Orders of the Day — Schedule 9
Mr Nigel Lawson (Blaby)
The hon. Member for Edinburgh, Central (Mr. Cook) said that he wished that the Treasury had listened to what was said in Committee. The reason why I introduced the amendments rather perfunctorily was that I was under the misapprehension that Opposition Members, particularly the hon. Member for Colne Valley (Mr. Wainwright), had listened to what was said in Committee. However, the contribution of the hon. Member for Colne Valley showed that nothing had penetrated his skull.
The hon. Gentleman said that the all stocks index was a consumer index. It is not. He also seemed to have no concept between changes in the general price level—inflation which the hon. Member for Edinburgh, Central also mentioned; and we would not be discussing the schedule if it were not for the effect of inflation on companies and the way that it ravages their liability for taxation if nothing is done through stock relief—and changes in relative prices.
We propose the new index on grounds of principle and not simply for administrative convenience, though there is some such convenience for the Inland Revenue and for individual companies. It is significant that the complaints that the hon. Gentleman voiced and that come from certain accountancy and other bodies are not echoed by individual companies. It is on grounds of principle that the clause and the schedule are framed in this way.
We are anxious to find a means of dealing with the consequences of inflation increasing the value of stocks and, therefore, increasing the tax liability. We are not concerned with changes in relative prices. The all stocks index will give a general indication of the rise in prices for stocks as a whole.
If we were to make a change for relative prices, as the hon. Member for Colne Valley suggests, a company that made substantial dealing profits because it had the wit to, say, buy a metal when it was rising in price would be held to have made no taxable profit, because its index would have gone up by the same amount. That would be a palpable absurdity.
What may be right for accounting purposes may not be right for taxation purposes, and we are talking about taxation and adjusting taxation for the effects of inflation. That is why we have the all stocks index.
The hon. Gentleman may, by all means, vote against the amendment. In conformity with the rest of the schedule, it is based on the all stocks index. It is a relief for new businesses and if the hon. Gentleman votes against the amendment he will be voting against relief for new businesses. That would be consistent with the Alice-in-Wonderland logic with which he has plagued the House on this matter, upstairs and down.