Clause 21. — (Borrowings Against Life Policies to Be Treated as Income in Certain Cases.)

Orders of the Day — Finance Bill – in the House of Commons at 12:00 am on 23 June 1949.

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Motion made, and Question proposed, "That the Clause stand part of the Bill."

Photo of Sir John Foster Sir John Foster , Northwich

I do not think this is a Clause which will increase the population of Great Britain. It is a Clause which is very strange in its effects. It has been introduced to undo the success of the hon. and learned Member for East Leicester (Mr. Donovan) who won a signal victory in another place in the judicial sense, against, I believe, the Solicitor-General. I acquit the right hon. and learned Gentleman immediately of running round to the Chancellor of the Exchequer and "doing down" the hon. Member for East Leicester by ensuring that he won in the last court of appeal, namely, the House of Commons. But joking apart, annuities as we know them under the present law, and that is where the trouble is, are taxed for Income Tax purposes both as to the return on capital and the interest. If I pay £1,000 to an insurance company for an annuity I get back what is in fact my capital and interest. If I live exactly the right time, to the period of my expectation of life, actuarially I get back my £1,000 and interest on it. But the law of the land is such, and I have always disagreed with it, that the revenue authorities levy tax on both the return on capital and the interest.

The Wesleyan and General Assurance Company devised a scheme by which the return on capital was not taxed, and the interest was quite properly taxed. That scheme put quite shortly was this. The Wesleyan contract say for £1,000, on an expectation of life of say 10 years, would be this. They divide the £1,000 by the number of months between now and 10 years hence. That is 120 months, giving roughly £8 10s. a month. They say I can borrow £8 10s. a month against the £1,000 I was going to get if I died on the right date. That is the equivalent of an annuity. If I live longer than the 10 years, then for every month I live they state that the £1,000 was increased by £8 10s., and I could also borrow £8 10s. a month against it. I would thus get a fixed annual sum plus the interest for as long as I lived.

The Wesleyan contract was a product of the evils of taxing the return on capital in an annuity. We may have some argument by the Solicitor-General that it was in the years of Tory misrule that this bad principle was brought in, but I hope that he will spare us that argument. I should like him to say whether he thinks it is right in principle, that an annuity should be taxed on that portion which is a return on capital. That is the first question of principle he should deal with. If he says he thinks that it is right I am sure that my hon. Friends will take it up with him. Let us assume he thinks that it is wrong and it is an evil to tax the return on capital. In Canada a distinction is made between interest as interest, and interest on return of capital. Although one might say it is perhaps a wrong distinction to be able to put into one contract wording so that one pays tax, and into another contract wording under which one does not pay tax, that is unfortunately all too familiar under our law.

12.30 a.m.

I could quite understand a Clause which would sweep away the Wesleyan contract provided the evil was cured. That is what the Government ought to have done. They should not have reversed the decision of the House of Lords, which found that the Wesleyan contract was on the right principles, that where it was a return on capital it was liable to tax and where it was providing for interest, it was not. They should rather have cured the evil of the taxation on capital annuities to which I have alluded. I am also anticipating another argument. I expect it to be said that this will cause a loss of revenue. I do not think that argument will hold because at the present moment a man who goes in for a Wesleyan contract will find it no longer profitable for him to do so. He will not rush in for profits which are taxed as return on capital. He will abstain from making any capital at all. That abstention will not cause any loss of revenue.

There is a small and unjust gain to the Revenue in this Clause, namely that it is retrospective in the sense that anybody who entered into the contract, relying on the decision by the House of Lords, will find he does not get the advantage of this decision. A man is entitled to rely on the law of the land as it is, but his position will be that, having entered into the contract, he now finds that, it may be a very high rate of taxation, proportionate to this income, will attach to him. If he has put all his capital into the Wesleyan contract he will find he has made his capital subject to tax and 50 per cent. has gone to the Government in taxation and, in fact, he will have lost 50 per cent. of his capital. Surely, the Solicitor-General does not think that it is just that a man who entered into a contract should find his capital turned into income contrary to the established law of the land, at the time when he entered into the contract and that half of it has gone to the taxpayer. I would like the Solicitor-General to enlighten us and to tell us the reason, apart from pique, that has made the Inland Revenue put this Clause forward. What will be the loss?

Photo of Mr Terence Donovan Mr Terence Donovan , Leicester East

The incidence of tax on life annuities has long been recognised to contain a strong element of hardship. Money is saved out of taxed income; a life annuity is bought with the savings; when the annuity comes in, it is taxed in full although the bulk of it represents taxed savings coming back in the form of capital.

Any attempt to remedy this is not immoral nor is it anti-social. Parliament itself in the Income Tax Act of 1918 proclaims that double taxation as there defined is something to be avoided wherever possible. And on many occasions recently this House on the Motion of the Government (quite rightly if I may say so) has approved convention after convention with foreign countries for avoiding that result. The effect of this Clause, however, is to maintain that hardship so far as life annuities are concerned. I should like to say, and so would every responsible Member of this House, that if without this Clause a serious or unacceptable loss of revenue will occur the Clause must be accepted. But those who have life annuities now cannot cancel their contracts and insist on having a new one; and those who do not have life annuities now and refrain because of this double taxation disadvantage will go on refraining. In these circumstances I cannot see, any more than could the hon. Member for Northwich (Mr. J. Foster) where the loss of revenue will occur.

It may be said that a person who took out a policy with the Wesleyan and General Insurance Company is in just the same position as if he had taken a life annuity for the amount of his loan plus interest. That is an appeal to the substance of the matter and an appeal to what one might call the broad merits of the situation. But the broad merits of the situation are that what a life annuitant is given back is capital plus interest. That is the substance of the matter, and when one finds that a company has evolved a method of distinguishing between the capital and interest content of an annuity quite fairly as between the Revenue and the taxpayer it is a little difficult to see why a decision in his favour that part of what he got was truly capital should not be reversed.

Photo of Mr Cecil Poole Mr Cecil Poole , Lichfield

I hope that when the Solicitor-General replies he will concern himself more with the two major points put forward by my hon. Friend the Member for Northwich (Mr. J. Foster) and the hon. and learned Member for East Leicester (Mr. Donovan) as to the main question of taxation of annuities, rather than the case of the Wesleyan Insurance Company. With all due respect to the hon. and learned Member for East Leicester, I am bound to say that as far as that case is concerned, I am in complete agreement with the Government in this Clause. I do not think it can be argued that anyone took out a policy of that sort without the intention of escaping an element of taxation of an annuity and, that being the case, it would not be right to allow that sort of case to continue.

I feel very strongly that the matter of taxation of annuities should be looked into and I suggest that the matter is not quite so simple as has been suggested by my hon. Friend and the hon. and learned Member. When one takes out an annuity the basis of the contract is not that the capital is returned to one but that one exchanges capital for income over an unlimited period of years. When it is a determinable period, a fixed period of years, the capital element is not taxed and it would be quite wrong for the Committee to feel that the issue is as simple as that. As my hon. Friend said, that difficulty has been overcome in Canada. I am not sufficiently conversant with the taxation situation there to know whether it would perhaps be applicable here.

I should like the Solicitor-General to concern himself with the fact that, because of the present incidence of taxation of annuities, many people are deterred from taking them out and, therefore, this class of business, which is entirely desirable in many cases, is not being continued. I hope the right hon. and learned Gentleman will say that the Government will look into the matter, bearing in mind that it is not in any way a simple problem. I hope that no one on either side of the Committee will, on a matter of principle, oppose this Clause which deals with the particular case of the Wesleyan Insurance Company.

Photo of Sir Frank Soskice Sir Frank Soskice , Birkenhead East

As the hon. Member for Oswestry (Mr. O. Poole) said, at any rate by implication, the position must be accepted that so long as the law of the country is that life annuities must be taxed, there can be no justification for a contract in the form of the Wesleyan Insurance Company contract to escape that taxation. I am asked by hon. Members to say what I think about taxation of the so-called capital element in annuities. The hon. Member for Oswestry put his finger on the point. There are two schools of thought on the matter. One has been adopted in the past very widely outside this country. Canada has been mentioned as the country which takes the opposite view, but the Republic of Ireland and South Africa take the same view as we do and recently confirmed that view.

We take the view that when one has, say, £500 of capital and decides to take a life annuity, one gets rid of the £500 and buys for it a source of income. It is a source of income which in the aggregate may amount to more than £500, or it may be less. You may live long enough to get £1,000 back for £500 originally spent or you may die so soon that you have received only £25. But you have taken £500 and spent it and you have got something in return which is entirely different. That is the view we take in this country.

To test that view outside, that if you tax life annuities you are taxing the capital element, let us take the case of a person who lives very long and for his £500 he received payments annually which total £1,000 whereas the capital element you are taxing is in respect of the excess over the £500 which the annuitant originally spent. We think the two things are entirely different. You are spending a capital sum and buying something which may be more or less valuable to you. It is your own choice: instead of having a capital sum you can have an income. The law of the country is that that income is income which is taxable under Case III of Schedule D as to its whole incidence. That has always been the case in this country and there is no reason that we see to change that principle.

Assuming that is so, if one looks to this contract in the Wesleyan case, we see it provided for the individual in question to spend £500. For that sum he got in all £64 per annum for his life. Of that £64 per annum, £7 was described as life annuity and as a matter of fact that sum is calculated actuarially to represent what was said to be the interest element in the life annuity. In addition to that, the contract gave him this right—to receive every month so long as he lived £4 14s. 8d. and it also gave him the right to borrow if he wished free of interest any part of the whole of that life assurance money, month by month from the start right up to the time of his death, and he did not have to repay the borrowing except out of the money he would get upon death.

It stands to reason that the effect of that transaction is that the individual in question got £7 a year and also received £4 14s. 8d. per month so long as he lived and that totalled a payment of £64 a year. The net result of this transaction was that he got £64 so that he did not have to pay back in cash any sum which was set off against what was due at his death. In another place when my hon. and learned Friend the Member for East Leicester (Mr. Donovan) and I argued it before their Lordships, they took the view that the legal form of that contract was that, as to the £4 14s. 8d. a month, it was in law a loan and in consequence it was not taxable. Except for that it had exactly the same effect in every conceivable possible way as if the individual in question had bought a life annuity of £64.

12.45 a.m.

That was the view we took or at any rate, the result was very close to what would have happened. The real substance of the matter, and the justice of the matter, was that the individual should be taxed as if he had received a life annuity. If we had not introduced this Clause everyone who wanted to get the equivalent of a life annuity free of tax in regard to a major portion of it would have entered into this sort of contract. The result would have been a loss to the Exchequer which in course of time would have become serious; we estimated it at £3 million.

I therefore come back to what I said at the outset that so long as annuities are taxable from the point of view which I have indicated to the Committee we think there can be no justification for excepting a contract in the form of this contract which so closely approximates in its result to a life annuity. I said it was the same but I think I must correct myself by saying there was some difference in result, which we thought was entirely immaterial.

What we have done, in point of fact, is to include in the Clause a provision which would prevent what we might describe as—I do not mean in any depreciatory sense—a genuine loan case from being affected by this Clause. We do that by subsection (3) where we say that if the Commissioners of Inland Revenue are satisfied that it is not the object of the payments to get an advantage equal to an annuity, they can except it from the scope of this Clause, and that is why we think it right to include this Clause.

With regard to its being retrospective, it is, in a very minor sense. It affects payments received after the time when the Act comes into force. That was intimated quite early by a Parliamentary Question asked on 24th June, 1948. The question of legislation as a result of the decision of the House of Lords was under consideration, and the decision of the House of Lords was given in March, 1948, some two or three months before that Parliamentary Question was asked. In point of fact, very few contracts indeed were affected.

The reason why the Clause is there, is that this way of getting what is the equivalent of an annuity without paying tax, except on a small proportion, would have provided a loophole which would have been greatly extended if this Clause had not been introduced. With regard to persons who already have life annuities, they are already taxed as such. If a person has a terminable annuity at a certain date that is treated as what it is, a redemption of capital, and the person is taxed only on the interest.

Photo of Mr Charles Hale Mr Charles Hale , Oldham

I do not think my right hon. and learned Friend has covered the important point raised by the hon. Member for Oswestry (Mr. O. Poole) which is a very serious and practical difficulty. It is the problem of the very small estate which is not sufficient to bring in an income to maintain a widow. As I understand the position at the moment, if a widow of 70 had £5,000 available and if she invests the whole of that in a life annuity—I am not defending the Wesleyan and General business—designed to cover her for life, which is after all the period which has to be covered, then she does not get any protection. But if an attempt is made to budget for the length of life she will live, and a maximum period is put, say of 30 years, there is tax protection. That seems to me to be an important point, and I would ask the learned Solicitor-General to consider that between now and the Report stage, because it is a very real hardship.

Photo of Mr John Boyd-Carpenter Mr John Boyd-Carpenter , Kingston upon Thames

I do not want to join issue with the Solicitor-General on his general repetition of the argument which 15 months ago failed to persuade four of the greatest English judges, but I do want to press him on the relatively narrow point of the retrospective effect of this Clause. He seemed to brush that aside, but it is a matter that calls for further consideration. Whether he is right or wrong in saying that contracts of this sort have no justification whatever I do not propose to argue. What I put to him is this. On 19th March, 1948, the highest legal tribunal found that the payment made in this form of contract did not attract tax. It was surely justifiable, therefore, in those circumstances, after that decision, for persons to make these contracts in the expectation that tax would not be attracted. Unless the decisions of the highest legal tribunal are treated in that way it is going to be impossible to carry on business at all. It does seem to be wrong now, 15 months later, to come forward with a provision which affects contracts made before this Finance Bill but since that decision of the House of Lords.

The Solicitor-General referred to a Parliamentary Question last June. The answer to that question gave no indication whatever that the legislation then being considered would apply to contracts made before it was introduced. There was no warning whatever of that retrospective effect given in the answer, according to my recollection. I would ask him, therefore, to reconsider the position of those people who were perfectly entitled to make their calculations on the basis that payments under these contracts were tax free, and made that calculation in the light of the decision of the highest legal tribunal in the country.

I understand that the number of people affected is limited. If that be so, the traditional Treasury argument of loss of revenue does not arise. Whether the number is large or small does not seem to me to matter very much. It seems to me to be a matter of principle. The Government are free to prohibit future contracts of this sort, but it seems wholly wrong for them—because they were defeated in legal argument 15 months ago—to say now that those who took advantage of that decision are to find that the firm legal basis on which they properly acted has been destroyed, reasonable calculations made by them vitiated, and tax levied retrospectively.

Photo of Flight Lieut Wavell Wakefield Flight Lieut Wavell Wakefield , St Marylebone

I want to add my protest on this matter of retrospective legislation. I do not see how business contracts or arrangements can be carried on if one, two, three or five years later these contracts are to be made null and void. When a contract or business arrangement is made, it is entered into according to the law at the time. It is going to be utterly impossible to make contracts if you have to consider what the law might be three or five years ahead. I earnestly hope that the Government will omit the retrospective part of this Clause, and in future, as a matter of principle, stop making retrospective legislation.

Photo of Mr Hugh Fraser Mr Hugh Fraser , Stone

I hope the right hon. and learned Gentleman will give us some indication of the number of annuitants who will be affected by this retrospective legislation. I am rather surprised, even mortified, by the attitude of my hon. Friend the Member for Oswestry (Mr. O. Poole). It seems unduly hard. This principle of retrospective legislation is condemned by the Charter and Declaration of Human Rights. I hope this matter will be looked into very carefully, to see whether there can be some administrative action to ensure that these unfortunate people have their losses made up to them. I think it is important that the whole question of annuities should be reviewed seriously by the Government. There is no question that Members on all sides of the House would like to see a much wider application of the possibilities which accrue to people in foreign countries where the law is more equitable to various classes of society.

As usual, the Solicitor-General was lucidity personified, but he has put forward a case which I confess I had difficulty in following. This afternoon we saw the Government take the most absurd, anachronistic and old-fashioned view of mining development. They are taking the same attitude towards the necessity of increasing the savings of the people. A wider policy of permitting annuities would certainly help this country to build up its lamentably low rate of investment. It would be perfectly possible to overcome some of the difficulties which the Solicitor-General envisaged. If I am to pay £500 down and live for 50 years and continue to get payment in the form of capital repayment, surely it would be a comparatively easy thing to arrange that when the capital was repaid, tax would fall on further repayments. I personally have shares in a Canadian company, and this has happened under Canadian law. When the capital is repaid, I immediately began to pay tax on any capital repaid beyond that point. Surely the Government, especially the Financial Secretary, who flatters himself on the brain power on the Front Bench opposite, can apply themselves to this comparatively simple problem, in order to see that people are not bludgeoned and bewildered by this attack when they are building up savings by a wider spread of annuity policies.

Photo of Mr Henry Strauss Mr Henry Strauss , Combined English Universities

I agree with one of the points the right hon. and learned Gentleman the Solicitor-General made. There are two different ways of regarding annuities. I agree that it is possible to take the view he gave us and to disagree with the view taken by the hon. and learned Member for East Leicester (Mr. Donovan) on what should be the general policy regarding annuities. I am bound to say, however, that there is a good deal to be said for the view of the hon. and learned Member (Mr. Donovan). Where I thought the Solicitor-General gave no justification at all for the Clause was in the matter of its retrospective action. It would be a simple matter to make a small modification of the present provision so as to prevent it applying to contracts made before the Finance Bill came into operation or made before it was introduced.

1.0 a.m.

The evil that can be done if contracts made by British insurance companies can have their whole effect suddenly altered is very great, not only in this country, but I should have thought abroad also in the effect on our invisible exports. It may be said that this Clause could not apply to foreigners. Nevertheless, if by the enactment of this Clause it were possible for the Government, after a decision of the House of Lords which made it clear that a particular form of contract had a particular effect, to say that by their action the law shall be deemed to be something quite different from what it was before the new legislation was introduced, that could have very evil effects indeed. I beg the Government to look into the matter again and, if they cannot go so far as some hon. Members have pleaded, at least to avoid this retrospective action.

Photo of Sir Frank Soskice Sir Frank Soskice , Birkenhead East

There is not a great deal which I can add to what I said before regarding the general issue. I tried then to put the conflicting points of view, but I should like to say a little more upon a question which is concerning hon. Members opposite very much, and that is the matter of retrospection. The fact which I did not state fully before is this. The contract about which I informed the Committee, and which was subject to a decision of the House of, Lords, was taken out by a director of the company, without doubt, I suppose, to see what the effect was. In August, 1948, the insurance company was warned that the Chancellor of the Exchequer was considering the introduction of legislation with regard to this contract. There was no contract apart from the contract taken out by the director of the company before August, 1948. Despite that warning, the insurance company, I think, took up some 20 contracts after August, 1948. The only contracts involved are, therefore, these 20. So, I think it is true to say that this is retrospective in the sense that it applies to these contracts entered into before this Act was passed.

Photo of Hon. Oliver Stanley Hon. Oliver Stanley , Bristol West

The 20 contracts were taken out after the House of Lords decision?

Photo of Sir Frank Soskice Sir Frank Soskice , Birkenhead East

Yes. The chronological order is that one contract was taken out, then there was the decision of the House of Lords in 1948; then in August, 1948, the Chancellor of the Exchequer gave the warning; then the 20 contracts were taken out after August, 1948. No other contracts are affected. The director of the company who took out the policy before August, 1948 is, in fact, dead. That is the contract which was the subject of the decision of the House of Lords. So only the 20 contracts which were taken out after the Chancellor of the Exchequer's warning to the insurance company in 1948 are affected.

Photo of Colonel Leonard Ropner Colonel Leonard Ropner , Barkston Ash

Can the learned Solicitor-General say what form the warning took?

Photo of Sir Frank Soskice Sir Frank Soskice , Birkenhead East

I am told that the warning was that the Chancellor of the Exchequer was considering the introduction of legislation with regard to this contract. Exactly what were the words used I do not know, but that was the general form of the warning. I understand that it clearly indicated that if this sort of contract was persisted in, the Chancellor of the Exchequer would introduce legislation, I suppose, to reverse the effect. The payments affected are only the payments in the future. That is to say, no payment made before the Act is passed is affected. The retrospection is in respect of payments made in future for contracts taken out before.

Photo of Mr Terence Donovan Mr Terence Donovan , Leicester East

My information is that there was no warning given by the Chancellor of the Exchequer that if further policies were issued legislation would follow, that there was nothing so specific as that. My information is that this company asked the Board of Inland Revenue some time after that, whether the Board would tell it precisely what its intentions were, and whether the company could, or could not, go ahead and issue these policies. I am told that the company is still waiting for an answer.

Photo of Mr Henry Strauss Mr Henry Strauss , Combined English Universities

Part of what I was about to say has just been said by the hon. and learned Member for East Leicester (Mr. Donovan), but I should like to ask the Solicitor-General this. Even if the hon. and learned Member is wrong—and I do not suggest that he is wrong—as to the warning given to the insurance company, I did not gather that the Solicitor-General is himself asserting that there was any notice to the annuitants; and surely that is equally important. Even assuming, as I do not assume, that the insurance company were in any way to blame, I cannot see that that should penalise the annuitants, and even if there are only twenty of them I do not see why the Committee should say that that is a reason why they should tolerate an injustice.

Photo of Sir John Foster Sir John Foster , Northwich

Is it not a fact, too, that just to announce that legislation is under consideration is no warning? The Government announce fifty times a day that they are considering things, and if one were to accept all those as warnings we should be in a sorry state. It merely means that they are in a muddle. This warning should have said that the Government were considering legislation which would undo the Wesleyan decision and that that legislation would be retro- spective so the people who paid money now and got repayments would find it was taxed, notwithstanding the decision. In 1935 or 1936, when the then Chancellor of the Exchequer gave a warning about accumulators, he gave the warning in the form that those entering into accumulators after that date might find certain things, because the Government might take retrospective action. The Wesleyan decision would have brought to the mind of everybody in the country the erroneous principle of taxing the return of capital and annuity; but nobody thought that the Government meant that anybody entering into this annuity arrangement after this date would find that repayment of capital, which was tax free, would then be liable to tax. This is a dishonest warning.

Photo of Sir Frank Soskice Sir Frank Soskice , Birkenhead East

I have had inquiries made, and I am informed that upon the instructions—the specific instructions—of the Chancellor, the Inland Revenue told the insurance company and made it perfectly clear beyond any doubt whatever, that legislation would be introduced to counter this device if it was persisted in. The insurance company was told that, if they issued further policies, they should inform the annuitant; and it must be agreed that that is a responsibility of the company.

Photo of Mr Cecil Poole Mr Cecil Poole , Lichfield

Remarks which I made earlier on this subject commended themselves to hon. Members, and I hope that these few remarks will, also. I agree that there is a principle involved which has serious repercussions far and away beyond this particular case. If one thinks back to the 1947 Finance Act, it will be remembered that retrospective legislation was introduced in the original Bill which had an effect on pensions schemes. Instead of affecting just a few people on that occasion, many hundreds of schemes were affected. The Chancellor of the Exchequer in fact withdrew his proposals, and they were all redrafted. If this principle is going to be accepted that insurance policies and pensions schemes which operate over a long period of time—and many people are involved—are suddenly going to be changed at what is the whim of the party in power, whatever party it is, the whole fundamental basis of British insurance is affected.

It is not possible for the right hon. Gentleman to say that in one particular case he gave or did not give to the insurance company some sort of warning, and, after all, there is doubt whether that has been done. The fact remains that if it is possible at all suddenly to come to this House and cancel insurance contracts that have been made, it takes away the whole of the basis of the insurance market in this country. I would urge the right hon. Gentleman seriously to consider that aspect before he considers pursuing this particular claim. I would really ask him to do that because I think it is a most serious point.

Photo of Mr Charles Hale Mr Charles Hale , Oldham

Surely this was done before? The General Life Assurance introduced some ingenious scheme by which one covenanted to pay annuities to trustees appointed for one's children. This was essentially an insurance device to save tax, and the policies were subsequently invalidated by retrospective legislation in a similar way.

Photo of Mr Cecil Poole Mr Cecil Poole , Lichfield

The hon. Member is very much more versed in legal matters than I am. That was quite a different case, and that point was different from the case we are discussing. Although I cannot remember the exact details of that particular scheme, it was more akin to the arrangements by which funds could be transferred to trustees who disposed of the income. Therefore a separate estate was created. This is quite a different thing. This is an annuity arrangement and the whole basis of contract in the other case was that it was spread over a long period of years. It is a most serious matter that these contracts can be swept away and I ask the Solicitor-General to look carefully into it.

Photo of Hon. Oliver Stanley Hon. Oliver Stanley , Bristol West

I apologise for intervening because I must admit I have not heard the whole of the Debate. This obviously is a question of some importance. It raises no party political matter whatsoever, and I am therefore going to make an appeal to the Solicitor-General, I am not concerned with the rights and wrongs of the decision in another place, and the decision of the Government to reverse by legislative action the authority given to that particular type of annuity by that decision. But this question of the retrospective action is an important one of principle, and we have here fortunately a case where it is easy to preserve a principle without any real cost to the Exchequer whatsoever.

We are told that there are only 20 of these annuities in existence. The loss of revenue to the Exchequer on this 20 contracts must be infinitesimal, and I do appeal to the right hon. and learned Gentleman. I know that he cannot on his own authority make any pronouncement tonight, but I appeal to him to recognise the strength of feeling there is on this principle of retrospection, to realise the very small practical effect from the point of view of the Revenue, and to assure the Committee that he will represent to the Chancellor of the Exchequer the course of this Debate. Although we cannot expect any pledge from him, I hope he will put to his right hon. and learned Friend the strength of our feeling. If it were possible for him to say that, I think probably it would be better to pass from this Clause now, and we could raise it again on Report when the Chancellor of the Exchequer is here and will have had an opportunity to think over the course of this Debate.

1.15 a.m.

Photo of Sir Frank Soskice Sir Frank Soskice , Birkenhead East

I am certain my right hon. and learned Friend will read and consider carefully what has been said in this Debate, and I shall convey to him the strength of the feeling manifested by hon. Members opposite. I am bound to say that when an insurance company receives an express warning and apparently deliberately disregards it, as far as the company is concerned—I do not say anything about the persons entering into the contracts—I do not think it is entitled to very much sympathy with regard to the contracts into which it has entered. I am sure the Chancellor will agree carefuly to consider what has been said in this Debate.

Clause ordered to stand part of the Bill.