I had an open mind on the Capital Gains Tax—[HON. MEMBERS: "Oh."] This is perfectly true. I have made a good many speeches in the country saying that I was in favour of a limited Capital Gains Tax, but the Financial Secretary has, by his arguments, convinced me that I was wrong. He has convinced me now to be a total opponent of any Capital Gains Tax. All his arguments lead me to that conclusion.
His arguments in the debate do not lead me to moderate my opinion or to accept his arguments. They have made me even more convinced that any Capital Gains Tax must be at a very low level and must take account of inflation and the individual circumstances of the person. As I listened to the arguments which he put, trying to convince me to support his cause, I became far more determined that my original conclusion on this subject was wrong.
Let us deal first with the question of inflation. It is all right for the Financial Secretary to say that we all live in an inflationary society—
I did not.
Yes you did—
You are far too wise, Dr. King, to say anything of that sort, but the Financial Secretary did say this.
Let us take the facets of the population of this country. I do not think that there has been any valid argument from either side of the Committee that the wage earner and salary earner does not manage to opt out of inflation by getting increases in salary. We hear soul-searching arguments about pensioners being the people hit by inflation, but the Financial Secretary knows perfectly well that, excluding the Labour Government from 1945 to 1951, which did not increase the pension to control inflation, every other Government from 1951 to the present time—including the present Government because of their increases in the pensions in the autumn—have made certain that the pensioner is kept in front of inflation—[Interruption.] They have kept in front of inflation. Those in need have kept pace with inflation; the pension today has a higher purchasing power than it had in 1948, and it is in front of inflation.
Let us go back in history a little because that is probably the best way to consider this matter. A person—and such a person could still be living—who invested £1,000 in a shop or shares in 1900 might feel that his investment is worth about £8,000 today. However, that sum means that his investment has not increased by a penny in terms of real purchasing power. Indeed, I doubt whether it has the same value as the original £1,000 had in 1900. If the present holder left it to a beneficiary, he would have to pay £2,500 on that capital gain, although the sum inherited would have the same value as it had when originally invested in 1900. I am speaking in terms of purchasing power. [interruption.] I suppose that most hon. Gentlemen opposite are not particularly interested in what I have to say. I know that the Financial Secretary is.
Now consider the position in present-day terms. Under the former Government, although inflation went on at a slower rate than under the Government which were in power during the 1945–51 era, it still went on at the rate of about 2½ per cent. per year. I am not a senior wrangler, but I understand that 2½ per cent. per year means than one's money is halved in 15 years.
Thus, a person with an investment worth £1 would, when disposing of it after 15 years, have to pay 6s. in Capital Gains Tax because of the amount by which the sum had increased due to inflation during those years, although the real value in terms of purchasing power would not have increased at all. Under the present proposals of the Government a static investment could, purely and simply because of inflation, be reduced in real value from £1 to 5s. in 30 years. This is, therefore, a confiscatory tax. It is taking capital from people who are not tycoons. [Interruption.] Many of them are very humble and moderate people, some widows and even orphans.
Because a man happens to be a Tory knight it does not necessarily mean that he is wealthy. [Interruption.] Because of the noise among hon. Gentlemen opposite I will direct my attention to the benches above the Gangway.
I have shown that in 30 years a perfectly stable investment could be reduced in purchasing power from £1 to 5s. because of inflation and the Capital Gains Tax. Perhaps hon. Gentlemen opposite consider that this is a just thing to do. I assure them that the majority of people in this country do not think so. The Financial Secretary said that people who invest do not expect to make a gain. It is obvious that he does not understand human nature.
Why does he think that about 30 million people fill in football coupons each week? Does he consider that when they fill in their football pools and receive profits which are not subject to the Capital Gains Tax they are doing something very different from people who invest money in other ways? It is obvious that the hon. and learned Gentleman does not know what makes human beings tick. If it applies to football pools and premium bonds it applies to other investments. The possibility of making a gain applies to every investment of this type and it is one of the things that has been responsible for building up our capitalist society.
I am not impressed by the Financial Secretary's arguments about what goes on in other countries, what the United States is doing or what is happening in Sweden. We are dealing with a tax which even in the United States has only a comparatively short history.
We have no idea what is the long-term result of eating the seed corn rather than ploughing it back into production. Of course, the United States may have had no adverse effect from this, because the United States is a country rich in minerals and natural resources, producing wealth out of the ground, whereas we in this country produce little wealth out of the ground. Far more are we dealing with the inheritance of centuries which the Government now propose to use for day-to-day activities in connection with consumer expenditure. There is not enough history in the world to show whether these Capital Gains Taxes are conductive to increased investment and to a dynamic economy because all the examples we have got are not analogous to the situation in this country.
This is probably the most vulnerable country in the world to a change in capital structure. We are a trading country; we are not a raw material producing country. In a raw material producing country one may squander one's raw materials and still increase one's wealth, but we have few raw materials. Under the Capital Gains Tax when we spend the accumulated savings of hundreds of years we produce a situation whereby it is only too likely that we shall deal a death blow to the saving incentive on which our economy has been built.
Having listened to all the arguments that have been put from both sides of the Committee, I am convinced that the Government's proposals are unworkable, unfair and very damaging indeed to our competitive economy. I am convinced that all the proposals in this Clause will make it less likely that people will invest on a risk basis. People who invest on a risk basis do so to make a profit and they balance that against the possibility of a loss.
I wish the Chief Secretary to the Treasury would give me his attention. Of course, the small investor can lay off his losses against his capital gains, but when we consider that the average investment in this country is something between £500 and £1,000 we appreciate that he is not concerned with laying off his losses against his profits. If he makes an investment and, having made a profit, disposes of the profit for domestic reasons, his wife, finding that one-third of the profit has to be paid to the State in Capital Gains Tax, will say, "We will not have any more of those investments. We might as well use our income for some immediate benefits." All the Gov- ernment's present intentions will make it less likely that people will invest in risk-taking operations.
This is probably the most important group of Amendments to be discussed under the capital gains side of the Bill. One faces it with rather more alarm than one otherwise would after having heard the Financial Secretary wind up the debate on the previous Amendment, because we now not only have to consider the inflationary effect but the new theme and thesis that the Government have brought to taxation, which is that the higher the rate of Income Tax the higher must be the rate of Capital Gains Tax. We know that under a Labour Government we always get increased taxation and inflation, and we recognise that in considering this group of Amendments we are faced with the possibility of a rising rate of Capital Gains Tax and of inflationary erosion as well.
The main topics under discussion now fall under the three heads of the effect on the elderly, the effect on the private company and the small business, and the effect on the small investor. As to the elderly, we noted when my hon. Friend the Member for Ormskirk (Sir D. Glover) was speaking the hilarious shouts from the other side about widows and orphans. Let there be no mistake; one group of people who will be particularly watching this group of Amendments will be the widows, because the very form of this tax makes it of maximum importance to widows in the future, as one of its applications is at the time of death. At the time of a death, the business assets and savings and investments of the deceased person will be subject to Capital Gains Tax, and if no account is taken of inflation it will be a very serious matter for widows.
The hon. Member for Orpington (Mr. Lubbock) illustrated by his example of the person whose investment of £1,000 had double over a period of years, the basic injustice of not taking the inflationary effect into account. That effect is extremely adverse to the elderly, because if in 20 years' time someone reaching old age decides to realise an asset, it will be subject to a form of Capital Gains Tax which purely taxes the inflation that has taken place, whereas the person who has made a profit during the previous 18 months, with no difference at all in the purchasing power of the money he has invested, will be subject to exactly the same level of taxation. That must be fundamentally wrong.
I hope that at this stage the Financial Secretary will pay attention, because he certainly did not pay attention to my hon. Friend the Member for Basingstoke (Mr. Mitchell) when he referred to the problem of the farmer. This is another section of the community which will be watching the fate of this group of amendments with great interest. Farmers will find in 20 or 30 years' time, if inflation has taken place, that when they realise their farms or pass them on to their sons they will be subject to a 30 per cent. tax on inflation. They will not have the cash to meet the tax, and the farms will have to be sold. That is another effect of not taking inflation into account.
I turn now to the small investor. The hon. and learned Gentleman made out a most remarkable case for not accepting the modest proposal of my hon. Friend the Member for Harrow, Central (Mr. Grant) that the first £400 of capital gains should be tax free. I should be glad to have the Financial Secretary's attention, because it is a very important matter, and the hon. and learned Gentleman was willing to say that he had no intention of assisting four million small investors in case there was the possibility that a Surtax payer might benefit to the maximum extent of £120. And because of this the Government were unwilling to consider giving any concession to the small investor.
The hon. Gentleman knows that that is not right. What we were saying was that we did not accept the £400 exemption limit as the way of doing it and that we believed that the way to help the small investor was on the basis of the alternative mehod of charge.
This is the second time that the hon. and learned Gentleman has made great play of this alternative method of charge. The sole result of this alternative method for the person paying the standard rate of Income Tax is that the Capital Gains Tax is reduced from 30 per cent. to 27½ per cent. If that is the maximum concession that the Government intend to give to the small investor he will not be very pleased about it. There are administrative advantages and the advantage of encouraging small savings and the small investor will be considerably adversely affected if these Amendments are not taken into consideration.
We are tired of hearing constantly about the Government's generosity in these matters. Last night they were generous in allowing us to give £100 in gifts tax-free. Tonight they are generous in allowing only a 30 per cent. Capital Gains Tax. We are concerned about inflation. This is something which affects savings and small businesses, and we are particularly worried about inflation while this Government are in power. It is something of an irony that within a few weeks of a Finance Bill being published which brings about a 30 per cent. tax on inflation we should have the biggest rise in the cost-of-living for 10 years. The Government are now putting themselves in the position that they actually obtain revenue and benefits from inflation and higher taxation. I certainly urge my hon. and right hon. Friends to support the Amendment in the name of my right hon. Friend the Member for Bexley (Mr. Heath) and myself and so protect the small investors, the small businesses and the elderly people of this country.
Can I help both the hon. Gentleman and the right hon. and learned Gentleman? If the Opposition wish to divide on Amendment No. 117, that Amendment is on Schedule 6 and the Committee can divide only at that Amendment's place on the Order Paper. If it wishes to divide at the moment on Amendment No. 349 it can do so now. I am in the hands of the Committee.
|Division No. 131.]||AYES||[10.45 p.m.|
|Agnew, Commander Sir Peter||Bryan, Paul||Emery, Peter|
|Alison, Michael (Barkston Ash)||Buchanan-Smith, Alick||Errington, Sir Erie|
|Allason, James (Hemel Hempstead)||Buxton, Ronald||Eyre, Reginald|
|Anstruther-Gray, Rt. Hn. Sir W.||Carlisle, Mark||Farr, John|
|Awdry, Daniel||Carr, Rt. Hn. Robert||Fisher, Nigel|
|Barlow, Sir John||Chichester-Clark, R.||Fletcher-Cooke, Sir John (S'pton)|
|Batsford, Brian||Clark, William (Nottingham, S.)||Foster, Sir John|
|Bennett, Sir Frederic (Torquay)||Cooke, Robert||Fraser, Rt Hn Hugh(St'fford&Stone)|
|Bennett, Dr. Reginald (Got & Fhm)||Cooper-Key, Sir Neill||Fraser, Ian (Plymouth, Sutton)|
|Berry, Hn. Anthony||Crawley, Aidan||Gibson-Watt, David|
|Bessell, Peter||Curran, Charles||Giles, Rear-Admiral Morgan|
|Biggs-Davison, John||Dalkeith, Earl of||Gilmour, Ian (Norfolk, Central)|
|Birch, Rt. Hn. Nigel||Dance, James||Gilmour, Sir John (East Fife)|
|Black, Sir Cyril||Davies, Dr. Wyndham (Perry Barr)||Glover, Sir Douglas|
|Bossom, Hn. Clive||d'Avigdor-Goldsmid, Sir Henry||Goodhew, Victor|
|Box, Donald||Dean, Paul||Gower, Raymond|
|Boyd-Carpenter, Rt. Hn. J.||Digby, Simon Wingfield||Grant, Anthony|
|Boyle, Rt. Hn. Sir Edward||Dodds-Parker, Douglas||Griffiths, Peter (Smethwick)|
|Brinton, Sir Tatton||Douglas-Home, Rt. Hn. Sir Alec||Gurden, Harold|
|Brooke, Rt. Hn. Henry||du Cann, Rt. Hn. Edward||Hall, John (Wycombe)|
|Bruce-Gardyne, J.||Elliott, R. W. (N'c'tle-upon-Tyne,N.)||Hall-Davis, A. G. F.|
|Hamilton, M. (Salisbury)||Longbottom, Charles||Ridsdale, Julian|
|Harris, Frederic (Croydon, N.W.)||Loveys, Walter H.||Roberts, Sir Peter (Heeley)|
|Harrison, Col. Sir Harwood (Eye)||Lubbock, Eric||St. John-Stevas, Norman|
|Harvey, John (Walthamstow, E.)||Mackenzie, Alasdair (Rost&Crom'ty)||Scott-Hopkins, James|
|Harvie Anderson, Mist||Mackie, George Y. (C'nsss & S'land)||Sharples, Richard|
|Hawkins, Paul||McLaren, Martin||Spearman, Sir Alexander|
|Hay, John||Maginnis, John E.||Stainton, Keith|
|Heald, Rt. Hn. Sir Lionel||Maude, Angus||Stanley, Hn. Richard|
|Heath, Rt. Hn. Edward||Maydon, Lt.-Cmdr. S. L. C.||Steel, David (Roxburgh)|
|Hendry, Forbes||Mills, Peter (Torrington)||Stodart, Anthony|
|Hiley, Joseph||Monro, Hector||Studholme, Sir Henry|
|Hill, J. E. B. (S. Norfolk)||More, Jasper||Summers, Sir Spencer|
|Hirst, Geoffrey||Morrison, Charles (Devizes)||Taylor, Sir Charles (Eastbourne)|
|Hogg, Rt. Hn. Quintin||Mott-Radclyffe, Sir Charles||Taylor, Edward M. (G'gow,Catheart)|
|Hordern, Peter||Munro-Lucas-Tooth, Sir Hugh||Taylor, Frank (Moss Side)|
|Hornby, Richard||Neave, Airey||Thatcher, Mrs. Margaret|
|Hornsby-Smith, Rt. Hn. Dame P.||Nicholls, Sir Harmar||Thomas, Sir Leslie (Canterbury)|
|Howe, Geoffrey (Bebington)||Noble, Rt. Hn. Michael||Thompson, Sir Richard (Croydon,S.)|
|Hunt, John (Bromley)||Nugent, Rt. Hn. Sir Richard||Thorpe, Jeremy|
|Hutchison, Michael Clark||Onslow, Cranley||Tiley, Arthur (Bradford, W.)|
|Irvine, Bryant Godman (Rye)||Osborn, John (Hallam)||Turton, Rt. Hn. R. H.|
|Jenkin, Patrick (Woodford)||Osborne, Sir Cyril (Louth)||Tweedsmuir, Lady|
|Johnson Smith, G. (East Grinstead)||Page, R. Graham (Crosby)||van Straubenzee, W. R.|
|Johnston, Russell (Inverness)||Pearson, Sir Frank (Clitheroe)||Vaughan-Morgan, Rt. Hn. Sir John|
|Jopling, Michael||Percival, Ian||walker, Peter (Worcester)|
|Joseph, Rt. Hn. Sir Keith||Pitt, Dame Edith||Ward, Dame Irene|
|Kerr, Sir Hamilton (Cambridge)||Pounder, Rafton||Weatherill, Bernard|
|Kilfedder, James A.||Powell, Rt. Hn. J. Enoch||Webster, David|
|King, Evelyn (Dorset, S.)||Prior, J. M. L.||Whitelaw, William|
|Kirk, Peter||Pym, Francis||Wilson, Geoffrey (Truro)|
|Kitson, Timothy||Ramsden, Rt. Hn. James||Wise, A. R.|
|Langford-Holt, Sir John||Redmayne, Rt. Hn. Sir Martin||TELLERS FOR THE AYES|
|Legge-Bourke, Sir Harry||Renton, Rt. Hn. Sir David||Mr. Ian MacArthur and|
|Lloyd, Rt.Hn.Geoffrey (Sut'nC'dfield)||Ridley, Hn. Nicholas||Mr. Dudley Smith.|
|Abse, Leo||Foley, Maurice||Manuel, Archie|
|Allen, Scholefield (Crewe)||Ford, Ben||Mapp, Charles|
|Armstrong, Ernest||Fraser, Rt. Hn. Tom (Hamilton)||Mason, Roy|
|Barnett, Joel||Freeson, Reginald||Mayhew, Christopher|
|Baxter, William||Galpern, Sir Myer||Mellish, Robert|
|Bence, Cyril||Garrett, W. E.||Mendelson, J. J.|
|Bennett, J. (Glasgow, Bridgeton)||Garrow, A.||Millan, Bruce|
|Bishop, E. S.||George, Lady Megan Lloyd||Miller, Dr. M. S.|
|Blackburn, F.||Gourlay, Harry||Milne, Edward (Blyth)|
|Blenkinsop, Arthur||Grey, Charles||Morris, Charles (Openshaw)|
|Boardman, H.||Griffiths, David (Rother Valley)||Morris, John (Aberavon)|
|Boston, T. G.||Griffiths, Will (M'chester, Exchange)||Murray, Albert|
|Bowden, Rt. Hn. H. W. (Leics S.W.)||Gunter, Rt. Hn. R. J.||Noel-Baker, Francis (Swindon)|
|Braddock, Mrs. E. M.||Hamilton, William (West Fife)||Norwood, Christopher|
|Bray, Dr. Jeremy||Hannan, William||Ogden, Eric|
|Brown, Hugh D. (Glasgow, Provan)||Hart, Mrs. Judith||O'Malley, Brian|
|Brown, R. W. (Shoreditch & Fbury)||Hattersley, Roy||Oram, Albert E. (E. Ham, S.)|
|Buchan, Norman (Renfrewshire, W.)||Hazell, Bert||Orme, Stanley|
|Buchan, Richard||Heffer, Eric S.||Oswald, Thomas|
|Butler, Herbert (Hackney, C.)||Herbison, Rt. Hn. Margaret||Page, Derek (King's Lynn)|
|Callaghan, Rt. Hn. James||Hill, J. (Midlothian)||Palmer, Arthur|
|Carmichael, Neil||Hobden, Dennis (Brighton, K'town.)||Pannell, Rt. Hn. Charles|
|Carter-Jones, Lewis||Holman, Percy||Park, Trevor (Derbyshire, S.E.)|
|Castle, Rt. Hn. Barbara||Howarth, Robert L. (Bolton, E.)||Pearson, Arthur (Pontypridd)|
|Chapman, Donald||Howell, Denis (Small Heath)||Peart, Rt. Hn. Fred|
|Craddock, George (Bradford, S.)||Hoy, James||Pentland, Norman|
|Crawshaw, Richard||Hughes, Cledwyn (Anglesey)||Popplewell, Ernest|
|Cullen, Mrs. Alice||Hughes, Emrys (S. Ayrshire)||Prentice, R. E.|
|Dalyell, Tam||Irvine, A. J. (Edge Hill)||Price, J. T. (Westhoughton)|
|Davies, G. Elfed (Rhondda, E.)||Jones, Dan (Burnley)||Probert, Arthur|
|de Freitas, Sir Geoffrey||Jones, J. Idwal (Wrexham)||Pursey, Cmdr. Harry|
|Delargy, Hugh||Jones, T. W. (Merioneth)||Redhead, Edward|
|Dell, Edmund||Kerr, Mrs. Anne (R'ter & Chatham)||Rees, Merlyn|
|Dempsey, James||Lawson, George||Reynolds, G. W.|
|Diamond, John||Lee, Rt. Hn. Frederick (Newton)||Rhodes, Geoffrey|
|Doig, Peter||Lee, Miss Jennie (Cannock)||Richard, Ivor|
|Duffy, Dr. A. E. P.||Lever, Harold (Cheetham)||Roberts, Albert (Normanton)|
|Dunn, James A.||Lever, L. M. (Ardwick)||Roberts, Goronwy (Caernarvon)|
|Dunnett, Jack||McBride, Neil||Robertson, John (Paisley)|
|Edelman, Maurice||MacDermot, Niall||Rodgers, William (Stockton)|
|Edwards, Rt. Hn. Ness (Caerphilly)||McGuire, Michael||Rogers, George (Kensington, N.)|
|Edwards, Robert (Bilston)||McKay, Mrs. Margaret||Rose, Paul B.|
|Ennals, David||Mackie, John (Enfield, E.)||Ross, Rt. Hn. William|
|Evans Ioan (Birmingham, Yardley)||MacMillan, Malcolm||Sheldon, Robert|
|Fernyhough, E.||MacPherson, Malcolm||Short,Rt.Hn.E.(N'c'tle-on-Tyne,C.)|
|Fletcher, Sir Eric (Islington, E.)||Mahon, Simon (Bootle)||Short, Mrs. Renée (W'hampton,N.E.)|
|Silkin, John (Deptford)||Thomson, George (Dundee, E.)||Willey, Rt. Hn. Frederick|
|Silverman, Julius (Aston)||Thornton, Ernest||Williams, Alan (Swansea, W.)|
|Small, William||Tinn, James||Williams, Albert (Abertillery)|
|Snow, Julian||Urwin, T. W.||Willis, George (Edinburgh,E.)|
|Stewart, Rt. Hn. Michael||Wainwright, Edwin||Wilson, William (Coventry, S.)|
|Stones, William||Walden, Brian (All Saints)||Woof, Robert|
|Summerskill, Hn. Dr. Shirley||Walker, Harold (Doncaster)||Wyatt, Woodrow|
|Swingler, Stephen||Wallace, George||Zilliacus, K.|
|Taverne, Dick||Wells, William (Walsall, N.)|
|Taylor, Bernard (Mansfield)||White, Mrs. Eirene||TELLERS FOR THE NOES:|
|Thomas, George (Cardiff, W.)||Whitlock, William||Mrs. Harriet Slater and|
|Thomas, Iorwerth (Rhondda, W.)||Wilkins, W. A.||Mr. Joseph Harper.|
I wish to draw the attention of the Committee to the effect of the Clause on the supply of much-needed capital for agriculture. The main problem of British agriculture for several generations has been that of finding enough capital for modernisation, for mechanisation, for improving fixed equipment, and for the expansion of output. This problem has increased, if anything, by the decline—
I was saying that this problem has increased by the decline of the landlord and tenant system, because landlords used to provide much of the capital, but now we find that more than 55 per cent. of the land which is farmed is farmed by owner-occupiers who have to find the capital themselves by one means or another.
It is because of the need to ensure that farming has enough capital for the purposes which I have mentioned, namely, mechanisation, modernisation, improving fixed equipment, and expanding output, that Parliament has done three things to try to help the situation. First, we have provided a rebate of 45 per cent. on Estate Duties on farm land. Secondly, we have by statute established the agricultural credit scheme. Thirdly, we have provided considerable sums of money under the Farm Improvements and the Small Farmers Schemes.
All those provisions were intended to improve the value of the fixed equipment on our farms. I therefore find it rather strange that the Government should now apparently be completely changing the policy. Instead of the Government and Parliament making it their responsibility to ensure that there is enough capital for our greatest industry to achieve prosperity, the Government are using the Capital Gains Tax to get much-needed capital away from agriculture and divert it to the general revenue of the State.
The combined effect of Clauses 19, 23 and 25, on the death of a farmer—and if I am wrong no doubt I shall be corrected by whoever replies to the debate—will be as follows: If the farmer is an owner-occupier, on his death, whether the estate is inherited by his son or by his widow, the land itself, and any securities, will be valued, and to the extent that they exceed £5,000 jointly—that is the land and the securities—they will come in for Capital Gains Tax if there has been any appreciation in the land or the securities since the farmer acquired them or inherited them. They will come in for Capital Gains Tax at 30 per cent.
In this connection it is only right to bear in mind, and only fair to the farmers to mention, that agricultural values today are considerably inflated—I think quite artificially in many cases—by the fact that there is a great demand for land. Perhaps I might illustrate that by pointing out that the South-East Study says that only about 3 per cent. of the farm land in the South-East region will be needed for development over the next 17 years, but we know that although only 3 per cent. of the farm land will be taken, the value of all the farm land has gone up, partly because of the general shortage of land for building. It is a strange position, but it is not one for which the farmer should be made to suffer.
After the Capital Gains Tax has been assessed the total amount of the assessment will be deducted from the gross value of the deceased farmer's estate before Estate Duty is calculated. When Estate Duty is
calculated the securities, which are part of his reserve capital and which have enabled him to get an overdraft on somewhat better terms than he might have got a mortgage will be fully valued for Estate Duty. The land will be subject to the 45 per cent. rebate, but in the end the widow or the son or the trustees, as the case may be, will have to pay a much larger amount when the Bill has been passed, as a result of the Capital Gains Tax, than has to be paid at the moment. To that extent the farm will
It is a complete reversal of policy. For several generations it has been our concern to see that farming was not deprived of its much-needed capital. In all earnestness I press the Government to reconsider the effect of the Clause and subsequent Clauses to ensure that a blow is not dealt which perhaps was not intended. It may be that the Government did not even think these things out beforehand. But if they intended a blow, they should justify the change of policy and justify this imposition. I hope that the Committee will not pass the Clause unless we have a full assurance from the Government that these matters will he properly considered.
I wish to ask a question about the meaning of "residence" for the purpose of the Clause. Perhaps I should declare an interest. I am half-Australian, I have an interest in Australia and I am a trustee for Australian interests which may be affected—although I do not know whether they will be affected.
Clause 19(2) charges the United Kingdom trading assets of a person who is "not resident" and "not ordinarily resident" in the United Kingdom. Why are both those expressions used? What is the difference between being resident and being ordinarily resident? Why are they coupled with the word "and"? In subsection (7) the same expression appears but there the words are "individuals resident or ordinarily resident". Why is there "and" in one case and "or" in the other? Is there any significance in that difference?
Somewhat different phraseology is used in subsection (1)—
Subject to any exceptions provided by this Act, a person shall be chargeable to capital gains tax in respect of chargeable gains accruing to him in a year of assessment during any part of which he is resident in the United Kingdom, or during which he is ordinarily resident in the United Kingdom.
I should have thought that if he were resident in any part of the year in the United Kingdom it was sufficient. Why is that phraseology used, and why is it different from the phraseology in the other two subsections which I have mentioned? I know that the meaning of "resident" is defined in a later Clause—I believe it is Clause 39—by reference to the Income Tax Acts; but subsection (2) of that Clause harks back to this Clause now under discussion. I must read it to the Committee. It states,
Subject to section 19(2) of this Act an individual who is in the United Kingdom for some temporary purpose only and not with any view or intend to establish his residence in the United Kingdom shall be charged to capital gains tax on chargeable gains accruing in any year of assessment if and only if the period (or the sum of the periods) for which he is resident in the United Kingdom in that year of assessment exceeds six months.
The question which one has then to ask is this. Does this mean that a foreign trader, or a Commonwealth trader with a branch in the United Kingdom who happens to spend six months of any year in this country, will become liable to tax in respect of any property wherever that property is situated? I would suggest that that would be the result of these two subsections read together, and if that is so, then the Government is creating a complete deterrent to any such people spending any length of time in the United Kingdom. They will certainly not stay in order to incur this liability for all sorts of charges.
What is the position of the long-term visitor to this country; for example, the student who spends more than six months in Britain but who has property in his own country? Such a person, as I read these two subsections, would be liable to be charged on his property, wherever it is situated, and this might well deter many students from coming here at all. What about the wife of a British subject who is herself of foreign origin? Australia immediately springs to mind, and the same argument would apply to many Americans. Such people are often interested in trusts made by their parents in their countries of origin and, as I understand this Clause, the property in such trusts would become subject to this charge if the individual remained in this country for six months; and that would be normal in the case of a wife.
If that surmise is right, then what is the position of the trustees because the charge would fall on the property and only the trustees could meet it. They would be people who, normally, would not come to the United Kingdom, but the charge would be recoverable and the wife or student would become liable; or, in the case of a wife, the husband would become liable and the total amount might exceed his whole income for a year. What about the student who is in the fortunate position of having some assets overseas? Conversely, what about the position of the United Kingdom trustees for a person who is a nonresident in respect of property which is overseas or, indeed, in this country? Is there any liability? Where the property is overseas, how will the tax be recovered?
May I have answers to these questions, and also to a question which I put on an Amendment? What is to be the position where there is a capital gain in one year and a capital loss in another year and the rate of tax changes between the years? Will the Government answer that question now? They have had plenty of time to consider it.
In the light of the speech we had a little time ago from the Financial Secretary to the Treasury we cannot allow the Clause to stand part of the Bill without a little further discussion. I got the impression that the Financial Secretary had very little idea of the impact which the Capital Gains Tax will have upon the whole economy. He has a complex, like a great many of his right hon. and hon. Friends, about the Surtax payers. He talked as if he were a schoolmaster addressing a form of boys, and saying, "All you Surtax payers have been very naughty. Therefore you shall not have a half-holiday for the rest of the term—nor will the rest of the school." That is the tone used by the hon. and learned Gentleman.
I can explain my criticisms of the Capital Gains Tax very briefly. I accept that there is a very strong argument for some kind of tax on speculative gains, but my first criticism of the Capital Gains Tax as outlined in Clauses 18 and 19 is that it makes no attempt to discriminate between a clearly speculative transaction and one which by no conceivable stretch of the imagination could be called speculative. It lumps together, in this typical Socialist way, the man who is playing the market—this strange creature who drifts around behind the scenes—and the man who realises some hard-earned savings made over many years in order that he can retire. In the name of social justice that would appear to me to be a complete farce.
The second argument put forward by hon. Members opposite was that there was something almost immoral about somebody who spends capital as income—something in the nature of tax evasion. There may be something in that argument, but the reverse side of the coin must be considered. Hundreds of thousands of man-hours are worked—particularly at this time of the year—by non-Surtax payers in somebody else's garden, painting somebody else's greenhouse or clipping somebody else's hedge for a couple of hours each evening, providing that the payment for their services is made in notes and is not returned for tax purposes.
My next criticism is that the whole impact of the tax appears to be completely negative. In every Clause the whole idea of the Government appears to be to trip up anybody who wants to do anything. There is no encouragement to anybody to "get on with it." At every stage he will be tripped up. I do not see how any new firm or business can, within the terms of the proposed tax, build up enough new capital to expand from a small start.
I ask the Committee to reflect: let us suppose that there had been a Capital Gains Tax of 30 per cent. over the last 30 or 40 years. Would there have been a de Havilland in the aircraft industry? Would there have been a Morris, an Austin, a Humber or a Hillman in the motor car industry? I do not know, but I suspect that it would have been very difficult. It may not have been impossible, but it would have been very difficult.
The fact remains that real economic progress and the real breakthrough that happens from time to time in a nation's economic life depends not on men of ordinary capacity but on men of extraordinary capacity. It is the men of ordinary capacity who benefit from the wit, skill, "know-how" and push of the men of extraordinary capacity. In a country with our present economy, I would have thought that it would have been one of the stupidest acts for any Government—whatever its colour—to bring in a Capital Gains Tax coupled with the present rates of Income and Surtax thereby attempting in any way to discourage the genius or the near-genius in the early stages of a man's career. If we do that we all swim along at the pace of the slowest horse in the race. On that basis, the economy does not expand to the degree which it ought to.
My third criticism of the Capital Gains Tax is that it produces ridiculous anomalies, a great many of which we have heard about in discussion on previous Amendments. My right hon. and learned Friend the Member for Huntingdonshire (Sir D. Renton) talked about the problems of agriculture. What sort of social justice is it that a farmer who wants to sell his farm to move to another does not pay Capital Gains Tax if it is the same type of farm, whereas if a farmer who has farmed for 40 years wants to sell his farm before he can retire—very few people can afford to retire unless they sell their business—he gets socked for the Capital Gains Tax? Take the case of the small shopkeeper, who cannot afford to retire unless he sells his business. He is socked for the 30 per cent. Capital Gains Tax.
The Surtax payer is much better off. The idea that this tax socks the Surtax payer and leaves the rest is quite untrue. By a strange paradox, the Surtax payer, or the man with a great deal of capital, is better able to weather the storm. It will pay him hand over fist to convert his income into capital. It is the man who does not have a great deal of capital, who has been building up his capital and saving it for his retirement who takes it on the chin. This is all in the name of social justice.
My next criticism is of the impossibility of valuations. We had some discussion of this last night in relation to chattels. That is only a very small part of it. If an agricultural holding is sold at Michaelmas 1970, the owner-occupier will have to pay tax on the difference between what he got for that holding at that time and what it was worth on Budget Day, April, 1965. What was it worth? No one knows, unless one rewrites the Domesday Book with a schedule of condition for every agricultural holding in the country, including the fences, the ditches, the buildings and everything else. It is absolutely impossible.
What about the shop in a quiet side street, which, in three years' time becomes a major thoroughfare because of a town redevelopment plan? I suppose that the value of the shop and its goodwill increases if the shopkeeper wants to sell in 1967 or 1968. What was the value of his business in the small side street in April, 1965, and who values it? Nobody knows. This is a nonsense.
I am very glad to see the Chancellor here, as I have been waiting for a long time to put this question to him. Does he realise the advice which he is giving to the British public in every line of Clause 19? He is saying, "Do not invest, do not save, but gamble. You can clock up £200,000 in the football pools and you are home and dry. Bin if you realise £500 of hard-earned savings, and you are soaked." This is the advice which he is giving: "You can gamble and bet as much as you like, and if you win you are home and dry. You can back good horses to beat indifferent ones, and bad horses to beat worse ones. You can bet on the date of the next General Election, whether next August Bank Holiday will be wet or fine, or when the First Secretary of State will drop his next brick, but you must not invest prudently and save for your retirement".
In common with a number of hon. Members, I was in this House during the 1945–51 period. I saw the then Labour Government create, I admit unwittingly, a "spivs'" paradise. I tell the present Labour Government that the Capital Gains Tax Clauses in the Bill will deliberately create a "spivs'" charter.
My hon. Friend the Member for Windsor (Sir C. Mott-Radclyffe) and my right hon. and learned Friend the Member for Huntingdonshire (Sir D. Renton) have drawn attention to the deleterious consequences which his Clause will have for agriculture. I need not, therefore, emphasise the harm that will be done by this provision, in addition to the blow to agriculture dealt by the Price Review and the other blows struck at this important import saving industry by the Chancellor. This Clause means double taxation and as well single taxation at far too high a level.
Yesterday and today, the hon. Member for Manchester, Cheetham (Mr. Harold Lever) regaled the Committee with some excellent speeches. It is unfortunate that the Treasury spokesmen who have been as it were answering the debates should have paid attention to them only on those occasions when the speeches of the hon. Member for Cheetham fell below their normal high level. Yesterday the hon. Member for Cheetham advised the Financial Secretary to ignore the experience of other countries. Today the Chief Secretary, in grave difficulties, took hold of the life-line which he thought he saw in the speech of his hon. Friend the Member for Cheetham when he said that companies were not created by shareholders but by the State.
That is quite untrue. The State has created no companies. What happens is that the State creates conditions in which companies can be formed and to which those companies must conform. But the idea that the State creates companies is utterly untrue. So pleased was he by this one crumb of comfort dropped by the hon. Member for Cheetham that the Chief Secretary went into a great disquisition about it. He fell into great errors, particularly when he spoke about a company being completely different from its shareholders. That is fundametally untrue. He tried to illustrate his argument by saying that the shareholder dies but the company goes on. In other words, a family is utterly different from those who compose it because, according to the hon. Gentleman's argument, if a child, father or mother dies the family goes on. Does the Chief Secretary seriously believe that the family is quite different from the people who compose it? Does he really believe that because people die, England or any other country is different from its inhabitants?
He should realise that that doctrine could lead to political implications which he would not like. The whole foundation of modern tyranny is that the State is something different from the individuals who compose it. That is the whole foundation of fascism, and if class is substituted for State it is the foundation of communism as well. On a small but extremely important Clause like this the hon. Gentleman should not repudiate the whole democratic tradition of this country, which is what he was doing. Whatever the Chief Secretary said, this is double taxation. Although he tried to pretend that it is not by saying that a company is something quite different from its shareholders, the fact still remains. A company is not something quite different from its shareholders and this is double taxation.
Yesterday the hon. Member for Cheetham tried to defend the Chancellor from the suggestion that the right hon. Gentleman was actuated by class malice and class hatred. The Chancellor intervened in a somewhat Walter Mittyish way to say that nobody thought that except my hon. Friends. This is not borne out by what one knows of the attitude of business. I certainly would not think that there was any hatred or malice on the part of the Chancellor. It is, however, reasonable to assume from the Budget that there is a good deal of anti-business prejudice. For this reason: whenever the Chancellor is faced with a choice of calling in aid American or European practice or of doing something different in England, he always comes down on the side of heavier taxation on business. Whichever choice is offered to him, it is always more taxation: double taxation, a higher rate than in America or whatever it may be. It is always higher taxation.
It is not fair to say that this is entirely a matter of anti-business prejudice. It is much more positive than that. The Chancellor, like most of his party, seriously believes that there is something positively good in taxation. This is the new attitude of the Labour Party, that taxation is good in itself and that people and the country will be saved by taxation. Taxation is a new sacrament. If one reads the writings of Dr. Kaldor, one gets the distinct impression that he believes that taxation has some curative and regenerative properties which will do great good to the country.
That is certainly the belief of the President of the Board of Trade, who in his rather sombre book "Socialism in the Sixties" allowed himself only one moment of emotion when he let out the exultant cry,
As surely as there will always be an England, there will always be direct taxation.
Did the right hon. Gentleman get a degree for that?
No. The right hon. Gentleman is academically extremely distinguished and he is well larded or decorated with academic honours. As a result of the Budget, however, I think that the Chancellor certainly worships at the same shrine, as, above all, does the Financial Secretary. We had the extraordinary doctrine tonight that because other taxation was high, therefore capital gains taxation had to be high.
That brings us into an infinite logical regress, or, perhaps, in the context of taxation, logical progress. Because Income Tax is high, Surtax must be high; therefore, Capital Gains Tax must be high. Goodness me, cigarettes have got far behind; they must go up, too. What about beer, and so on? It has long been known that many workers have a cost of living agreement written into their wages agreements. Now, we are to have taxation worked in too. As the cost of living goes up, taxation will go up, too.
We have been used to leapfrogging claims in wages. Now, we are to have them in taxation, too. Because one tax goes up, the other must go up as well. This shows the extraordinary religion of taxation which the Chancellor and the Labour Party have got themselves into believing. They believe that taxation is a good thing in itself. The followers of Baal believed that their deity produced fertility, agricultural and animal, and it seems to me that the Chancellor now thinks that taxation also produces fertility in the economy. Taxation, however, like Baal, is very much a false god; it does not produce anything. It produces, if anything, the exact opposite to fertility. The only thing that it produces is extreme damage to the economy, and its only fortunate by-product is that it produces extreme damage to the Labour Party as well.
For most of today, we have enjoyed the company of the Financial Secretary to the Treasury and I am sorry that he is not with us now. In the spring of last year, the hon. and learned Gentleman spent many days at Aylesbury prosecuting the train robbers. This year, he is having a rather less uplifting time defending another lot of robbers. Unfortunately, however, during his period last year, neither the hon. and learned Member nor his hon. Friends seemed to learn the lessons of the success of the train robbers: the maximum use of intelligence and the minimum use of violence.
From experience abroad one thing is clear. In every case we hear that Capital Gains Tax has been a happy hunting ground for tax avoidance. Every time we use the expression "tax dodgers" from this side of the Committee there is a corresponding excited and highly-strung noise from the other side. Tax avoidance is not some inherent sin belonging to any particular race. It is the logical consequence of any tax which contains infuriating absurdities and injustices.
The reason that we in this country think that we have less tax dodging than exists in many other countries is that those who have made our taxes in the past have succeeded in avoiding making taxes which contain infuriating absurdities and injustices, at least to the extent that other countries have them. But this tax that we are discussing today simply overflows with absurdities. Yesterday we were talking about selling a house and buying a smaller house, in which case there is no Capital Gains Tax payable. On the other hand, if at the same time one sells one's pictures because they are too big for the new house, Capital Gains Tax arises. One can talk about this sort of absurdity well into the night, but I do not intend to do that. [HON. MEMBERS: "Why not?"] I will leave that to some other hon. Members. These absurdities sow the seed for the plant of tax avoidance.
What is more, the Government have no way of policing this tax. In fact, they ask the taxpayers to police it. Only yesterday we found from replies that we received that there will not be the staff to police the tax, as far as valuation is concerned, at any rate. We shall have neither the quality of people nor the numbers we require. Therefore, in fact, one is asking the taxpayers to cross-check on each other and to police the tax themselves.
If we do this, we require the maximum of good will for the tax. It cannot be expected to work on its own. Therefore, it seems to me the height of folly, if the tax depends on the good will of the taxpayer, to go in for all the snooping which we shall be debating on Schedule 9. We have the most sharply progressive Income Tax in the world. If, on top of that, there is to be imposed—probably paid by much the same people—the highest Capital Gains Tax in the world, this is the height of provocation.
What is more, it is even more provocative when the Financial Secretary positively rejoices in this. It was the strongest point that he made all the afternoon—this leapfrog tax which we shall be talking about for a long time to come. The other day I was talking to a man who is fairly high up in the art world about the possible effect of our Amendment in increasing the limit on the short-term Capital Gains Tax from £1,000 to £5,000. He said, "I would not bother to do that. It will have very little effect. If you leave it as it is, the whole thing will sink under its own weight anyway."
The longer we attend debates on this Capital Gains Tax it seems to me that we are probably in error on this side of the Committee in trying to improve the Bill as much as we are, because we are getting no replies from the other side. The Ministers are not stonewalling. They are standing back from their wicket and allowing us to bowl them out time and again; but they see no reason, when the wicket is shattered, to retire from the crease.
I ask the Ministers, when they get time, to look back on the debates of the last two days, when they will find that they have not answered 50 per cent, of the questions that we have put to them.
Only yesterday my hon. Friend the Member for Worcester (Mr. Peter Walker) asked whether the effect of the tax on horse racing would turn out to be a subsidy, but he got no answer. The answer was not known. We had the ridiculous business of the set of antiques, the set of chairs, and we had to be content with the answer that we must have a rule for this sort of thing, but there is no sense in having a rule if it cannot be observed. On valuation, once again, after having made a most devastating attack we have had no reply.
I mention all this because I want a reply to the straight question: how will the tax be made to work administratively? In page 34 of the Royal Commission's Report we read:
… it would be unrealistic to suppose that it would not require a substantial addition of staff to administer it. We have been supplied by the
Board with a tentative estimate that
the increase of staff in the Chief Inspector's Branch would be of the order of 500. To this must be added a formidable addition to the work of the Valuation Office of the Inland Revenue and of that branch of the Estate Duty Office that is responsible for the valuation of unquoted shares.
May we be told what is to be done about staffing? Are these numbers available? What is the recruiting position? The figures I have quoted are from a document ten years old—are they still true, or what is to be done? The more one looks at the question of valuation, the more impossible it seems.
One has to remember that with the ordinary valuations for Estate Duty purposes the problem is quite easy compared with what will be faced under this provision, because there is a good deal of good will all round. The executors of the dead man are almost always given the benefit of the doubt, mainly for the one good reason that the Government do not have the equipment, or have very little equipment, with which to challenge the executors' valuation in any case.
Here we shall have a different position. It is not the case of a dead man but of a live man, with his own personal interest in the matter. That is quite a different situation. If big sums of money are involved, the man will have first-class valuers on his side—who will the Government put up against them? It is just not on. Whom are they to recruit? We hear that curators of museums are not allowed to occupy themselves in this way—perhaps we will find the Government recruiting 24-year-olds from the Courtauld Institute to value some of the finest works of art in the land.
We have learned one thing from abroad about administration. The hon. Member for Manchester, Cheetham (Mr. Harold Lever) said that we should not take any notice of foreign experience, but since we have no experience at home, and since no notice is taken of the Royal Commission, foreign experience is all that we can turn to—it is all we have to go on. It has been discovered abroad that this is a very expensive and a very difficult tax to administer. Then why, under those conditions, have the Government chosen to make it even harder here than other countries have found it by including in the Bill such an unduly wide basis of taxation? One is told that in America the main yield from the Capital Gains Tax comes from stocks and shares and real estate. Why not limit this tax to that? Those are the things on which the higher income groups—which are what I suppose the other side is trying to penalise—pay the most tax. It would greatly simplify matters if we were to reduce the tax to those items.
We would all like to know more about the yield of this tax. It is far too much in the air. The hon. Member for Colne Valley (Mr. Duffy) said earlier that the First Secretary had made a bargain with the trade unions. I have a suspicion that when the trade unions see what sort of bargain they have made and what a tiny return they will have on this side of the bargain, they will begin to think that the First Secretary has once again made a bargain very similar in value and type to the bargain he hade with the hon. Members for Bosworth (Mr. Wyatt) and Pembroke (Mr. Donnelly).
Finally, we keep on coming back the longer we go on with the debate to why on earth the Government have chosen to bring in the tax in this way, and we come back each time to the sinister figure of Dr. Kaldor. We all know the effect of his advice in other countries, which has ranged from chaos in one place to riots in another. Surely this must be his finest hour. He has taken the hand of the Chancellor of the Exchequer of what is supposed to be the most financially sophisticated country in the world—
I was complimenting Dr. Kaldor. I was saying that this is his finest hour. In his wildest dreams he could never have dreamed that he was going to take the Chancellor of the Exchequer of the most financially sophisticated country in the world by the hand and lead him up the garden path and say to him, "The ants are getting at the strawberries. My advice to you is to bring a steam-roller into the garden and drive it across all the beds." The whole of this tax has been brought forward in the name of social justice, but the imposition of it will bring more unfairness and cumbrous complications than any injustice that it is supposed to remedy.
On a point of order. Is it in order that back-benchers opposite who seek to speak should be pressured into silence by the Government Front Bench? The hon. Member for Manchester, Cheetham (Mr. Harold Lever) was eager to make a speech—and a previous speech of his has been referred to at some length—but was pressured into silence by the Patronage Secretary with the offer of a life peerage or something of that kind—
Order. That is not a point of order for me.
The debate on this Question has included many references to earlier discussions which have taken place today on Amendments and even to yesterday's debate. I am sure therefore that the Committee would not wish me to go over all the ground that has already been covered. Hon. Members can refer to HANSARD for the speeches on the points made and the answers given. [HON. MEMBERS: "Not always."] I hope therefore that it will be for the convenience of the Committee if I deal only with the points raised on the Question that the Clause stand part of the Bill.
The right hon. and learned Member for Huntingdonshire (Sir D. Renton) asked whether it was wise that farms should be the subject of a Capital Gains Tax. His argument seemed to be that inasmuch as we treat farming favourably in many respects why did not we treat it exceptionally favourably in this respect. [HON. MEMBERS: "No."] Yes, this was his argument. We did this, that and the other for farming, why did not we do this yet further thing for farming? One is not leaning against or in favour of farming in the Capital Gains Tax. The right hon. and learned Gentleman will not mind my reminding him that this tax is levied on realised gains. There is no question of being asked to pay the levy until the gain has been realised.
From the point of view which he raised, the question of providing adequate money for running the farm and adequate working capital, there is no distinction between money provided out of realised capital gains and money provided out of realised profits in the running of the farm. In each case, funds are provided. In the one case, they have been taxed, and always have been, according to the rate of profit, which is a fair way of dealing between one farmer and another or one income earner and another. What have not been taxed are realised capital gains. Now they are to be brought in in just the same way as every other business or individual is brought in.
In the example I gave, the gains are not in fact realised at all. The assets merely pass from one member of the family to another—from husband to widow or from father to son—and the business is continuing. The assets are not realised in any actual sense at all, and the use of the word "realised" in this context is so artificial as to be misleading.
The right hon. and learned Gentleman is on the same point. He is trying to draw a distinction between farms and everything else, and I am saying that there is no such distinction to be drawn. If he is on the further point about realisation, he will appreciate that capital gains generally, not merely in the hands of farmers, could never be realised if there were not some point at which one said, if they had not been sold but if they passed from one hand to another, that they must be treated as being realised. There are special provisions to which we shall come later which apply to both farms and any other kind of property passing on death.
The hon. Member for Windsor (Sir C. Mott-Radclyffe) asked what the position would have been if there had been a Capital Gains Tax over the years. I can offer him two answers. If there had been a Capital Gains Tax over the years, those who have been called upon to pay high rates of taxation on what they have earned by their ability, their industry and the sweat of their brow, whatever it may be, would have been asked to pay less tax to provide the same total revenue. That is a simple matter of arithmetic. If the same total revenue is to be obtained for the country and an additional source is brought in, one of the existing sources must be subject to less taxation. That is one answer I can give.
The other answer is that, if we had had a Capital Gains Tax over the years, there would not have been anything like the tax avoidance, the dodging and the "fiddles" which have gone on year after year and which the previous Government had to deal with year after year by bringing in special provisions to try to catch those who, as the hon. Member for Windsor said, adopted the simple expedient of turning their income into tax-free capital and so avoided the tax which they would have had to pay on income.
I come now to the series of rather technical questions which I was asked by the hon. Member for Hendon, South (Sir H. Lucas-Tooth).
So far as the question of carry-forward on losses is concerned that is a straight-forward matter. Any losses or deficit on a realisation is simply carried forward in the normal way and set off against a gain made at a future date and the gain at a future date is reduced pro tanto by that amount and the balance of the gain suffers Capital Gains Tax at the rate ruling at that time so far as that year is concerned.
The general position on residence is that if a person is resident here he is liable on all his capital gains. If a person is ordinarily resident here he is similarly liable. A person can be ordinarily resident without being resident for a particular year. "Ordinarily resident" has a meaning which has been decided by case after case and it is a different point from being resident for a particular year. Therefore, if a person is ordinarily resident he is again liable. The next question asked was whether an overseas resident was liable. The answer is that if he is neither resident nor ordinarily resident he is liable only if he is carrying on a business here through a branch or agency. The liability is limited to the gains on assets connected with that business.
If such a man comes here for six months and is resident, he is not liable on his world gains, that is his gains made in other areas of the world. Unless he is domiciled here his overseas gains are only taxable to the extent that they are remitted to the United Kingdom. If the foreign-born wife of a United Kingdom citizen living here is a beneficiary under an overseas trust she is not liable on the trust gains unless the settlor is resident or ordinarily resident or was so when he made the settlement. A United Kingdom resident trust is liable in respect of world gains.
The right hon. Gentleman said he was going to give way on a question of agriculture. He referred to agriculture being treated exceptionally. If agriculture has been treated exceptionally in the past, it is presumably because it is an exceptional industry. Would the right hon. Gentleman tell the Committee what happened on April 6th, 1965, to stop agriculture being an exceptional industry?
Order. The hon. Gentleman has sat down. Mr. Heath.
I associate myself with the regret expressed by my hon. Friend that the Chief Secretary has not found it suitable to answer the specified point put to him. It is only typical of the way in which the Chief Secretary and his colleagues have been constantly out-argued in the whole of the debate. If we had not done it ourselves it was admirably done by the hon. Member for Manchester, Cheetham (Mr. Harold Lever). The Chief Secretary has given some detailed answers to the questions put to him and we shall study them carefully because this Bill is the sort of Bill to which we can return on innumerable occasions in the future if his answers are not satisfactory.
As my hon. and right hon. Friend's wish to divide against the Clause, I shall explain why we are taking this action. We want to vote against it, first, because of the rate of taxation contained in the Clause, which we have debated at length, and I have put on record our views about it. Secondly, we want to vote against it because of the structure of the tax as expressed in the Clause, which again we have discussed at length, and on which we have expressed our views clearly. Thirdly, we want to vote against it because both the rate and structure have to be considered in the context of the remaining taxation in this country at the moment, and we have expressed our views about this. Fourthly, we want to vote against it to express our immediate wholehearted disagreement and disapproval of the views expressed by the Financial Secretary, which I can only describe as MacDermot's law.
This is very interesting, because unfortunately the Chief Secretary was not here at the point of the exposition of the major exposition of the law, and therefore we have an advantage over him. What the hon. and learned Gentleman said has been in contradiction with the law already. He was asked what would have happened if there had been a Capital Gains Tax in the past, and he replied that those who had been paying high rates of tax would have had those rates reduced. He must realise that under MacDermot's law the Capital Gains Tax would have had to be reduced as well, and therefore the revenue from the Capital Gains Tax would have been much less than he anticipates, and therefore there would not have been this benefit. This is the automatic consequence of MacDermot's law.
MacDermot's law can be defined as follows: When raising a new tax, the objective should be to raise the tax sufficiently to ensure that the next adjacent tax is raised sufficiently to ensure that the next adjacent tax is raised sufficiently to ensure that the next adjacent tax is raised sufficiently. This is how it goes on. If we reduce the tax, which the Chief Secretary suggested, we have to reduce the Capital Gains Tax as well, and so his argument does not hold water, except to this extent, that nobody can really believe that if there had been additional revenue the Government would have reduced the higher levels of taxation. That is the whole weakness in the hon. Gentleman's argument. We know that the Government are only too anxious to raise the maximum levels of taxation and to keep them there.
This epitomises the whole purpose of the Government in the rate of tax and the structure of this tax. It is not to perform the genuine purpose of catching speculative gains, or unjust gains, but to take a sufficient level of capital to make a major redistribution of wealth. That is the Government's purpose, and it is the great weakness of the Chancellor that he has not stated that frankly as being the object of this tax as he has framed it in the Bill. We have come to the end of the Clause, and for the four reasons which I have stated I advise my hon. Friends to divide against it.
|Division No. 132.]||AYES||[11.59 p.m.|
|Abse, Leo||Hamilton, William (West Fife)||Pentland, Norman|
|Allen, Scholefield (Crewe)||Hannan, William||Popplewell, Ernest|
|Armstrong, Ernest||Harper, Joseph||Prentice, R. E.|
|Barnett, Joel||Hart, Mrs. Judith||Price, J. T. (Westhoughton)|
|Baxter, William||Hattersley, Roy||Probert, Arthur|
|Bence, Cyril||Hazell, Bert||Pursey, Cmdr. Harry|
|Bennett, J. (Glasgow, Bridgeton)||Heffer, Eric S.||Redhead, Edward|
|Bishop, E. S.||Herbison, Rt. Hn. Margaret||Rees, Merlyn|
|Blackburn, F.||Hill, J. (Midlothian)||Reynolds, G. W.|
|Blenkinsop, Arthur||Hobden, Dennis (Brighton, K'town)||Rhodes, Geoffrey|
|Boardman, H.||Howarth, Robert L. (Bolton, E.)||Richard, Ivor|
|Boston, T. G.||Howell, Denis (Small Heath)||Roberts, Albert (Normanton)|
|Bowden, Rt. Hn. H. W. (Leics S.W.)||Hughes, Cledwyn (Anglesey)||Roberts, Goronwy (Caernarvon)|
|Braddock, Mrs. E. M.||Hughes, Emrys (S. Ayrshire)||Robertson, John (Paisley)|
|Bray, Dr. Jeremy||Irvine, A. J. (Edge Hill)||Rodgers, William (Stockton)|
|Brown, Hugh D. (Glasgow, Provan)||Jones, Dan (Burnley)||Rogers, George (Kensington, N.)|
|Brown, R. W. (Shoreditch & Fbury)||Jones, J. Idwal (Wrexham)||Rose, Paul B.|
|Buchan, Norman (Renfrewshire, W.)||Jones, T. W. (Merioneth)||Ross, Rt. Hn. William|
|Buchanan, Richard||Kerr, Mrs. Anne (R'ter & Chatham)||Sheldon, Robert|
|Callaghan, Rt. Hn. James||Lawson, George||Short,Rt.Hn.E.(N'c'tle-on-Tyne,C)|
|Carmichael, Neil||Lee, Rt. Hn. Frederick (Newton)||Short, Mrs. Renée (W'hampton,N.E.)|
|Carter-Jones, Lewis||Lee, Miss Jennie (Cannock)||Silkin, John (Deptford)|
|Castle, Rt. Hn. Barbara||Lever, Harold (Cheetham)||Silverman, Julius (Aston)|
|Chapman, Donald||MacDermot, Niall||Small, William|
|Craddock, George (Bradford, S.)||McGuire, Michael||Snow, Julian|
|Crawshaw, Richard||McKay, Mrs. Margaret||Stewart, Rt. Hn. Michael|
|Cullen, Mrs. Alice||Mackie, John (Enfield, E.)||Summerskill, Hn. Dr. Shirley|
|Dalyell, Tam||MacMillan, Malcolm||Swingler, Stephen|
|Davies, G. Elfed (Rhondda, E.)||MacPherson, Malcolm||Taverne, Dick|
|de Freitas, Sir Geoffrey||Mahon, Simon (Bootle)||Taylor, Bernard (Mansfield)|
|Delargy, Hugh||Manuel, Archie||Thomas, George (Cardiff, W.)|
|Dell, Edmund||Mapp, Charles||Thomas, Iorwerth (Rhondda, W.)|
|Dempsey, James||Mason, Roy||Thomson, George (Dundee, E.)|
|Diamond, John||Mayhew, Christopher||Thornton, Ernest|
|Doig, Peter||Mellish, Robert||Tinn, James|
|Duffy, Dr. A. E. P.||Mendelson, J. J.||Urwin, T. W.|
|Dunn, James A.||Millan, Bruce||Wainwright, Edwin|
|Dunnett, Jack||Miller, Dr. M. S.||Walden, Brian (All Saints)|
|Edelman, Maurice||Milne, Edward (Blyth)||Walker, Harold (Doncaster)|
|Edwards, Rt. Hn. Ness (Caerphilly)||Morris, John (Aberavon)||Wallace, George|
|Edwards, Robert (Bilston)||Murray, Albert||Wells, William (Walsall, N.)|
|Ennals, David||Noel-Baker, Francis (Swindon)||White, Mrs. Eirene|
|Evans, Ioan (Birmingham, Yardley)||Norwood, Christopher||Whitlock, William|
|Fernyhough, E.||Ogden, Eric||Willey, Rt. Hn. Frederick|
|Fletcher, Sir Eric (Islington, E.)||Oram, Albert E. (E. Ham, S.)||Williams, Alan (Swansea, W.)|
|Foley, Maurice||Orme, Stanley||Williams, Albert (Abertillery)|
|Ford, Ben||Oswald, Thomas||Willis, George (Edinburgh,E.)|
|Fraser, Rt. Hn. Tom (Hamilton)||Page, Derek (King's Lynn)||Wilson, William (Coventry, S.)|
|Garrett, W. E.||Palmer, Arthur||Woof, Robert|
|Garrow, A.||Pannell, Rt. Hn. Charles||Wyatt, Woodrow|
|George, Lady Megan Lloyd||Park, Trevor (Derbyshire, S.E.)||Zilliacus, K.|
|Gourlay, Harry||Pearson, Arthur (Pontypridd)||TELLERS FOR THE AYES:|
|Griffiths, David (Rother Valley)||Peart, Rt. Hn. Fred||Mr. Brian O'Malley and|
|Griffiths, Will (M'chester, Exchange)||Mrs. Harriet Slater|
|Agnew, Commander Sir Peter||Gower, Raymond||Mott-Radclyffe, Sir Charles|
|Alison, Michael (Barkston Ash)||Grant, Anthony||Munro-Lucas-Tooth, Sir Hugh|
|Allason, James (Hemel Hempstead)||Griffiths, Peter (Smethwick)||Neave, Airey|
|Anstruther-Gray, Rt. Hn. Sir W.||Grimond, Rt. Hn. J.||Nicholls, Sir Harmar|
|Awdry, Daniel||Gurden, Harold||Noble, Rt. Hn. Michael|
|Barlow, Sir John||Hall, John (Wycombe)||Nugent, Rt. Hn. Sir Richard|
|Batsford, Brian||Hall-Davis, A. G. F.||Onslow, Cranley|
|Bennett, Sir Frederic (Torquay)||Hamilton, M. (Salisbury)||Osborn, John (Hallam)|
|Berry, Hn. Anthony||Harrison, Col. Sir Harwood (Eye)||Osborne, Sir Cyril (Louth)|
|Bessell, Peter||Harvey, John (Walthamstow, E.)||Page, R. Graham (Crosby)|
|Biggs-Davison, John||Harvie Anderson, Miss||Pearson, Sir Frank (Clitheroe)|
|Bossom, Hn. Clive||Hawkins, Paul||Percival, Ian|
|Box, Donald||Hay, John||Pitt, Dame Edith|
|Boyd-Carpenter, Rt. Hn. J.||Heald, Rt. Hn. Sir Lionel||Pounder, Rafton|
|Boyle, Rt. Hn. Sir Edward||Heath, Rt. Hn. Edward||Powell, Rt. Hn. J. Enoch|
|Brinton, Sir Tatton||Hendry, Forbes||Prior, J. M. L.|
|Brooke, Rt. Hn. Henry||Hiley, Joseph||Pym, Francis|
|Bruce-Gardyne, J.||Hill, J. E. B. (S. Norfolk)||Ramsden, Rt. Hn. James|
|Bryan, Paul||Hirst, Geoffrey||Redmayne, Rt. Hn. Sir Martin|
|Buchanan-Smith, Alick||Hogg, Rt. Hn. Quintin||Renton, Rt. Hn. Sir David|
|Buxton, Ronald||Hordern, Peter||Ridley, Hn. Nicholas|
|Carlisle, Mark||Hornby, Richard||Ridsdale, Julian|
|Carr, Rt. Hn. Robert||Hornsby-Smith, Rt. Hn. Dame P.||Roberts, Sir Peter (Heeley)|
|Chichester-Clark, R.||Howe, Geoffrey (Bebington)||Scott-Hopkins, James|
|Clark, William (Nottingham, S.)||Hunt, John (Bromley)||Sharples, Richard|
|Cooke, Robert||Hutchison, Michael Clark||Smith, Dudley (Br'ntf'd & Chiswick)|
|Cooper-Key, Sir Neill||Irvine, Bryant Godman (Rye)||Spearman, Sir Alexander|
|Curran, Charles||Jenkin, Patrick (Woodford)||Stainton, Keith|
|Dalkeith, Earl of||Johnson Smith, C. (East Grinstead)||Stanley, Hn. Richard|
|Dance, James||Johnston, Russell (Inverness)||Steel, David (Roxburgh)|
|Davies, Dr. Wyndham (Perry Barr)||Jopling, Michael||Studholme, Sir Henry|
|d'Avigdor-Goldsmid, Sir Henry||Joseph, Rt. Hn. Sir Keith||Summers, Sir Spencer|
|Dean, Paul||Kerr, Sir Hamilton (Cambridge)||Taylor, Sir Charles (Eastbourne)|
|Digby, Simon Wingfield||Kilfedder, James A.||Taylor, Edward M. (G'gow.Cathcart)|
|Dodds-Parker, Douglas||King, Evelyn (Dorset, S.)||Taylor, Frank (Moss Side)|
|du Cann, Rt. Hn. Edward||Kirk, Peter||Thatcher, Mrs. Margaret|
|Elliott, R. W. (N'c'tle-upon-Tyne,N.)||Kitson, Timothy||Thomas, Sir Leslie (Canterbury)|
|Emery, Peter||Langford-Holt, Sir John||Thompson, Sir Richard (Croydon,S.)|
|Errington, Sir Eric||Legge-Bourke, Sir Harry||Tiley, Arthur (Bradford, W.)|
|Eyre, Reginald||Longbottom, Charles||Turton, Rt. Hn. R. H.|
|Farr, John||Loveys, Walter H.||Tweedsmuir, Lady|
|Fisher, Nigel||Lubbock, Eric||van Straubenzee, W. R.|
|Fletcher-Cooke, Sir John (S'pton)||MacArthur, Ian||Walker, Peter (Worcester)|
|Foster, Sir John||Mackenzie, Alasdair (Ross&Crom'ty)||Ward, Dame Irene|
|Fraser, Rt Hn Hugh(St'fford&Stone)||Mackie, George Y. (C'ness & S'land)||Whitelaw, William|
|Frascr, Ian (Plymouth, Sutton)||Maude, Angus||Wilson, Geoffrey (Truro)|
|Gibson-Watt, David||Maydon, Lt.-Cmdr. S. L. C.||Wise, A. R.|
|Gilmour, Ian (Norfolk, Central)||Mills, Peter (Torrington)||TELLERS FOR THE NOES:|
|Gilmour, Sir John (East Fife)||Monro, Hector||Mr. Martin McLaren and|
|Glover, Sir Douglas||Morrison, Charles (Devizes)||Mr. Jasper More|
I beg to move, That the Chairman do report Progress and ask leave to sit again.
I move this Motion in order to ask the Chancellor if he would convey his views to the Committee as to how we should conduct our business. Today, again, we have had a hard day's work with some serious debates, and nobody who has been present would disagree that hon. Members opposite have played their part—not perhaps so much as have my hon. Friends, but to a certain extent—and I would suggest that we have reached a convenient position with the end of Clause 19. I ask the Chancellor if he does not think we should resume tomorrow with the important Clause concerned with the two-thirds charge in the matter of personal arrangements. Could the Chancellor convey his views to the Committee?
I agree with the right hon. Member for Bexley (Mr. Heath) that we have all done a hard day's work. I have listened to the debate without taking much part in it, but in my opinion those hon. Members who have taken part in it have made constructive speeches. Whether ten different Members making the same constructive speech is ten times as constructive as one constructive speech made by one Member is not for me to say, but certainly all the speeches have been constructive in that sense.
Despite all the hard work that has gone into our discussions, however, I cannot say that without a little more effort it would not be possible to get a few more Clauses. Last night the right hon. Gentleman—[Interruption.] I would not say that that sneeze from the right hon. and learned Member for St. Marylebone (Mr. Hogg) was the most intelligent speech that he has made, but it was certainly very close to it. The right hon. Member for Bexley told us last night how eager he was to hear about some of the concessions that my hon. Friend wishes to make on some of the later Clauses, and he was apparently willing to go through. If we take this opportunity we shall be able to get to some of those Clauses and the Committee will be better instructed on some of the points in respect of which my hon. Friend, in the light of his consideration of the Amendments which have been put down, wishes to make some alterations in the Bill.
If we apply ourselves constructively to our work, as we have done so far today, this should be possible. We have had a long debate on this Clause—six hours, including our discussions of the Amendments—and I need not multiply the number of Clauses in the Bill by 6 to find out what the answer will be. I believe that we ought to make progress tonight with some of the other Clauses and get a little further on before we finally conclude the proceedings for the day.
I support my right hon. Friend the Member for Bexley (Mr. Heath) in his suggestion that this is an appropriate time to break off our proceedings. We have dealt with a distinct phase of the Capital Gains Tax in Clause 19, and Clause 20 brings us to a new phase of the argument. Ten minutes past midnight is not the time to start on this new phase. I appreciate the desire of the Chancellor to get various Clauses, but it was pretty clear to all those of us who have seen previous Chancellors going through the same moves that he was trying to negotiate, even against the common sense of the clock, a quick decision in his favour on some of the other Clauses.
In my opinion, if he had given proper consideration to the matter he would agree that Clause 19—which has had a very full investigation—marks the end of a phase, and that at this hour it would be sensible to break off and start with Clauses 20 and 21 on a new day. Those Clauses can be taken together.
It is clear to all of us who have sat through other Budget and Finance Bill debates that the Chancellor is merely going through a manoeuvre. He has produced no argument to warrant continuing our discussions on the following Clauses. He has gone through the normal motions of trying to get, on the cheap, one or two quick decisions in his favour. I hope that we shall be able to put enough pressure upon him—and I hope that the pressure will come not only from this side of the Committee but from some of the independent-minded hon. Members opposite—[Interruption.] Yes, there are a few independent-minded Members opposite. Not all of them are easy Lobby fodder. Some of them have the interests of the nation at heart, and quite a number realise that at this hour it would be wrong to start discussing the Clause that we are now approaching. I hope that we shall be able to convince the Chancellor, who is often quite reasonable, that this is the time to break off our discussions for today. It would be a good thing to break away from the maneouvres of the past of trying to get Clauses easily and to agree that now is the time to break off so that we can start afresh on a new and important phase.
I also think that we should accept the Motion. The Chancellor said that many of the speeches during the debate have been constructive. I cannot apply the same adjective to his own speech. He gave no indication of how far he expects to get, and he must know that we are about to start on an extremely important Clause. He has also given a vague indication that there are Amendments on which he or his hon. Friend will give some concessions, but we have heard all this before. We have been told by the Financial Secretary and by the Chief Secretary that if we will only be patient and wait we shall come to some Amendments which the Government are able to accept. That has not happened so far.
I think this is a ruse to persuade us to go on until very late tonight. I am not prepared to accept this. [AN HON. MEMBER: "It makes no difference whether the hon. Member accepts it or not"] It is not dignified for the Committee to continue sitting late into the night, night after night, when the Government benches can muster only two hon. Members in the debate. There are plenty of them there at the moment, but they are only waiting to know when they can go home. As soon as we have finished discussing the Motion they will all disappear into other parts of the building and we shall not see them again until the next Division. Very little has been said from that side of the Committee during the whole of this long session of afternoon and evening. At one time, only two hon. Members were sitting on the benches opposite behind the Chief Secretary and the Financial Secretary.
This is another reason that I urge the Chancellor to think again about this. If his hon. Friends are not disposed to take part in the debate, perhaps they might like to return tomorrow at 3.30 p.m., when we should be willing to hear what the attitude of Government back benchers is to the Amendments under discussion. It may be that they do not mind staying when they know that television is on upstairs and they can watch the big fight. I do not think that the Chancellor should presume on the sporting instincts of hon. Members to make us stay until three o'clock in the morning. I ask him to think again about this.
I think that the Chancellor and the Leader of the House will have seen the strong reaction to the Chancellor's suggestion that we should continue now to deal with the very important Clauses which are coming. I appreciate the Chancellor's problem, but I am not certain that he altogether appreciates the immense size of some of the issues with which we have been dealing today. The debates have not been unduly long—for the most part two hours, which is not an undue length of time when four or five Amendments on a very important subject have been discussed together.
I do not think the Chancellor can suggest to us that we have not made reasonable progress in dealing with these big issues. I do not think he was serious in suggesting that that half of the Committee on this side should get together and select somebody to represent them and make a speech about an Amendment. There has not been duplication of speeches—[HON. MEMBERS: "Hear, hear."] I do not know how hon. Members opposite can murmur "Hear, hear" to that when not more than three or four of them have been here during the debate.
We are now coming on to Clause 20, a very important Amendment to which has been selected, and to Clause 21 and Amendment No. 192, a very important Amendment, with which at least six other Amendments will be taken. We indicated that we were willing to have a short debate on short-term gains because the main debate would take place on long-term gains. That is the situation in respect of the forthcoming Amendments.
I make this point because on Clause 21 two very important debates will take place, one of which is bound to be lengthy because of the nature of the subject. All sorts of interests are raised—chattels, agriculture and so on—and many of my hon. Friends will wish to speak.
I urge the right hon. Gentleman to reconsider the matter or at least give an indication of what he considers would be a reasonable part of the Bill to aim at at this late hour. In this connection, I remind the Leader of the House that the House meets tomorrow at 10.30 a.m.
Not tomorrow at 10.30 a.m. but today at that time. It is, therefore, not an ordinary Parliamentary day in that sense. This is a serious matter from the point of view of the organisation of the House of Commons and the Committee as a whole. In view of the strength of feeling on this matter, I trust that the Chancellor will reconsider his decision. Otherwise my hon. Friends and I will have to express our view accordingly.
In responding to the right hon. Gentleman's invitation to reconsider the matter, I assure him that nothing would please me more than to feel that we could leave now feeling that we had done our day's work, in which we must all participate.
I am rather concerned about what the right hon. Gentleman said about the probability of there being a long debate on the issues of chattels, detachable and movable property and so on. I thought that we had a very long debate on that yesterday. The same principles apply today on these matters as applied yesterday. With respect, there is little new argument that could be adduced that we have not already heard. But if it is to be a long debate, the sooner we get on with it the better. There is no suggestion that if we start tomorrow at 3.30 p.m. we shall make faster progress, but as to the rest, we had better see if we can, with co-operation from all sides of the Committee—in making the speeches which we have to make and expressing the point of view of our constituents—see how far we can get.
Certainly there will be no obstruction from anybody. I am certain about that. We will do our best to facilitate business. I hope, therefore, that the Committee will agree—particularly since we have discussed at some length the issue of chattels; yesterday we spent the whole day, in effect, discussing one subject—that we should now make more progress, especially in view of the slow progress of the last two days.
Without wishing to claim any particular credit, I do not think that any hon. Member can say that there has been any great pressure brought to bear on the Committee to move at a faster pace. It is, therefore, reasonable to ask hon. Members, no pressure having been brought on the Committee, to now proceed to continue our consideration of the Bill in an orderly and constructive manner.
for more than a minute or so. I merely wish to appeal to the Chancellor to be fair to hon. Members and reconsider his decision. I readily admit that some of the discussion may have been a little longer than some of us had hoped. There is no need for the Chief Secretary to smile at that remark. He is partly the culprit. Perhaps we have taken longer over certain matters because the answers we have been getting from the Government Front Bench have not been adequate to our questions.
There have been one or two technical points on which the Chief Secretary has been handed a brief and has cleared them up but, generally speaking, he has not answered our questions in a satisfactory way. I hope, therefore, that the Chancellor will either have some fresh batting on the Treasury Bench or insist that we get quicker answers to our questions so that we can proceed more quickly.
The Financial Secretary obviously annoyed the Committee by trying to anticipate a lot of the discussion by saying what the Government were not prepared to do on certain things, such as the inflation issue, before waiting to hear the discussion. That annoyed many of my hon. Friends. I do not want to delay the Committee because if we are to stay here we had better get on. I hope that the Chancellor will realise that the fault does not rest on these benches but on the extraordinarily bad performance of the Treasury Ministers.
|Division No. 133.]||AYES||[12.25 a.m.|
|Agnew, Commander Sir Peter||Carr, Rt. Hn. Robert||Foster, Sir John|
|Alison, Michael (Barkston Ash)||Chichester-Clark, R.||Fraser, Rt Hn Hugh(St'fford&Stone)|
|Allason, James (Hemel Hempstead)||Clark, William (Nottingham, S.)||Fraser, Ian (Plymouth, Sutton)|
|Anstruther-Gray, Rt. Hn. Sir W.||Cooke, Robert||Gibson-Watt, David|
|Awdry, Daniel||Cooper-Key, Sir Neill||Gilmour, Ian (Norfolk, Central)|
|Barlow, Sir John||Crawley, Aidan||Gilmour, Sir John (East Fife)|
|Batsford, Brian||Curran, Charles||Glover, Sir Douglas|
|Bennett, Sir Frederic (Torquay)||Dalkeith, Earl of||Goodhew, Victor|
|Berry, Hn. Anthony||Dance, James||Grant, Anthony|
|Bessell, Peter||Davies, Dr. Wyndham (Perry Barr)||Griffiths, Peter (Smethwick)|
|Biggs-Davison, John||d'Avigdor-Goldsmid, Sir Henry||Grimond, Rt. Hn. J.|
|Bossom, Hn. Clive||Dean, Paul||Gurden, Harold|
|Box, Donald||Digby, Simon Wingfield||Hall, John (Wycombe)|
|Boyd-Carpenter, Rt. Hn. J.||Dodds-Parker, Douglas||Hall-Davis, A. G. F.|
|Boyle, Rt. Hn. Sir Edward||du Cann, Rt. Hn. Edward||Hamilton, M. (Salisbury)|
|Brinton, Sir Tatton||Elliott, R. W. (N'c'tle-upon-Tyne,N.)||Harrison, Col. Sir Harwood (Eye)|
|Brooke, Rt. Hn. Henry||Emery, Peter||Harvey, John (Walthamstow, E.)|
|Bruce-Gardyne, J.||Errington, sir Eric||Harvie Anderson, Miss|
|Bryan, Paul||Eyre, Reginald||Hawkins, Paul|
|Buchanan-Smith, Alick||Farr, John||Heald, Rt. Hn. Sir Lionel|
|Buxton, Ronald||Fisher, Nigel||Heath, Rt. Hn. Edward|
|Carlisle, Mark||Fletcher-Cooke, Sir John (S'pton)||Hendry, Forbes|
|Hiley, Joseph||Mackie, George Y. (C'ness & S'land)||Roberts, Sir Peter (Heeley)|
|Hill, J. E. B. (S. Norfolk)||Maude, Angus||Scott-Hopkins, James|
|Hirst, Geoffrey||Maydon, Lt.-Cmdr. S. L. C.||Sharples, Richard|
|Hogg, Rt. Hn. Quintin||Mills, Peter (Torrington)||Smith, Dudley (Br'ntf'd & Chiswick)|
|Hordern, Peter||Monro, Hector||Spearman, Sir Alexander|
|Hornby, Richard||Morrison, Charles (Devizes)||Stainton, Keith|
|Hornsby-Smith, Rt. Hn. Dame P.||Mott-Radclyffe, Sir Charles||Stanley, Hn. Richard|
|Howe, Geoffrey (Bebington)||Munro-Lucas-Tooth, Sir Hugh||Steel, David (Roxburgh)|
|Hunt, John (Bromley)||Neave, Airey||Studholme, Sir Henry|
|Hutchison, Michael Clark||Nicholls, Sir Harmar||Summers, Sir Spencer|
|Irvine, Bryant Godman (Rye)||Noble, Rt. Hn. Michael||Taylor, Sir Charles (Eastbourne)|
|Jenkin, Patrick (Woodford)||Nugent, Rt. Hn. Sir Richard||Taylor, Edward M. (G'gow,Cathcart)|
|Johnson Smith, G. (East Grinstead)||Onslow, Cranley||Taylor, Frank (Moss Side)|
|Johnston, Russell (Inverness)||Osborn, John (Hallam)||Thatcher, Mrs. Margaret|
|Jopling, Michael||Osborne, Sir Cyril (Louth)||Thomas, Sir Leslie (Canterbury)|
|Joseph, Rt. Hn. Sir Keith||Page, R. Graham (Crosby)||Thompson, Sir Richard (Croydon,S.)|
|Kerr, Sir Hamilton (Cambridge)||Pearson, Sir Frank (Clitheroe)||Tiley, Arthur (Bradford, W.)|
|Kilfedder, James A.||Percival, Ian||Turton, Rt. Hn. R. H.|
|King, Evelyn (Dorset, S.)||Pitt, Dame Edith||Tweedsmuir, Lady|
|Kirk, Peter||Pounder, Rafton||van Straubenzee, W. R.|
|Kitson, Timothy||Powell, Rt. Hn. J. Enoch||Walker, Peter (Worcester)|
|Langford-Holt, Sir John||Prior, J. M. L.||Ward, Dame Irene|
|Legge-Bourke, Sir Harry||Pym, Francis||Whitelaw, William|
|Longbottom, Charles||Ramsden, Rt. Hn. James||Wilson, Geoffrey (Truro)|
|Loveys, Walter H.||Redmayne, Rt. Hn. Sir Martin||Wise, A. R.|
|Lubbock, Eric||Renton, Rt. Hn. Sir David||TELLERS FOR THE AYES:|
|MacArthur, Ian||Ridley, Hn. Nicholas||Mr. Martin McLaren and|
|Mackenzie, Alasdair (Ross&Crom'ty)||Ridsdale, Julian||Mr. Jasper More.|
|Abse, Leo||Hamilton, William (West Fife)||Prentice, R. E.|
|Allen, Scholefield (Crewe)||Hannan, William||Price, J. T. (Westhoughton)|
|Armstrong, Ernest||Harper, Joseph||Probert, Arthur|
|Barnett, Joel||Hart, Mrs. Judith||Pursey, Cmdr. Harry|
|Baxter, William||Hattersley, Roy||Redhead, Edward|
|Bence, Cyril||Hazell, Bert||Rees, Merlyn|
|Bennett, J. (Glasgow, Bridgeton)||Heffer, Eric S.||Reynolds, G. W.|
|Bishop, E. S.||Herbison, Rt. Hn. Margaret||Rhodes, Geoffrey|
|Blackburn, F.||Hill, J. (Midlothian)||Richard, Ivor|
|Blenkinsop, Arthur||Hobden, Dennis (Brighton, K'town.)||Roberts, Albert (Normanton)|
|Boardman, H.||Howarth, Robert L. (Bolton, E.)||Roberts, Goronwy (Caernarvon)|
|Boston, T. G.||Howell, Denis (Small Heath)||Robertson, John (Paisley)|
|Bowden, Rt. Hn. H. W. (Leics S.W.)||Hughes, Cledwyn (Anglesey)||Rodgers, William (Stockton)|
|Braddock, Mrs. E. M.||Hughes, Emrys (S. Ayrshire)||Rogers, George (Kensington, N.)|
|Bray, Dr. Jeremy||Irvine, A. J. (Edge Hill)||Rose, Paul B.|
|Brown, Hugh D. (Glasgow, Provan)||Jones, Dan (Burnley)||Ross, Rt. Hn. William|
|Brown, R. W. (Shoreditch & Fbury)||Jones, J. Idwal (Wrexham)||Sheldon, Robert|
|Buchan, Norman (Renfrewshire, W.)||Jones, T. W. (Merioneth)||Short,Rt.Hn.E.(N'c'tle-on-Tyne,C.)|
|Buchanan, Richard||Kerr, Mrs. Anne (R'ter & Chatham)||Short, Mrs. Renée (W'hampton,N.E.)|
|Callaghan, Rt. Hn. James||Lawson, George||Silkin, John (Deptford)|
|Carmichael, Neil||Lee, Rt. Hn. Frederick (Newton)||Silverman, Julius (Aston)|
|Carter-Jones, Lewis||Lee, Miss Jennie (Cannock)||Small, William|
|Castle, Rt. Hn. Barbara||Lever, Harold (Cheetham)||Snow, Julian|
|Chapman, Donald||MacDermot, Niall||Stewart, Rt. Hn. Michael|
|Craddock, George (Bradford, S.)||McGuire, Michael||Summerskill, Dr. Shirley|
|Crawshaw, Richard||McKay, Mrs. Margaret||Swingler, Stephen|
|Cullen, Mrs. Alice||Mackie, John (Enfield, E.)||Taverne, Dick|
|Dalyell, Tam||MacMillan, Malcolm||Taylor, Bernard (Mansfield)|
|Davies, G. Elfed (Rhondda, E.)||MacPherson, Malcolm||Thomas, George (Cardiff, W.)|
|de Freitas, Sir Geoffrey||Mahon, Simon (Bootle)||Thomas, Iorwerth (Rhondda, W.)|
|Delargy, Hugh||Manuel, Archie||Thomson, George (Dundee, E.)|
|Dell, Edmund||Mapp, Charles||Thornton, Ernest|
|Dempsey, James||Mayhew, Christopher||Tinn, James|
|Diamond, John||Mellish, Robert||Urwin, T. W.|
|Doig, Peter||Mendelson, J. J.||Wainwright, Edwin|
|Duffy, Dr. A. E. P.||Millan, Bruce||Walden, Brian (All Saints)|
|Dunn, James A.||Miller, Dr. M. S.||Walker, Harold (Doncaster)|
|Dunnett, Jack||Milne, Edward (Blyth)||Wallace, George|
|Edelman, Maurice||Morris, John (Aberavon)||Wells, William (Walsall, N.)|
|Edwards, Rt. Hn. Ness (Caerphilly)||Murray, Albert||White, Mrs. Eirene|
|Edwards, Robert (Bilston)||Noel-Baker, Francis (Swindon)||Whitlock, William|
|Ennals, David||Norwood, Christopher||Willey, Rt. Hn. Frederick|
|Evans Ioan (Birmingham, Yardley)||Ogden, Eric||Williams, Alan (Swansea, W.)|
|Fernyhough, E.||Oram, Albert E. (E. Ham, S.)||Williams, Albert (Abertillery)|
|Fletcher, Sir Eric (Islington, E.)||Orme, Stanley||Willis, George (Edinburgh, E.)|
|Foley, Maurice||Oswald, Thomas||Wilson, William (Coventry, S.)|
|Ford, Ben||Page, Derek (King's Lynn)||Woof, Robert|
|Fraser, Rt. Hn. Tom (Hamilton)||Palmer, Arthur||Wyatt, Woodrow|
|Garrett, W. E.||Pannell, Rt. Hn. Charles||Zilliacus, K.|
|Garrow, A.||Park, Trevor (Derbyshire, S.E.)||TELLERS FOR THE NOES|
|George, Lady Megan Lloyd||Pearson, Arthur (Pontypridd)||Mrs. Harriet Slater and|
|Gourlay, Harry||Peart, Rt. Hn. Fred||Mr. Brian O'Malley.|
|Griffiths, David (Rother Valley)||Pentland, Norman|
|Griffiths, Will (M'chester, Exchange)||Popplewell, Ernest|