Clause 28. — (Transactions Designed to Avoid Liability to the Profits Tax.)

– in the House of Commons at 12:00 am on 11th June 1951.

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Photo of Mr David Logan Mr David Logan , Liverpool Scotland

On a point of order. I listened to the earnest appeal made by the hon. Gentleman the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) and I thought for the convenience of the Committee, seeing that there are 21 Amendments to Clause 28, it would expedite the business if they could be taken together.

Photo of Mr Douglas Clifton Brown Mr Douglas Clifton Brown , Hexham

I wish they could, but I am afraid that that is not possible.

Photo of Mr David Eccles Mr David Eccles , Chippenham

I beg to move, in page 20, line 29, to leave out from "where," to "may," in line 33, and to insert: any transaction is not a bona fide commercial transaction and has as its main purpose or one of its main purposes, the avoidance or reduction of liability to the profits tax, the Commissioners. This Amendment in the names of my right hon. Friend and hon. Friends is fundamental to this horrid Clause. I regret having to discuss it at this time in the morning but I will try to make my argument as clear as I can. As it stands, the Clause is quite unacceptable to us. We shall try to amend it. We shall listen to the Government's arguments, but I am doubtful whether anything respectable can be made out of such a bad beginning.

The drafting of the Clause is very complicated, but its main purpose is clear. Perhaps it would be for the convenience of the Committee if I tried to put it very shortly. In subsection (1) the Commissioners of Inland Revenue are given power, at their discretion, to make an assessment to Profits Tax for an amount which they think the taxpayer would have paid had he conducted his business in a manner which the Commissioners think he would have done had he not had avoidance of tax in mind. To make matters worse, under subsection (3), when the Commissioners consider that a taxpayer has arranged his business with the result that his liability to tax has been reduced, without further ado they may assume that his motive was to avoid tax.

The purpose of this Amendment is to limit and define these powers, which we consider are far too wide. As the Amendment goes to the root of the Clause the Committee may allow me to begin the argument by some reference to the fundamental issues of tax-evasion. Our ideas on why crimes are committed ought to influence the nature of the penalties we prescribe. Taxation is now so monstrously high that only prigs and humbugs will manifest surprise that a growing number of citizens should twist and turn, this way and that, to escape the Chancellor's net.

All taxpayers are human, and many of them are no worse than the monkey in the zoo on whose cage the notice reads "This animal has a bad disposition. When he is attacked he defends himself." So does the taxpayer when he is attacked by a Government which fails even to provide a groundnut for £36 millions of his money.

Photo of Mrs Jean Mann Mrs Jean Mann , Coatbridge and Airdrie

Is the hon. Gentleman likening the taxpayer to a monkey?

Photo of Mr David Eccles Mr David Eccles , Chippenham

I said the taxpayer was no worse in one respect. None the less, we agree that certain taxpayers have effected transactions which are so nakedly for the purpose of evading tax that the Government should have some powers in reserve to go after them.

"Evasion" is a much better word than "avoidance," which is used here. There is a significant difference between these two words. A man has a right to avoid tax, but if he deliberately evades it, that is another matter altogether. If, when I have made this speech, I leave the Chamber and drink a glass of water instead of a cup of tea I shall avoid tax, but the exercise of that choice cannot be called a crime. But if I sneak into the Festival of Britain without paying the gate money, that would be evading tax and I should be hauled up. Using that example to show what would happen in company practice if this Clause goes through, the Commissioners would have power, not to force me to drink tea, but to tax me for drinking water.

I do not like the word "avoidance" in the Bill, and at a later stage I hope my hon. Friends may support an Amendment to substitute for it "evasion." Even if all our Amendments are accepted, the granting of the powers asked for in this Clause would be a most regrettable act, which we should like to see repealed as soon as circumstances permit, that is, as soon as the burden of taxation—which is the father and mother of evasion—can be reduced.

4.0 a.m.

The Attorney-General is sure to ask why we are objecting to a Clause which is modelled on Sections in the 1941 and 1944 Finance Acts designed to deal with evasion of E.P.T. We do not accept the E.P.T. legislation as a precedent. When it was introduced by the Coalition Government, they declared that the need for such powers arose from the fact that E.P.T. was a new and temporary tax. Sir Kingsley Wood made that perfectly clear. In a more general way, it can be said that many restrictions on personal rights and liberties are accepted in war for the precise purpose of carrying the battle to a victory which will ensure the return of those very same rights and liberties.

Far too often the Labour Government have relied on the conditions of Hitler's war as a model for their Socialist Utopia. Time and again they have extended wartime Measures into peace and got away with it. In our opinion all controls and discretionary powers, tolerated when life itself was at stake, should be most jealously reviewed and most reluctantly continued in peace. Therefore we reject the parallel with E.P.T. legislation and propose to leave out the first words of the Clause. As it stands, subsection (1) begins: Where the Commissioners are of opinion … and goes on to say that when certain transactions have been effected for the purpose of avoiding tax, they may make the taxpayer pay as much as they think he ought to have paid.

The subsection goes too far in two respects. First of all, it is left to the Commissioners' discretion, to their opinion, to decide when transactions are unlawful. The present Lord Chancellor used a phrase which struck me very much when, as Solicitor-General, he was defending the Clause in which these powers were first brought forward in relation to E.P.T. Lord Jowitt said: It is a difficult thing to leave anything to a person's discretion, because, once you do so, you leave it also to his indiscretion."—[OFFICIAL REPORT: 17th June, 1941; Vol. 372, c. 607.]

Photo of Colonel Sir Alan Gomme-Duncan Colonel Sir Alan Gomme-Duncan , Perth and East Perthshire

Could my hon. Friend say on which side the Lord Chancellor was at that time?

Photo of Mr David Eccles Mr David Eccles , Chippenham

He was a member of the Coalition Government and the noble Lord was using those words in relation to the humble taxpayer, and, of course, he was a Socialist at that time. I am using these words as a Conservative in relation to the Executive, about the Commissioners of the Inland Revenue, because, however careful and wise these gentlemen may be, it is wrong in principle to leave so much to their discretion.

It would be bad enough if we gave such powers to a Minister, who at least would be responsible to the House; and if we thought he abused his powers we could go after him. But to give those powers to the Commissioners, that cloistered body of Torquemadas, is altogether wrong, because it is the facts and not the motives which ought to be examined. Therefore, we propose in our Amendment to leave out the words, "the Commissioners are of opinion" and thus to make it a question of fact whether or not the transactions to be adjusted fall within the definition of unlawful acts.

In the second place, we wish to define more clearly what are to be unlawful transactions. We propose to insert the words on the Order Paper, which I have already read out. These words carry out what we believe to be the intention of the Government. They cannot want to adjust bona fide commercial transactions. I challenge the right hon. learned Gentleman the Attorney-General to say that the Government are aiming at anything other than deliberate evasion. There is a precedent for our Amendment and it will be found in Section 18 of the 1936 Finance Act. The purpose of that Section was to prevent individuals from transferring their assets abroad, and so to evade Income Tax, but it specifically exempted transactions affected mainly for some purpose other than the purpose of avoiding tax. That is a rough and ready description of a commercial transaction.

We think we are on good ground in asking for these words which were used in the 1936 Act to be inserted into this Bill because that was a peace-time Measure drawn with much more care than the E.P.T. legislation. If the Government do not restrict the definition to non-commercial transactions let us see what would arise. Any transaction, as the Clause now stands, which results in the avoidance of tax, is open to review, and, broadly speaking, that means that any expense charged against profits can be attacked.

Suppose a firm decides to buy a motorcar for the use of important overseas customers. If it buys a Rolls-Royce instead of a Morris 8 it will avoid tax. Are the Commissioners to assess the company as though it had bought a Morris 8? They have the power to do so, and before long we shall find the Commissioners giving a horse-power rating to every company in the country.

Let us take another case. Suppose a company in need of new capital decides to make an issue of debentures instead of ordinary shares. By that it will avoid liability for profits tax, and the Commissioners will have to decide whether the debentures were issued to avoid tax. If they do so decide they must assess the company as though it had issued ordinary shares. On what grounds could they come to such a decision? They would have to make an estimate of the future earning capacity of the company, of possible trends in interest rates at the time the debentures were issued and to discover what alternatives were open to the company to borrow money if it had not used the method of debentures.

It is quite fantastic to put on the Commissioners a decision such as this, and indeed the Chancellor of the Exchequer realises this, because in subsection (3) he relieves them of the responsibility. There they are empowered to say that because the issue of debentures resulted in the avoidance of tax the directors must have had tax avoidance as their main purpose when they made the issue. My hon. Friends will multiply examples of transactions which result in a diminution of the liability and which we should all agree are perfectly genuine commercial transactions, and of a type which no one in his senses would wish to turn into a crime.

If we brought all these transactions under suspicion there would be no end to uncertainty in business and to the overwork of the Inland Revenue. One consequence would be that the relative attraction of conducting business in other countries compared with the United Kingdom would increase still further. If Clause 28 were to become law without amendment I can well understand that the Government want to have Clause 32, which puts in prison all the United Kingdom companies.

Those are some of the particular reasons for asking the Committee, in the terms of our Amendment, to define the unlawful transactions aimed at in the Clause as a non "bona fide commercial transaction" and as having the avoidance of tax as a main purpose. But there are some more general considerations with which I will close my remarks. The arguments for the powers sought in the first subsection even when those powers have been defined and restricted by our Amendment, are a striking reminder that the present high level of taxation has much wider revenue.

High taxation does more than hit a man's pocket; it leaves a scar on his thinking and on his character. Everyone is familiar with the point of diminishing returns at which, if the rate of tax is pushed any higher, the yields falls. There is also the point of diminishing moral returns when, if a tax is pushed too high, there is a loss of honesty and character which makes itself felt among Ministers and officials as well as among taxpayers.

Take, first, the lowering of standards on the side of the Government. Fifty years ago no Government would have dreamed of giving such discretionary powers to the Commissioners to re-adjust the citizen's affairs. And why not? Because both they and the public, not being demoralised by intolerable taxation, would have thought such arbitrary power indecent and un-British. But as the taxes rise higher and higher, the Government become more and more powerful and the avoidance of taxes appears in their eyes to be more and more wicked. Today, the lust to punish the little citizens, who are now so far beneath the mighty Government machine, grows more savage and vindictive as the machine itself swells and proliferates.

The Inland Revenue pursue with a ferocious inhumanity the single black sheep who stands out among a hundred honest taxpayers. All sense of proportion is lost and, in their blinkered zeal to harry, hobble and chastise the solitary sinner, they entirely overlook the effect of their persecution upon the hundred good citizens; and, I may add, on their own respect for the convenience and liberties of their fellows. One must not forget that deterioration in high places is an inevitable result of the colossal system of power which the servants of the State are now forced to operate.

As for the taxpayer himself, throughout all history he has always been corrupted by heavy taxes, and even in this virtuous country he will be corrupted by them. Of course, the modern State needs a very large revenue, but it also needs reliable, honest citizens who can be trusted both to do their business with a whole-hearted respect for the law and in an emergency, to do their duty.

Photo of Mr Arthur Woodburn Mr Arthur Woodburn , Clackmannan and East Stirlingshire

The hon. Gentleman is talking about the honest citizen. Is it not the duty of the Government to protect the honest citizen against the dishonest citizen who dodges his due taxation by whatever means possible? Is it not the Government's duty in this case to protect the honest citizen, and is not the hon. Gentleman defending the dishonest citizen?

Photo of Mr David Eccles Mr David Eccles , Chippenham

The right hon. Gentleman should recognise the facts and should realise that it is the Government who create the dishonest citizen.

That is the really serious thing about this Clause, and it must sadden every hon. Member of this Committee when he sees economic or financial necessity driving the Government to measures which do violence to the common stuff of humanity shared, as it must be, by those in power and those for whom they are responsible. From one evil comes another. This Clause is the child of oppressive taxation, and we who are the guardians of the British tradition should not pass it without substantial amendment.

4.15 a.m.

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

This Amendment, which has been, if I may say so, so effectively moved by my hon. Friend, seeks to substitute the objective test of the facts of the matter for the subjective test of the opinion of the Commissioners of Inland Revenue, and, in principle, that is surely a very much to be preferred substitution. I do not want to say anything which would even seem to cast aspersions upon the Commissioners, who are responsible public official who attempt to do their duty according to their rights. But the mere opinion of individual officials is, it seems to me, in legislation, a remarkably poor substitute for laying down precise tests of fact, and what we seek to do by this Amendment is to lay down a test of fact whether or not a bona fide commercial transaction is involved.

In passing, I ask the learned Attorney-General: Is it the desire of the Government that any bona fide commercial transaction should be attacked under the powers given by this Clause? I hope that the right hon. and learned Gentleman will answer that, because then we shall at any rate be clear where the Government stand. If the Government can say, as I hope they will say, that they do not wish to attack any such transaction, then it would surely be wiser so to enact and to make their wishes clear in statutory form, in words which were used in the Finance Act, 1936, in somewhat analogous circumstances.

If, on the other hand, it is the view of the Government that, in pursuit of taxation which they believe to have been evaded, they are prepared to attack even bona fide commercial transactions, then it would be more honest and frank if they were to tell this Committee that that is their intention. I therefore hope that the right hon. and learned Gentleman may find it convenient to answer that specific question.

The other point to which I invite the attention of the Committee is the extraordinary thing that we are asked to do from a constitutional point of view. We are asked, not to enact with some degree of precision what transactions are to be open to attack, what transactions are to be treated as being contrary to public policy, but to delegate that power, not to one of the Ministers of the Crown, who—with the exception of the Minister of Transport—answer questions from that Bench, but to a body of officials outside who are to be given power, in substance, to amend the Revenue legislation passed by this House.

Now even if an immensely strong case on tax evasion could be made out, I myself would hesitate to give officials outside that, in the technical sense, wholly irresponsible legislative power. That power is not subject to any measure of Parliamentary control; not even to the Affirmative resolution procedure on Statutory Instruments—which we have reserved even when we deal, say, with so grave a matter as the opening of Sunday cinemas in Little Puddleton—nor to the Negative resolution procedure. This is simply handed over to the Commissioners and their opinion, thereby, no doubt intentionally, making for all practical purposes appeal, at any rate beyond the Special Commissioners, impossible.

That is constitutionally a monstrous thing to do even if, from a practical point of view, there are merits and advantages. But I do not think any advantages we may be told about will be really sufficient to outweigh the constitutional disadvantages. Were we to be told that these necessities existed, that would be to cast a severe aspersion upon the capacity of the Government and its advisers to draft legislation. If there is a real, specific and definite evil here, surely the right hon. and learned Gentleman with his advisers can draft specific legislation to deal with it, which can be discussed in the House and its efficacy questioned.

To provide that the whole thing can be shovelled over to the hands of the Commissioners who, quite unfettered, are to decide whether one commercial transaction offends the law and another does not, is an astonishing proposition for this Committee to be debating even at 4.20 in the morning. I do believe that we would be unwise, unless we are told a great deal more than we have been told so far, to assent to that. I hope that we shall not be stampeded by the nonsense about tax evasion. No one wants to assist that. But it does not follow from that proposition that every action which the Government may see fit to take in the name of preventing tax evasion is right or sensible.

Once that attitude is adopted one is taking up precisely the same attitude as totalitarian States, that anything whether enacted in legislation or not, which is inconvenient to those who control the State is, for that reason, an offence against the law. That is a doctrine of totalitarianism, whether of the Fascist Right or the Communist Left. It is the attitude that the public interest, in this case the prevention of tax evasion, must take precedence over every safeguard of the liberty of the individual. That is an attitude which hon. Members in all quarters of this Committee condemn abroad, and which in certain quarters is not observed with that degree of clarity when it is advanced at home.

I hope that hon. Members will not say that this is to prevent tax evasion, and that, therefore, the question of constitutional principle of the freedom of the individual does not matter. It is our duty to hold the balance equally between the citizen and the State in this matter. Experience over a good many years has shown that the best and most effective way to hold that balance evenly is to put the restrictive provisions in full legislative form, so that the citizen may known whether what he does is lawful or unlawful, and so that he may have, in case of dispute with the executive, recourse to the King's courts.

That, I am sure, is a far more important matter even than stopping occasional bits of tax evasion; because that is a principle which, once sacrificed, cannot be recovered afterwards in the way that unpaid revenue can be. I hope that we shall not submit to a demand which, I believe, comes from the Board of Inland Revenue, and which I believe that right hon. Gentlemen opposite dislike just as much as we do.

Photo of Mr Reginald Manningham-Buller Mr Reginald Manningham-Buller , Northamptonshire South

I intervene at this moment only because I want to get from the Attorney-General answers to specific questions about the extent of this Clause. In spite of the powerful arguments advanced by my hon. Friends, I think that the true interpretation of this Clause makes its even worse than they have themselves indicated. The right hon. Member for East Stirling (Mr. Woodburn) interrupted my hon. Friend the Member for Chippenham (Mr. Eccles) and suggested that this Clause was for the purpose of protecting the good taxpayer from the bad, and that our objection to it was that it hit a tax dodging.

I do not think that he can have heard, or if he heard, cannot have understood, the opening remarks of my hon. Friend: for, if he had, he would have appreciated that our objection is something much deeper than hitting at the tax dodger. It is quite true that the right hon. Gentleman may have been misled by the marginal note to this Clause, but then it is very unwise to rely too much on the marginal note for that, perhaps, gives an indication of what was the first intention of the Clause, that it should apply to transactions designed to avoid liability to the Profits Tax.

If the Clause itself did not do more than apply to transactions designed in the sense of evading liability to Profits Tax, then I think there would be little comment to be raised in connection with it. But, in my view, it goes much further than that; and of course, in considering its interpretation, one must have no regard to the marginal note. Anyone just reading this Clause, and not familiar with decisions arrived at on points similar to those arising under it, would form the view that this Clause only applies to transactions effected with the purpose, mainly, or as one of the main purposes, of avoidance or reduction of liability to Profits Tax.

That, I submit, is the first impression one might get; but that is not the full effect of the Clause. In its present form, I think it will apply to any ordinary commercial transaction effected in the ordinary and usual course of business if, in fact, that transaction results in tax avoidance or reduction; even although, at the time that the transaction was put into operation, there was no intention whatever of securing that result. If that result follows from the transaction, then it would; be deemed to have been a purpose of the transaction and, no doubt, one of the main purposes. For, just as a man is presumed to intend the natural consequences of his action, so, if one result of a transaction is the avoidance or reduction of tax it would be presumed that that was the purpose; and that presumption, according to the authorities, is most difficult to rebut If there is avoidance or reduction, that will be presumed to have been one of the main purposes.

There are three cases to which I would refer the learned Attorney-General in support of this proposition, decided on wording very similar to the wordng of this Section. First, Majestic (Derby) Ltd., Marshall Castings, Ltd., and Joseph Smith (Cleckheaton) Ltd. All decided, and all establishing that in these cases, the transaction was held to be effected with the main purpose of tax avoidance because that was the result of the transaction; even although the Special Commissioners found, as a fact, that when the transaction was started, the individual responsible for starting it had no intention of avoiding tax, or of reducing it.

4.30 a.m.

If that is the interpretation to be given to this Clause in the light of these authorities, I am sure most hon. Members of the Committee have been very misled by this Clause if they think that what one has to have regard to is the object for which the transaction is entered into. If it was a Clause which would only hit tax dodgers' operations, if it was a Clause that would only hit the culpable mala fide, and almost fraudulent transactions for tax evasion, then we should not be spending this time at this hour of the morning discussing it.

Photo of Mr Arthur Woodburn Mr Arthur Woodburn , Clackmannan and East Stirlingshire

Does it make any difference to the company that, for instance has not arranged its affairs in such a way that part of its charges are not liable to Profits Tax, if the other people are arranging their affairs in such a way that their affairs are not liable to Profits Tax? Does it not inevitably mean the cost goes on to the company in running its affairs in one direction and the other company avoids it by arranging its affairs in another direction?

Photo of Mr Reginald Manningham-Buller Mr Reginald Manningham-Buller , Northamptonshire South

If the right hon. Gentleman is suggesting it is very unfair for an individual to place his money on deposit at one-half per cent. interest and so pays less Income Tax than he would by placing his money where he got a better yield and so paid more—that is all the right hon. Gentleman is saying comes to—I am sorry we are discussing it at an early hour of the morning, because I am sure he is showing difficulty in following the arguments advanced. He failed also to follow the arguments advanced by my hon. Friend. I know I am putting an intricate argument to follow, but I am doing my best and I hope I am succeeding in trying to put a difficult and important argument on this Clause

My argument is that whereas this Clause will apply to the perfectly ordinary commercial transactions entered into by a company without thought in its mind of tax avoidance or tax reduction, entered into for ordinary normal business purposes, but if that transaction entered into only with that object has the result of tax avoidance or tax reduction—the fortuitous result, the result not contemplated but actually following, which was not by any means the intention with which it was entered into—then, I think I am right in saying, it will be deemed to be the purpose and held to be the purpose, in the light of those authorities I have referred to, even though the Special Commissioners might come to the definite conclusion that there was no intention of avoiding or reducing tax.

Photo of Mr Arthur Woodburn Mr Arthur Woodburn , Clackmannan and East Stirlingshire

Perhaps the hon. and learned Gentleman will clear up the point. Why should profit made in that company not pay its contribution to the State the same as the profit of another company?

Photo of Mr Robin Turton Mr Robin Turton , Thirsk and Malton

On a point of order. Is it in order for the hon. Gentleman the Member for Bolton, West (Mr. John Lewis), to recline full-length on the bench?

Photo of Mr Gordon Touche Mr Gordon Touche , Dorking

I do not think I need take any notice of it.

Photo of Mr David Logan Mr David Logan , Liverpool Scotland

Do not make a noise; the hon. Member is waking up that side now.

Photo of Mr Reginald Manningham-Buller Mr Reginald Manningham-Buller , Northamptonshire South

That is one of the disadvantages of discussing this matter at this early hour on a Clause, which I am sure, would be of great interest to the hon. Gentleman the Member for Bolton, West (Mr. J. Lewis). I do not think he has been paying very much attention to it but, in spite of that, I will not repeat it. I really cannot undertake the very difficult task at this hour of the morning of seeking to explain once again the reasons why we on this side of the Committee think that this is a very bad Clause indeed. Our objection is not because it will hit some people who are tax dodgers but because, in its operation, it will hit and penalise many companies which had not any idea of engaging in tax evasion.

I hope that the right hon. and learned Gentleman will answer the question put to him in such a short form by my hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter). Perhaps I might have the attention of the Attorney-General.

Photo of Mr Reginald Manningham-Buller Mr Reginald Manningham-Buller , Northamptonshire South

I agree that the right hon. and learned Gentleman is extremely competent, but I should flatter him if I thought that he could take in the argument I am advancing at the same time as the instructions he is obviously receiving from his hon. Friend behind him.

I ask him to give a specific answer to the question: Is it intended that this Clause shall apply to bona fide commercial transactions not entered into with any intention of tax avoidance or reduction? If the Attorney-General says it is not intended to have that effect, then I suggest that by the acceptance of this wording he is making that absolutely clear beyond doubt.

My hon. Friend referred to Section 18 of the 1936 Act. That, again, was a Clause introduced into the Bill. It had as its preamble the words "in order to prevent avoidance of tax." That Clause was directed to people transferring money outside this country, but the right hon. and learned Gentleman no doubt is aware that it was specifically provided in that Clause that the bona fide commercial transaction should not come within its ambit. The actual wording of that exception to the Clause was: bona fide commercial transactions not designed for the purpose of avoiding liability to taxation. In our Amendment we have sought to introduce the same provision and, by doing so, it appears to us that we shall be carrying out the intention shown in the marginal note to this Clause by leaving it applied to transactions designed to avoid liability, while exempting from its operation transactions not so designed, even though one indirect result should be the reduction of liability to Profits Tax.

Photo of Sir Harry Hylton-Foster Sir Harry Hylton-Foster , City of York

I bow to no hon. Member of this Committee in my altruistic enthusiasm for seeing that my fellow taxpayers have to pay the uttermost farthing which the law demands of them. But I believe this Committee, and the right hon. and learned Gentleman the Attorney-General not excluded, ought to look with considerable suspicion on a Clause which, on the face of it, is nothing but a device, an attempt to make the taxpayer pay notwithstanding that he has arranged his affairs so that the law does not compel him to pay an amount which this Clause is designed to extort from him. When devices of that kind are encountered, one has to look to see what excuse can be offered for them.

My hon. Friend the Member for Chippenham (Mr. Eccles) has already anticipated that we are going to hear about E.P.T. and the war-time Clauses. That seems to be the weakest possible defence for a Clause of this kind—I do not know whether it is to be advanced—because, not only was E.P.T. new taxation, not only was the state of war making things difficult for the revenue, but there were under bombardment changes of trade, changes of location, changes of personality, shortage of accountants, those people on whom the revenue so rightly put their trust, even shortage of bits of paper on which to do sums. No sort or kind of parallel can be found with the Clause now introduced.

Every time our privileges are taken away in war—the original privilege of the subject—it is always the war-time precedent that is used to prevent them getting back to their normal state, and I do not believe this should be compared to it. I would like to show for a moment how this Clause is going to work, unless it has this Amendment in it. We need not adopt the interpretation of the law which my hon. and learned Friend the Member for Northamptonshire, South (Mr. Manningham-Buller) has just been suggesting, to see how hopeless it will be in practice.

What happens with the person, firm or company which has a perfectly bona fide commercial transaction and wants to know how to do it? It goes to its advisors—thank goodness—its accountants, its lawyers, and gets advice and is told, "You can do it that way, or that way, but from the tax point of view, that is the cheapest way to do it." No one but a fool would do anything but adopt that way—indeed, they have duties compelling them, their duty to the shareholders compels them; their duty to the customer compels them, because if they put more tax on, they put prices up; their duty to the workers compels them because on the tax they pay depends the amount they have to invest in maintenance, including machinery and welfare. In the last resort they are convinced of the need to be sensible about tax, and of not butting their heads into paying more tax than they need. They take the advice they are given, and adopt the cheapest method from the Profits Tax point of view. The primary purpose is a bona fide commercial one, and the ultimate purpose is a bona fide commercial one.

By that time, as they have been advised, this is one of the main purposes of the reduction of liability to Profits Tax. Then you get those worthy citizens, the commissioners. It is a very difficult question, and what you will get in actual practice is a difference of opinion between different sets of Commissioners in different divisions. If there is one vice you cannot tolerate in taxation, it is that it should be equal and fair between equivalent specimens of taxpayers. That is what you will not get if you confer a discretion of the kind this Clause, un-amended, does confer.

4.45 a.m.

That is why we have always insisted in this land, and I hope this is particularly understood by the Committee this morning, that the conferring of a wide discretion is the evening of the supremacy of the law. If we include a wide discretion such as this Amendment would confer on the Commissioners, what we are doing is to substitute the "incertain and crooked cord of discretion for the golden and streight metwand of the law."

Photo of Mr Henry Strauss Mr Henry Strauss , Norwich South

The right hon. and learned Attorney-General might give some guidance to the Committee on the meaning of "transaction or transactions." I wonder whether he, or any other hon. or right hon. Gentleman opposite, has any clear idea of the nature of the transaction which he might wish to fall within the mischief of this Clause.

Really, the Government are faced with this dilemma. If they have got some idea of the nature of the transaction which they wish to bring within the mischief of this Clause, it would be far less offensive to all the principles of our law if they endeavoured to define that transaction and to hit it so that the tax became legally due if people indulged in it. If, on the other hand, they have no idea of what the transaction is which they wish to bring within the scope of this Clause, but merely fear that some ingenious legal practitioners or accountants may think of some transaction which, if adopted, would cause the company to escape from legal liability, then how foolish really is the principle that they are here adopting.

They will be abandoning the well-known principles of law, which have been mentioned by my hon. and hon. and learned Friends who have already spoken, for the sake of one year's tax. Of course, if a transaction which they have not foreseen but which they wish, after it has taken place, that they had foreseen, takes place, in the next Finance Act they can hit it for the future. Therefore, the whole of this legally offensive Clause must be designed, if it has any object which is not absurd, to save the tax for one year on a transaction that the Government and their advisers have been, unable to foresee. Is it really worth it?

I should like to ask also this question of the right hon. and learned Gentleman. I am asking this for information, because I do not pretend to have pursued researches on the subject. Can he give us guidance on how far the words "transaction or transactions" have been defined? Let me give one example. Suppose a company decided to pay next to no dividend, to pay a very small dividend indeed—what many hon. Members might consider an unreasonably small dividend. The effect of that decision will be that they will pay less in Profits Tax than they would otherwise pay, and that may be one of the main objects which made the directors decide upon so low a dividend. Would that be a transaction within the meaning of the Clause? I ask that question, but would add that I am under the impression that it would not be.

I do not think it would be a transaction, but I think you can, in thinking out various decisions of that kind, find that you can say with comparative confidence of some that they are not transactions, of others that they are dubious, and of others that they are undoubtedly transactions. That is why I put that question to the right hon. and learned Gentleman. I think the point of what is meant by "transaction or transactions" is one on which the Committee is entitled to legal guidance from the Law Officers of the Crown.

But the main objection to the Clause as it stands, and as it will stand unless an amendment such as that now under discussion is adopted, is this: that it will have all that legal offensiveness which has been described by previous speakers in advocating this Amendment, and that the Clause will have no adequate compensation in any gain to the Government. If the transaction which the Government wish to fall within the mischief of the Clause is now foreseen by them, they should define it with legal precision. If it is not foreseen by them, it is asking the Committee to take a most foolish step when the Government invite us to do what is legally offensive only for the purpose of saving tax for one year on a transaction the nature of which they have been unable to foresee.

Photo of Sir Frank Soskice Sir Frank Soskice , Sheffield Neepsend

The Amendment raises a comparatively small issue on this Clause, although during the discussion hon. Members have used arguments advancing their view that the Clause is undesirable. In a sense it is a convenient course that at the outset we should have some general discussion whether the Clause is one we should accept or not. Hon. Members have used many adjectives about it—that it is offensive to them, that it curtails liberty in a way which is unconstitutional, that there is no respectable precedent, and they even went so far as to say that however it was amended they doubted whether it could ever become acceptable.

May I give some reasons why we think it was unavoidable that we should use this precedent? It is our experience, unfortunately, that there is a growing number of all sorts of different transactions resorted to to avoid Profits Tax. I can give a great many examples. [HON. MEMBERS: "Go on."] If hon. Members say "Go on" I will give them, so that they may see the multiplicity of devices which can be resorted to. These are actual cases that have come to notice, and I am informed that the number is growing. I cannot say that it has reached serious proportions yet, but it will do so.

The first example is this. A director controlled company which carries on business at a number of shops, the profits of which are aggregated for the purpose of computing its profits liable to tax, sets up a number of separate companies each running two of its shops, with a view to obtaining in the case of the new companies the benefit of the abatement provisions for businesses with small profits—the tax is not charged under £2,000, and is then on a sliding scale up to £12,000—and also the allowance for directors' remuneration of £2,500 in the case of each company.

That is one kind of transaction, and you can play upon it infinitely. Here is another. A trading company, with income from investments which represent accumulated reserves, transfers the investments to a separate company in return for shares in that company, which shares the trading company distributes to its own shareholders as a partial return of capital. The result is that the new investment holding company obtains the benefit of the abatement provisions. That admits of a whole number of different variations. The controlling directors of a director controlled company transfer sufficient of their shares to members of their family to reduce the directors' personal holdings below 50 per cent., so that the company ceases—technically—to be director controlled. The remuneration of the controlling directors is thereafter allowable in full in computing the company's profits, instead of being subject to the £2,500 limitation.

That admits of all sorts of different variations. Take this example. The director of a director controlled company transfers sufficient of his shares to his wife to bring his personal shareholding below 5 per cent. of the ordinary shares, thus qualifying himself as a whole-time service director, and his remuneration is allowable in full as a deduction against profits. That kind of device can be multiplied almost ad infinitum.

I can go on thinking of devices of that sort, and if they are not drastically checked the result will be extremely serious. Hon. Members look at the picture as if the taxpayer strikes against the Revenue. That is not a true picture. The Revenue have to see that every taxpayer pays a fair share. Hon. Members on both sides differ strongly about what is the appropriate rate of taxation—that is a party point of view and differences will persist—but I am sure all hon. Members will agree with me that, whatever the rate of tax, everybody must pay his fair share. In using this Clause the Inland Revenue are simply trying to bring that about by protecting the taxpayer who wants to pay his fair share from having to pay part of the burden which should be on the shoulders of those who want to get rid of it.

Photo of Sir John Foster Sir John Foster , Northwich

Does the right hon. and learned Gentleman say that the transactions he cited are bona fide commercial transactions?

Photo of Sir Frank Soskice Sir Frank Soskice , Sheffield Neepsend

It depends on what is meant by bona fide commercial transactions. We are dealing with transactions the actors in which desire to avoid the burden of tax.

May I proceed with my argument? We are faced with a growing number of potential evasions, which is growing continually, and we have to do something to prevent a very serious loss of tax, which would be paid by those taxpayers who do not try to shift the burden off their shoulders on to those of other people. We have been told we are trying to justify this by using the E.P.T. precedent. I do not try to justify it by the E.P.T. precedent—that is neither here nor there. Hon. Members have said that was war-time legislation and hoped I do not seek to justify it on those grounds.

The hon. Member for Chippenham (Mr. Eccles) was fearful about the consequences, and other hon. Members gave examples of how they thought the Clause might operate harshly. Speaking from my own experience, after appearing in a great many E.P.T. cases, and from the advice of those who advise me, the difficulties hon. Members fear have simply not arisen. The difficulty is the other way round. It is always difficult to get Commissioners to conclude that the case they are dealing with is one within the Act.

We had two choices. Either we could use this Clause, drastic as it is, and it would be futile to pretend it is not, or to go the other way round and start working out the endless Clauses to be put on the Statute Book year after year, as we have done for years past in the case of Income Tax to stop up leakages as they appear in the course of a year's trading. In the case of Profits Tax these leakages are multiplying thick and fast, and there seems to be a number of evasions in connection with this tax.

5.0 a.m.

Photo of Sir John Foster Sir John Foster , Northwich

I am grateful to the right hon. and learned Gentleman for giving way. Is there not another alternative that of Section 18 of the 1936 Act there is a proposal between the drastic Clause and the stopping up of every loophole.

Photo of Sir Frank Soskice Sir Frank Soskice , Sheffield Neepsend

That is not really a precedent. It is a Section dealing with the transfer of income abroad, and is not the same kind of thing as that with which we are dealing.

To come back to the point I was making, we had the alternative of using this Clause, or beginning the laborious process about which hon. Members complain of having an elaborate and difficult Clause on the Statute Book always one jump behind, trying to catch up with the person who has found some way of getting out of it The examples I have quoted to the Committee are sufficient for pages and pages of Clauses to stop them. It would mean heaps of complicated Clauses, with the kind of language about which the hon. and gallant Gentleman the Member for Bristol, North-East (Lieut.-Commander Braithwaite) complained earlier when it was used in relation to directors' remuneration. It is one thing or the other.

I entirely sympathise with the hon. and gallant Gentleman. The language is extremely complicated, but there is no other way round, and, on balance, having given the matter great thought and weight of the kind hon. Gentlemen have urged, and considered its novel character and that its only precedent was that of war-time, we thought it better to use the Clause, drastic though it is, in dealing with an undoubted mischief which is growing in proportion and which will be serious unless something is done about it.

I should like, before I close, to enter a protest a mild protest, against the suggestion that this is an infringement of liberty. I hope hon. Gentlemen will not say this, because it is not. Anyone is perfectly free to carry out the transactions. We do not make it a crime. No one is inhibited. He can carry out the transactions as much as he likes, but we say if the Commissioners are satisfied there was a tax avoidance motive, and that it was the main motive, or one of the main motives, the transactions stands but the tax position is readjusted to be that which it would have been if the transaction had not been carried out. I say that it is not right to describe this as an invasion of liberty; it is nothing of the sort.

It is not the first time we have used direction in this matter. Section 21 of the Finance Act 1922 which dealt with the avoidance of the payment of Supertax on undistributed profits is an example of directions used. I want to be fair to the Committee and to say that in that case, in Section 21, the limit of the discretion which is vested in the Special Commissioners is narrower than the limit in this case, but not so very much narrower. Here they have a wider discretion, but, nevertheless, it is fastened to certain broad lines. If they see fit to make a direction they have to do it in such a way as to equate the position to what it would have been had the transaction not taken place.

May I call attention to the appeal provisions? The Commissioners make the directions and there is an appeal to the Special Commissioners. The Special Commissioners can review the whole thing and say, "We think this is a case in which no direction should have been made "—and they can cancel the direction. There is a very large loophole of escape. The Special Commissioners can do justice if they feel that it is not right that the direction should have been made.

I have endeavoured to deploy the general considerations on which I seek to justify the Clause. To deal with the particular consideration raised by the Amendment I would say that we certainly have no desire at all to catch bona fide commercial transactions where there is no tax motive, but to require the Commissioners to perform the test of saying whether a particular case is a bona fide commercial transaction or not is to put upon them something extremely difficult. Supposing we have a case such as I have given—where companies are formed to take over specific shops, there being in that case the desire to use the abatement provisions. It is very difficult for the Special Commissioner hearing the case to say whether the transactions are bona fide or not.

Photo of Mr Reginald Maudling Mr Reginald Maudling , Barnet

Mr. Maudling rose

Photo of Sir Frank Soskice Sir Frank Soskice , Sheffield Neepsend

Perhaps I might finish; this has been a lengthy argument already.

The main point on which they have to focus in asking whether a direction should be made is whether one of the main purposes is tax avoidance. If they find that, the rest does not matter. One cannot say what is a bona fide transaction, but what they have to ask themselves is this: is tax avoidance one of the main purposes, and if it is, then it is right to make the direction.

Photo of Mr Reginald Manningham-Buller Mr Reginald Manningham-Buller , Northamptonshire South

The right hon. and learned Gentleman keeps mentioning the "main purpose," but does he not agree with the view I put forward—that the first thing the Commissioners will do is to see the result, and if one of the results is tax avoidance or tax reduction, on the authorities I cited is it not assumed that one of the purposes was achieved by the result? If that is so—and I think it is so—the right hon. and learned Gentleman is not being entirely frank by attaching so much importance to the word "purpose". If the Clause was limited so as to apply only to transactions designed for the purpose of tax evasion or avoidance there would not be all this argument. Does he not agree that this Clause, in its wording, which sets the frame to the picture, goes far wider than that?

Photo of Sir Frank Soskice Sir Frank Soskice , Sheffield Neepsend

I do not complain of that intervention, because my speech was lengthy, but I was about to come to that point. The advice I would give the Committee is that the Commissioners must be of the opinion that it was, in fact, one of the main purposes. If hon. Members look at subsection (3) they will see that a particular type of transaction is referred to, centering upon a transaction which involved the transfer of shares. This has been specifically laid down by the cases, one of which is Crown Bedding v. Commissioners of Inland Revenue, decided in 1946, reported in the All England Reports. In a subsection (1) transaction the Commissioners must be of opinion that it was the main purpose or one of the main purposes. They have to be of that opinion, never mind what the result is.

Clearly, if the result was tax avoidance, that would obviously be an important factor which they would take into account in making up their minds whether it was the main purpose or one of the main purposes. It is only when we get to subsection (3) that we have to look at the transaction to see what the main benefit was, and if the main benefit was tax avoidance or reduction the main purpose or one of the main purposes is deemed to have been met.

Looking at the next subsection it is found that on going to the Special Commissioners on appeal from the Commissioners the Special Commissioners can upset the whole thing—never mind whether it is deemed to have been met or not—if they think a direction should not have been made. If a company can go to the Special Commissioners and say, "We do not care what is deemed. In fact it was not our main intention." the Special Commissioners have a perfect right to say, "Then the direction should not have been made."

Photo of Mr Reginald Manningham-Buller Mr Reginald Manningham-Buller , Northamptonshire South

I hope the right hon. and learned Gentleman will forgive my saying that my argument was not directed to subsection (3) at all. We will no doubt have an opportunity of discussing that later. My argument was directed to the interpretation of subsection (1). I agree that the wording there is: the main purpose or one of the main purposes, but I suggest to him—and I should be interested to hear whether he agrees or disagrees—that on the decided cases, of which I gave him the names, the first thing that happens in practice is that the result of the transaction is ascertained, and if one of the results is the avoidance or reduction of tax, then that is assumed to be one of the purposes.

In those cases, as I said, that has been held by the Special Commissioners, although they have come to the definite conclusion that tax avoidance was not the motive of the transaction. Now that, it seems to me, would apply to subsection (1), and I should be interested to know whether the right hon. and learned Gentleman agrees or disagrees with that. If he agrees, then it is quite clear that subsection (1) will apply equally to transactions whether they are perfectly bona fide commercial transactions or tax dodging transactions.

Photo of Sir Frank Soskice Sir Frank Soskice , Sheffield Neepsend

I have not the Marshall Castings case before me, and I accept what the hon. and learned Gentleman says, but my impression of it was—and that is the impression of those who advise me—that it was a case which was decided not on subsection (1) but on subsection (3). I can only say—and I say so with all respect to him—that I should be very surprised indeed if he has correctly interpreted the principle of those cases and their application to subsection (1), because it seems to me that the language of subsection (1) is perfectly plain.

What is requisite is that the Commissioners should be of opinion that the … purpose … was. I quite agree that, supposing the result was tax avoidance, it is probable that they would come to the conclusion of fact—not certain, but only probable—that that was either the main purpose or one of the main purposes, but beyond that I would not go. It still remains for them to decide whether as a fact, in their opinion, tax avoidance was the main purpose or one of the main purposes.

I have endeavoured both to deploy the general arguments in the light of which I would support this Clause and to give the reasons why I think the Amendment ought not to be accepted. I therefore hope that the Committee will reject the Amendment.

5.15 a.m.

Photo of Sir Kenneth Pickthorn Sir Kenneth Pickthorn , Carlton

I hope the Committee will forgive my voice, but I will do my best to be audible.

It is interesting to hear the Attorney-General explain that he sees no invasion of liberty in this matter. He sees no invasion of liberty in the provision that if a man has arranged his affairs within the provisions of the law, but so that he pays less tax than he would have done if he had arranged them differently, it shall be open to the administration to hold that is to be considered not to have happened, and that the tax is nevertheless to be collected.

I could quite understand the argument that it were necessary to get this money in that way, and therefore to make some sort contraction of liberty. I could understand the argument which we have read recently from the pen of the hon. Member for Coventry, East (Mr. Crossman), in which he explained that the Socialist Party owing, as it does, everything to two great wars, is now under a duty to exploit the cold war to reduce liberties and extend controls.

I could understand that defence, but I find it a little difficult to understand, and I think it would be illuminating to the public, if the Leader of the House had not so arranged matters as to make practically certain that the public will not know, that his Majesty's legal adviser can see no invasion of liberty in what is proposed, and in resisting the Amendment which we are now discussing. I did not understand his argument about the appeal to the Special Commissioners. He argued that this was not so bad, because after all the Special Commissioners might hold that though the Commissioners were right, yet in all the circumstances the result was not fair, and that therefore the appellant should win.

I think I am putting fairly what the Attorney-General told us. He will, of course, understand that I say in no sense ironically that he lives with this business all the time, and that he may find it easy to know what are the "other circumstances" which the Special Commissioners would take into account, and which would cause them to reverse a decision by the Commissioners. But the learned Attorney gave no indication of what they might be.

I did not understand his argument on the competition between "bona fide" as a test, on the one hand, and "main purpose" as a test on the other. He said that for the Commissioner to decide whether a transaction was a bona fide transaction would be much too difficult for them. On the other hand, he said that they have simply to decide whether one of the main purposes was tax evasion. Does the right hon. and learned Gentleman really think that that is the simpler decision of the two? How many "main purposes" does he think there can be in this matter? And what percentage of the aggregate purposes must there be in any one for it to be a "main purpose"? Have those words to be judicially defined?

That brings me to another point which I intended to raise, but which was raised by my hon. and learned Friend who sits by me, and which the Attorney-General

did not attempt to answer. I hope that he will think it worth while for those of us who are not lawyers, and even for those of us who are lawyers, to try to explain what "transaction" means. I have not looked it up in the dictionary, but my guess would be that a transaction is something which necessitates two parties. If we look at subsection (3), which, of course, is not in order at present, though it has been referred to by previous speakers, it will be seen that in this all the transactions are, to use the horrible current slang, bi-partite.

They are all things which require two parties; and the special question which I put is: "What is the difference between transaction and action?" Some of the illustrations given by the learned Attorney-General were not really transactions. Then, returning to where I began, following the example of the Poet Laureate, the assumption by the use of the word "due" on the hypothesis of either side approaching what the man is doing, is not avoiding something which is due at the time at which he enters upon that transaction. Much of the learned Attorney's argument was vitiated by an unconscious want of continuity of mind in the use of the word "due," which seemed to beg several questions.

Photo of Mr Robert Taylor Mr Robert Taylor , Morpeth

Mr. R. J. Taylor rose in Ms place, and claimed to move, "That the Question be now put."

Question put, "That the Question be now put."

The Committee divided: Ayes, 292; Noes, 276.

Division No. 116.]AYES[5.23 a.m.
Acland, Sir RichardBoardman, H.Collindridge, F.
Adams, RichardBooth, A.Cook, T. F.
Albu, A. H.Bottomley, A. G.Cooper, Geoffrey (Middlesbrough, W.)
Allen, Arthur (Bosworth)Bowden, H. W.Cooper, John (Deptford)
Allen, Scholefield (Crewe)Bowles, F. G. (Nuneaton)Corbet, Mrs. Freda (Peckham)
Anderson, Alexander (Motherwell)Braddock, Mrs. ElizabethCove, W. G.
Anderson, Frank (Whitehaven)Brook, Dryden (Halifax)Craddock, George (Bradford. S.)
Attlee, Rt. Hon. C. RBrooks, T. J. (Normanton)Crawley, A.
Awbery, S. S.Broughton, Dr. A. D. D.Crosland, C. A. R
Ayles, W. H.Brown, Rt. Hon. George (Belper)Crossman, R. H. S.
Bacon, Mill AlicaBrown, Thomas (Ince)Cullen, Mrs. A.
Baird, J.Burke, W. A.Daines, P.
Balfour, A.Burton, Miss E.Dalton, Rt. Hon. H.
Barnes, Rt. Hon. A. J.Butler, Herbert (Hackney, S.)Darling, George (Hillsborough)
Bartley, P.Callaghan, L. J.Davies, A. Edward (Stoke, N.)
Bellenger, Rt. Hon. F. J.Carmichael, J.Davies, Harold (Leek)
Benn, WedgwoodCattle, Mrs. B. A.Davies, Stephen (Merthyr)
Benson, G.Champion, A. Freitas, Geoffrey
Beswiek, F.Chetwynd, G. R.Deer, G.
Bevan, Rt. Hon. A. (Ebbw Vale)Clunle, J.Delargy, H. J.
Bing, G. H. C.Cocks, F. S.Dodds, N. N.
Blenkinsop, A.Coldriek, W.Donnelly, D.
Blyton, W. R.Collick, P.Driberg, T. E. N.
Dugdale, Rt. Hon. John (W. Bromwich)Kinghorn, Sun. Ldr. E.Richards, R.
Dye, S.Kinley, J.Robens, Rt. Hon. A.
Ede, Rt. Hon. J. C.Lang, GordonRoberts, Goronwy (Caernarvonshire)
Edelman, M.Lee, Frederick (Newton)Robertson, J. J. (Berwick)
Edwards, John (Brighouse)Lee, Miss Jennie (Cannock)Robinson, Kenneth (St. Pancras, N.)
Edwards, Rt. Hon. Ness (Caerphilly)Lever, Harold (Cheetham)Rogers, George (Kensington, N.)
Edwards, W. J. (Stepney)Lever, Leslie (Ardwick)Ross, William
Evans, Albert (Islington, S. W.)Lewis, Arthur (West Ham, N.)Royle, C.
Evans, Edward (Lowestoft)Lewis, John (Bolton, W.)Shawcross, Rt. Hon. Sir Hartley
Evans, Stanley (Wednesbury)Lindgren, G. S.Shinwell, Rt. Hon. E.
Ewart, R.Lipton, Lt.-Col. M.Shurmer, P. L. E.
Fernyhough, E.Logan, D. G.Silverman, Julius (Erdington)
Field, Capt. W. J.Longden, Fred (Small Heath)Silverman, Sydney (Nelson)
Finch, H. J.McAllister, G.Simmons, C. J.
Fletcher, Eric (Islington, E.)MacColl, J. E.Slater, J.
Follick, M.McGhee, H. G.Smith, Ellis (Stoke, S.)
Foot, M. M.McGovern, J.Smith, Norman (Nottingham, S.)
Forman, J. C.McInnes, J.Snow, J. W.
Fraser, Thomas (Hamilton)Mack, J. D.Sorensen, R. W.
Freeman, John (Watford)McKay, John (Wallsend)Soskice, Rt. Hon. Sir Frank
Freeman, Peter (Newport)Mackay, R. W. G. (Reading, N.)Steele, T.
Gaitskell, Rt. Hon. H. T. N.McLeavy, F.Stewart, Michael (Fulham, E.)
Ganley, Mrs. C. S.MacMillan, Malcolm (Western Isles)Stokes, Rt. Hon. R. R.
Gibson, C. W.McNeil, Rt. Hon. H.Strachey, Rt. Hon. J.
Gilzean, A.MacPherson, Malcolm (Stirling)Strauss, Rt. Hon. George (Vauxhall)
Glanville, James (Consett)Mainwaring, W. H.Stross, Dr. Barnett
Gooch, E. G.Mallalieu, E. L. (Brigg)Summerskill, Rt. Hon. Edith
Gordon-Walker, Rt. Hon. P. C.Mallalieu, J. P. W. (Huddersfield, E.)Sylvester, G. O.
Greenwood, Anthony (Rossendale)Mann, Mrs. JeanTaylor, Bernard (Mansfield)
Greenwood, Rt. Hn. Arthur (Wakefield)Manuel, A. C.Taylor, Robert (Morpeth)
Grenfell, D. R.Marquand, Rt. Hon. H. A.Thomas, David (Aberdare)
Grey, C. F.Mathers, Rt. Hon. G.Thomas, George (Cardiff)
Griffiths, David (Rother Valley)Mellish, R. J.Thomas, Iorwerth (Rhondda, W.)
Griffiths, Rt. Hon. James (Llanelly)Messer, F.Thomas, Ivor Owen (Wrekin)
Griffiths, William (Exchange)Middleton, Mrs. L.Thorneycroft, Harry (Clayton)
Gunter, R. J.Mikardo, Ian.Thurtle, Ernest
Hale, Joseph (Rochdale)Mitchison, G. RTimmons, J.
Hall, John (Gateshead, W.)Moeran, E. W.Tomney, F.
Monslow, W.Turner-Samuels, M.
Hall, Rt. Hon. Glenvil (Colne Valley)Moody, A. S.Ungoed-Thomas, Sir Lynn
Hamilton, W. W.Morgan, Dr. H. B.Usborne, H.
Hardman, D. R.Morley, R.Vernon, W. F.
Hargreaves, A.Morris, Percy (Swansea, W.)Viant, S. P.
Hastings, S.Mort, D. L.Wallace, H. W.
Hayman, F. H.Moyle, A.Watkins, T. E.
Henderson, Rt. Hon. Arthur (Tipton)Mulley, F. W.Webb, Rt. Hon. M. (Bradford, C.)
Herbison, Miss M.Murray, J. D.Weitzman, D.
Hewitson, Capt. M.Nally, W.Walls, Percy (Faversham)
Hobson, C. R.Neal, Harold (Bolsover)Weds, William (Walsall)
Holman, P.Noel-Baker, Rt. Hon. P. J.West, D. G.
Holmes, Horace (Hemsworth)O'Brien, T.Wheatley, Rt. Hon. John (Edmb'gh E.)
Houghton, D.Oldfield, W. H.White, Mrs. Eirene (E. Flint)
Hoy, J.Oliver, G. H.White, Henry (Derbyshire, N. E.)
Hubbard, T.Orbach, M.Whiteley, Rt. Hon. W.
Hudson, James (Ealing, N.)Padley, W. E.Wilcock, Group Capt. C. A. B.
Hughes, Emrys (S. Ayrshire)Paget, R. T.Wilkes, L.
Hughes, Hector (Aberdeen, N.)Paling, Rt. Hon. Wilfred (Deane V'lly)Wilkins, W. A.
Hynd, H. (Accrington)Paling, Will T. (Dewsbury)Willey, Frederick (Sunderland)
Hynd, J. B. (Attercliffe)Pannell, T. C.Willey, Octavius (Cleveland)
Irvine, A J. (Edge Hill)Pargiter, G. A.Williams, David (Neath)
Irving, W. J. (Wood Green)Parker J.Williams, Rev. Llywelyn (Abertillery)
Isaacs, Rt. Hon. G. A.Paton, J.Williams, Ronald (Wigan)
Janner, B.Pearson, A.Williams, Rt. Hon. Thomas (Don V'lly)
Jay, D. P. T.Peart, T. F.Williams, W. T. (Hammersmith, S.)
Jeger, George (Goole)Popplewell, E.Wilson, Rt. Hon. Harold (Huyton)
Jenkins, R. H.Porter, G.Winter bottom, Ian (Nottingham, C.)
Johnson, James (Rugby)Price, Philips (Gloucestershire, W.)Winterbottom, Richard (Brightside)
Johnston, Douglas (Paisley)Proctor, W. T.Wise, F. J.
Jones, David (Hartlepool)Pryde, D. J.Woodburn, Rt. Hon. A.
Jones, Frederick Elwyn (West Ham, S.)Pursey, Cmdr. H.Wyatt. W. L.
Jones, Jack (Rotherham)Rankin, J.Yates, V. F.
Jonas, William Elwyn (Conway)Rees, Mrs. D.Younger, Rt. Hon. K.
Keenan, W.Reeves, J.
Kenyon, C.Raid, Thomas (Swindon)TELLERS FOR THE AYES:
Key, Rt. Hon. C. W.Reid, William (Camlachie)Mr. Hannan and Mr. Sparks
King, Dr. H. M.Rhodes, H.
Aitken, W. T.Ashton, H. (Cheimsford)Baldwin, A. E.
Alport, C. J. M.Assheton, Rt. Hon. R. (Blackburn, W.)Banks, Col. C.
Amery, Julian (Preston, N)Astor, Hon. M. L.Baxter, A. B.
Amory, Heathcoat (Tiverton)Baker, P. A. D.Beamish, Maj. Tufton
Arbuthnot, JohnBaldock, Lt.-Cmdr. J. MBell, R. M.
Bennett, Dr. Reginald (Gosport)Harvie-Watt, Sir GeorgeNicholls, Harmar
Bennett, William (Woodside)Hay, JohnNicholson, G.
Bevins, J. R. (Liverpool, Toxteth)Head, Brig. A. HNield, Basil (Chester)
Birch, NigelHeald, LionelNoble, Cmdr. A. H. P.
Bishop, F. P.Henderson, John (Cathcart)Nugent, G. R. H.
Black, C. W.Hicks-Beach, Maj. W. W.Nutting, Anthony
Boles, Lt.-Col. D. C. (Wells)Higgs, J. M. C.Oakshott, H. D.
Boothby, R.Hill, Dr. Charles (Luton)Odey, G. W.
Bossom, A. C.Hill, Mrs. E. (Wythenshawe)O'Neill, Rt. Hon. Sir Hugh
Boyd-Carpenter, J. A.Hinchingbrooke, ViscountOrmsby-Gore, Hon. W. D.
Boyle, Sir EdwardHirst, GeoffreyOrr, Capt. L. P. S.
Bracken, Rt. Hon. B.Hollis, M. C.Orr-Ewing, Charles Ian (Hendon, N.)
Braine, B. R.Holmes, Sir Stanley (Harwich)Orr-Ewing, Ian L. (Weslon-super-Mare)
Braithwaite, Sir Albert (Harrow, W.)Hope, Lord JohnOsborne, C.
Braithwaite, Lt.-Cr. G. (Bristol, N. W.)Hopkinson, HenryPerkins, W. R. D.
Bromley-Davenport, Lt.-Col. W.Hornsby-Smith, Miss P.Peto, Brig. C. H. M.
Brooke, Henry (Hampstead)Horsbrugh, Rt. Hon. FlorencePickthorn, K.
Browne, Jack (Govan)Howard, Gerald (Cambridgeshire)Pitman, I. J.
Buchan-Hepburn, P. G. T.Howard, Greville (St. Ives)Powell, J. Enoch
Bullock, Capt. M.Hudson, Sir Austin (Lewisham, N.)Price, Henry (Lewisham, W.)
Bullus, Wing Commander E. E.Hudson, W. R. A. (Hull, N.)Profumo, J. D.
Burden, F. A.Hurd, A. R.Raikes, H. V.
Butcher, H. W.Hutchinson, Geoffrey (Ilford, N.)Rayner, Brig. R.
Butler, Rt. Hn. R. A. (Saffron Walden)Hutchison, Lt.-Cmdr.Clark (E'b'rgn W.)Redmayne, M.
Carr, Robert (Mitcham)Hutchison, Colonel James (Glasgow)Remnant, Hon. P.
Carson, Hon. E.Hyde, Lt.-Col. H. M.Renton, D. L. M.
Channon, H.Hylton-Foster, H. B.Roberts, Maj. Peter (Heeley)
Clarke, Col. Ralph (East Grinstead)Jennings, R.Robertson, Sir David (Caithness)
Clarke, Brig. Terence (Portsmouth, W.)Johnson, Howard (Kemptown)Robinson, Roland (Blackpool, S.)
Clyde, J. L.Jones, A. (Hall Green)Robson-Brown, W.
Colegate, A.Joynson-Hicks, Hon. L. W.Rodgers, John (Sevenoaks)
Cooper, Sqn. Ldr. Albert (Ilford, S.)Kaberry, D.Roper, Sir Harold
Cooper-Key, E. M.Kerr, H. W. (Cambridge)Ropner, Col. L
Corbett, Lt.-Col. Uvedale (Ludlow)Kingsmill, Lt.-Col. W. H.Russell, R. S.
Craddock, Beresford (Spelthorne)Lambert, Hon. G.Ryder, Capt. R. E. D.
Cranborne, ViscountLancaster, Col. C. GSalter, Rt. Hon. Sir Arthur
Crookshank, Capt. Rt. Hon. H. F. C.Langford-Holt, J.Sandys, Rt. Hon. D.
Crosthwaite-Eyre, Col. O. E.Law, Rt. Hon. R. K.Shepherd, William
Crouch, R. F.Leather, E. H. C.Smiles, Lt.-Col. Sir Walter
Crowder, Capt. John (Finchley)Legge-Bourke, Maj. E. A. H.Smithers, Peter (Winchester)
Crowder, Petre (Ruislip—Northwood)Lennox-Boyd, A. T.Smithers, Sir Waldron (Orpington)
Cundiff, F. W.Lindsay, MartinSmyth, Brig. J. G. (Norwood)
Cuthbert, W. N.Linstead, H. N.Snadden, W. McN.
Davidson, ViscountessLlewellyn, D.Soames, Capt. C.
Davies, Nigel (Epping)Lloyd, Rt. Hn. Geoffrey (King's Norton)Spearman, A. C. M.
de Chair, SomersetLloyd, Maj. Guy (Renfrew, E.)Spence, H. R. (Aberdeenshire, W.)
De la Bère, R.Lloyd, Selwyn (Wirral)Spens, Sir Patrick (Kensington, S.)
Deedes, W. F.Lockwood, Lt.-Col. J. C.Stanley, Capt. Hon. Richard (N. Fylde)
Dlgby, S. WingfieldLongden, Gilbert (Herts, S. W.)Stevens, G. P.
Dodds-Parker, A. D.Low, A. R. W.Steward, W. A. (Woolwich, W.)
Dornner, P. W.Lucas, Sir Jocelyn (Portsmouth, S.)Stewart, Henderson (Fife, E.)
Douglas-Hamilton, Lord MalcolmLucas, P. B. (Brentford)Stoddart-Scott, Col. M.
Drayson, G. B.Lucas-Tooth, Sir HughStorey, S.
Drewe, C.Lyttelton, Rt. Hon. O.Strauss, Henry (Norwich, S.)
Dugdale, Maj. Sir Thomas (Richmond)McAdden, S. J.Stuart, Rt. Hon. James (Moray)
Duncan, Capt. J. A. L.McCorquodale, Rt. Hon. M. S.Studholme, H. G.
Dunglass, LordMacdonald, Sir Peter (I. of Wight)Summers, G. S.
Duthie, W. S.Macketon, Brig. H. R.Sutcliffe, H.
Eccles, D. M.McKibbin, A.Taylor, Charles (Eastbourne)
Eden, Rt. Hon. A.McKie, J. H. (Galloway)Taylor, William (Bradford, N.)
Elliot, Rt. Hon. W. E.Maclay, Hon. JohnTeeling, W.
Erroll, F. J.Maclean, FitzroyTeevan, T. L.
Fisher, NigelMacLeod, Iain (Enfield, W.)Thomas, J. P. L. (Hereford)
Fort, R.MacLeod, John (Ross and Cromarty)Thompson, Kenneth Pugh (Walton)
Foster, JohnMacmillan, Rt. Hon. Harold (Bromley)Thompson, Lt.-Cmdr. R. (Croydon, W.)
Fraser, Hon. Hugh (Stone)Macpherson, Major Niall (Dumfries)Thorneycroft, Peter (Monmouth)
Fraser, Sir I. (Morecambe & Lonsdale)Maitland, Cmdr. J. W.Thornton-Kemsley, Col. C. N.
Fyfe, Rt. Hon. Sir David MaxwellManningham-Buller, R. E.Thorp, Brig. R. A. F.
Gage, C. H.Marlowe, A. A. H.Tilney, John
Galbraith, Cmdr. T. D. (Pollok)Marples, A. E.Turner, H. F. L.
Gaibraith, T. G. D. (Hillhead)Marshall, Douglas (Bodmin)Turton, R. H.
Gammans, L. D.Marshall, Sidney (Sutton)Tweedsmuir, Lady
Garner-Evans, E. H. (Denbigh)Maude, Angus (Ealing, S.)Vane, W. M. F.
Gates, Maj. E. E.Maude, John (Exeter)Vaughan-Morgan, J. K.
Gomme-Dunean, Col. A.Maudling, R.Vosper, D. F.
Gridley, Sir ArnoldMedlicott, Brig. F.Wakefield, Edward (Derbyshire, W.)
Grimston, Hon. John (St. Albans)Mellor, Sir JohnWakefield, Sir Wavell (Marylebone)
Grimston, Robert (Westbury)Molson, A. H. E.Walker-Smith, D. C.
Harden, J. R. E.Monckton, Sir WalterWard, Hon. George (Worcester)
Hare, Hon. J. H. (Woodbridge)Moore, Lt.-Col. Sir ThomasWard, Miss I. (Tynemouth)
Harris, Frederic (Croydon, N.)Morrison, John (Salisbury)Waterhouse, Capt. Rt. Hon. C.
Harris, Reader (Heston)Morrison, Rt. Hon. W. S. (Cirencester)Watkinson, H.
Harvey, Air-Codre. A. V. (Macclesfield)Mott-Radclyffe, C. E.Webbe, Sir H. (London & Westminster)
Harvey, Ian (Harrow, E.)Nabarro, G.Wheatley, Maj. M. J. (Poole)
White, Baker (Canterbury)Wills, G.York, C.
Williams, Charles (Torquay)Wilson, Geoffrey (Truro)
Williams, Gerald (Tonbridge)Winterton, Rt. Hon. EarlTELLERS FOR THE NOES:
Williams, Sir Herbert (Croydon, E.)Wood, Hon. R.Major Conant and Mr. Heath.

Question put accordingly, "That the words proposed to be left out, to 'whether', in line 31, stand part of the Clause."

The Committee divided: Ayes, 292; Noes, 279.

Division No. 117.]AYES[5.35 a.m.
Acland, Sir RichardEde, Rt. Hon. J. C.Key, Rt. Hon. C. W.
Adams, RichardEdelman, M.King, Dr. H. M.
Albu, A. H.Edwards, John (Brighousa)Kinghorn, Sn. Ldr.E.
Allen, Arthur (Bosworth)Edwards, Rt. Hon. Ness (Caerphilly)Kinley, J.
Allen, Scholefield (Crewe)Edwards, W. J. (Stepney)Lang, Gordon
Anderson, Alexander (Motherwell)Evans, Albert (Islington, S. W.)Lee, Frederick (Newton)
Anderson, Frank (Whitehaven)Evans, Edward (Lowestoft)Lee, Miss Jennie (Cannock)
Attlee, Rt. Hon. C. R.Evans, Stanley (Wednesbury)Lever, Harold (Cheetham)
Awbery, S. S.Ewart, R.Lever, Leslie (Ardwick)
Ayles, W. H.Fernyhough, E.Lewis, Arthur (West Ham, N.)
Bacon, Miss AliceField, Capt. W. J.Lewis, John (Bolton, W.)
Baird, J.Finch, H. J.Lindgren, G. S.
Balfour, A.Fletcher, Eric (Islington, E.)Upton, Lt.-Col. M.
Barnes, Rt. Hon. A. JFollick, M.Logan, D. G.
Bartley, P.Fool, M. M.Longden, Fred (Small Heath)
Bellenger, Rt. Hon. F. J.Forman, J. C.McAllister, G.
Benn, WedgwoodFraser, Thomas (Hamilton)MacColl, J. E.
Benson, G.Freeman, John (Watford)McGhee, H. G.
Beswick, F.Freeman, Peter (Newport)McGovern, J.
Sevan, Rt. Hon. A. (Ebbw Vale)Gaitskell, Rt. Hon. H. T. NMcInnes, J.
Bing, G. H. C.Ganley, Mrs. C. S.Mack, J. D.
Blenkinsop, A.Gibson, C. W.McKay, John (Wallsend)
Blyton, W. R.Gllzean, A.Mackay, R. W. G. (Reading, N.)
Boardman, H.Glanville, James (Consett)McLeavy, F.
Booth, A.Gooch, E. G.MacMillan, Malcolm (Western Isles)
Bottomley, A. G.Gordon-Walker, Rt. Hon. P. C.McNeil, Rt. Hon. H.
Bowden, H. W.Greenwood, Anthony (Rossendala)MacPherson, Malcolm (Stirling)
Bowles, F. G. (Nuneaton)Greenwood, Rt. Hn. Arthur (Wakefield)Mainwaring, W. H.
Braddock, Mrs. ElizabethGrenfell, D. R.Mallalieu, E. L. (Brigg)
Brook, Dryden (Halifax)Grey, C. F.Mallalieu, J. P. W. (Huddersfield, E.)
Brooks, T. J. (Normanton)Griffiths, David (Rother Valley)Mann, Mrs. Jean
Broughton, Dr. A. D. D.Griffiths, Rt. Hon. James (Llanelly)Manuel, A. C.
Brown, Rt. Hon. George (Belper)Griffiths, William (Exchange)Marquand, Rt. Hon. H. A.
Brown, Thomas (Ince)Gunter, R. J.Mathers, Rt. Hon. G.
Burke, W. A.Hale, Joseph (Rochdale)Mellish, R. J.
Burton, Miss E.Hall, Rt. Hon. Glenvil (Colne Valley)Messer, F.
Butler, Herbert (Hackney, S.)Hall, John (Gateshead, W.)Middleton, Mrs. L.
Callaghan, L. J.Hamilton, W. W.Mikardo, Ian.
Carmichael, J.Hardman, D. R.Mitchison, G. R.
Castle, Mrs. B. A.Hargreaves, A.Moeran, E. W.
Champion, A. J.Hastings, S.Monslow, W.
Chetwynd, G. R.Hayman, F. H.Moody, A. S.
Clunie, J.Henderson, Rt. Hon. Arthur (Tipton)Morgan, Dr. H. B.
Cocks, F. S.Herbison, Miss M.Morley, R.
Coldrick, W.Hewitson, Capt. M.Morris, Percy (Swansea, W.)
Collick, P.Hobson, C. R.Mort, D. L.
Collindridge, F.Holman, P.Moyle, A.
Cook, T. F.Holmes, Horace (Hemsworth)Mulley, F. W.
Cooper, Geoffrey (Middlesbrough, W.)Houghton, D.Murray, J. D.
Cooper, John (Deptford)Hoy, J.Nally, W.
Corbet, Mrs. Freda (Peckham)Hubbard, T.Neal, Harold (Bolsover)
Cove, W. G.Hudson, James (Eating, N.)Noel-Baker, Rt. Hon. P. J.
Craddock, George (Bradford, S.)Hughes, Emrys (S. Ayrshire)O'Brien, T.
Crawley, A.Hughes, Hector (Aberdeen, N.)Oldfield, W. H.
Crosland, C. A. R.Hynd, H. (Accrington)Oliver, G. H.
Crossman, R. H. S.Hynd, J. B. (Attercliffe)Orbach, M.
Cullen, Mrs. A.Irvine, A. J. (Edge Hill)Padley, W. E.
Daines, P.Irving, W. J. Wood Green)Paget, R. T.
Dalton, Rt. Hon. H.Isaacs, Rt. Hon. G. A.Paling, Rt. Hon. Wilfred (Dearne V'lly)
Darling, George (Hillsborough)Janner, B.Paling, Will T. (Dewsbury)
Davies, A. Edward (Stoke, N.)Jay, D. P. T.Pannell, T. C.
Davies, Harold (Leek)Jeger, George (Goole)Pargiter, G. A.
Davies, Stephen (Merthyr)Jenkins, R. H.Parker J.
de Freitas, GeoffreyJohnson, James (Rugby)Paton, J.
Deer, G.Johnston, Douglas (Paisley)Pearson, A.
Delargy, H. J.Jones, David (Hartlepool)Peart, T. F.
Dodds, N. N.Jones, Frederick Erwyn (West Ham, S.)Popplewell, E.
Donnelly, D.Jones, Jack (Rorherham)Porter, G.
Driberg, T. E. N.Jones, William Elwyn (Conway)Price, Philips (Gloucestershire, W.)
Dugdale, Rt. Hon. John (W. Bromwich)Keenan, W.Proctor, W. T.
Bye, S.Kenyon, C.Pryde, D. J.
Pursey, Cmdr. H.Steele, T.Wells, Percy (Faversham)
Rankin, J.Stewart, Michael (Fulham, E.)Wells, William (Walsall)
Ren, Mrs. D.Stokes, Rt. Hon. R. R.West, D. G.
Reeves, J.Strachey, Rt. Hon. J.Wheatley, Rt. Hon. John (Edinb'gh E.)
Reid, Thomas (Swindon)Strauss, Rt. Hon. George (Vauxhall)White, Mrs. Eirene (E. Flint)
Reid, William (Camlachie)Stross, Dr. BarnettWhite, Henry (Derbyshire, N. E.)
Rhodes, H.Summerskill, Rt. Hon. EdithWhiteley, Rt. Hon. W.
Richards, R.Sylvester, G. O.Wilcock, Group Capt. C. A. [...]
Roberts, Rt. Hon. A.Taylor, Bernard (Mansfield)Wilkes, L.
Roberts, Goronwy (Caernarvonshire)Taylor, Robert (Morpeth)Wilkins, W. A.
Robertson, J. J. (Berwick)Thomas, David (Aberdare)Willey, Frederick (Sunderland)
Robinson, Kenneth (St. Pancras, N.)Thomas, George (Cardiff)Willey, Octavius (Cleveland)
Rogers, George (Kensington, N.)Thomas, Iorwerth (Rhondda, W.)Williams, David (Neath)
Ross, WilliamThomas, Ivor Owen (Wrekin)Williams, Rev. Llywelyn (Abertillery)
Royle, C.Thorneycroft, Harry (Clayton)Williams, Ronald (Wigan)
Shawcross, Rt. Hon. Sir HartleyThurtle, ErnestWilliams, Rt. Hon. Thomas (Don V'lly)
Shinwell, Rt. Hon. E.Timmons, J.Williams, W. T. (Hammersmith, S.)
Shurmer, P. L. E.Tomney, F.Wilson, Rt. Hon. Harold (Huyton)
Silverman, Julius (Erdington)Turner-Samuels, M.Winterbottom, Ian (Nottingham, C.)
Silverman, Sydney (Nelson)Ungoed-Thomas, Sir LynnWinterbottom, Richard (Brightside)
Simmons, C. J.Usborne, H.Wise, F. J.
Slater, J.Vernon, W. F.Woodburn, Rt. Hon. A.
Smith, Ellis (Stoke, S.)Viant, S. P.Wyatt, W. L.
Smith, Norman (Nottingham, S.)Wallace, H. W.Yates, V. F.
Snow, J. W.Watkins, T. E.Younger, Rt. Hon. K
Sorensen, R. W.Webb, Rt. Hon. M. (Bradford, C.)
Soskice, Rt. Hon. Sir FrankWeitzman, D.TELLERS FOR THE AYES:
Mr. Hannan and Mr. Sparks.
Aitken, W. T.Crosthwaite-Eyre, Col. O. E.Higgs, J. M. C.
Alport, C. J. M.Crouch, R. F.Hill, Dr. Charles (Luton)
Amery, Julian (Preston, N.)Crowder, Capt. John (Finchley)Hill, Mrs. E. (Wythenshawe)
Amory, Heathcoat (Tiverton)Crowder, Petre (Ruislip—Northwood)Hinchingbrooke, Viscount
Arbuthnot, JohnCundiff, F. W.Hirst, Geoffrey
Ashton, H. (Chelmsford)Cuthbert, W. N.Hollis, M. C.
Assheton, Rt. Hon. R. (Blackburn, W.)Davidson, ViscountessHolmes, Sir Stanley (Harwich)
Astor, Hon. M. L.Davies, Nigel (Epping)Hope, Lord John
Baker, P. A. Chair, SomersetHopkinson, Henry
Baldock, Lt.-Cmdr. J. M.De la Bère, R.Hornsby-Smith, Miss P.
Baldwin, A. E.Deedes, W. F.Horsbrugh, Rt. Hon. Florence
Banks, Col. C.Digby, S. WingfieldHoward, Gerald (Cambridgeshire)
Baxter, A. B.Dodds-Parker, A. D.Howard, Greville (St. Ives)
Beamish, Maj. TuftonDonner, P. W.Hudson, Sir Austin (Lewisham, N.)
Bell, R. M.Douglas-Hamilton, Lord MalcolmHudson, Rt. Hon. Robert (Southport)
Bennett, Dr. Reginald (Gosport)Drayson, G. B.Hudson, W. R. A. (Hull, N.)
Bennett, W. G. (Woodside)Drewe, C.Hurd, A. R.
Bevins, J. R. (Liverpool, Toxteth)Dugdale, Maj. Sir Thomas (Richmond)Hutchinson, Geoffrey (Ilford, N.)
Birch, NigelDuncan, Capt. J. A. L.Hutchison, Lt.-Cmdr. Clark (E'b'rgh W.)
Bishop, F. P.Dunglass, LordHutchison, Colonel James (Glasgow)
Black, C. W.Duthie, W. S.Hyde, Lt.-Col. H. M.
Boles, Lt.-Col. D. C. (Wells)Eccles, D. M.Hylton-Foster, H. B.
Boothby, R.Eden, Rt. Hon. A.Jennings, R.
Bossom, A. C.Elliot, Rt. Hon. W. E.Johnson, Howard (Kemptown)
Bowen, E. R. (Cardigan)Erroll, F. J.Jones, A. (Hall Green)
Boyd-Carpenter, J. A.Fisher, NigelJoynson-Hicks, Hon. L. W.
Boyle, Sir EdwardFort, R.Kaberry, D.
Bracken, Rt. Hon. B.Foster, JohnKerr, H. W. (Cambridge)
Braine, B. R.Fraser, Hon. Hugh (Stone)Kingsmill, Lt.-Col. W. H.
Braithwaite, Sir Albert (Harrow, W.)Fraser, Sir I. (Morecambe & Lonsdale)Lambert, Hon. G.
Braithwaite, Lt.-Cr. G. (Bristol, N. W.)Fyfe, Rt. Hon. Sir David MaxwellLancaster, Col. C. G
Bromley-Davenport, Lt.-Col. WGage, C. H.Langford-Holt, J.
Brooke, Henry (Hampstead)Galbraith, Cmdr. T. D. (Pollok)Law, Rt. Hon. R. K.
Browne, Jack (Govan)Galbralth, T. G. D. (Hillhead)Leather, E. H. C.
Buchan-Hepburn, P. G. T.Gammans, L. D.Legge-Bourke, Maj. E. A. H
Bullock, Capt. M.Garner-Evans, E. H. (Denbigh)Lennox-Boyd, A T.
Bullus, Wing Commander E. EGates, Maj. E. E.Lindsay, Martin
Burden, F. A.Gomme-Duncan, Col. ALinstead, H. N.
Butcher, H. W.Gridley, Sir ArnoldLlewellyn, D.
Butler, Rt. Hn. R. A. (Saffron Walden)Grimston, Hon. John (St. Albans)Lloyd, Rt. Hn. Geoffrey (King's Norton)
Carr, Robert (Mitcham)Grimston, Robert (Westbury)Lloyd, Maj. Guy (Renfrew, E.)
Carson, Hon. E.Harden, J. R. E,Lloyd, Selwyn (Wirral)
Channon, H.Hare, Hon. J. H. (Woodbridge)Lockwood, Lt.-Col. J. C.
Clarke, Col. Ralph (East Grinslead)Harris, Frederic (Croydon, N.)Longden, Gilbert (Herts, S. W.)
Clarke, Brig. Terence (Portsmouth, W.)Harris, Reader (Heston)Low, A. R. W.
Clyde, J. LHarvey, Air-Codre. A. V. (Macclesfield)Lucas, Sir Jocelyn (Portsmouth, S.)
Colegate, A.Harvey, Ian (Harrow, E.)Lucas, P. B. (Brentford)
Cooper, Sqn. Ldr. Albert (Ilford, S.)Harvie-Watt, Sir GeorgeLucas-Tooth, Sir Hugh
Cooper-Key, E. MHay, JohnLyttelton, Rt. Hon. O.
Corbett, Lt.-Col. Uvedale (Ludlow)Head, Brig. A. H.McAdden, S. J.
Craddock, Beresford (Spelthorne)Heald, LionelMcCorquodale, Rt. Hon. M. S.
Cranborne, ViscountHeath, EdwardMacdonald, Sir Peter (I. of Wight)
Crookshank, Capt. Rt. Hon. H. F CHenderson, John (Cathcart)Mackeson, Brig. H R
Hicks-Beach, Maj. W. WMcKibbin, A
McKie, J. H. (Galloway)Peto, Brig. C. H. M.Summers, G. S.
Maclay, Hon. JohnPickthorn, K.Sutcliffe, H.
Maclean, FitzroyPitman, I. J.Taylor, Charles (Eastbourne)
MacLeod, Iain (Enfield, W.)Powell, J. EnochTaylor, William (Bradford, N.)
MacLeod, John (Ross and Cromarty)Price, Henry (Lewisham, W.)Teeling, W.
Macmillan, Rt. Hon. Harold (Bromley)Profumo, J. D.Teevan, T. L.
Macpherson, Major Niall (Dumfries)Raikes, H. V.Thomas, J. P. L. (Hereford)
Maitland, Cmdr. J. W.Rayner, Brig. R.Thompson, Kenneth Pugh (Walton)
Manningham-Buller, R. E.Redmayne, M.Thompson, Lt.-Cmdr. R. (Croydon, W.)
Marlowe, A. A. H.Remnant, Hon. P.Thorneycroft, Peter (Monmouth)
Marples, A. E.Renton, D. L. M.Thornton-Kemsley, Col. C. N.
Marshall, Douglas (Bodmin)Roberts, Maj. Peter (Heeley)Thorp, Brig. R. A. F.
Marshall, Sidney (Sutton)Robertson, Sir David (Caithness)Tilney, John
Maude, Angus (Ealing, S.)Robinson, Roland (Blackpool, S.)Turner, H. F. L.
Maude, John (Exeter)Robson-Brown, W.Turton, R. H.
Maudling, R.Rodgers, John (Sevenoaks)Tweedsmuir, Lady
Medlicotl, Brig. F.Roper, Sir HaroldVane, W. M. F.
Mellor, Sir JohnRopner, Col. L.Vaughan-Morgan, J. K.
Molson, A. H. E.Russell, R. S.Vosper, D.F.
Monckton, Sir WalterRyder, Capt. R. E. D.Wakefield, Edward (Derbyshire, W.)
Moore, Lt.-Col. Sir ThomasSalter, Rt. Hon. Sir ArthurWakefield, Sir Wavell (Marylebone)
Morrison, John (Salisbury)
Morrison, Rt. Hon. W. S. (Cirencester)Sandys, Rt. Hon. D.Walker-Smith, D. C.
Mott-Radclyffe, C. E.Shepherd, WilliamWard, Hon. George (Worcester)
Nabarro, G.Smiles, Lt.-Col. Sir WalterWard, Miss I. (Tynemouth)
Nicholls, HarmarSmithers, Peter (Winchester)Waterhouse, Capt. Rt. Hon. C.
Nicholson, G.Smithers, Sir Waldron (Orpington)Watkinson, H.
Niald, Basil (Chester)Smyth, Brig. J. G. (Norwood)Webbe, Sir H. (London & Westminster)
Noble, Cmdr. A. H. P.Snadden, W. McN.Wheatley, Major M. J. (Poole)
Nugent, G. R. H.Soames, Capt. C.White, Baker (Canterbury)
Nutting, AnthonySpearman, A. C. M.Williams, Charles (Torquay)
Oakshott, H. D.Spence, H. R. (Aberdeenshire, W.)Williams, Gerald (Tonbridge)
Odey, G. W.Spens, Sir Patrick (Kensington, S.)Williams, Sir Herbert (Croydon, E.)
O'Neill, Rt. Hon. Sir HughStanley, Capt. Hon. Richard (N Fylde)Wills, G.
Ormsby-Gore, Hon. W. D.Stevens, G. P.Wilson, Geoffrey (Truro)
Orr, Capt. L. P. S.Steward, W. A. (Woolwich, W.)Winterton, Rt. Hon. Earl
Orr-Ewing, Charles Ian (Hendon, N.)Stewart, Henderson (Fife, E.)Wood, Hon. R.
Orr-Ewing, Ian L. (Weston-super-Mare)Stoddart-Scott, Col. M.York, C.
Osborne, C.Storey, S.
Peake, Rt. Hon. O.Strauss, Henry (Norwich, S.)TELLERS FOR THE NOES:
Perkins, W. R. D.Stuart, Rt. Hon. James (Moray)Mr. Studholme and Major Conant.

5.45 a.m.

Photo of Mr Reginald Manningham-Buller Mr Reginald Manningham-Buller , Northamptonshire South

I beg to move, in page 20, line 31, to leave out from "effected" to "was" in line 32.

I think it may be for the convenience of the Committee if, with this Amendment, we discussed two others, namely, in page 20. to leave out lines 38 to 41, and, in page 21, line 34, at the end, to insert: (5) The expressions "transaction" or "transactions" in this section shall not include a transaction which was effected before the date of the passing of this Act or made in pursuance of a contract entered into before that date. All these Amendments have some connection. I assume that it will still be possible for us to divide on each one.

The Deputy-Chairman:

No. If the first Amendment falls, the others fall with it.

Photo of Mr Reginald Manningham-Buller Mr Reginald Manningham-Buller , Northamptonshire South

One is consequential, I agree. I am not sure about the one on line 34, and in my explanation I shall state why I think it does not fall with the first Amendment.

Subsection (1) deals with transactions effected before or after the passing of this Bill. This extremely bad Clause—bad because it is far too wide, and goes further than is necessary to achieve the purpose which the Attorney-General has indicated—is bad also in this respect. So far as I can see, subsection (1) has unlimited retrospective effect. The proviso then says that the subsection does not apply to transactions completed before 10th April.

I am not sure that I understand the difference between the interpretation of "effected" and "completed." Obviously, some difference is intended, in view of the use of "effected" in line 31 and of "completed" in line 40. The effect of subsection (1) appears to be that it applies to every class of transaction no matter how long ago it was effected, but if it has been completed by 10th April, then it is outside the scope of the provision.

We have had before now long and somewhat controversial debates on retrospective legislation. Last year, when we were discussing the Finance Bill, we heard advanced what we thought to be cogent arguments to justify legislation based on the proposition that the individuals against whom the legislation was directed had received warning. There has been no warning in this case that any penal Clause such as this would have retrospective effect. It is wrong to penalise with-

out warning transactions which were perfectly lawful when entered into.

The proviso limiting retrospective effect is a proviso to subsection (1) and there is no similar limitation to subsection (3). Why should that proviso be inserted only in subsection (1)? It seems to us that subsection (3) is not intended to have unlimited retrospective effect, and that the limiting proviso should not be a proviso to subsection (1), but should be a proviso to the Clause. That is the reason for the third Amendment, in which we ask for a limitation on the retrospective effect of the whole Clause. I submit that the third Amendment does not automatically fall with the first Amendment, which applies only to subsection (1), if it is defeated. I advance that argument now to save time.

The Deputy-Chairman:

I understood that the three Amendments went together and that the hon. and learned Gentleman thought the same until he found that I was not going to call the last one.

Photo of Mr Reginald Manningham-Buller Mr Reginald Manningham-Buller , Northamptonshire South

I agree they go conveniently together for the purpose of discussion. It is convenient to discuss the whole retrospective effect of the Clause in one debate. It would be tiresome to discuss it on subsection (1) and then discuss the absence of any limiting words in subsection (3) in two separate debates, but they are two separate points.

The Deputy-Chairman:

I am willing to allow a Division on the third of these three Amendments if there is no further discussion when we reach it.

Photo of Mr Reginald Manningham-Buller Mr Reginald Manningham-Buller , Northamptonshire South

We shall be most obliged, if we are unsuccessful in securing any acceptance by the Government of the proposal in the first Amendment.

It is monstrous that this penal Clause should apply, as clearly it does in view of the speech of the right hon. and learned Gentleman on the last Amendment, to perfectly lawful and innocent transactions effected without intent of tax avoidance and probably a long time ago. It is in the hope that we might at least minimise to some extent an injustice which might flow from this Clause in its present form that I move this Amendment.

Photo of Viscount  Hinchingbrooke Viscount Hinchingbrooke , South Dorset

These Amendments are designed to remove a most mischievous part of this Clause. The Attorney-General, on the last Amendment, instanced several cases of transactions which came to light in the Inland Revenue, and which would be the type of transaction that this Clause seeks to incorporate within the Act. One of those cases appeared to be that of a large group of companies engaged in the retail trade. The Attorney-General said they were trying to avoid tax by a reduction in the size of the company by splitting it up into small units and thereby becoming entitled to some provision under previous Finance Acts.

That will be just the type of case which will be caught if this Clause becomes law. It is obviously a transaction started some months, or perhaps years, ago. It is obviously a case not completed before the year in question, because if it had been I doubt very much whether the Attorney-General would have brought it before the House now. He has no doubt been given that example by the Inland Revenue as one they desperately desire to catch by this provision.

But here is a business the directors and managers of which are anxious to know how they stand. Having started their operations in a legitimate way weeks, months or perhaps years ago, not believing they would be penalised, they find that, because of the retrospective nature of the Clause which we are now trying to amend, they are having to pay tax on the highest scale. I should have thought this case justified our moving this Amendment.

6.0 a.m.

Photo of Sir John Foster Sir John Foster , Northwich

The object of these Amendments is to get rid of the retrospective provision. One of the odd features of the Clause is that it talks of "transaction or transactions." The question was put on the previous Amendment as to what "transaction or transactions" meant. It is also relevant to this Amendment to know what is the difference between the singular and the plural, because if we look at the Clause we find that it says: Where the Commissioners are of the opinion that the main purpose or one of the main purposes for which any transaction or transactions was or were effected … they can take certain steps. It gives as an exception that if the transaction or, if there are more than one all the transactions were completed. The draftsmen seem to have an idea that the transactions are connected, but nowhere do we see in the Clause what is the connection between the transactions.

Let me take an example. Suppose that a company took steps to set up a pension fund for their employees. That is a transaction which they are invited to undertake by the Finance Acts, because a tax inducement is given to them to undertake it. But this Bill apparently regards that step as harmful. Obviously, it is a transaction which will reduce profits.

Photo of Sir John Foster Sir John Foster , Northwich

It sounds nonsense, but then most of this Clause is nonsense. The right hon. Gentleman puts his finger on the spot. Where does he think it is nonsense?

Photo of Mr William Hall Mr William Hall , Colne Valley

The hon. and learned Gentleman should not talk like that. He knows very well that this Clause aims at people who are trying to avoid the payment of tax. He cannot say that to set up a superannuation fund under the law and to get the reliefs provided is to avoid the payment of tax.

Photo of Sir John Foster Sir John Foster , Northwich

That is the point. The Clause may aim at something but it does not hit it. It is because hon. Members opposite have not their wits about them that they cannot see that. I think I can satisfy the Committee that I am right here; it sounds absurd and it is absurd, but it is what the Clause says. I am sure the right hon. Gentleman will follow me in this. First of all, setting up a pension fund is a transaction. We can all agree about that. Secondly that pension fund will reduce the liability to Profits Tax. We can all agree about that. Therefore, if in setting up the fund the directors decide that they will set it up first of all because it reduces Profits Tax and secondly because they want to help their employees, then one of the main purposes is the reduction of Profits Tax and that is hit by this Clause.

Photo of Sir John Foster Sir John Foster , Northwich

I invite the hon. Member for Sowerby (Mr. Houghton) to say why he thinks that is rubbish.

Photo of Mr Douglas Houghton Mr Douglas Houghton , Sowerby

For the simple reason that the setting up of a pensions fund has as its main purpose the provision of superannuation benefits for employees.

Photo of Sir John Foster Sir John Foster , Northwich

That is one of the main purposes.

Photo of Mr Douglas Houghton Mr Douglas Houghton , Sowerby

I am expressing that as my opinion in support of the epithet which I hurled across the Floor. I invite any right hon. or hon. Gentleman opposite to state any case under the provisions of the 1941 Act or the 1944 Act dealing with avoidance of Excess Profits Duty where the setting up of a pension scheme was judged to have as one of its main purposes the avoidance of E.P.T.

Photo of Sir John Foster Sir John Foster , Northwich

The first answer is that, obviously one cannot deal with the Clauses as if they were law before they become law. The second answer is that, it is well known that in certain cases a pensions fund is sought to be set up because it reduces the liability to taxation.

Photo of Mr Will Nally Mr Will Nally , Bilston

With great respect, we cannot allow the hon. and learned Gentleman to get away with that. He was challenged by my hon. Friend on two previous occasions, where the same principle was involved, to state one single case and he did not accept that challenge. He now goes on to say that it is well known that in superannuation schemes, of which he presumably has knowledge, one of the main motives, if not the main motive, is the avoidance of tax.

I now invite the hon. and learned Gentleman to state any case. After all, we on this side have, from the trade union point of view, had some experience—I have myself—in drafting superannuation schemes. I invite the hon. and learned Gentleman to stand up in this Committee and give one solitary example from his own experience where a superannuation scheme of any company has been drafted for the prime purpose of avoiding tax. We shall be delighted to know the name.

Photo of Sir John Foster Sir John Foster , Northwich

It is an implicit inducement given in the Income Tax Act. That is the foolish part of the hon. Gentleman's intervention. The Income Tax Act gives an inducement to people by saying "If you do this in certain ways you will reduce your liability to taxation." Of course one of the main objects is to get off a bit of tax. It does not make any sense otherwise.

I am only giving this instance in passing, and I am sorry that the result of the Clause was not appreciated by hon. Gentlemen opposite. I think it is a good thing that it should go out to the country that if companies set up pensions schemes and superannuation schemes they will find themselves caught by the provisions of this Clause. I was only giving that instance in order to show how the Clause really operates.

In one place the Clause refers to "transaction or transactions," but the value of that is not at all clear, because we catch a transaction by saying "transaction." If somebody else carries out another transaction it is still caught by the word "transaction"; we do not have to say "transaction or transactions." But we do have to say "transaction or transactions" if there is envisaged some connection between them. Under the Income Tax Act there may be a series of transactions which are connected together, but no word of that appears in this Clause.

Exception given to any transaction which was completed would be an understandable exception, but if there is more than one transaction all of them have to be completed but without any connection between them. Suppose before this Bill comes into force a company sets up a pension fund and also undertakes some other transaction, those are two transactions. Does it mean that because the company undertook more than one transaction before the coming into force of this Bill they have both to be completed? That is nonsense. This provision is complicated, and I have every sympathy with laymen.

Photo of Mr John Jones Mr John Jones , Rotherham

I heard the hon. and learned Gentleman say that many hon. Members on this side of the Committee would not have their wits about them at this time of the morning. I realised when working for 35 years in the steel industry that a man is not at his best at six o'clock in the morning, but I think we are witty enough and alive enough to realise what he is now telling us, and I want to have it put on record so that it can be told to the country, and particularly to his constituents in Northwich who work for Ludwig Mond, or Brunner Mond, of

Is the hon. and learned Gentleman now telling his constituents that Ludwig Mond, or Brunner Mond, as the case may be, who was supposed to be magnanimous, and who was supposed to be giving the persons who worked for him a share in the profits and to be looking after them in their old age, was doing nothing of the sort, and that all he was doing in putting forward those schemes was avoiding paying legitimate tax?

Photo of Sir John Foster Sir John Foster , Northwich

The hon. Member is one argument behind, or two arguments behind. But there is no mystery about it. The Finance Act gave a tax inducement to the setting up of schemes.

Photo of Mr John Jones Mr John Jones , Rotherham

That is not the point.

Photo of Sir John Foster Sir John Foster , Northwich

I am trying to put the facts clearly before the hon. Member, because I do not think that he is aware of them. The second point is that, this inducement having been given, people took advantage of it. One of their motives in taking advantage of it is obviously to take advantage of this concession.

The Finance Acts give this concession because, through the high rates of taxation, it would be uneconomic, or impossible, for employers to provide these schemes without the advantage given by the Finance Act. Therefore the answer is that one of the main purposes is to look after the employees, as every decent employer should, and the other purpose is to take advantage of the tax concession given by the Finance Act.

Photo of Mr John Jones Mr John Jones , Rotherham

That is not the primary consideration.

Photo of Sir John Foster Sir John Foster , Northwich

One can check whether it is the primary purpose. There are two, three, four, or five ways of doing it. [Interruption.] I did give way. The hon. Member made a very tendentious intervention, and I am trying to answer it. Although it is 6.10 a.m. I am trying to deal with it as though he were asking a serious question. [Interruption.] It is difficult for me to answer if hon. Members will not let me finish a sentence. The answer to the question is that there are expensive ways of having superannuation schemes, and there are cheap ways. In other words, one can arrange one's pension scheme so that a great part of it is deductible for expenses. I do not think that the hon. Member would blame any company for taking advantage of the tax inducement provided by the Finance Act.

That brings me to an important point in regard to this Amendment. This Clause makes it imperative for any company always to choose the expensive way; because if it chooses the cheap way, one of its main purposes has been to avoid Profits Tax. Therefore, the Attorney-General said in his speech on one of the previous Amendments, if it was found that by doing it one way it has reduced its liability to Profits Tax, the transaction must be undone notionally and the company must be made to do it the expensive way. It has to do it in the expensive way in which it does not require to get the permission of the Commissioners and where, I think, all, or most, of the expenses for setting up a superannuation scheme are not deductible from profits.

But I have not reached the beginning of my illustration. I would say that the curious part about this Clause is the using of the words "transaction or transactions." The exemption which the second Amendment under discussion removes—but only to introduce a wider exemption—deals with the words "transaction or transactions." I should like to ask the Attorney-General what is the connection, or must there be a connection, between different transactions. If there must be a connection, what is it? Is it contained in the Bill, or must we guess what it is? Will it be a matter of interpretation by the Commissioners?

6.15 a.m.

If one says there are more than one, and all the transactions are completed, does that mean that one counts them like sheep—transaction one, transaction two, three, four—or does it mean that they have to be connected? What we are suggesting is that retrospective legislation in this instance is to be avoided, and that, therefore, the Amendment should be made in line 31 and that then the exemption should be removed, and the other Amendment inserted.

The general effect of the last Amendment is to protect any transaction begun pursuant to a contract coming into force before the coming into effect of this Bill, or before a certain date; I have not got it before me. The Amendments will then make clear that which in my submission is just, that no transaction brought into effect by contract should be hit by this Clause if no warning was given. That introduces a limitation on subsection (3), which at the moment has not even the proviso attached to subsection (1).

The latter provides that if one, or all the transactions are completed, the subsection shall not apply; but it does seem that in subsection (3), the transactions envisaged can be before, or after, the date of the exception in subsection (1) and no limitation can ensue. It is possible that, as subsection (3) is a section deeming something to have happened, it may be that no exception is required. As it is not operative on its own, but only refers back to the preceding provision, no limitation is required.

The main point of the Amendment is that it is not possible to see exactly what the contrast between the words "effected" and "completed" may be. It seems to be implied that a transaction can be effected without its being completed; but that, I think, will be a conception which may well lead to difficulties. The ordinary interpretation is that, if one effects something, one has completed it. If one does an act it usually means that one has completed it. The Attorney-General should tell us how he views the difference in wording between "effected" and "completed," because it might very well be said that a transaction which was effected before the passing of the Act would have been automatically completed.

One could have a series of transactions, some effected, and others contemplated, and, therefore, the proviso would not result in an exception. As I say, the wording is very complicated and the explanation must necessarily be complicated, and the questions must be complicated. That is not the fault of the Opposition. It is, I think, important in this case to realise that not only has the harmful principle of retrospective legislation been brought in but it is being made to operate on words which are not clear. It is bad enough to have retrospective legislation but at least the taxpayer should know where he stands.

If something was made liable to tax, which before this Bill was not liable to tax, it is essential that the taxpayer should at least know what transactions are liable to tax and what transactions he can consider he has effected, and which transactions he can consider he has completed. There is no definition of "transaction or transactions" in this Bill. It is hard enough to differentiate between what is a transaction and what is not a transaction. Is the payment of a dividend a transaction? If one sets up a pension fund, is the setting up of it a transaction, or is the continuing investment or reinvestment of the pension fund a transaction?

The Attorney-General very often does not meet the points which are put to him. He tries, I think, but he himself is overwhelmed by the complexity of this Bill and also by the fact that these expressions in this Clause are incapable of precise explanation. I would submit to him that as regards retrospective legislation that is more harmful than the introduction of the principle itself. If one gets a combination of the two evils, retrospective legislation and obscure legislation, the taxpayer cannot know where he stands, and cannot know what transactions he has entered into will come within the scope of this Clause.

For these reasons, I ask the Attorney-General if he will first explain what the Clause means, if he will explain to us what "transactions" entails when it is coupled with the words if there are more than onetransaction, and if he will tell the Committee how he views the words "effective" and "complete.

Photo of Sir Frank Soskice Sir Frank Soskice , Sheffield Neepsend

I really do not think that this Clause is anything like as complicated or difficult as has been made out. I shall briefly address myself to the questions asked, first, with regard to the justification of this provision going back to Budget day, which is what it does. There was given a very clear warning, in general terms, I know, by the Chancellor in his Budget speech, and I will read it. He said: Finally, I propose to provide against avoidance of Profits Tax, in particular against arrangements for reducing Profits Tax liability by the issue of bonus shares coupled with redemption of capital, and also against avoidance of Profits Tax and Income Tax by switching profits from one associated concern to another."—[OFFICIAL REPORT, 10th April, 1951; Vol. 486, c. 857.] He referred there compendiously to all the Clauses he proposed to introduce. He did not describe this one in terms, but gave the clearest possible indication that those who are minded to avoid Profits Tax were likely to find in the Finance Bill a Clause designed to prevent them from so doing. I should have thought that was ample justification for making this Clause retrospective to Budget day.

The Amendment seeks to prevent it from operating until the Bill is passed. If that Amendment were passed it would be a field day for all would-be avoiders. They would have two months, or whatever the appropriate period is, to get down to working out their avoidance schemes and, no doubt, they would reap a rich harvest. I cannot think that it is seriously proposed that such an opportunity should be given by the terms of this Bill to those minded to put their taxation burdens on to the shoulders of their fellow citizens.

With regard to the specific points asked, I should have thought that subsection (3) is quite clearly limited in time to the time limit provided for subsection (1). Subsection (3) provides that where the given circumstances obtain, the avoidance or reduction of liability to the Profits Tax shall be deemed for the purposes of this Clause to have been the purpose. That has absolutely no effect unless it is a transaction which is within the time limits laid down in subsection (1), and those time limits are perfectly clearly specified in the proviso. Whatever "effected" means in the earlier part of subsection (1), the time limit which appears in the proviso clearly avoids any transaction being brought within the scope of the Clause, whether by subsections (1) or (3), if it is a transaction or a series of transactions completed before Budget day.

The hon. and learned Gentleman asked what was meant by the expression "transaction or transactions". If he would look more closely at the opening sentences of subsection (1) he would see that what is there intended is that we may have a single transaction or we may have a series of transactions—

Photo of Sir John Foster Sir John Foster , Northwich

Mr. J. Foster indicated dissent.

Photo of Sir Frank Soskice Sir Frank Soskice , Sheffield Neepsend

The hon. and learned Gentleman shakes his head, if I may say so, characteristically, before I have said what I want to say. We may have a transaction or a series of transactions bound together by this: that the purpose which is protected in the subsection is common to all of them. The words are: the main purpose or one of the main purposes for which any transaction or transactions was or were effected … Where there are more transactions than one, we must find a situation in which we can say that the purpose at which we are looking is a purpose that is common to all. That is another way of simply saying that they must form part of one scheme or that, where there is one transaction or more than one each forming part of one scheme, then the Clause does not apply to them if the individual transaction or the series of transactions which form the scheme were completed before Budget day.

I think that the Amendments which are suggested not only do not improve the Clause, but would have a most disastrous effect, because they would be inviting all those who are minded to avoid the tax to get down to it and to do as much as they can until the Bill becomes an Act.

Photo of Sir Kenneth Pickthorn Sir Kenneth Pickthorn , Carlton

I think that the Committee might have been saved time if the Attorney-General had explained to us what he took "transaction or transactions" to mean before the Government moved the Closure on the previous debate, rather than waiting for this one. Even now, with respect and without being so certain as was the hon. Member for Rotherham (Mr. Jack Jones) that I have all my wits about me at this time, I do not think the matter is wholly plain.

The Attorney-General imported into his explanation the word "series." But there is nothing about "series" in the Clause as drafted, and the whole argument is vitiated by the importation of that word. Even if we are—and I cannot think how either the Attorney-General or the draughtsman thought we were—to guess that the word "series" should be there, even then it is not quite easy to see the relation between "transaction or transactions" on line 3, page 21, and the same words in subsection 1, because on the second occasion, that is in page 21, it is: If it appears in the case of any transaction or transactions, being a transaction which involves, or transactions, one or more of which involve …. 6.30 a.m.

That appears to contemplate a series of transactions at least one of which has in it two vices. Is that not right? [Interruption.] I am trying to understand a rather difficult bit of draughtsmanship. That seems to me to mean something quite different from what the words mean in subsection (1) just as similarly, I cannot understand the Attorney-General's apparent assumption that "effect" and "complete" are wholly identical words. I thought it was one of the normal rules of interpretation to suppose that, especially when they follow each other, two words meaning nearly, but not quite, the same are used, the almost irrebuttable assumption is that the two words are used because their meaning is different to the other.

I did think it was just possible that they had some connection with the actual meaning of the word transaction—just possible that it was thought that the transaction which required agreement between two parties—I do not know if the Minister is helping the Attorney-General but he is rather hindering me. [Interruption.] I am sorry I am physically not so good at doing it as I generally am.

An Hon. Member:

The hon. Gentleman's arrogance is quite as good as usual.

Photo of Sir Kenneth Pickthorn Sir Kenneth Pickthorn , Carlton

I do not know at this time whether it is in order for us to bandy across the floor of the Committee judgments of the moral qualities of each other, but I do not think it would be very helpful.

I did think it was just possible it was considered that "transaction" would necessarily involve two parties, and it might be effected without being completed. I do not think that is a very good explanation of this change of words, but it is the best that has occurred to me so far. If there is some better one, I think the Attorney-General ought already to have explained it to us, and I hope he will now do so. If the words are just designed by chance, like grains of pepper out of a pepper pot, then I do not think this provision should go further without Amendment.

Photo of Viscount  Hinchingbrooke Viscount Hinchingbrooke , South Dorset

I feel compelled to make a short and emphatic protest against this idea of the right hon. and learned Gentleman. He has now announced twice in the course of the debate that in some way the burden of taxation is shifted on to other groups in the community, one particular set of persons, or group of companies claiming to be relieved of the taxation. People bear the tax according to the assessment of tax made against them, and the right hon. and learned Gentleman is quite wrong to try and put a political gloss on this and say other sections of the community would feel aggrieved because we on this side of the Committee are quite legitimately trying to see whether a particular group of companies are being unduly penalised and compelled to pay taxation where they should not do so. I do not think the right hon. and learned Gentleman should be able to get away with this idea.

Photo of Mr Hugh Fraser Mr Hugh Fraser , Stafford and Stone

The Attorney-General has not convinced us of the Tightness or desirability of making this Clause retrospective. He referred to some warnings issued by the Chancellor during his Budget oration, chiefly concentrated round the question of bonus issues. On this side of the House and in well informed sections of the community, one of the things we think that Socialists really know nothing about is bonus issues in industry.

But whatever the warning may have been, there is no question that this Clause is one of great gravity to the whole of the business community in this country. Once this type of rule, not by law, but by whim has been introduced, it will mean that next year, if this Government is in office—which, thank Heavens, is unlikely—it will be applied to every variety of tax. It applies here to the Profits Tax, but there is nothing to prevent this Government pushing it forward to cover every variety of tax. Under this Clause the Income Tax authorities are the detectives, the accusers, the police, and the judges of the victim, who, as often as not, will be an innocent one.

As my hon. and learned Friend has pointed out in an able speech ploughing through the immense difficulties and discrepancies of this Clause, it is perfectly possible for a superannuation scheme under certain circumstances to be regarded as having the partial function of avoiding taxation and, therefore, to be subject to the intervention of the Income Tax Commissioners. The same sort of thing is happening as we have seen in the past under this Government.

As my hon. Friend the Member for Chippenham (Mr. Eccles) pointed out, tax evasion is growing, owing to bad government and high taxation. [Interruption.] It is all very well for hon. Members to talk about encouragement, but we have seen the sort of person who gets through the net—Sidney Stanley and that type. It is precisely this type of legislation which will hit the innocent company. The clever sharks, the clever type of person with whom too many people in this House were friendly, will avoid this.

To bring forward this type of Clause without much fuller consideration than we have been allowed to give it tonight is something of a minor scandal. If this type of legislation is brought in, as it is being brought in by the Government, it means automatically that innocent people will be affected, ordinary innocent moves will be suspect. Right through there will be built up a sense of fear and a sense of an incipient Gestapo.

It has been said that the liberties of a country never go overnight; they go slowly. But they go fairly fast when hon. Gentlemen opposite bring forward this type of legislation, which will pry into everybody's affairs and which, at the whim of the wrong people in office, might condemn any activity of any company on the grounds that one of its purposes, however remote, may have been designed to avoid liability to taxation.

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

Hon. Members opposite have challenged us to give any single instance in which this Clause would affect any superannuation scheme. I knew a case, two or three years ago, in which a superannuation scheme was being worked out for certain directors, and the whole purpose was to avoid taxation. I know of an instance now, where a superannuation scheme is being considered for two working directors, and the whole purpose is to avoid taxation. It is clear that the Commissioners have certain powers when they are of opinion that one of the purposes of a transaction is to avoid taxation.

It is no good assurances being given from the other side. Only last year an assurance was given that a Clause would not have certain effects, but the Inland Revenue took what was in the Clause, not the assurance of the Minister. In this Bill an Amendment is being moved to try and put right what took place last year. This is a bad Clause, great difficulty will be caused, genuine and innocent people will be harmed and industry will be hurt. This is another example of the mess and muddle of this Government.

Photo of Mr Douglas Houghton Mr Douglas Houghton , Sowerby

It is time a protest came from these benches. What we are getting from the other side is synthetic indignation. The noble Lord the Member for Dorset, South (Viscount Hinchingbrooke) claims no support from successive Royal Commissions on Income Tax from the doctrine that the payment of tax is a personal assessment unaccompanied by civic responsibility. The Royal Commission of 1919–20, in its comments on the tax evader, said it was equivalent to putting his hand in his neighbour's pocket. There can be no moral judgment stronger than that.

Several hon. Members opposite, including the two who spoke last, have referred to this Clause as if we had never seen its like before. Yet the first nine lines of subsection (1) are an exact copy of what appeared in the Finance Act. 1941, Section 35 (1). All the words complained of—"main purpose or one of the main purposes," "transaction or transactions"—have all appeared before. All the contentious words in this Clause appeared ten years ago in the Finance Act of 1941.

6.45 a.m.

With regard to retrospection, the E.P.T. retrospection provisions were retrospective not to Budget day, but to the beginning of E.P.T. When these provisions were strengthened in Section 33 (3) of the 1944 Finance Act, the strengthened provisions were made retrospective to the beginning of E.P.T., four years previously. I fear that hon. Gentlemen have not informed themselves on the history of this matter. If they look at Section 33 (3) of the 1944 Act, they will find embodied in that Act further words which govern the application of the retrospective Clause, which is the subject of contention in the present Bill.

As we have had such a long experience of provisions to check tax avoidance similar to these in the Bill, why have we not had cases cited to us where the Inland Revenue authorities had behaved badly and where the Special Commissioners had judged wrongly, maliciously and unjustly? We have not had a single case of the bad administration of these anti-avoidance provisions in earlier Acts as evidence against limiting them for the purpose of Profits Tax avoidance in the Bill before us. I think we are entitled to ask: what is all this fuss about?

Photo of Mr Reginald Manningham-Buller Mr Reginald Manningham-Buller , Northamptonshire South

I can well understand the hon. Gentleman asking that question because from his speech it is obvious, although he "hotted up" a lot of synthetic sentiment, that he was otherwise engaged during the earlier part of the debate.

Photo of Mr Douglas Houghton Mr Douglas Houghton , Sowerby

I must refute that. I have sat in this Committee since proceedings commenced.

Photo of Mr Reginald Manningham-Buller Mr Reginald Manningham-Buller , Northamptonshire South

I did not say the hon. Gentleman had been absent from the Committee. I said he must have been otherwise engaged.

Photo of Mr Douglas Houghton Mr Douglas Houghton , Sowerby

That is equally offensive.

Photo of Mr Reginald Manningham-Buller Mr Reginald Manningham-Buller , Northamptonshire South

If he had been awake and alert, the hon. Gentleman could not have failed to hear my hon. Friend the Member for Chippenham (Mr. Eccles), in the course of moving the first Amendment to this Clause, refer to the previous legislation on which the hon. Gentleman has now treated us to the lengthy lecture. We are well aware of the Section to which he refers and to the history of war-time legislation. If the hon. Gentleman had remained alert, he might also have heard the Attorney-General say he was not prepared to rest his case on war-time legislation.

Photo of Mr Douglas Houghton Mr Douglas Houghton , Sowerby

I was not basing the case for the Clause in this Bill upon what was embodied in the 1941 and 1944 Acts. I was merely saying that we had experience of similar provisions and asked for evidence that they had been misapplied.

Photo of Mr Reginald Manningham-Buller Mr Reginald Manningham-Buller , Northamptonshire South

I was dealing with the hon. Gentleman's speech point by point, and the first part—and a rather boring part in view of the history of the debate—was when he reminded the Committee, at great length, of the similarity between this Clause and earlier legislation. I have dealt with that. He asked for examples of bad administration in earlier legislation.

We are concerned with the width of the legislation. It is a bad precedent to give the Executive wider powers than is necessary to achieve their purpose. That is our objection to the Clause. We oppose tax dodging and tax evasion as much as does the hon. Gentleman, but we say that the Clause goes far further than is necessary to stop it. In speaking of the absence of instances of bad administration from the past the hon. Gentleman does not in any way show that the wording of this Clause is satisfactory and is not liable to great abuse. That is the danger.

Having answered the hon. Gentleman as briefly as I can, I would now turn to the speech of the right hon. and learned Gentleman. In dealing with the point about retrospection he said that the reference to "transactions" means a series of transactions, a scheme of transactions, a number of transactions all connected or inter-linked to achieve one purpose. I do not read the Clause as being so limited. It seems to me that there is no real connection between the transactions indicated in the Clause. I ask the right hon. and learned Gentleman to give further consideration to that point so as to make the meaning which he expresses clearer in the Clause.

In his speech the right hon. and learned Gentleman treated the word "effected" as having precisely the same meaning as "completed." I should have thought they had the same meaning, but because the two words are used in different contexts in the same Clause I feel there is some risk that when the phrase "the transaction is effected" is used it may be interpreted as meaning the actual making of an agreement for the transaction, whereas the completion might apply to the Executive. If they are intended to mean the same thing, and if it is simply meant that the Clause shall be retrospective to 10th April, I ask the right hon. and learned Gentleman to say that he will make Amendments.

Thirdly, it should be made quite clear by the alteration of the decisions of the retrospective proviso that it is applicable to Clause 3. If the right hon. and learned Gentleman will say that he will reconsider the Clause in all those connections no doubt he will effect some improvement, but as it is, in view of his explanation of the meaning which, in my view, is not completely carried out by the present wording, we must divide the Committee in support of the Amendment.

Photo of Mr Will Nally Mr Will Nally , Bilston

Whatever the truth of the situation, we can always rely on the hon. and learned Gentleman for Northants, South (Mr. Manningham-Buller) even at this hour to produce the slightly mildewed ham and go through exactly the same performances as is usual from him on these occasions. My hon. Friend the Member for Sowerby (Mr. Houghton) asked for, and did not receive, even from the hon. and learned Gentleman, one simple illustration of where injustice was done when similar legislation was enforced in the past. It is the sort of county court mind, which the layman would not use, the Hundred Court mind—

Photo of Sir Geoffrey Hutchinson Sir Geoffrey Hutchinson , Ilford North

Does not the hon. Gentleman appreciate that that is extremely disrespectful to a very ancient and well-established tribunal?

Photo of Mr Will Nally Mr Will Nally , Bilston

It is very ancient and well-established, but I have heard better pleading from office boys—I was a solicitor's office boy in previous employment—than we have heard tonight. I mean no disrespect to that court. I have heard a 16-year old before that court plead far more ably than the pleading from the Opposition Front Bench tonight. Only two Members have spoken from this side of the Committee on the Amendment, while five have spoken from the other side. To each speaker from the benches opposite we have said, "Give us one case of injustice being done." Hon. Members opposite began with the allegation that superannuation schemes had been introduced with evasion of tax as one of its main purposes.

Photo of Mr Will Nally Mr Will Nally , Bilston

All right, avoidance of tax. I could not care less. I invite any Member of the Opposition now to get up and tell us what particular firm he has in mind, where the main purpose or one of the main purposes of introducing a superannuation scheme was the avoidance of tax. Three times has it been said from the Opposition benches that this is one of the purposes. Now can we have from hon. Members opposite, who have referred to this continually, one single case of any superannuation scheme, large or small, whether for employees or for directors, introduced by a company whose main purpose, or one of whose main purposes, was the avoidance of tax?

Photo of Sir Isaac Pitman Sir Isaac Pitman , Bath

I think I can oblige the hon. Gentleman by giving the name of my own firm. In this matter of superannuation funds there is a submission of an estimate from an insurance company under the group insurance scheme, and there set out, as part of the story, is the net cost; that is to say, the cost after taking Income Tax into consideration; and for the future it will be an aggregated sum of Income Tax and Profits Tax. The facts of that situation are, and will be, laid in front of every company that considers any superannuation fund at any time, and it is wholly academic and wholly stupid to say that the consideration of Income Tax is not a main factor in the decision to put a superannuation fund into force.

Photo of Mr Will Nally Mr Will Nally , Bilston

The hon. Gentleman is confessing what seems to me to be a very small sin, if it be a sin at all. I can only hope, looking along the benches opposite, that we could have the same full and frank explanation from others. It seems to me that the hon. Gentleman has nothing at all to worry about. He has said himself that the thing was openly declared, and what it was intended to do. The purpose of it was to benefit the company; it was honestly decided upon and honestly administered. But if I read this Clause aright the main purpose or one of the main purposes for which any transaction or transactions … was the avoidance or reduction"—

7.0 a.m.

Photo of Mr Will Nally Mr Will Nally , Bilston

I know sufficient about the hon. Gentleman's company to know that neither the main purpose nor one of the main purposes of the transaction which he has just been kind enough to describe to the Committee was to avoid or to evade tax payment.

Let me now go on to make this further point. The Opposition—including the hon. Member for Stafford and Stone (Mr. H. Fraser), that elongated streak of political misery—[HON. MEMBERS: "Withdraw."] Certainly not. I will repeat it, if necessary. The hon. Gentleman introduced certain names into the discussion. Let us make it perfectly clear what the Opposition are doing, despite, if I may say so, the point made by the hon. Member for Bath (Mr. Pitman). This is the best defence of pin-table saloon proprietors that this Committee has ever heard. We are not talking about the company of the hon. Member for Bath in terms of tax evasion. We are not talking about the honest, decent company which introduces a superannuation scheme, or the honest company that makes other similar provisions.

The Clause is perfectly clear in its first five or ten lines. We are not talking about those. We are talking about the pin-table boys, or the people who run greyhound tracks, or companies who do this sort of thing. Some companies have an arrangement with motorcar distributors. The Company gets a new motorcar and transfers it, as it is perfectly entitled to do, for the personal use of a director. At the expiry of the covenant that motorcar is sold to that director at a nominal price, and the director then sells it, getting another new car in its place, at a vastly inflated price. Now, where the original cost has been met by the company—

Photo of Mr Will Nally Mr Will Nally , Bilston

Certainly I am in order. Where the original cost has been met by the company the Commissioners would at any rate be entitled to investigate whether or not that car transaction was an avoidance of tax, and they would be entitled, under the terms of this Clause—which the Opposition seek to weaken—to investigate the circumstances of the transaction.

Hypocrisy is always unwholesome, and I see no more reason why we on these benches should tolerate it from the Opposition at seven o'clock in the morning as at seven o'clock at night. It ought to be made perfectly plain in the country that, despite the fact that the motives are completely honest in many cases, what the Opposition are trying to do is to weaken the policy of the Government in dealing with those who seek to evade tax and who seek to evade their fair obligations, and to that extent I hope that we shall not have from our own Government Front Bench any weakness in this matter.

Photo of Lieut-Commander Joseph Braithwaite Lieut-Commander Joseph Braithwaite , Bristol North West

We are pleased to have had the two contributions from the benches opposite. But at the conclusion of what I am sure hon. Members opposite will agree has been a very good tempered all-night Sitting, I am sorry that the hon. Member for Bilston (Mr. Nally), who has now apparently assumed very much more responsibility in the party opposite, should have been the first to strike a jarring note. But I think we must be grateful to him, despite the fact that some of his remarks were, I thought, unnecessarily offensive.

At the same time, I think that he put his finger upon the weakness of this Clause more effectively than have some of my hon. Friends, because after speaking of two or three instances of superannuation funds being established which had the consequences laid down in the Clause, he brought to his feet the hon. Member for Bath (Mr. Pitman) who, with great frankness, told the Committee that his own firm had such a scheme, whereupon the hon. Member for Bilston went on to say that he need not worry, and that he was all right.

Photo of Lieut-Commander Joseph Braithwaite Lieut-Commander Joseph Braithwaite , Bristol North West

But that is the whole point. If the Clause stands part of the Bill my hon. Friend will no longer be all right. That is the whole point of our opposition to this Clause. If the Clause stands part of the Bill my hon. Friend will be unable to do the same in the future.

I feel sure that, despite the extremely painstaking explanations of the learned Attorney-General, there is in this Clause a very serious fault. It has been disclosed by the hon. Member for Bilston, who, by his vitriolic methods, has obtained results which we failed to get by our arguments. So I would suggest that there is very great force in the objections which have been put forward, if the intention is that laid down by the hon. Member for Sowerby (Mr. Houghton), who, after all, is an expert on this subject, and, I think, briefed his hon. Friend adequately, but with some unfortunate expressions.

I suggest that the intention is not fulfilled by the present wording of Clause 28, if it be the intention set forth by the hon. Member for Bilston. So, even at this late hour, and after a Sitting which has lasted so long, and though it is a heavy burden upon the Attorney-General, who has been so courteous throughout the night, he must be asked to consider once again the redrafting of this Clause between now and the Report stage. I know that that is grievous at this hour, and after all the work he has put into it; but I feel that it will have to be done again if only to satisfy the hon. Member for Bilston, who is such a formidable contestant for the leadership of the Government.

Photo of Mr Robert Taylor Mr Robert Taylor , Morpeth

Mr. R. J. Taylor rose in his place, and claimed to move, "That the Question be now put."

Question put, "That the Question be now put."

The Committee divided: Ayes, 290; Noes, 278.

Division No. 118.]AYES[7.10 a.m.
Acland, Sir RichardBowden, H. W.Craddock, George (Bradford, S.)
Adams, RichardBowles, F. G. (Nuneaton)Crawley, A.
Albu, A. H.Braddook, Mrs. ElizabethCrosland, C. A. R.
Allen, Arthur (Bosworth)Brook, Dryden (Halifax)Crossman, R. H. S.
Allen, Scholefield (Crewe)Brooks, T. J. (Normanton)Cullen, Mrs. A.
Anderson, Alexander (Motherwell)Broughton, Dr. A. D. D.Daines, P.
Anderson, Frank (Whitehaven)Brown, Rt. Hon. George (Belper)Dalton, Rt. Hon. H.
Attlee, Rt. Hon. C. R.Brown, Thomas (Ince)Darling, George (Hillsborough)
Awbery, S. S.Burke, W. A.Davies, A. Edward (Stoke, N.)
Ayles, W. H.Burton, Miss E.Davies, Harold (Leek)
Bacon, Mils AliceButler, Herbert (Hackney, S.)Davies, Stephen (Merthyr)
Baird, J.Callaghan, L. Freitas, Geoffrey
Balfour, A.Carmichael, J.Deer, G.
Barnes, Rt. Hon. A. J.Castle, Mrs. B. ADodds, N. N.
Hartley, P.Champion, A. J.Donnelly, D.
Bellenger, Rt. Hon. F. J.Chetwynd, G. R.Driberg, T. E. N.
Benn, WedgwoodClunie, J.Dugdale, Rt. Hon. John (W. Bromwich)
Benson, G.Cocks, F. S.Dye, S.
Beswck, F.Coldrick, W.Ede, Rt. Hon. J. C.
Sevan, Rt. Hon. A. (Ebbw Vale)Collick, P.Edelman, M.
Bing, G. H. C.Collidridge, F.Edwards John (Brighouse)
Blenkinsop, A.Cook, T. F.Edwards, Rt. Hon. Ness (Caerphilly)
Blyton, W. R.Cooper, Geoffrey (Middlesbrough, W.)Edwards, W. J. (Stepney)
Boardman, H.Cooper, John (Deptford)Evans, Albert (Islington, S. W.)
Booth, A.Corbel, Mrs. Freda (Peekham)Evans, Edward (Lowestoft)
Bottomley, A. G.Cove, W. G.Evans, Stanley (Wednesbury)
Ewarl, R.Lever, Harold (Cheetham)Robinson, Kenneth (St. Pancras, N.)
Fernyhough, E.Lever, Leslie (Ardwick)Rogers, George (Kensington, N.)
Field, Capt. W. J.Lewis, Arthur (West Ham, N.)Ross, William
Finch, H. J.Lewis, John (Bolton, W.)Royle, C.
Fletcher, Erie (Islington, E.)Lindgren, G. S.Shawcross, Rt. Hon. Sir Harlley
Follick, M.Lipton, Lt.-Col. M.Shinwell, Rt. Hon. E.
Foot, M. M.Logan, D. G.Shurmer, P. L. E.
Forman, J. C.Longden, Fred (Small Heath)Silverman, Julius (Erdington)
Fraser, Thomas ('Hamilton)McAllister, G.Silverman, Sydney (Nelson)
Freeman, John (Watford)MacColl, J. E.Simmons, C. J.
Freeman, Peter (Newport)McGhee, H. G.Slater, J.
Gaitskell, Rt. Hon. H. T. NMcGovern, J.Smith, Ellis (Stoke, S.)
Ganley, Mrs. C. S.McInnes, J.Smith, Norman (Nottingham, S.)
Gibson, C. W.Mack, J. D.Snow, J. W.
Gilzean, A.Mackay, R. W. G. (Reading, N.)Sorensen, R. W.
Glanville, James (Consett)McLeavy, FSoskice, Rt. Hon. Sir Frank
Gooeh, E. G.MacMillan, Malcolm (Western Isles)Sparks, J. A.
Gordon-Walker, Rt. Hon. P. C.McNeil, Rt. Hon. H.Steele, T.
Greenwood, Anthony (Rossendale)MacPherson, Malcolm (Stirling)Stewart, Michael (Fulham, E.)
Greenwood, Rt. Hn. Arthur (Wakefield)Mainwaring, W. H.Stokes, Rt. Hon. R. R.
Grenfell, D. R.Mallalieu, E. L. (Brigg)Strachey, Rt. Hon. J.
Grey, C. F.Mallalieu, J. P. W. (Huddersfield, E.)Strauss, Rt. Hon. George (Vauxhall)
Griffiths, David (Rother Valley)Mann, Mrs. JeanStross, Dr. Barnett
Griffiths, Rt. Hon. James (Llanelly)Manuel, A. C.Summerskill, Rt. Hon. Edith
Griffiths, William (Exchange)Marquand, Rt. Hon. H. A.Sylvester, G. O.
Gunter, R. J.Mathers, Rt. Hon. GTaylor, Bernard (Mansfield)
Hale, Joseph (Rochdale)Mellish, R. J.Taylor, Robert (Morpeth)
Messer, F.
Hall, Rt. Hon. Glenvil (Colne Valley)Middleton, Mrs. L.Thomas, David (Aberdare)
Hall, John (Gateshead, W.)Mikarde, Ian.Thomas, George (Cardiff)
Hamilton, W. W.Mitchison, G. R.Thomas, Iorwerth (Rhondda, W.)
Hannan, W.Moeran, E. W.Thomas, Ivor Owen (Wrekin)
Hardman, D. R.Monslow, W.Thorneycroft, Harry (Clayton)
Hargreaves, A.Moody, A. S.Thurtle, Ernest
Hastings, S.Morgan, Dr. H. B.Timmons, J.
Hayman, F. HMorley, R.Tomney, F.
Henderson, Rt. Hon. Arthur (Tipton)Morris, Percy (Swansea, W.)Ungoed-Thomas, Sir Lynn
Herbison, Miss M.Mort, D. L.Usborne, H.
Hewitson, Capt. MMoyle, A.Vernon, W. F.
Hobson, C. R.Mulley, F. W.Viant, S. P.
Holman, P.Murray, J. D.Wallace, H. W.
Helmes, Horace (Hemsworth)Nally, W.Watkins, T. E.
Houghton, D.Neal, Harold (Bolsover)Webb, Rt. Hon. M. (Bradford, C.)
Hoy, J.Noel-Baker, Rt. Hon. P. J.Weitzman, D.
Hubbard, T.O'Brien, T.Wells, Percy (Faversham)
Hudson, James (Ealing, N.)Oldfield, W. H.Wells, William (Walsall)
Hughes, Emrys (S. Ayrshire)Oliver, G. H.West, D. G.
Hughes, Hector (Aberdeen, N.)Orbach, M.Wheatley, Rt. Hon. John (Edinb'gh E.)
Hynd, H. (Accrington)Padley, W. E.White, Mrs. Eirene (E. Flint)
Hynd, J. B. (Attercliffe)Paget, R. T.White, Henry (Derbyshire, N. E.)
Irvine, A. J. (Edge Hill)Paling, Rt. Hon. W. (Dearne Valley)Whiteley, Rt. Hon. W.
Irving, W. J. (Wood Green)Paling, Will T. (Dewsbury)Wilcock, Group Capt. C. A. B.
Isaacs, Rt. Hon. G. A.Pannell, T. C.Wilkes, L.
Janner, B.Pargiter, G. A.Wilkins, W. A.
Jay, D. P. T.Parker, J.Willey, Frederick (Sunderland)
Jeger, George (Goole)Paton, J.Willey, Octavius (Cleveland)
Jenkins, R. H.Popplewell, E.Williams, David (Neath)
Johnson, James (Rugby)Porter, G.Williams, Rev. Llywelyn (Abertillery)
Johnston, Douglas (Paisley)Price, Philips (Gloucestershire, W.)Williams, Ronald (Wigan)
Jones, David (Hartlepool)Proctor, W. T.Williams, Rt. Hon. Thomas (Don V'lly)
Jones, Frederick Elwyn (W. Ham, S.)Pryde, D. J.Williams, W. T. (Hammersmith, S.)
Jones, Jack (Rotherham)Pursey, Cmdr. H.Wilson, Rt. Hon. Harold (Huyton)
Jones, William Elwyn (Conway)Rankin, J.Winterbottom, Ian (Nottingham, C.)
Keenan, W.Rees, Mrs. D.Winterbottom, Richard (Brightside)
Kenyon, C.Reeves, J.Wise, F. J.
Key, Rt. Hon. C. W.Reid, Thomas (Swindon)Woodburn, Rt. Hon. A.
King, Dr. H. M.Raid, William (Camlachie)Wyatt, W. L.
Kinghorn, Sqn. Ldr. E.Rhodes, H.Yates, V. F.
Kinley, J.Richards, R.Younger, Rt. Hon. K.
Lang, GordonRobens, Rt. Hon. A.
Lee, Frederick (Newton)Roberts, Goronwy (Caernarvonshire)TELLERS FOR THE AYES:
Lee, Miss Jennie (Cannock)Robertson, J. J. (Berwick)Mr. Pearson and Mr. Delargy
Aitken, W. T.Baldwin, A. E.Black, C. W.
Alport, C. J. M.Banks, Col. C.Boles, Lt.-Col. D. C. (Wells)
Amery, Julian (Preston, N.)Baxter, A. B.Boothby, R.
Amory, Heathcoat (Tiverton)Beamish, Maj. TuftonBossom, A. C.
Arbuthnot, JohnBell, R. M.Bowen, E. R. (Cardigan)
Ashton, H. (Chelmsford)Bennett, Dr. Reginald (Gosport)Boyd-Carpenter, J. A.
Assheton, Rt. Hon. R. (Blackburn. W.)Bennett, William (Woodsido)Boyle, Sir Edward
Astor, Hon. M. L.Bevins, J. R. (Liverpool, Toxteth)Bracken, Rt. Hon. B.
Baker, P. A. D.Birch, NigelBraine, B. R.
Baldeck, Lt.-Cmdr. J. M.Bishop, F. P.Braithwaite, Sir Albert (Harrow, W.)
Braithwaite, Lt.-Cr. G. (Bristol, N. W.)Hope, Lord JohnOsborne, C.
Bromley-Davenport, Lt.-Col. W.Hopkinson, HenryPeake, Rt. Hon. O.
Brooke, Henry (Hampstead)Hornsby-Smith, Miss P.Perkins, W. R. D.
Browne, Jack (Govan)Horsbrugh, Rt. Hon. FlorencePeto, Brig. C. H. M.
Buchan-Hepburn, P. G. THoward, Gerald (Cambridgeshire)Pickthorn, K.
Bullock, Capt. M.Howard, Greville (St. Ives)Pitman, I. J.
Bullus, Wing Commander E. E.Hudson, Sir Austin (Lewisham, N.)Powell, J. Enoch
Burden, F. A.Hudson, Rt. Hon. Robert (Southport)Price, Henry (Lewisham, W.)
Butcher, H. W.Hudson, W. R. A. (Hull, N.)Prefumo, J. D.
Butler, Rt. Hn. R. A. (Saffron Walden)Hurd, A. R.Raikes, H. V.
Carr, Robert (Mitcham)Hutchinson, Geoffrey (Ilford, N.)Rayner, Brig. R.
Carson, Hon. E.Hutchison, Lt.-Com. Clark (E'b'rgh W.)Redmayne, M.
Channon, H.Hutchison, Col. James (Glasgow)Remnant, Hon. P.
Churchill, Rt. Hon. W. S.Hyde, Lt.-Col. H. M.Renton, D. L. M.
Clarke, Col. Ralph (East Grinstead)Hylton-Foster, H. B.Roberts, Maj. Peter (Heeley)
Clarke, Brig. Terence (Portsmouth, W.)Jennings, R.Robertson, Sir David (Caithness)
Clyde, J. L.Johnson, Howard (Kemptown)Robinson, Roland (Blackpool, S.)
Colegate, A.Jones, A. (Hall Green)Robson-Brown, W.
Conant, Maj. R. J. E.Joynson-Hicks, Hon. L. WRodgers, John (Sevenoaks)
Cooper, Sqn. Ldr. Albert (Ilford, S.)Kaberry, D.Roper, Sir Harold
Cooper-Key, E. M.Kerr, H. W. (Cambridge)Ropner, Col. L.
Corbett, Lt.-Col. Uvedale (Ludlow)Kingsmill, Lt.-Col. W. H.Russell, R. S.
Craddock, Beresford (Spelthorne)Lambert, Hon. G.Ryder, Capt. R. E. D.
Cranborne, ViscountLancaster, Col. C. G.Salter, Rt. Hon. Sir Arthur
Crookshank, Capt. Rt. Hon. H. F. C.Langford-Holt, J.Sandys, Rt. Hon. D.
Crosthwaite-Eyre, Col. O. E.Law, Rt. Hon. R. K.Shepherd, William
Crouch, R. F.Leather, E. H. C.Smiles, Lt.-Col. Sir Walter
Crowder, Capt. John (Finchley)Legge-Bourke, Maj E. A. [...]Smithers, Peter (Winchester)
Crowder, Petre (Ruislip—Northwood)Lennox-Boyd, A. T.Smithers, Sir Waldron (Orpington)
Cundiff, F. W.Lindsay, MartinSmyth, Brig. J. G. (Norwood)
Cuthbert, W. N.Linstead, H. N.Snadden, W. McN.
Davidson, ViscountessLlewellyn, D.Soames, Capt. C.
Davies, Nigel (Epping)Lloyd, Rt. Hn. Geoffrey (King's N'rt'n)Spearman, A. C. M.
de Chair, SomersetLloyd, Maj. Guy (Renfrew, E.)Spence, H. R. (Aberdeenshire, W.)
De laère, R.Lloyd, Selwyn (Wirral)Spens, Sir Patrick (Kensington, S.)
Deedes, W. F.Lockwood, Lt.-Col. J. C.Stanley, Capt. Hon. Richard (N. Fylde)
Digby, S. WingfieldLongden, Gilbert (Herts, S. W.)Stevens, G. P.
Dodds-Parker, A. D.Low, A. R. W.Steward, W. A. (Woolwich, W.)
Donner, P. W.Lucas, Sir Jocelyn (Portsmouth, S.)Stewart, Henderson (Fife, E.)
Douglas-Hamilton, Lord MalcolmLucas, P. B. (Brentford)Stoddart-Scott, Col. M.
Drayson, G. B.Lucas-Tooth, Sir HughStorey, S.
Dugdale, Maj. Sir Thomas (Richmond)Lyttelton, Rt. Hon. O.Strauss, Henry (Norwich, S.)
Duncan, Capt. J. A. L.McAdden, S. J.Stuart, Rt. Hon. James (Moray)
Dunglass, LordMcCorquodale, Rt. Hon. M. S.Studholme, H. G.
Duthie, W. S.Macdonald, Sir Peter (I. of Wight)Summers, G. S.
Ecckss, D. M.Mackeson, Brig. H. R.Sutcliffe, H.
Eden, Rt. Hon. A.McKibbin, A.Taylor, Charles (Eastbourne)
Elliot, Rt. Hon. W. E.McKie, J. H. (Galloway)Taylor, William (Bradford, N)
Erroll, F. J.Maclay, Hon. JohnTeeling, W.
Fisher, NigelMaclean, FitzroyTeevan, T. L.
Fort, R.MacLeod, Iain (Enfield, W.)Thomas, J. P. L. (Hereford)
Foster, JohnMacLeod, John (Ross and Cromarty)Thompson, Kenneth Pugh (Walton)
Fraser, Hon. Hugh (Stone)Macmillan, Rt. Hon. Harold (Bromley)Thompson, Lt.-Cmdr. R. (Croydon, W.)
Fraser, Sir Ian (Morecambe & Lonsdals)Macpherson, Major Niall (Dumfries)Thorneycroft, Peter (Monmouth)
Fyfe, Rt. Hon. Sir David MaxwellMaltland, Cmdr. J. W.Thornton-Kemsley, Col. C. N.
Gage, C. H.Manningham-Buller, R. E.Thorp, Brig. R. A. F.
Galbraith, Cmdr. T. D. (Pollok)Marlowe, A. A. H.Tilney, John
Galbraith, T. G. D. (Hillhead)Marples, A. E.Turner, H. F. L.
Gammans, L. D.Marshall, Douglas (Bodmin)Turton, R. H.
Garner-Evans, E. H. (Denbigh)Marshall, Sidney (Sutton)Tweedsmuir, Lady
Gomme-Duncan, Col. A.Maude, Angus (Ealing S.)Vane, W. M. F.
Gridley, Sir ArnoldMaude, John (Exeter)Vaughan-Morgan, J. K.
Grimston, Hon. John (St. Albans)Maudling, R.Vosper, D. F.
Grimston, Robert (Westbury)Medlicott, Brig. F.Wakefield, Edward (Derbyshire, W.)
Harden, J. R. E.Mellor, Sir JohnWakefield, Sir Wavell (Marylebone)
Hare, Hon. J. H. (Woodbridge)Molson, A. H. E.Walker-Smith, D. C.
Harris, Frederic (Croydon, N.)Monckton, Sir WalterWard, Hon. George (Worcester)
Harris, Reader (Heston)Moore, Lt.-Col. Sir Thomas
Ward, Miss I. (Tynemouth)
Harvey, Air Cdre. A. V. (Macclesfield)Morrison, John (Salisbury)Waterhouse, Capt. Rt. Hon. C.
Harvey, Ian (Harrow, E.)Morrison, Rt. Hon. W. S. (Cirencester)Watkinson, H.
Harvie-Watt, Sir GeorgeMott-Radclyffe, C. E.Webbe, Sir H. (London & Westminster)
Hay, JohnNabarro, G.White, Baker (Canterbury)
Mead, Brig. A. HNicholls, HarmarWilliams, Charles (Torquay)
Heald, LionelNicholson, G.Williams, Gerald (Tonbridge)
Heath, EdwardNield, Basil (Chester)Williams, Sir Herbert (Croydon, E.)
Henderson, John (Cathcart)Noble, Cmdr. A. H. P.Wills, G.
Hicks-Beach, Maj. W. W.Nugent, G. R. H.Wilson, Geoffrey (Truro)
Higgs, J. M. C.Nutting, AnthonyWinterton, Rt. Hon. Earl
Hill, Dr. Charles (Luton)Oakshott, H. D.Wood, Hon. R.
Hill, Mrs. E. (Wythenshawe)Odey, G. W.York, C.
Hinchingbrooke, ViscountOrmsby-Gore, Hon. W. D.
Hirst, GeoffreyOrr, Capt. L. P. S.TELLERS FOR THE NOES:
Hollis, M. C.Orr-Ewing, Charles Ian (Hendon, N.)Mr. Drove and Major Wheatley.
Holmes, Sir Stanley (Harwich)Orr-Ewing, Ian L. (Weston-super-Mare)

Question put accordingly, "That the words proposed to be left out stand part of the Clause."

The Committee divided: Ayes, 290; Noes, 279.

Division No. 119.]AYES[7.22 a.m.
Acland, Sir RichardEwart, R.Longden, Fred (Small Heath)
Adams, RichardFernyhough, E.McAllister, G.
Albu, A. H.Field, Capt. W. J.MacColl, J. E.
Allen, Arthur (Bosworth)Finch, H. J.McGhee, H. G.
Alton, Scholefield (Crewe)Fletcher, Erie (Islington, E.)McGovern, J.
Anderson, Alexander (Motherwell)Follick, M.McInnes, J.
Anderson, Frank (Whitehaven)Fool, M. M.Mack, J. D.
Attlee, Rt. Hon. C. RForman, J. C.McKay, John (Wallsend)
Awbery, S. S.Fraser, Thomas (Hamilton)Mackay, R. W. G. (Reading, N.)
Ayles, W. H.Freeman, John (Watford)McLeavy, F.
Bacon, Miss AliceFreeman, Peter (Newport)MacMillan, Malcolm (Western Isles)
Baird, J.Gaitskell, Rt. Hon. H. T. N.McNeil, Rt. Hon. H.
Balfour, A.Ganrey, Mrs. C. S.MacPherson, Malcolm (Stirling)
Barnes, Rt. Hon. A. J.Gibson, C. W.Mainwaring, W. H.
Bartley, P.Gilzean, A.Mallalieu, E. L. (Brigg)
Bellenger, Rt. Hon. F. J.Glanville, James (Consett)Mallalieu, J. P. W. (Huddersfield, E.)
Benn, WedgwoodGooch, E. G.Mann, Mrs. Jean
Benson, G.Gordon-Walker, Rt. Hon. P. C.Manuel, A. C.
Beswick, F.Greenwood, Anthony (Rossendale)Marquand, Rt. Hon. H. A.
Bevan, Rt. Hon. A. (Ebbw Vale)Greenwood, Rt. Hn. Arthur (Wakefield)Mathers, Rt. Hon. G.
Bing, G. H. C.Grenfell, D. R.Mellish, R. J.
Blenkinsop, A.Grey, C. F.Messer, F.
Blyton, W. R.Griffiths, David (Rother Valley)Middleton, Mrs. L.
Boardman, H.Griffiths, Rt. Hon. James (Llanelly)Mikardo, Ian.
Booth, A.Griffiths, William (Exchange)Mitchison, G. R.
Bottomley, A. G.Gunter, R. J.Moeran, E. W.
Bowden, H. W.Hale, Leslie (Oldham, W.)Monslow, W.
Bowles, F. G. (Nuneaton)Halt, Rt. Hon. Glenvil (Colne Valley)Moody, A. S.
Braddock, Mrs. ElizabethHall, John (Gateshead, W.)Morgan, Dr. H. B.
Brook, Dryden (Halifax)Hamilton, W. W.Morley, R.
Brooks, T. J. (Normanton)Hannan, W.Morris, Percy (Swansea, W.)
Broughton, Dr. A. D. D.Hardman, D. R.Mort, D. L.
Brown, Rt. Hon. George (Belper)Hargreaves, A.Moyle, A.
Brown, Thomas (Ince)Hastings, S.Mulley, F. W.
Burke, W. A.Hayman, F. H.Murray, J. D.
Burton, Miss E.Henderson, Rt. Hon. Arthur (Tipton)Nally, W.
Butler, Herbert (Hackney, S)Herbison, Miss M.Neal, Harold (Bolsover)
Callaghan, L. J.Hewitson, Capt. M.Noel-Baker, Rt. Hon. P. J.
Carmichael, J.Hobson, C. R.O'Brien, T.
Castle, Mrs. B. A.Holman, P.Oldfield, W. H.
Champion, A. J.Holmes, Horace (Hemsworth)Oliver, G. H.
Chetwynd, G. R.Houghton, D.Orbach, M.
Clunie, J.Hoy, J.Padley, W. E.
Cocks, F. S.Hubbard, T.Paget, R. T.
Coldrick, W.Hudson, James (Ealing, N.)Paling, Rt. Hon. Wilfred (Dearne Vally)
Collick, P.Hughes, Emrys, (S. Ayrshire)Paling, Will T. (Dewsbury)
Collindridge, F.Hughes, Hector (Aberdeen, N.)Pannell, T. C.
Cook, T. F.Hynd, H. (Accrington)Pargiter, G. A.
Cooper, Geoffrey (Middlesbrough, W.)Hynd, J. B. (Attercliffe)Parker, J.
Cooper, John (Deptford)Irvine, A. J. (Edge Hill)Paton, J.
Corbet, Mrs. Freda (Peckham)Irving, W. J. (Wood Green)Pearson, A.
Cove, W. G.Isaacs, Rt. Hon. G. A.Popplewell, E.
Craddock, George (Bradford, S.)Janner, B.Porter, G.
Crawley, A.Jay, D. P. T.Price, Philips (Gloucestershire, W.)
Crosland, C. A. RJeger, George (Goole)Proctor, W. T.
Crossman, R. H. SJenkins, R. H.Pryde, D. J.
Cullen, Mrs. A.Johnson, James (Rugby)Pursey, Cmdr. H.
Daines, P.Johnston, Douglas (Paisley)Rankin, J.
Dalton, Rt. Hon. HJones, David (Hartlepool)Rees, Mrs. D.
Darling, George (Hillsborough)Jones, Frederick Elwyn (W. Ham, S.)Reeves, J.
Davies, A. Edward (Stoke, N.)Jones, Jack (Rotherham)Reid, Thomas (Swindon)
Davies, Harold (Leek)Jones, William Elwyn (Conway)Reid, William (Camlachie)
Davies, Stephen (Merthyr)Keenan, W.Rhodes, H.
de Freitas, GeoffreyKenyon, C.Richards, R.
Deer, G.Key, Rt. Hon. C. W.Robens, Rt. Hon. A.
Dodds, N. N.King, Dr. H. M.Roberts, Goronwy (Caernarvonshire)
Donnelly, D.Kinghorn, Sqn. Ldr. E.Robertson, J. J. (Berwick)
Driberg, T. E. N.Kinley, J.Robinson, Kenneth (St. Pancras, N.)
Dugdale, Rt. Hon. John (W. Bromwich)Lang, GordonRogers, George (Kensington, N.)
Dye, S.Lee, Frederick (Newton)Ross, William (Kilmarnock)
Ede, Rt. Hon. J. C.Lee, Miss Jennie (Cannock)Shawcross, Rt. Hon. Sir Hartley
Edelman, M.Lever, Harold (Cheetham)Shinwell, Rt. Hon. E.
Edwards, John (Brighouse)Lever, Leslie (Ardwick)Shurmer, P. L. E.
Edwards, Rt. Hon. Ness (Caerphilly)Lewis, Arthur (West Ham, N.)Silverman, Julius (Erdington)
Edwards, W. J. (Stepney)Lewis, John (Bolton, W.)Silverman, Sydney (Nelson)
Evans, Albert (Islington, S. W.)Lindgren, G. S.Simmons, C. J.
Evans, Edward (Lowestoft)Lipton, Lt.-Col. M.Slater, J.
Evans, Stanley (Wednesbury)Logan, D. G.Smith, Ellis (Stoke, S.)
Smith, Norman (Nottingham, S.)Thurtle, ErnestWilkins, W. A.
Snow, J. W.Timmons, J.Willey, Frederick (Sunderland)
Sorensen, R. W.Tomney, F.Willey, Octavius (Cleveland)
Soskice, Rt. Hon. Sir FrankUngoed-Thomas, Sir LynnWilliams, David (Neath)
Sparks, J. A.Usborne, H.Williams, Rev. Llywelyn (Abertillery)
Steele, T.Vernon, W. F.Williams, Ronald (Wigan)
Stewart, Michael (Fulham, E.)Viant, S. P.Williams, Rt. Hon. Thomas (Don V'lly)
Stokes, Rt. Hon. R. R.Wallace, H. W.Williams, W. T. (Hammersmith, S.)
Strachey, Rt. Hon. J.Watkins, T. E.Wilson, Rt. Hon. Harold (Huyton)
Strauss, Rt. Hon. George (Vauxhall)Webb, Rt. Hon. M. (Bradford, C.)Winterbottom, Ian (Nottingham, C.)
Stross, Dr. BarnettWeitzman, D.Winterbottom, Richard (Brightside)
Summerskill, Rt. Hon. EdithWells, Percy (Faversham)Wise, F. J.
Sylvester, G. O.Wells, William (Walsall)Woodburn, Rt. Hon. A
Taylor, Bernard (Mansfield)West, D. G.Wyatt, W. L.
Taylor, Robert (Morpeth)Wheatley, Rt. Hon. John (Edinb'gh E.)Yates, V. F.
Thomas, David (Aberdare)White, Mrs. Eirene (E. Flint)Younger, Rt. Hon. K.
Thomas, George (Cardiff)White, Henry (Derbyshire, N. E.)
Thomas, Iorwerth (Rnondda, W.)Whiteley, Rt. Hon. W.TELLERS FOR THE AYES:
Thomas, Ivor Owen (Wrekin)Wilcock, Group Capt. C. A. B.Mr. Royle and Mr. Delargy.
Thorneycroft, Harry (Clayton)Wilkes, L.
Aitken, W. T.Davidson, ViscountessHutchinson, Geoffrey (Ilford, N.)
Alport, C. J. M.Davies, Nigel (Epping)Hutchison, Lt.-Com. Clark (E'b'rgh W.)
Angry, Julian (Preston, N.)de Chair, SomersetHutchison, Colonel James (Glasgow)
Amory, Heathcoat (Tiverton)De la Bère, R.Hyde, Lt.-Col. H. M.
Arbuthnot, JohnDeedes, W. F.Hylton-Foster, H. B.
Ashton, H. (Chelmsford)Dodds-Parker, A. D.Jennings, R.
Assheton, Rt. Hon. R. (Blackburn, W.)Donner, P. W.Johnson, Howard (Kemptown)
Astor, Hon. M. L.Douglas-Hamilton, Lord MalcolmJones, A. (Hall Green)
Baker, P. A. D.Drayson, G. B.Joynson-Hicks, Hon. L. W.
Baldock, Lt.-Cmdr. J. M.Drewe, C.Kaberry, D.
Baldwin, A. E.Dugdale, Maj. Sir Thomas (Richmond)Kerr, H. W. (Cambridge)
Banks, Col. C.Duncan, Capt. J. A. L.Kingsmill, Lt.-Col. W. H.
Baxter, A. B.Dunglass, LordLambert, Hon. G.
Beamish, Major TuftonDuthie, W. S.Lancaster, Col. C. G.
Bell, R. M.Eccles, D. M.Langford-Holt, J.
Bennett, Dr. Reginald (Gosport)Eden, Rt. Hon. A.Law, Rt. Hon. R. K.
Bennett, William (Woodside)Elliot, Rt. Hon. W. E.Leather, E. H. C.
Bevins, J. R. (Liverpool, Toxteth)Erroll, F. J.Legge-Bourke, Maj. E. A. H.
Birch, NigelFisher, NigelLennox-Boyd, A. T.
Bishop, F. P.Fort, R.Lindsay, Martin
Black, C. W.Foster, JohnLinstead, H. N.
Boles, Lt.-Col. D. C. (Wells)Fraser, Hon. Hugh (Stone)Llewellyn, D.
Boothby, R.Fraser, Sir I. (Morecambe & Lonsdale)Lloyd, Rt. Hn. Geoffrey (King's Norton)
Bossom, A. C.Fyfe, Rt. Hon. Sir David MaxwellLloyd, Maj. Guy (Renfrew, E.)
Bowen, E. R. (Cardigan)Gage, C. H.Lloyd, Selwyn (Wirral)
Boyd-Carpenter, J. A.Galbraith, Cmdr. T. D. (Pollok)Lockwood, Lt.-Col. J. C.
Boyle, Sir EdwardGalbraith, T. G. D. (Hillhead)Longden, Gilbert (Herts, S. W.)
Bracken, Rt. Hon. B.Gammans, L. D.Low, A. R. W.
Braine, B. R.Garner-Evans, E. H. (Denbigh)Lucas, Sir Jocelyn (Portsmouth, S.)
Braithwaite, Sir Albert (Harrow, W.)Gomme-Duncan, Col. A.Lucas, P. B. (Brentford)
Braithwaite, Lt.-Cr. G. (Bristol, N. W.)Gridley, Sir ArnoldLucas-Tooth, Sir Hugh
Bromley-Davenport, Lt.-Col. W.Grimston, Hon. John (St. Albans)Lyttelton, Rt. Hon. O.
Brooke, Henry (Hampstead)Grimston, Robert (Westbury)McAdden, S. J.
Browne, Jack (Govan)Harden, J. R. E.McCorquodale, Rt. Hon. M. S.
Buchan-Hepburn, P. G. T.Hare, Hon. J. H. (Woodbridge)Macdonald, Sir Peter (I. of Wight)
Bullock, Capt. M.Harris, Frederic (Croydon, N.)Mackeson, Brig. H. R.
Bullus, Wing Commander E. E.Harris, Reader (Heston)McKibbin, A.
Burden, F. A.Harvey, Air Cdre. A. V. (Macclesfield)McKie, J. H. (Galloway)
Butcher, H. W.Harvey, Ian (Harrow, E.)Maclay, Hon. John
Butler, Rt. Hon. R. A. (S'ffr'n W'ld'n)Harvie-Watt, Sir GeorgeMaclean, Fitzroy
Carr, Robert (Mitcham)Hay, JohnMacLeod, Iain (Enfield, W.)
Carson, Hon. E.Head, Brig. A. H.MacLeod, John (Roes and Cromarty)
Channon, H.Heald, LionelMacmillan, Rt. Hon. Harold (Bromley)
Churchill, Rt. Hon. W. S.Henderson, John (Cathcart)Macpherson, Major Niall (Dumfries)
Clarke, Col. Ralph (East Grinstead)Hicks-Beach, Maj. W. W.Maitland, Cmdr. J. W.
Clarke, Brig. Terence (Portsmouth, W.)Higgs, J. M. C.Manningham-Buller, R. E.
Clyde, J. L.Hill, Dr. Charles (Luton)Marlowe, A. A. H.
Colegate, A.Hill, Mrs. E. (Wythenshawe)Marples, A. E.
Conant, Maj. R. J. E.Hinchingbrooke, ViscountMarshall, Douglas (Bodmin)
Cooper, Sqn Ldr. Albert (Ilford, S.)Hirst, GeoffreyMarshall, Sidney (Sutton)
Cooper-Key, E. M.Hollis, M. C.Maude, Angus (Ealing, S.)
Corbett, Lt.-Col. Uvedale (Ludlow)Holmes, Sir Stanley (Harwich)Maude, John (Exeter)
Craddock, Beresford (Spelthorne)Hope, Lord JohnMaudling, R.
Cranborne, ViscountHopkinson, HenryMedlicott, Brig. F.
Crookshank, Capt. Rt. Hon. H. F. C.Hornsby-Smith, Miss P.Mellor, Sir John
Crosthwaite-Eyre, Col. O. E.Horsbrugh, Rt. Hon. FlorenceMolson, A. H. E.
Crouch, R. F.Howard, Gerald (Cambridgeshire)Monckton, Sir Walter
Crowder, Capt. John (Finchley)Howard, Greville (St. Ives)Moore, Lt.-Col. Sir Thomas
Crowder, Petre (Ruislip-Northwood)Hudson, Sir Austin (Lewisham, N.)Morrison, John (Salisbury)
Cundiff, F. W.Hudson, Rt. Hon. Robert (Southport)Morrison, Rt. Hon. W. S. (Cirencester)
Cuthbert, W. N.Hudson, W. R. A. (Hull, N.)Mott-Radclyffe, C. E.
Darling, Sir William (Edinburgh, S.)Hurd, A. R.Nabarro, G.
Nicholls, HarmarRopner, Col. L.Thompson, Lt.-Cmdr. R. (Croydon, W.)
Nicholson, G.Russell, R. S.Thorneycroft, Peter (Monmouth)
Nield, Basil (Chester)Ryder, Capt. R. E. D.Thornton-Kemsley, Col. C. N.
Noble, Cmdr. A. H. P.Salter, Rt. Hon. Sir ArthurThorp, Brig. R. A. F.
Nugent, G. R. H.Sandys, Rt. Hon. D.Tilney, John
Nutting, AnthonyShepherd, WilliamTurner, H. F. L.
Oakshott, H. D.Smiles, Lt.-Col. Sir WalterTurton, R. H.
Odey, G. W.Smithers, Peter (Winchester)Tweedsmuir, Lady
Ormsby-Gore, Hon. W. D.Smithers, Sir Waldron (Orpington)Vane, W. M. F.
Orr, Capt. L. P. S.Smyth, Brig. J. G. (Norwood)Vaughan-Morgan, J. K.
Orr-Ewing, Charles Ian (Hendon, N.)Snadden, W. McN.Vosper, D. F.
Orr-Ewing, Ian L. (Weston-super-Mare)Soames, Capt. C.Wakefield, Edward (Derbyshire, W.)
Osborne, C.Spearman, A. C. M.Wakefield, Sir Wavell (Marylebone)
Peake, Rt. Hon. O.Spence, H. R. (Aberdeenshire, W.)Walker-Smith, D. C.
Perkins, W. R. D.Spens, Sir Patrick (Kensington, S.)Ward, Hon. George (Worcester)
Peto, Brig. C. H. MStanley, Capt. Hon. Richard (N. Fylde)Ward, Miss I. (Tynemouth)
Pickthorn, K.Stevens, G. P.Waterhouse, Capt. Rt. Hon. C.
Pitman, I. J.Steward, W. A. (Woolwich, W.)Watkinson, H.
Powell, J. EnochStewart, Henderson (Fife, E.)Webbe, Sir H. (London & Westminster)
Price, Henry (Lewisham, W.)Stoddart-Scott, Col. M.Wheatley, Maj. M. J. (Poole)
Profumo, J. D.Storey, S.White, Baker (Canterbury)
Raikes, H. V.Strauss, Henry (Norwich, S.)Williams, Charles (Torquay)
Rayner, Brig. R.Stuart, Rt. Hon. James (Moray)Williams, Gerald (Tonbridge)
Redmayne, M.Studholme, H. G.Williams, Sir Herbert (Croydon, E.)
Remnant, Hon. P.Summers, G. S.Wills, G.
Renton, D. L. M.Sutoliffe, H.Wilson, Geoffrey (Truro)
Roberts, Maj. Peter (Heeley)Taylor, Charles (Eastbourne)Winterton, Rt. Hon. Earl
Robertson, Sir David (Caithness)Taylor, William (Bradford, N.)Wood, Hon. R.
Robinson, Roland (Blackpool, S.)Teeling, W.York, C.
Robson-Brown, W.Teevan, T. L.
Rodgers, John (Sevenoaks)Thomas, J. P. L. (Hereford)TELLERS FOR THE NOES:
Roper, Sir HaroldThompson, Kenneth Pugh (Walton)Mr. Digby and Mr. Heath.

7.30 a.m.

Photo of Mr Oliver Lyttelton Mr Oliver Lyttelton , Aldershot

I beg to move, "That the Chairman do report Progress and ask leave to sit again."

I move this Motion for a number of reasons. First, night's candles are burned out, and if the day does not appear particularly jocund to any of us it seems a particularly good reason why we should report Progress. Secondly, we are credibly informed by watchers from the Victoria Tower that public transport is now running, and the pretext upon which the Government have obliged us to discuss this very vital Clause has, therefore, been removed.

Thirdly, we are still only half way through Clause 28, which, as it develops, shows what very great inroads it makes on the liberty of the subject. Fourthly, my reason is to ascertain the Government's intentions. The many bearded Members on all sides of the Committee will agree at least that, if to report Progress does nothing else, we shall learn at what time we are likely to reach the end of our labours.

Photo of Mr James Ede Mr James Ede , South Shields

I do not think we have yet very much progress to report, and I think the right hon. Gentleman is rather overestimating the progress that has been made with Clause 28 so far. He said that we were half way through it; but I rather doubt that. We are still far short of the progress that could have been made with this Bill if what was suggested earlier had proved acceptable. That being so, we must ask the Committee to continue with the task of getting on with the Clauses of the Bill, and I sincerely hope that we may be able to make a little more progress in the next few hours.

Photo of Mr Winston Churchill Mr Winston Churchill , Woodford

The right hon. Gentleman has abruptly refused the suggestion of my right hon. Friend. I should have thought that in this morning light he ought to be feeling very uncomfortable. I do not mean physically but morally and mentally. When we look back at what has happened, and the long time that has been required by the Committee to discuss these Clauses, we can see how monstrously unfair was the proposal he made, which he tried through the usual channels to get us to adopt, that we should have finished Clause 31 by 12.15 last night.

No more gross attempt could be imagined, for a man of his honour and generosity, than to try and cozen us into accepting something so utterly detrimental to the rights of Members and so frustrating to the whole process of Parliamentary debate. Now the right hon. Gentleman asks us to continue with Clause 28. We are here under the Government's orders. The majority they have—10, 11, or 12—and which they would not have had if the present Foreign Secretary had not thought of the bright idea of breaking all his pledges, and the inter-party agreement, to which the Prime Minister was a party—[Interruption.]

Photo of Mr Clement Attlee Mr Clement Attlee , Walthamstow West

The right hon. Gentleman knows that there was no agreement to retain his pocket boroughs.

Photo of Mr Winston Churchill Mr Winston Churchill , Woodford

I do not intend to refer to this matter except as an illustration. [HON. MEMBERS: "Oh."] The right hon. Gentleman has made a statement which is not, in my opinion—[Interruption.] The all-party agreement was against—

Photo of Mr Douglas Clifton Brown Mr Douglas Clifton Brown , Hexham

Order. I must be allowed to hear what the right hon. Gentleman, or any other hon. Gentleman, says.

Photo of Mr Winston Churchill Mr Winston Churchill , Woodford

The all-party agreement was against abolishing university representation.

Photo of Mr Douglas Clifton Brown Mr Douglas Clifton Brown , Hexham

I must point out to the right hon. Gentleman that the debate must be limited to the question of reporting Progress and must not go on to other matters.

Photo of Mr Winston Churchill Mr Winston Churchill , Woodford

Yes, and it is one of the reasons for reporting Progress that the majority which is being used to tyrannise over the House was obtained only by an after-thought and bad taste—

Photo of Mr Douglas Clifton Brown Mr Douglas Clifton Brown , Hexham

The argument is now getting too remote from the matter before the Committee.

Photo of Mr Winston Churchill Mr Winston Churchill , Woodford

I shall not probe further into the painful topic of the mandate which the right hon. Gentleman had. But I return to the direct point of whether our affairs will be advantaged by causing the Committee to continue to sit. I must give the Home Secretary a warning. Revenge is a dangerous and costly motive. The idea of saying, "You did not let us finish up at a quarter to midnight, therefore we will give you a bigger dose than any you administered to us," shows that the right hon. Gentlemen on the Government Front Bench are allowing themselves to become a prey to degraded emotions.

It is a wicked world. If this is the mood and temper which prevails opposite, I can assure the Home Secretary we shall not be at all lacking in resolve to do our duty and continue. The great question which occurs to me is whether Parliamentary rights can be enjoyed by a minority, which is almost as big as the Government majority in the House and much bigger in the country, when the party opposite at all cost of reputation and character and dignity, are resolved to cling to office and drain the last dregs of that ill-gotten cup. When the facts are bluntly put the reaction of the pro-Chinese quarters below the Gangway is a very good indication of their sentiments.

I am glad my right hon. Friend the Member for Aldershot (Mr. Lyttelton) has moved this Motion. We shall do our utmost to sustain it. I do not consider that His Majesty's Government will be benefited by the rough way in which they have used the Committee, forcing us to continue to sit in order to get the business through. When we ask hon. Members opposite what it is that has made the matter so urgent, they will be utterly unable to give a reasonable or satisfactory answer.

Photo of Mr Frederic Harris Mr Frederic Harris , Croydon North

I should definitely like to know when the Government intend to stop. Is it right what I hear hon. Members opposite mumbling to themselves—that we are going on to 10 p.m. tonight?

Photo of Mr David Eccles Mr David Eccles , Chippenham

I should like to say a word for those not in the Chamber. The Attorney-General pointed out that this Clause is a very drastic measure, and in the course of the debate it has become clear that every charge which is made against profits under this Clause may have to be investigated. That means that we are discussing the affairs of every single company in the country. I do not think hon. Gentlemen opposite can accuse us of not having directed our minds to the best of our abilities to each Amendment as it came forward.

7.45 a.m.

If we go on discussing the Bill, it is not fair to hundreds of thousands of people outside the House who are affected, let alone to us, though we are quite prepared, as my right hon. Friend says, to go on. We have something else to do besides standing up to the Government; we have also to think of the people outside. With great respect to the right hon. and learned Gentleman, who is the only voice from the Government benches on this Clause and has done exceedingly well, it is becoming rather difficult to understand the arguments. I do not think the Government are being fair to those people who affairs have to be discussed on this Clause.

Photo of Sir Herbert Butcher Sir Herbert Butcher , Holland with Boston

I should like to give an additional reason why the Committee should now report Progress and ask leave to sit again. I refer to the police, the attendants, the messengers and people like that, and—[Interruption.] Labour Members protest that they represent the interests of this community, but they impose additional hardship upon them—and they are the most inoffensive people—at a time when, by some more reasonable re-adjustment of our business they could be spared that hardship. [Interruption.] It is hardship, when they

could be spending the morning in pleasant—[HON. MEMBERS: "Sit down."] I speak as a Member who has not previously spoken during this sitting. If the Home Secretary disregards the reasonable comfort of the messengers, the police and the women in the Catering Department, he is neglecting his duty as Leader of the House.

Photo of Mr Robert Taylor Mr Robert Taylor , Morpeth

Mr. R. J. Taylor rose in his place and claimed to move, "That the Question be now put."

Question put, "That the Question be now put."

The Committee divided: Ayes, 289; Noes, 280.

Division No. 120.]AYES[7.48 a.m.
Acland, Sir RichardCrostman, R. H. S.Hastings, S.
Adams, RichardCullen, Mrs. A.Hayman, F. H.
Albu, A. H.Daines, P.Henderson, Rt. Hon. Arthur (Tipton)
Allen, Arthur (Bosworth)Dalton, Rt. Hon. H.Herbison, Miss M.
Alien, Scholefield (Crewe)Darling, George (Hillsborough)Hewitson, Capt. M.
Anderson, Alexander (Motherwell)Davies, A. Edward (Stoke, N.)Hobson, C. R.
Anderson, Frank (Whitehaven)Davies, Harold (Leek)Holman, P.
Attlee, Rt. Hon. C. R.Davies, Stephen (Merthyr)Holmes, Horace (Hemsworth)
Awbery, S. Freitas, GeoffreyHoughton, D.
Ayles, W. H.Deer, G.Hoy, J.
Bacon, Miss AliceDodds, N. N.Hubbard, T.
Baird, J.Donnelly, D.Hudson, James (Ealing, N.)
Balfour, A.Driberg, T. E. N.Hughes, Emrys (S. Ayrshire)
Barnes, Rt. Hon. A. J.Dugdale, Rt. Hon. John (W. Bromwich)Hughes, Hector (Aberdeen, N.)
Bartley, P.Dye, S.Hynd, H. (Accrington)
Bellenger, Rt. Hon. F. J.Ede, Rt. Hon. J. C.Hynd, J. B. (Attercliffe)
Bonn, WedgwoodEdelman, M.Irvine, A. J. (Edge Hill)
Benson, G.Edwards, John (Brighou[...])Irving, W. J. (Wood Green)
Beswick, F.Edwards, Rt. Hon. Ness (Caerphilly)Isaacs, Rt. Hon. G. A.
Bevan, Rt. Hon. A. (Ebbw Vale)Edwards, W. J. (Stepney)Janner, B.
Bing, G. H. C.Evans, Albert (Islington, S. W.)Jay, D. P. T.
Blenkinsop, A.Evans, Edward (Lowestoft)Jeger, George (Goole)
Blyton, W. R.Evans, Stanley (Wednesbury)Jenkins, R. H.
Boardman, H.Ewart, R.Johnson, James (Rugby)
Booth, A.Fernyhough, E.Johnston, Douglas (Paisley)
Bottomley, A. G.Field, Capt. W. J.Jones, David (Hartlepool)
Bowden, H. W.Finch, H. J.Jones, Frederick Elwyn (West Ham, S.)
Bowles, F. G. (Nuneaton)Fletcher, Eric (Islington, E.)Jones, Jack (Rotherham)
Braddock, Mrs. ElizabethFollick, M.Jones, William Elwyn (Conway)
Brook, Dryden (Halifax)Foot, M. M.Keenan, W.
Brooks, T. J. (Normanton)Forman, J. C.Kenyon, C.
Broughton, Dr. A. D. D.Fraser, Thomas (Hamilton)Key, Rt. Hon. C. W.
Brown, Rt. Hon. George (Belper)Freeman, John (Watford)King, Dr. H. M.
Brown, Thomas (Ince)Freeman, Peter (Newport)Kinghorn, Sqn. Ldr. E.
Burke, W. A.Gaitskell, Rt. Hon. H. T. N.Kinley, J.
Burton, Miss E.Ganley, Mrs. C. S.Lang, Gordon
Butler, Herbert (Hackney, S.)Gibson, C. W.Lee, Frederick (Newton)
Callaghan, L. J.Gilzean, A.Lee, Miss Jennie (Cannock)
Carmichael, J.Glanville, James (Cornell)Lever, Harold (Cheetham)
Castle, Mrs. B. A.Gooch, E. G.Lever, Leslie (Ardwick)
Champion, A. J.Gordon-Walker, Rt. Hon. P. C.Lewis, Arthur (West Ham, N.)
Chetwynd, G. R.Greenwood, Anthony (Rossendate)Lewis, John (Bolton, W.)
Clunie, J.Greenwood, Rt. Hn. Arthur (Wakefield)Lindgren, G. S.
Cooks, F. S.Grenfell, D. R.Lipton, Lt.-Col. M.
Coldrick, W.Grey, C. F.Logan, D. G.
Collick, p.Griffiths, David (Rother Valley)Longden, Fred (Small Heath)
Collindridge, F.Griffiths, William (Exchange)McAllister, G.
Cook, T. F.Gutter, R. J.MacColl, J. E.
Cooper, Geoffrey (Middlesbrough, W.)Hale, Joseph (Rochdale)McGhee, H. G.
Cooper, John (Deptford)Hall, Rt. Hon. Glenvil (Colne Valley)McGovern, J.
Corbet, Mrs. Freda (Peckham)Hall, John (Gateshead, W.)McInnes, J.
Cove, W. G.Hamilton, W. W.Mack, J. D.
Craddock, George (Bradford, S.)Hannan, W.McKay, John (Wallsend)
Crawley, A.Hardman, D. R.Mackay, R. W. G. (Reading, N.)
Crosland, C. A. R.Hargreaves, A.McLeavy, F.
MacMillan, Malcolm (Western Isles)Proctor, W. T.Thomas, Ivor Owen (Wrekin)
McNeil, Rt. Hon. H.Pryde, D. J.Thorneycroft, Harry (Clayton)
MacPherson, Malcolm (Stirling)Pursey, Cmdr. H.Thurtle, Ernest
Mainwaring, W. H.Rankin, J.Timmons, J.
Mallalieu, E. L. (Brigg)Rees, Mrs. D.Tomney, F.
Mallalieu, J. P. W. (Huddersfield, E.)Reeves, J.Ungoed-Thomas, Sir Lynn
Mann, Mrs. JoanReid, Thomas (Swindon)Usborne, H.
Manuel, A. C.Raid, William (Camlachie)Vernon, W. F.
Marquand, Rt. Hon. H. A.Rhodes, H.Viant, S. P.
Mathers, Rt. Hon. G.Richards, R.Wallace, H. W.
Mellish, R. J.Roberts, Rt. Hon. A.Watkins, T. E.
Messer, F.Roberts, Goronwy (Caernarvonshire)Webb, Rt. Hon. M. (Bradford, C.)
Middleton, Mrs. L.Robertson, J. J. (Berwick)Weitzman, D.
Mikardo, Ian.Robinson, Kenneth (St. Pancras, N.)Wells, Percy (Faversham)
Mitchison, G. R.Rogers, George (Kensington, N.)Wells, William (Walsall)
Moeran, E. W.Ross, William (Kilmarnock)West, D. G.
Monslow, W.Royle, C.Wheatley, Rt. Hon. John (Edinb'gh E.)
Moody, A. S.Snawcross, Rt. Hon. Sir HartleyWhite, Mrs. Eirene (E. Flint)
Morgan, Dr. H. B.Shinwell, Rt. Hon. E.White, Henry (Derbyshire, N. E.)
Morley, R.Shurmer, P. L. E.Whiteley, Rt. Hon. W.
Morris, Percy (Swansea, W.)Silverman, Julius (Erdington)Wilcock, Group Capt. C. A. B.
Mort, D. L.Silverman, Sydney (Nelson)Wilkes, L.
Moyle, A.Simmons, G. J.Wilkins, W. A.
Mulley, F. WSlater, J.Willey, Frederick (Sunderland)
Murray, J. DSmith, Ellis (Stoke, S.)Willey, Octavius (Cleveland)
Nally, W.Smith, Norman (Nottingham, S.)
Neal, Harold (Bolsover)Snow, J. W.Williams, David (Neath)
Noel-Baker, Rt. Hon. P. J.Sorensen, R. W.Williams, Rev. Llywelyn (Abertillery)
O'Brien, T.Soskice, Rt. Hon. Sir FrankWilliams, Ronald (Wigan)
Oldfield, W. H.Sparks, J. A.Williams, Rt. Hon. Thomas (Don V'lly)
Oliver, G. H.Steele, T.Williams, W. T. (Hammersmith, S.)
Orbach, M.Stewart, Michael (Fulham, E.)Wilson, Rt. Hon. Harold (Huyton)
Padley, W. E.Stokes, Rt. Hon. R. R.Winterbottom, Ian (Nottingham, C.)
Paget, R. T.Strachey, Rt. Hon. J.Winter bottom, Richard (Brightside)
Paling, Rt. Hon. Wilfred (Dearne Vally)Strauss, Rt. Hon. George (Vauxhall)Wise, F. J.
Paling, Will T. (Dewsbury)Stross, Dr. BarnettWoodburn, Rt. Hon. A.
Pannell, T. C.Summerskill, Rt. Hon. EdithWyatt, W. L.
Pargiter, G. A.Sylvester, G. O.Yates, V. F.
Parker, J.Taylor, Bernard (Mansfield)Younger, Rt. Hon. K.
Paton, J.Taylor, Robert (Morpeth)
Pearson, A.Thomas, David (Aberdare)
Porter, G.Thomas, George (Cardiff)TELLERS FOR THE AYES:
Price, Philips (Gloucestershire, W.)Thomas, Iorwerth (Rhondda, W.)Mr. Popplewell and Mr. Delargy.
Aitken, W. T.Butcher, H. W.Duthie, W. S.
Alport, C. J. M.Butler, Rt. Hn. R. A. (Saffron Walden)Eccles, D. M.
Amery, Julian (Preston, N.)Carr, Robert (Mitcham)Eden, Rt. Hon. A.
Amory, Heathcoat (Tiverton)Carson, Hon. E.Elliot, Rt. Hon. W. E.
Arbuthnot, JohnChannon, H.Erroll, F. J.
Ashton, H. (Chelmsford)Churchill, Rt. Hon. W. S.Fisher, Nigel
Assheton, Rt. Hon. R. (Blackburn, W.)Clarke, Col. Ralph (East Grinstead)Fort, R.
Astor, Hon. M. L.Clarke, Brig. Terence (Portsmouth, W.)Foster, John
Baker, P. A. D.Clyde, J. L.Fraser, Hon. Hugh (Stone)
Baldock, Lt.-Cmdr. J. M.Colegate, A.Fraser, Sir I. (Morecambe & Lonsdale)
Baldwin, A. E.Conant, Maj. R. J. E.Fyfe, Rt. Hon. Sir David Maxwell
Banks, Col. C.Cooper, Sqn. Ldr. Albert (Ilford, S.)Gage, C. H.
Baxter, A. B.Cooper-Key, E. M.Galbraith, Cmdr. T. D. (Pollok)
Beamish, Major TuftonCorbett, Lt.-Col. Uvedale (Ludlow)Galbraith, T. G. D. (Hillhead)
Bell, R. M.Craddock, Beresford (Spelthorne)Gammans, L. D.
Bennett, Dr. Reginald (Gosport)Cranborne, ViscountGarner-Evans, E. H. (Denbigh)
Bennett, William (Woodside)Crookshank, Capt. Rt. Hon. H. F. C.Gates, Maj. E. E.
Bevins, J. R. (Liverpool, Toxteth)Crosthwaite-Eyre, Col. O. E.Gomme-Duncan, Col. A.
Birch, NigelCrouch, R. F.Gridley, Sir Arnold
Bishop, F. P.Crowder, Capt. John (Finchley)Grimston, Hon. John (St. Albans)
Black, C. W.Crowder, Petre (Ruislip—Northwood)Grimston, Robert (Westbury)
Boles, Lt.-Col. D. C. (Wells)Cundiff, F. W.Harden, J. R. E.
Boothby, R.Cuthbert, W. N.Hare, Hon. J. H. (Woodbridge)
Bossom, A. C.Darling, Sir William (Edinburgh, S.)Harris, Frederic (Croydon, N.)
Bowen, E. R. (Cardigan)Davidson, ViscountessHarris, Reader (Heston)
Boyd-Carpenter, J. A.Davies, Nigel (Epping)Harvey, Air Cdre. A. V. (Macclesfield)
Boyle, Sir Edwardde Chair, SomersetHarvey, Ian (Harrow, E.)
Bracken, Rt. Hon. B.De la Bère, R.Harvie-Watt, Sir George
Braine, B. R.Deedes, W. F.Hay, John
Braithwaite, Sir Albert (Harrow, W.)Digby, S. WingfieldHead, Brig. A. H.
Braithwaite, Lt.-Cr. G. (Bristol, N. W.)Dodds-Parker, A. D.Heald, Lionel
Bromley-Davenport, Lt.-Col. W.Donner, P. W.Heath, Edward
Brooke, Henry (Hampstead)Douglas-Hamilton, Lord MalcolmHenderson, John (Catheart)
Browne, Jack (Govan)Drayson, G.B.Hicks-Beach, Maj. W. W.
Buchan-Hepburn, P. G. T.Drewe, C.Higgs, J. M. C.
Bullock, Capt. M.Dugdale, Maj. Sir Thomas (Richmond)Hill, Dr. Charles (Luton)
Bullus, Wing Commander E. E.Duncan, Capt. J. A. L.Hill, Mrs. E. (Wythenshawe)
Burden, F. A.Dunglass, LordHinchingbrooke, Viscount
Hirst, GeoffreyMaitland, Cmdr. J. W.Smiles, Lt.-Col. Sir Walter
Hollis, M. C.Manningham-Buller, R. E.Smithers, Peter (Winchester)
Holmes, Sir Stanley (Harwich)Marlowe, A. A. H.Smithers, Sir Waldron (Orpington)
Hope, Lord JohnMarples, A. E.Smyth, Brig. J. G. (Norwood)
Hopkinson, HenryMarshall, Douglas (Bodmin)Snadden, W. McN.
Hornsby-Smith, Miss P.Marshall, Sidney (Sutton)Soames, Capt. C.
Horsbrugh, Rt. Hon. FlorenceMaude, Angus (Ealing, S.)Spearman, A. C. M.
Howard, Gerald (Cambridgeshire)Maude, John (Exeter)Spence, H. R. (Aberdeenshire, W.)
Howard, Greville (St. Ives)Maudling, R.Spens, Sir Patrick (Kensington, S.)
Hudson, Sir Austin (Lewisham, N.)Medlicott, Brig. F.Stanley, Capt. Hn. Richard (N. Fylde)
Hudson, Rt. Hon. Robert (Southport)Mellor, Sir JohnStevens, G. P.
Hudson, W. R. A. (Hull, N.)Molson, A. H. E.Steward, W. A. (Woolwich, W.)
Hurd, A. R.Monckton, Sir WalterStewart, Henderson (Fife, E.)
Hutchinson, Geoffrey (Ilford, N.)Moore, Lt.-Col- Sir ThomasStoddart-Scott, Col. M.
Hutchison, Lt.-Com. Clark (E'b'rgh W.)Morrison, John (Salisbury)Storey, S.
Hutchison, Colonel James (Glasgow)
Hyde, Lt.-Col. H. M.Morrison, Rt. Hon. W. S. (Cirencester)Strauss, Henry (Norwich, S.)
Hylton-Foster, H. B.Mott-Radclyffe, C. E.Stuart, Rt. Hon. James (Moray)
Jennings, R.Nabarro, G.Summers, G. S.
Johnson, Howard (Kemptown)Nicholls, HarmarSutcliffe, H.
Jones, A. (Hall Green)Nicholson, G.Taylor, Charles (Eastbourne)
Joynson-Hicks, Hon. L. W.Nield, Basil (Chester)Taylor, William (Bradford, N.)
Kaberry, D.Noble, Cmdr. A. H. P.Teeling, W.
Kerr, H. W. (Cambridge)Nugent, G. R. H.Teevan, T. L.
Kingsmill, Lt.-Col. W. H.Nutting, AnthonyThomas, J. P. L. (Hereford)
Lambert, Hon. G.Oakshott, H. O.Thompson, Kenneth Pugh (Walton)
Lancaster, Col. C. GOdey, G. W.Thompson, Lt.-Cmdr. R. (Croydon, W.)
Langford-Holt, J.Ormsby-Gore, Hon. W. D.Thorneycroft, Peter (Monmouth)
Law, Rt. Hon. R. K.Orr, Capt. L. P. S.Thornton-Kemsley, Col. C. N.
Leather, E. H. C.Orr-Ewing, Charles Ian (Hendon, N.)Thorp, Brig. R. A. F.
Legge-Bourke, Maj. E. A. H.Orr-Ewing, Ian L. (Weston-super-Mare)Tilney, John
Lennox-Boyd, A. T.Osborne, C.Turner, H. F. L.
Lindsay, MartinPeake, Rt. Hon. O.Turton, R. H.
Linstead, H. N.Perkins, W. R. D.Tweedsmuir, Lady
Llewellyn, D.Peto, Brig. C. H. M.Vane, W. M. F.
Lloyd, Rt. Hn. Geoffrey (King's N'rt'n)Pickthorn, K.Vaughan-Morgan, J. K.
Lloyd, Maj. Guy (Renfrew, E.)Pitman, I. J.Vosper, D. F.
Lloyd, Selwyn (Wirral)Powell, J. EnochWakefield, Edward (Derbyshire, W.)
Lockwood, Lt.-Col. J. C.Price, Henry (Lewisham, W.)Wakefield, Sir Wavell (Marylebone)
Longdon, Gilbert (Herts, S. W.)Profumo, J.D.Walker-Smith, D. C.
Low, A. R. W.Raikes, H. V.Ward, Hon. George (Worcester)
Lucas, Sir Jocelyn (Portsmouth, S.)Rayner, Brig. R.Ward, Miss I. (Tynemouth)
Lucas, P. B. (Brentford)Redmayne, M.Waterhouse, Capt. Rt. Hon. C.
Lucas-Tooth, Sir HughRemnant, Hon. P.Watkinson, H.
Lyttelton, Rt. Hon. O.Renton, D. L. M.Webbe, Sir H. (London & Westminster)
McAdden, S. J.Roberts, Major Peter (Heeley)White, Baker (Canterbury)
McCorquodale, Rt. Hon. M. S.Robertson, Sir David (Caithness)Williams, Charles (Torquay)
Macdonald, Sir Peter (I. of Wight)Robinson, Roland (Blackpool, S.)Williams, Gerald (Tonbridge)
Mackeson, Brig. H. R.Robson-Brown, W.Williams, Sir Herbert (Croydon, E.)
McKibbin, A.Rodgers, John (Sevenoaks)Wills, G.
McKie, J. H. (Galloway)Roper, Sir HaroldWilson, Geoffrey (Truro)
Maclay, Hon. JohnRopner, Col. L.Winterton, Rt. Hon. Earl
Maclean, FitzroyRussell, R. S.Wood, Hon. R.
MacLeod, Iain (Enfield, W.)Ryder, Capt. R. E. D.York, C.
MacLeod, John (Ross and Cromarty)Salter, Rt. Hon. Sir Arthur
Macmillan, Rt. Hon. Harold (Bromley)Sandys, Rt. Hon. D.TELLERS FOR THE NOES:
Macpherson, Major Niall (Dumfries)Shepherd, WilliamMr. Studholme and Major Wheatley

Question put accordingly, "That the Chairman do report Progress and ask leave to sit again."

The Commitee divided: Ayes, 280; Noes, 290.

Division No. 121.]AYES[7.58 a.m.
Aitken, W. T.Birch, NigelBullus, Wing Commander E. E.
Alport, C. J. M.Bishop, F. P.Burden, F. A.
Amery, Julian (Preston, N.)Black, C. W.Butcher, H. W.
Amory, Heathcoat (Tiverton)Boles, Lt.-Col. D. C. (Wells)Butler, Rt. Hn. R. A. (Saffron Walden)
Arbuthnot, JohnBoothby, R.Carr, Robert (Mitcham)
Ashton, H. (Chelmsford)Bossom, A. C.Carson, Hon. E.
Assheton, Rt. Hon. R. (Blackburn, W.)Bowen, E. R. (Cardigan)Channon, H.
Astor, Hon. M. L.Boyd-Carpenter, J. A.Churchill, Rt. Hon. W. S.
Baker, P. A. D.Boyle, Sir EdwardClarke, Col. Ralph (East Grinstead)
Baldock, Lt.-Cmdr. J. M.Bracken, Rt. Hon. B.Clarke, Brig. Terence (Portsmouth, W.)
Baldwin, A. E.Braine, B. R.Clyde, J. L.
Banks, Col. C.Braithwaite, Sir Albert (Harrow, W.)Colegate, A.
Baxter, A. B.Braithwaite, Lt.-Cr. G. (Bristol, N. W.)Cooper, Sqn Ldr. Albert (Ilford, S.)
Beamish, Major TuftonBromley-Davenport, Lt.-Col. W.Cooper-Key, E. M.
Bell, R. M.Brooke, Henry (Hampstead)Corbett, Lt.-Col. Uvedale (Ludlow)
Bennett, Dr. Reginald (Gosport)Browne, Jack (Govan)Craddock, Beresford (Spelthorne)
Bennett, William (Woodside)Buchan-Hopburn, P. G. T.Cranborne, Viscount
Bevins, J. R. (Liverpool, Toxteth)Bullock, Capt. M.Crookshank, Capt. Rt. Hon. H. F. C.
Crosthwaite-Eyre, Col. O. E.Jennings, R.Price, Henry (Lewisham, W.)
Crouch, R. F.Johnson, Howard (Kemptown)Profumo, J. D
Crowder, Capt. John (Finchley)Jones, A. (Hall Green)Raikes, H. V.
Crowder, Petre (Ruislip—Northwood)Joynson-Hicks, Hon. L. W.Rayner, Brig. R.
Cundiff, F. W.Kaberry, D.Redmayne, M.
Cuthbert, W. N.Karr, H. W. (Cambridge)Remnant, Hon. P.
Darling, Sir William (Edinburgh, S.)Kingsmill, Lt.-Col. W. H.Renton, D. L. M.
Davidson, ViscountessLambert, Hon. G.Roberts, Major Peter (Heeley)
Davies, Nigel (Epping)Lancaster, Col. C. G.Robertson, Sir David (Caithness)
de Chair, SomersetLangford-Holt, J.Robinson, Roland (Blackpool, S.)
De la Bère, R.Law, Rt. Hon. R. K.Robson-Brown, W.
Deedal, W. F.Leather, E. H. C.Rodgers, John (Sevenoaks)
Digby, S. WingfieldLegge-Bourke, Maj. E. A. H.Roper, Sir Harold
Dodds-Parker, A. D.Lennox-Boyd, A. T.Ropner, Col. L.
Donner, P. W.Lindsay, MartinRussell, R. S.
Douglas-Hamilton, Lord MalcolmLinstead, H. N.Ryder, Capt. R. E. D.
Drayson, G. B.Llewellyn, D.Salter, Rt. Hon. Sir Arthur
Drewe, C.Lloyd, Rt. Hn. Geoffrey (King's N'rt'n)Sandys, Rt. Hon. D.
Dugdale, Maj. Sir Thomas (Richmond)Loyd, Maj. Guy (Renfrew, E.)Shepherd, William
Duncan, Capt. J. A. L.Lloyd, Solwyn (Wirral)Smiles, Lt.-Col. Sir Walter
Dunglass, LordLockwood, Lt.-Col. J. C.Smithers, Peter (Winchester)
Duthie, W. S.Longden, Gilbert (Herts, S. W.)Smithers, Sir Waldron (Orpington)
Eccles, D. M.Low, A. R. W.Smyth, Brig. J. G. (Norwood)
Eden, Rt. Hon. A.Lucas, Sir Jocelyn (Portsmouth, S.)Snadden, W. McN.
Elliot, Rt. Hon. W. E.Lucas, P. B. (Brentford)Soames, Capt. C.
Erroll, F. J.Lucas-Tooth, Sir HughSpearman, A. C. M.
Fisher, NigelLyttelton, Rt. Hon. O.Spence, H. R. (Aberdeenshire, W.)
Fort, R.McAdden, S. J.Spens, Sir Patrick (Kensington, S.)
Foster, JohnMcCorquodale, Rt. Hon. M. S.Stanley, Capt. Hn. Richard (N. Fylde)
Fraser, Hon. Hugh (Stone)Macdonald, Sir Peter (I. of Wight)Stevens, G. P.
Fraser, Sir I. (Morecambe & Lonsdale)Mackeaon, Brig. H. R.Steward, W. A. (Woolwich, W.)
Fyfe, Rt. Hon. Sir David MaxwellMcKibbin, A.Stewart, Henderson (Fife, E.)
Gaga, C. H.McKie, J. H. (Galloway)Stoddart-Scott, Col. M.
Galbraith, Cmdr. T. D. (Pollok)Maclay, Hon. JohnStorey, S.
Galbraith, T. G. D. (Hillhead)Maclean, FitzroyStrauss, Henry (Norwich, S.)
Gammans, L. D.MacLeod, Iain (Enfield, W.)Stuart, Rt. Hon. James (Moray)
Garner-Evans, E. H. (Denbigh)MacLeod, John (Ross and Cromarty)Studholme, H. G.
Gates, Maj. E. E.Macmillan, Rt. Hon. Harold (Bromley)Summers, G. S.
Gomme-Duncan, Col. A.Macpherson, Major Niall (Dumfries)Sutcliffe, H.
Gridley, Sir ArnoldMaitland, Cmdr. J. W.Taylor, Charles (Eastbourne)
Grirmston, Hon. John (St. Albans)Manningham-Buller, R. E.Taylor, William (Bradford, N.)
Grimston, Robert (Wastbury)Marlowe, A. A. H.Teeling, W.
Harden, J. R. E.Marplas, A. E.Teevan, T. L.
Hare, Hon. J. H. (Woodbridge)Marshall, Douglas (Bodmin)Thomas, J. P. L. (Hereford)
Harris, Frederic (Croydon, N.)Marshall, Sidney (Sutton)Thompson, Kenneth Pugh (Walton)
Harris, Reader (Heston)Mauda, Angus (Ealing, S.)Thompson, Lt.-Cmdr. R. (Croydon, W.)
Harvey, Air-Codre. A. V. (Macclasfield)Maude, John (Exeter)Thornaycroft Peter (Monmouth)
Harvey, Ian (Harrow, E.)Maudling, R.Thornton-Kemsley, Col. C. N.
Harvie-Watt, Sir GeorgeMedlicott, Brig. F.Thorp, Brig. R. A. F.
Hay, JohnMellor, Sir JohnTilney, John
Head, Brig. A. H.Molson, A. H. E.Turner, H. F. L.
Heald, LionelMonckton, Sir WalterTurton, R. H.
Henderson, John (Catheart)Moore, Lt.-Col. Sir ThomasTweedsmuir, Lady
Hicks-Beach, Maj. W. W.Morrison, John (Salisbury)Vane, W. M. F.
Higgs, J. M. C.Morrison, Rt. Hon. W. S. (Cirencester)Vaughan-Morgan, J. K.
Hill, Dr. Charles (Luton)Mott-Radolyffe, C. E.Vosper, D. F.
Hill, Mrs. E. (Wythenshawe)Nabarro, G.Wakefield, Edward (Derbyshire, W.)
Hinchingbrooke, ViscountNicholls, HermarWakefield, Sir Wavell (Marylebone)
Hirst, GeoffreyNicholson, G.Walker-Smith, D.
Hollis, M. C.Nield, Basil (Chester)Ward, Hon. George (Worcester)
Holmes, Sir Stanley (Harwich)Noble, Cmdr. A. H. P.Ward, Miss I. (Tynemouth)
Hope, Lord JohnNugent, G. R. H.Waterhouse, Capt. Rt. Hon. C.
Hopkinson, HenryNutting, AnthonyWatkison, H.
Hornsby-Smith, Miss P.Oakshott, H. D.Webbe, Sir H. (London & Westminster)
Horsbrugh, Rt. Hon. FlorenceOdey, G. W.Wheatley, Major M. J. (Poole)
Howard, Gerald (Cambridgeshire)Ormsby-Gore, Hon. W. D.White, Baker (Canterbury)
Howard, Grevilla (St. Ives)Orr, Capt. L. P. S.Williams, Charles (Torquay)
Hudson, Sir Austin (Lewisham, N.)Orr-Ewing, Charles Ian (Hendon, N.)Williams, Gerald (Tonbridge)
Hudson, Rt. Hon. Robert (Southport)Orr-Ewing, Ian L. (Weston-super-Mare)Williams, Sir Herbert (Croydon, E.)
Hudson, W. R. A. (Hull, N.)Osborne, C.Wills, G.
Hurd, A. R.Peaka, Rt. Hon. O.Wilson, Geoffrey (Truro)
Hutchinson, Geoffrey (Ilford, N.)Parkins, W. R. D.Winterton, Rt. Hon. Earl
Hutchison, Lt.-Cmdr. Clark (E'b'rgh W.)Peto, Brig. C. H. M.Wood, Hon. R.
Hutchison, Colonel James (Glasgow)Pickthorn, K.York, C.
Hyde, Lt.-Col. H. M.Pitman, I. J.TELLERS FOR THE AYES:
Hylton-Foster, H. B.Powell, J. EnochMajor Conant and Mr. Heath.
Acland, Sir RichardAnderson, Alexander (Motherwell)Bacon, Miss Alice
Adams, RichardAnderson, Frank (Whitehaven)Baird, J.
Albu, A. H.Attlee, Rt. Hon. C. R.Balfour, A.
Allan, Arthur (Bosworth)Awbery, S. S.Barnes, Rt. Hon. A. J.
Allen, Scholefield (Crewe)Ayles, W. H.Bartley, P.
Bellenger, Rt. Hen. F. J.Grey, C. F.Morgan, Dr. H. B.
Benn, WedgwoodGriffiths, David (Rather Valley)Morley, R.
Benson, G.Griffiths, Rt. Hon. James (Llanelly)Morris, Percy (Swansea, W.)
Beswick, F.Griffiths, William (Exchange)Mort, D. L.
Bevan, Rt. Hon. A. (Ebbw Vale)Gunter, R. J.Moyle, A.
Bing, G. H. C.Hale, Joseph (Rochdale)Mulley, F. W.
Blenkinsop, A.Hall, Rt. Hon. Glenvil (Colne Valley)Murray, J. D.
Blyton, W. R.Hall, John (Gateshead, W.)Nally, W.
Boardman, H.Hamilton, W. W.Neal, Harold (Bolsover)
Booth, A.Hannan, W.Noel-Baker, Rt. Hon. P. J.
Bottomley, A. G.Hardman, D. R.O'Brien, T.
Bowden, H. W.Hargreaves, A.Oldfield, W. H.
Bowles, F. G. (Nuneaton)Hastings, S.Oliver, G. H.
Braddock, Mrs. ElizabethHayman, F. H.Orbach, M.
Brook, Dryden (Halifax)Henderson, Rt. Hon. Arthur (Tipton)Padley, W. E.
Brooks, T. J. (Normanton)Herbison, Miss M.Paget, R. T.
Broughton, Dr. A. D. D.Hewitson, Capt. M.Paling, Rt. Hon. Wilfred (Dearne Vally)
Brown, Rt. Hon. George (Belper)Hobson, C. R.Paling, Will T. (Dewsbury)
Brown, Thomas (Ince)Holman, P.Pannell, T. C.
Burke, W. A.Holmes, Horace (Hemsworth)Pargiter, G. A.
Burton, Miss E.Houghton, D.Parker, J.
Butler, Herbert (Hackney, S.)Hoy, J.Paton, J.
Callaghan, L. J.Hubbard, T.Pearson, A.
Carmichael, J.Hudson, James (Ealing, N.)Popplewell, E.
Castle, Mrs. B. A.Hughes, Emrys (S. Ayrshire)Porter, G.
Champion, A. J.Hughes, Hector (Aberdeen, N.)Price, Philips (Gloucestershire, W.)
Chetwynd, G. R.Hynd, H. (Accrington)Proctor, W. T.
Clunie, J.Hynd, J. B. (Attercliffe)Pryde, D. J.
Cooks, F. S.Irvine, A. J. (Edge Hill)Pursey, Cmdr. H.
Coldrick, W.Irving, W. J. (Wood Green)Rankin, J.
Collick, P.Isaacs, Rt. Hon. G. A.Rees, Mrs. D.
Collindridge, F.Janner, B.Reeves, J.
Cook, T. F.Jay, D. P. T.Reid, Thomas (Swindon)
Cooper, Geoffrey (Middlesbrough, W.)Jeger, George (Goole)Reid, William (Camlachie)
Cooper, John (Deptford)Jenkins, R. H.Rhodes, H.
Corbet, Mrs. Freda (Peckham)Johnson, James (Rugby)Richards, R.
Cove, W. G.Johnston, Douglas (Paisley)Robens, Rt. Hon. A.
Craddock, George (Bradford, S.)Jones, David (Hartlepool)Roberts, Goronwy (Caernarvonshire)
Crawley, A.Jones, Frederick EIwyn (West Ham, S.)Robertson, J. J. (Berwick)
Crosland, C. A. R.Jones, Jack (Rotherham)Robinson, Kenneth (St. Pancras, N.)
Crossman, R. H. S.Jones, William Elwyn (Conway)Rogers, George (Kensington, N.)
Cullen, Mrs. A.Keenan, W.Ross, William (Kilmarnock)
Daines, P.Kenyon, C.Shawcross, Rt. Hon. Sir Hartley
Dalton, Rt. Hon. H.Key, Rt. Hon. C. W.Shinwell, Rt. Hon. E.
Darting, George (Hillsborough)King, Dr. H. M.Shurmer, P. L. E.
Davies, A. Edward (Stoke, N.)Kinghorn, Sqn. Ldr. E.Silverman, Julius (Erdington)
Davies, Harold (Leek)Kinley, J.Silverman, Sydney (Nelson)
Davies, Stephen (Merthyr)Lang, GordonSimmons, C. J.
de Freitas, GeoffreyLee, Frederick (Newton)Slater, J.
Deer, G.Lee, Miss Jennie (Cannock)Smith, Ellis (Stoke, S.)
Delargy, H. J.Lever, Harold (Cheetham)Smith, Norman (Nottingham, S.)
Dodds, N. N.Lever, Leslie (Ardwick)Snow, J. W.
Donnelly, D.Lewis, Arthur (West Ham, N.)Sorensen, R. W.
Driberg, T. E. N.Lewis, John (Bolton, W.)Soskice, Rt. Hon. Sir Frank
Dugdale, Rt. Hon. John (W. Bromwich)Lindgren, G. S.Sparks, J. A.
Dye, S.Lipton, Lt.-Col. M.Steele, T.
Ede, Rt. Hon J. C.Logan, D. G.Stewart, Michael (Fulham, E.)
Edelman, M.Longden, Fred (Small Heath)Stokes, Rt. Hon. R. R.
Edwards, John (Brighouse)McAllister, G.Strachcy, Rt. Hon. J.
Edwards, Rt. Hon. Ness (Caerphilly)MacColl, J. EStrauss, Rt. Hon. George (Vauxhall)
Edwards, W. J. (Stepney)McGhee, H. GStross, Dr. Barnett
Evans, Albert (Islington, S. W.)McGovern, J.Summerskill, Rt. Hon. Edith
Evans, Edward (Lowestoft)McInnes, J.Sylvester, G. D.
Evans, Stanley (Wednesbury)Mack, J. D.Taylor, Bernard (Mansfield)
Ewart, R.McKay, John (Wallsend)Taylor, Robert (Morpeth)
Fernyhough, E.Mackay, R. W. G. (Reading, N)Thomas, David (Aberdare)
Field, Capt. W. J.McLeavy, F.Thomas, George (Cardiff)
Finch, H. J.MacMillan, Malcolm (Western Isles)Thomas, Iorwerth (Rhondda, W.)
Fletcher, Eric (Islington, E.)McNeil, Rt. Hon. H.Thomas, Ivor Owen (Wrekin)
Follick, M.MacPherson, Malcolm (Stirling)Thorneycroft, Harry (Clayton)
Foot, M. M.Mainwaring, W. H.Thurtle, Ernest
Forman, J. C.Mallalieu, E. L. (Brigg)Timmons, J.
Fraser, Thomas (Hamilton)Mallalieu, J. P. W. (Huddersfield, E.)Tomney, F.
Freeman, John (Watford)Mann, Mrs. JeanUngoed-Thomas Sir Lynn
Freeman, Peter (Newport)Manuel, A. C.Usborne, H.
Gaitskell, Rt. Hon. H. T. N.Marquand, Rt. Hon. H. A.Vernon, W. F.
Ganley, Mrs. C. S.Mathers, Rt. Hon. G.Viant, S. P.
Gibson, C. W.Mellish, R. J.Wallace, H. W.
Gilzean, A.Messer, F.Watkins, T. E.
Glanville, James (Consett)Middleton, Mrs. L.Webb, Rt. Hon. M. (Bradford, C.)
Gooch, E. G.Mikardo, Ian.Weitzman, D.
Gordon-Walker, Rt. Hon. P. C.Mitchison, G. R.Wells, Percy (Faversham)
Greenwood, Anthony (Rossendale)Moeran, E. W.Wells, William (Walsall)
Greenwood, Rt. Hn. Arthur (Wakefield)Monslow, W.West, D. G.
Grenfell, D. R.Moody, A. S.Wheatley, Rt. Hon. John (Edinb'gh E.)
White, Mrs. Eirene (E. Flint)Williams, Rev. Llywelyn (Abertillery)Woodburn, Rt. Hon. A.
White, Henry (Derbyshire, N. E.)Williams, Ronald (Wigan)Wyatt, W. L.
Whiteley, Rt. Hon. W.Williams, Rt. Hon. Thomas (Don V'lly)Yates, V. F.
Wilcock, Group Capt. C. A. BWilliams, W. T. (Hammersmith, S.)Younger, Rt. Hon. K.
Writes, L.Wilson, Rt. Hon. Harold (Huyton)
Willey, Frederick (Sunderland)Winterbottom, Ian (Nottingham, C.)TELLERS FOR THE NOES:
Willey, Octavius (Cleveland)Winterbottom, Richard (Brightside)Mr. Wilkins and Mr. Royle.
Williams, David (Neath)Wise, F. J.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

I beg to move, in page 20, line 33, after "tax," to insert: either by a reduction of the profits assessable to profits tax or the increase of a loss. I do not think this is an Amendment on which feelings can really rise very high, and I apologise to the Attorney-General that I should be asking him to consider it when he has had such a trying night. The Amendment will have the effect of making the Clause read: Where the Commissioners are of opinion that the main purpose, or one of the main purposes for which any transaction, or transactions, was or were effected (whether before or after the passing of this Act) was the avoidance or reduction of liability to the profits tax either by a reduction of the profits assessable to profits tax or the increase of a loss, they may, if they think fit, direct, … I do not know whether the Attorney-General will agree with me but it does seem to me that there must be some relation between Clause 27 and Clause 28. Whoever it was who conceived these two Clauses, whether the hon. Member for Sowerby (Mr. Houghton) or somebody else, the purpose of Clause 27 was to deal with the transactions relating to distribution; that if profits were capitalised and later distributed by way of reduction of capital, then it was designed that they should fall under Clause 27 because we agree they should be liable to Profits Tax. That was a matter already agreed on this side of the Committee.

Clause 27 is designed to deal with tax evasion so far as distribution is concerned. Clause 28, I assume, is designed to deal with evasion of Profits Tax so far as the manipulation, if that is the proper word to use, of profits assessable to tax is concerned. If that is the purpose of Clause 28, it would be very much clearer to say so. We have Clause 27 dealing with tax evasion so far as distribution is concerned, and Clause 28 dealing with tax evasion so far as computation of the figures assessable to Profits Tax is concerned.

Of course, Profits Tax can be evaded, and I am not dealing with the case of tax evasion or avoidance. It seems to me that could be achieved, either by artificially reducing the Profits Tax assessable to tax, or by increasing a loss, in one of these two ways. If the object of Clause 28 is to deal with that sort of tax evasion, it would be very much clearer to say so. If there are other types of tax evasion which it is intended Clause 28 should deal with, the Committee should know what they are. As far as I can follow the examples given by the right hon. and learned Gentleman, it seems that they would be covered by Clause 27 or Clause 28. One cannot help being rather flattered by the attendance of hon. Members on the other side who have not been here much of the evening with us. I apologise for the rather dull nature of the Amendment.

8.15 a.m.

Photo of Sir Frank Soskice Sir Frank Soskice , Sheffield Neepsend

The difficulty in the way of the Amendment is that the avoidance of tax by reduction of profits, or the increasing of a loss, is not the only sort of avoidance that is within the scope of the Clause. As the hon. and learned Gentleman said. Clause 27 deals with capitalisation and repayment of capital, but Clause 28 is quite general in scope and, supposing the form of words which the hon. and learned Gentleman proposes were adopted, this kind of case would be excluded from the Clause.

The case of payment of excessive directors' remuneration would be the case of a director-controlled company where a director has put his shares in the name of a nominee and, therefore, is not technically a member of the company, with the result that the excess remuneration paid to him would not, under the law, attract the higher rate of Profits Tax. That would be a case in which there was an obvious manoeuvre which would have the result of preventing the company being director-controlled and, therefore, the limitation on the remuneration of the directors would not apply and the higher rates would not be imposed upon the excess remuneration. That would be a clear case of obvious avoidance, but it would not be within either of the limits of the formula which the hon. and learned Gentleman proposes. For that reason I think he will agree that the Amendment would not improve the Clause.

Photo of Sir John Mellor Sir John Mellor , Sutton Coldfield

May I ask the Attorney-General what he means by a director not being technically a member of the company? Surely he must be a member of the company?

Photo of Sir Frank Soskice Sir Frank Soskice , Sheffield Neepsend

I am stating the case of a person who has started off by being a director in a director-controlled company and then, in order to prevent the company remaining a director-controlled one he transfers his shares into the name of a nominee, with the result that the company ceases to be director-controlled, the director no longer having a controlling interest because he has transferred his shares into the name of a nominee.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

Does that not reduce the figures of the profits assessable to Profits Tax?

Photo of Sir Frank Soskice Sir Frank Soskice , Sheffield Neepsend

No, it reduces the figure of profits assessable to the higher rate of Profits Tax, but they are still assessable to Profits Tax.

The formula of the hon. and learned Gentleman is "reduction of the profits assessable to profits tax," without specifying whether it is the higher or lower rate. Such a manoeuvre has the result of preventing a certain proportion of the profits being taxable at the higher rate, although they still remain taxable at the lower rate. It is questionable, even if it is arguable, that upon one view one can say that was within the first part of the formula of the hon. and learned Gentleman. I should have thought probably the better view was that it would not. At least there is a doubt. That is simply an example of a case which I quote solely by way of illustration to show that there are a number of similar circumstances in which it is doubtful whether the formula applies.

Photo of Sir John Foster Sir John Foster , Northwich

Surely there can be no doubt in this case that profits would be reduced, because by this device of which the Attorney-General has given an instance, the director would reduce the profits assessable to tax. My recollection was—I am asking for information here—that the definition of "control" would cover a director controlling the company through a nominee holding. I may be wrong because I have not the books here to look it up, but my recollection is that a director controls a company either directly or indirectly through nominee shareholders.

Passing from that, would not the Attorney-General agree that the principle behind the Amendment is right? He used the argument a good deal earlier during this debate, that this was a very drastic Clause and that it provided a remedy which went' a very long way. If it is drastic, I think he will agree with me that it is necessary to cut it down as far as is compatible with the objects of the Clause. I do not think anyone can object to that. I would suggest that, even if this form of words is open to criticism, the Clause should be cut down to exclude the mischief covered by Clause 27.

Photo of Sir Frank Soskice Sir Frank Soskice , Sheffield Neepsend

I am most reluctant to accept all that the hon. Member has said. As I explained when I argued on the first Amendment, the whole object of adopting this particular form of Clause is because we shall be able to deal with a very large number of these types of transaction which are being enhanced and multiplied. I have given one case and one can give other cases, where it would be doubtful, and even further cases may appear in the future. I feel that once one has decided to use the Clause it would be a wrong thing to frustrate its object by limiting its classification so as to apply it only to a limited class of transaction, and not to be able to apply it whatever the transaction, wherever the main object was tax avoidance.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

I am very disappointed at the right hon. and learned Gentleman. He did put up the whole argument for a blank cheque. I think the proper way to draft the Clause is first of all to decide the categories of transaction at which the Government seek to aim, to list these and then to give power to the Commissioners to deal at their discretion with these categories of transactions at any time when, in their opinion they are for the purpose of evading, or avoiding, or reducing tax. These cases will be a great strain on the administration, and ultimately they will not be in the public interest. I hope he will reconsider this matter between now and the Report stage.

Amendment negatived.

Photo of Mr William Spens Mr William Spens , Kensington South

I beg to move, in page 20, line 33, after "fit," to insert: deliver to the persons concerned a statement in writing to that effect setting out the facts and reasons on which the opinion of the Commissioners is based and. The Clause in its present form is closely reminiscent of war legislation. It is a Clause where, if the Commissioners form an opinion in a certain direction, they do not have to express it or explain any reasons for it. They are invited to proceed at once to action and give directions that may go to the length of charging any persons with the tax who have not previously been liable, or increasing the amount of tax to any amount they think Rt. It is possible that in a particular case the first thing a person might know that he had become liable under this Clause was the receiving of a direction charging him with tax. I do not say it is likely, but it is possible that that would take place.

The reason why I put down this Amendment was directly concerned with the appeal subsection—subsection (4). Of course, the Clause itself obviously contemplates that there will be very doubtful cases where the subject will exercise the right given to him of going before the Special Commissioners. The Special Commissioners are given certain powers to deal with the direction given by the Commissioners. One has known, both at the Bar and elsewhere, how difficult it is, where it is merely a question of a Minister's or a Commissioner's opinion, to find out exactly what were the facts and reasons that led to the forming of an opinion.

It is highly desirable that there should be some express provision that the Commissioners, when they have formed their opinion, with their very wide discretion, and made up their minds to give a direction, should at the same time that they give the direction deliver to the persons or individual concerned, in writing, the facts on which the opinion is based. This Amendment is followed by another, authorising an appeal if the subject can show that the Commissioners have been misinformed on any fact or reason on which the opinion was based.

It is not really asking of the Commissioners any more than in all probability they would do in an informal manner after the subject had extracted the information from them by writing for it. In a case of such importance, and with a Clause so far reaching as this, it is not asking very much. [Interruption.]

Photo of Sir John Mellor Sir John Mellor , Sutton Coldfield

On a point of order. Will you be so good, Sir, as to instruct that hon. Member to discontinue his conversation, which makes it very difficult to listen to a reasoned argument.

Photo of Mr Charles Pannell Mr Charles Pannell , Leeds West

Further to that point of order. Will you also take into consideration that we suffer continually from the right hon. Gentleman the Leader of the Opposition?

Photo of Mr Samuel Silverman Mr Samuel Silverman , Nelson and Colne

Further to that point of order. May I call your attention to the fact that I am sitting much farther away from the hon. and learned Gentleman than the hon. Member who complained, and the hon. and learned Member seems to me to be speaking, at any rate vocally, with the greatest possible lucidity? I have no difficulty in hearing at all.

Photo of Mr William Spens Mr William Spens , Kensington South

I was quite unaware that there was any talking going on; I was concentrating on addressing the Chair with special reference to the Attorney-General in the hope that I should be found convincing.

To conclude: in the obvious case—the sort of case that one or two hon. Members have discussed earlier this morning—there would be no difficulty at all in the Commissioners' putting on paper the facts on which they are basing their opinion and the reasons for it. In the more difficult cases, there is obviously a possibility of the Commissioners—against whom I would not make any kind of suggestion, on the ground of fairness, but they are, after all, human—not having all the evidence available when they come to their decision. They may not have evaluated the various factors properly, they may have decided that tax avoidance was the principal purpose, whereas it may not even have been a serious motive.

In these circumstances, I suggest it would be much more satisfactory and helpful to everybody if some such machinery could be adopted. This Debate, continuing on this Clause for some hours, shows that there is serious anxiety in many quarters about its effect. It would be far better for everybody who has to suffer under this Clause to be told exactly for what reasons they are being brought within it.

8.30 a.m.

Photo of Sir Frank Soskice Sir Frank Soskice , Sheffield Neepsend

If one considers what happens, there is no need for the statement of reasons which the hon. and learned Gentleman suggests. The direction which has to be served will, from the very nature of things—and it is apparent from the Clause that it has so to do—set out the transactions which it says were for tax avoidance purposes and the adjustments which in the view of the Commissioners are necessary for the purpose of restoring the tax position. That direction must tell the taxpayer practically all that he needs to know. It is not as though one were talking about things of which one has no experience. We have had experience of how this works out in excess profits cases.

The direction is a fairly full document. What it does not do—and should not do—is to contain general reasoning on the evidence. Supposing the Commissioners were suspicious, and had no doubt in their minds that a particular transaction was not what it purported to be but concealed a tax avoidance motive. It would not only be unnecessary but undesirable that the Commissioners should have to prepare a detailed judgment analysing the evidence which led to their conclusions.

If we had not this right of appeal to the Special Commissioners which subsection (4) provides, there might be a greater need for a fairly full statement of claim, a pleading in the true sense. But it is the simplest and easiest thing to get before the Special Commissioners. If the Commissioners had to serve a statement of claim on the company, equally, when the company goes to appeal it should serve grounds of appeal on the Commissioners. It is done on a more informal basis before the Special Commissioners, for there we have a hearing in which all the reasons are deployed.

I submit that there is no room for this detailed statement of claim. All we want is a direction setting out what the transactions are of which the Commissioners complain and what adjustments are to be made in respect of those transactions. In a very large number of cases there will have been a number of interviews between the company and the Commissioners, there will have been discussions and correspondence; and the way the thing works out in connection with Excess Profits Tax liability is in the result we get a full direction which gives the company everything which at that stage it wants to know.

Anything beyond what appears in the direction would be somewhat like the full analytical judgment a judge delivers on a consideration of the evidence deployed before him. I should have thought that was not necessary or desirable. Direction having been given, if there was disagreement, there is quick procedure by way of appeal before the Special Commissioners, who hear the full argument on behalf of both parties and the issues are crystallised. I should have thought that the direction as at present served was adequate and that anything beyond that would lead to a great deal of unnecessary duplication, possibly delays and would serve no useful purpose.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

Is subsection (3) a repetition of the previous subsection (3)?

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

In that case, may I ask whether direction has been made in cases to which subsection (3) applies? As I read it, subsection (3) provides that where there has been a reduction of the liability for tax, that is deemed to be one of the main benefits of the transaction. If I am wrong, I should like to be corrected.

Photo of Sir Frank Soskice Sir Frank Soskice , Sheffield Neepsend

The mere fact that there has been a reduction is not enough: it has to be a main part of the transaction. The Crown Betting Case shows that the test to apply is to look at the transaction from outside and just what is the main benefit to be expected.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

I accept the right hon. and learned Gentleman's explanation. Suppose it has been decided that tax reduction is the main benefit, does it follow automatically that the reduction in liability for tax is deemed to be one of the main benefits of the transaction? In such cases, it may be that the direction will not contain very full particulars. If it is the practice that the direction should contain most of what my hon. and learned Friend is asking, there would not be great harm in writing into the Clause, if not the actual words put forward, at least something similar.

Photo of Sir Lionel Heald Sir Lionel Heald , Chertsey

It may be my denseness, due to the events of the last 12 hours, but I was left in considerable difficulty about what the right hon. and learned Gentleman said about the direction that had to be given. I understood him to say that the directions refer to the nature of the transactions and so on, but on looking at the wording I find only one word, "Direction."

8.45 a.m.

My experience is that if an Act of Parliament says that someone is to direct something, there is nothing whatever laid down about the manner in which it is to be done. There is not the slightest use the right hon. and learned Gentleman saying that we usually do this or always do that. Parliament is enacting the law and, if it is to be done, let it be done in plain language. I submit that there is not the slightest justification for the right hon. and learned Gentleman not acceding to the request made to him because he has said, "That is right, that is what will have to be done." Why not, therefore, let Parliament say, "That is what shall be done "?

Photo of Sir Frank Soskice Sir Frank Soskice , Sheffield Neepsend

If I may supplement what I said, I feel that the hon. and learned Member for Kensington, South (Sir P. Spens), misunderstands the subsection. He concedes that subsection (1) can be satisfied if I say, "I direct"; but from the very nature of things one cannot apply that subsection unless one gives a direction which says certain things. One cannot direct that such adjustments are to be made unless one says what the adjustments are. From the clearly expressed service of the subsection, one would have to state what the transactions are of which complaint is made, what adjustments are to be made in respect of them, the terms of the tax claimed and so on. Under subsection (3) one would have to indicate whether it is a transfer of shares, or what is the subject of the complaint, and also what is the main benefit expected from the transaction.

From the very nature of things, therefore, the direction cannot be given unless it contains very nearly all the information—though not entirely all of it—which the hon. and learned Member had in mind. If one goes beyond that one embarks on the realm of argument. One can argue a case and set out the reasons why a certain conclusion is drawn. That is argumentative and the sort of thing a judge does when he delivers a full judgment. Clearly we do not want that when we are initiating this procedure by direction. It is something which has to come in for consideration when and if the matter comes to appeal.

Photo of Sir Lionel Heald Sir Lionel Heald , Chertsey

Before the right hon. and learned Gentleman sits down, would he not agree to look at this once more? He has referred to information which would be given about the transaction. If it were not given, he said, there could not be adjustments. But it is not the transaction which is adjusted but the tax liability. The right hon. and learned Gentleman, assisted by those we see in another place, could very quickly draft a document adjusting the liability without giving any information at all, simply saying, "You pay so much more and you pay so much less."

Photo of Sir Isaac Pitman Sir Isaac Pitman , Bath

That was the gist of what I intended to say. It seems to me that it is a statement on the tax computation which underlay the direction that is wanted, not a statement on the direction. If the right hon. and learned Gentleman is prepared to say that he wishes the Commissioners to give the information with regard to computation, then some Amendment, if not this one, is clearly desirable. I think my hon. and learned Friend is to be congratulated on putting his finger on an important issue and also to be congratulated on his helpful Amendment.

Photo of Mr Reginald Maudling Mr Reginald Maudling , Barnet

I think the right hon. and learned Gentleman might be a little more sympathetic in his attitude on this. This Clause, after all, cannot be a Clause of which he is proud. He may say that it is necessary, but I cannot help feeling that it must be thoroughly out of keeping with his views as a member of the legal profession. Surely he will go out of his way to do everything he can to assist the Committee to improve the Clause. If he feels, as he does, that the Amendment goes a little too far, very well; he has conceded the major part of my hon. and learned Friend's case by saying that in practice the directions issued by the Commissioners will contain this information, but that is not what the Clause says.

However one reads the Clause, it does not say more than that a direction may be issued which will adjust the liability. Certainly that does not include anything like the major part of my hon. and learned Friend's case, which the right hon. and learned Gentleman himself conceded. Having said that that sort of information would be in the directions in practice, it would be only reasonable to attempt to improve the Clause by including it in the words, making it quite clear that, as a matter of Statute, that is what shall and must happen.

Photo of Sir Arthur Salter Sir Arthur Salter , Ormskirk

The right hon. and learned Gentleman has clearly indicated in his reply to my hon. and learned Friend the Member for Kensington, South (Sir P. Spens) that the Commissioners would in practice give more information as to why they are making the adjustment than they would have to give under the wording of the Clause as it stands. In explaining what he thought they would give, what in practice they would have to give, he said it covered practically everything covered in the Amendment. He feared that perhaps the exact interpretation of the Amendment might seem to imply that they would have to give some things which the right hon. and learned Gentleman thought it undesirable that they should give, but he said that the greater part of what is covered by the Amendment would have to be given or ought to be given.

Surely a very slight Amendment to the Amendment, if any indeed is required, would be quite acceptable to my hon. and learned Friend and would give effect to what the right hon. and learned Gentleman thought ought to be done in this case. Would he therefore undertake to consider this matter before Report?

Photo of Sir Frank Soskice Sir Frank Soskice , Sheffield Neepsend

I will certainly consider the point. Perhaps I have too many of these directions in my mind and I am rather taking it that automatically they will have to contain what the Clause does not insist that they shall contain. I want to guard myself against holding out any sort of promise that I will provide for including in the direction anything of what I might call the judgment a judge would deliver. I think it would be most dangerous and undesirable to start going as far as that when the outline, the indication of what the transactions are, and what adjustments are to be made, is different.

If the hon. and learned Gentleman will give me the opportunity of so doing, I will consider this between now and the Report stage. I say that without commitment because, on promising to go into things, one finds that all sorts of considerations are urged. Therefore, without commitment, I will sympathetically consider it to see whether anything can be done to go, not perhaps the whole way, but at any rate some way to meet the point.

Photo of Mr William Spens Mr William Spens , Kensington South

The yardstick I want to apply is that the company or individual concerned shall get a statement which will tell him what the Commissioners have decided, and thus give him an opportunity of making up his mind whether he ought to appeal. That is the important thing. He has got a right of appeal, but if he merely gets a bald adjustment of tax liability he may not have the slightest idea whether the grounds on which the Commissioners have decided are good or bad, or whether he agrees with them. That is what I have in mind. After studying the appeal Clause I looked at the main Clause and said: "If it is a straightforward direction and nothing more, how is the man to know whether to appeal or not"? He will have to appeal in order to find out why the Commissioners decided to say that.

Photo of Sir Frank Soskice Sir Frank Soskice , Sheffield Neepsend

I will certainly consider that, but, as I have said, without any definite commitment.

Photo of Mr William Spens Mr William Spens , Kensington South

I understand that. In those circumstances, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Photo of Sir Ronald Bell Sir Ronald Bell , Buckinghamshire South

I beg to move, in page 20, line 33, to leave out from "fit," to "so," in line 35, and to insert: at any time within three years of the end of a specified chargeable accounting period adjust the liability to the profits tax therein. The effect of this Amendment is to limit the period within which the Commissioners may exercise their power under this Clause. It seems only fair that, when a re-adjustment of an already completed transaction is to be met, the taxpayer should know in a shorter time than the normal six years exactly what his final liability for tax will be, and this Amendment is designed to bring about that effect.

When the right hon. and learned Gentleman was speaking on earlier proposed Amendments to this Clause he referred to the difficult task which the Special Commissioners would have in ascertaining whether or not a transaction fell within the purview of this Clause, and what is difficult for the Commissioners would be equally difficult, if not more difficult, for the taxpayer himself.

We must remember that this new law will present a new problem to the businessman. He will have to consider whether arrangements which he is advised to make, and transactions which he is advised to enter into, may in fact be caught by the terms of this Clause. It will often be a very difficult decision for him to take. At was said earlier, one motive for doing a thing in a particular way may very easily be the avoidance of Profits Tax, or a diminution of liability to Profits Tax. Of course, there may be other motives.

The original motive may have been a commercial one, nothing to do with the avoidance of tax at all, but a subsequent motive may very well be the avoidance of Profits Tax. That is to say, he may choose to do a transaction in a particular way in order to diminish his liability to Profits Tax, and he then will not know, and it might be extremely difficult to estimate, whether it would be held that that was a main motive, or a main purpose of the transaction into which he had entered. Until that was finally decided for or against him by the Commissioners of Inland Revenue the taxpayer would not know whether his liability to Profits Tax was a quite small figure or a very much larger figure, to which it had been adjusted by a direction under this Clause.

I hope that the Attorney-General will feel that this Amendment proposes something for the relief of the taxpayer in facing a novel and difficult situation, which he should think it a matter of justice to apply. I hope that he will give sympathetic consideration to this Amendment, and will see whether he cannot accept it. If he feels that some other period than three years is desirable, I hope he will at least meet the principle of the Amendment by undertaking to introduce an Amendment to the same effect on the Report stage.

The Amendment does not limit the ambit of the Clause. It merely allows the taxpayer to know where he is within what I suggest is a reasonable period of time. It would be a great hardship if for six years after embarking upon a business transaction the taxpayer did not know where he stood and how much Profits Tax he owed to the Exchequer. Six years is a very long time in the life of a business. Indeed, one has known businesses whose whole life was comprised of less than that period. It is quite obvious that to be practical in drafting the law some shorter period than six years ought to be written into this Clause, and I hope that the right hon. and learned Gentleman will be able to accept the Amendment.

Photo of Sir Frank Soskice Sir Frank Soskice , Sheffield Neepsend

This is an Amendment with which, at first sight, I confess that I have a lot of sympathy, but the difficulty is that in this class of transaction one is dealing, not infrequently, with cases of downright dishonesty. If one has a time limit of this sort, the longer a person—

Notice taken that 4 Members were not present; Committee counted, and 40 Members being present—

Photo of Sir Frank Soskice Sir Frank Soskice , Sheffield Neepsend

When we were momentarily diverted by the incident which, I think, has just been brought to a close, I was explaining that my difficulty about this Amendment was that one would not infrequently be dealing with dishonest persons. If one had a time limit, one would be giving the most dishonest persons the most chance of avoiding the tax. One would be disadvantaging others more honestly minded.

There is, as a matter of fact, no time limit in the Profits Tax assessments, quite independently of this Clause. That, of course, is not necessarily a conclusive reason why there should not be a time limit in this Clause, and the hon. Gentleman has suggested reasons which would seem to point to the desirability of such a time limit. But, on balance, I hope that he will agree that, having regard to the type of transactions which, generally speaking, one would be dealing with, it would be to the interest of persons who were honestly minded that there should not be given an opportunity to the dishonest to escape paying tax by, as it were, lying low until the six or five years, or the three which, I think, the hon. Member has in mind. On balance, therefore, I would advise the Committee not to accept this Amendment for the reasons I have given.

Experience will, I think, show that difficulty does not, in general, arise over these things. Where a question has emerged whether a direction should be given there will have been consultation, discussion and negotiations, and the matter will have been cleared up one way or the other. In practice, any person who has no tax-avoidance motive would have little to fear. If there is doubt the matter could be cleared up, and he will know whether he is in danger of having a direction served upon him.

9.0 a.m.

Photo of Mr David Eccles Mr David Eccles , Chippenham

I think that I should have some sympathy with the Attorney-General if the transactions against which the Clause is aimed were really well defined; because, in that case, the honest taxpayer would not have anything to fear from the extension of the three years to six years. But part of our submission is that this Clause does not define the transactions clearly. That being so, a whole range of taxpayers will be suspicious that what they have done may, or may not, come under this review. In weighing up the advantage to the honest taxpayer, it is, I agree, to his gain that as many as possible of the crooks are caught.

Photo of Sir Frank Soskice Sir Frank Soskice , Sheffield Neepsend

I would remind the hon. Member that I have undertaken to see if I cannot make the nature of the transactions more specific; that is, to insert some provision to make it obligatory for the taxpayer to be given some clearer information about the transaction.

Photo of Mr David Eccles Mr David Eccles , Chippenham

I am grateful to the Attorney-General for that, but the whole tenor of his argument previously was that it was impossible to produce a hundred different Clauses for stopping up all the leaks, which are always growing, and always appearing somewhere; and so, he wanted wide powers. However he may try to amend this Clause, there will be a whole series of transactions in which the taxpayer does not know if he is going to be proceeded against.

The honest taxpayer will be at an advantage if the crooked ones are caught, but he will be at a disadvantage because of the certainty in his own mind as to whether some of the things he has done may possibly be brought under review by the Commission. A period of three years is enough at any rate to see how we get along, and to see what sort of transactions, in fact, the Commissioners will proceed against. They will learn from experience and proceed on that experience. There is more in it than the Attorney-General thought, judging by his argument.

Photo of Mr Arthur Molson Mr Arthur Molson , High Peak

It is no part of our desire that this limitation of time should not prevent someone doing something dishonest. What I gather from the explanation of the Attorney-General is that it is possible under this Clause for an accounting period of several years ago to be opened up at any time in the future. That might mean that after the profits have been assessed over a number of years it would occur to the Commissioners that something which did not appear to be improper at the time had resulted in a substantial reduction in tax, it then being possible for them to go back five or six years and say, "We thought there was nothing wrong in this at the time, but our experience now suggests something which did not appear at that time." The Commissioners could then propose to take a number of years and re-open the whole case. That, I think, the Attorney-General would agree is unreasonable.

Photo of Sir Frank Soskice Sir Frank Soskice , Sheffield Neepsend

It would not be unreasonable. Supposing there had been a concealed fraud, the case would have been perfectly reasonable and proper.

Photo of Mr Arthur Molson Mr Arthur Molson , High Peak

I thought I made it plain that I am not asking that this provision shall protect a case of fraud, but after all the Attorney-General earlier today has said that the purpose is that this Clause should be so wide in its scope that it is able to deal with cases that he has not yet been able to think of. There is nothing improper in financial arrangements being made in order reasonably to reduce the incidence of taxation. I personally would be entirely happy if the Attorney-General would undertake to look at this matter again to exclude any case of fraud, but at the same time to rule out the case I have suggested—the Commissioners opening up the question of a liability for tax which apparently had been satisfactorily settled some four or five years before.

Photo of Mr William Keenan Mr William Keenan , Liverpool Kirkdale

I intervene because this Clause strikes me—[HON. MEMBERS: "Divide."] Most of the hours we have spent during the night have been to get from the Attorney-General certain promises that he will do something to make it easier to dodge taxes. I suggest to him that, judging by the number of questions raised on this particular Clause, he might seriously consider drawing up a book of rules so that hon. Members on the other side of the Committee might know how far to go beyond the point they have already gone in this matter. I should like to draw attention to the great fight there is on behalf of profits taxpayers by hon. Members opposite compared with the fellow who works for his living—in a word, P.A.Y.E.

Photo of Mr Reginald Maudling Mr Reginald Maudling , Barnet

I think the Attorney-General's arguments really are quite unacceptable on a major point of principle, in that he imported into the consideration of this Clause something which does not arise—the question of wilful evasion. I was surprised when, even with his knowledge, the hon. Member for Sowerby (Mr. Houghton) appeared to be confusing evasion with avoidance. I tried to interrupt him, but I was unsuccessful.

The most important point of this Clause is that here we are not dealing with fraud or dishonesty. We are dealing with transactions which at the time they were carried out were perfectly legal transactions. That is, as I understand it, the meaning of avoiding liability to tax. Therefore, it is wrong, in considering this proposal about limits of time available to the Commissioners, to talk about dishonesty. That is not dishonesty, but a person acting within his legal right. With fraud, quite different considerations arise and Clause 34 deals with an extension of time for proceedings for penalties in case of fraud or wilful default.

This Clause deals with a man who has done something which it was perfectly legal to do at the time, but which was subsequently and restrospectively decided by the Commissioners in the exercise of their powers to be liable to tax. No question of dishonesty comes into it, and in those circumstances I think it is only reasonable to say that there should be some time limit. In tax matters there must be some ending to things.

There is a clear distinction in dealing with Income Tax, that the Revenue can go back up to six years, to reopen an assessment but that where there has been fraud there is no time limit. That should apply here. Where there is fraud there should be no time limit, and where there is no fraud, as there is not in cases arising under this Clause, the taxpayer is entitled to say, "If I am liable to have the legality of my transactions subsequently challenged and the freedom from tax subsequently changed, then I am entitled to say that if these changes are to be applied retrospectively I ought to know that this must be done within a stated period of years."

Photo of Sir Isaac Pitman Sir Isaac Pitman , Bath

I support what has been said by my hon. Friend the Member for Barnet (Mr. Maudling), because the Amendment has been more clearly shown to be necessary by what the learned Attorney-General has said, in that he has made it quite clear that the whole of the assessments for Profits Tax for this Kingdom will be unfinal, that they will never be finally certain. That seems to me to be an intolerable situation. My hon. Friend the Member for Chippenham (Mr. Eccles) rightly said that this was a balance, that both sides of the Committee wish to prevent fraud. On the other hand, we want to give that degree of certainty and finality to the honest taxpayer whom we are seeking to protect.

My hon. Friend the Member for Barnet has proposed a middle course which is reasonable. Might I, as a constructive suggestion, put up yet another? It is instanced by the arrangements which apply to companies where there is a requirement of high dividend distribution. I believe that those companies run under the risk that at any time they can be required to distribute the whole of their earned profits during the past years in order to bring the proprietors under Surtax.

I think I am right in saying, however, that there is a Section in the Finance Act which enables somebody who might come within the mischief of that Section to submit his accounts to the Commissioners and say to them, "Here are the facts, complete disclosure, ask any questions you like, and tell me whether I am all right for the future with any degree of certainty, or whether I must watch out and live under the Sword of Damocles which I cannot see and the precise nature of which I cannot predict." I think the Attorney-General has accepted the principle that there ought to be some degree of certainty in good cases.

Photo of Lieut-Colonel Sir Walter Smiles Lieut-Colonel Sir Walter Smiles , North Down

The Royal Commission Report of a few years ago produced legislation which made it difficult for company directors to carry on their businesses. They had to be extremely careful that they did not go beyond the law in any way. Earlier this morning the Attorney-General mentioned general and specific instances, and many things seemed to be left to the view of the Commissioners.

The Attorney-General said he could not make rules and laws for every specific instance. Take, for instance, the directors of some of these investment trusts. They are in a very delicate and difficult situation today. Even today, I am told, a great many of them are considering the selling of rubber shares that have reached heights and which are paying dividends today they have not paid for the last 30 years. At the present moment these directors of investment trusts may well be thinking of selling their rubber shares that are getting 10 per cent. or even more today, and putting them into shares that will give them less return. By doing that they will be avoiding Profits Tax. What view will the Commissioners take of that?

9.15 a.m.

We can take private companies—many of them are almost family controlled companies. Some of these companies have existed for 100 years, and in the past one senior partner or a member of the family reached the age of 70 and was prepared to retire. In the old days nothing was thought about it. He handed on the business to his eldest son and other members of his family and they carried it on, but he himself would be avoiding Profits Tax by doing that. If he lives for five, years, incidentally, he will also escape tax by way of Death Duties.

I certainly think this Amendment should be accepted. In addition to the things I have mentioned, it is rendering it liable for an indefinite period of time for the Commissioners to go back to what might have been a perfectly legal action three or four years ago, and is now declared to be illegal and makes a company liable to a very serious fine.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

I would ask the right hon. and learned Gentleman to believe that we are not altogether happy about this Clause. It is clear that some hon. Members, for instance the hon. Gentleman the Member for Kirkdale (Mr. Keenan) think that this Clause will catch only fraudulent people or deliberate tax dodgers.

Photo of Mr William Keenan Mr William Keenan , Liverpool Kirkdale

What I got up to protest against was the time spent to protect tax dodgers, and to try to get from the Attorney-General some promise that something will be done to help those people. That is why I suggested tax dodgers' rules so that it would help hon. Gentlemen opposite.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

Knowing the hon. Gentleman as I do and have done, I do not think he really meant it, especially the latter part.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

There is no sympathy at all on these benches with the person who endeavours to avoid tax, and I entirely agree that no time limit should be imposed on that class of case. There is another class of case which might be described as the wilful evasion. I have not much sympathy with that.

There is another type of case. Supposing a company know that an initial allowance is still to be permitted to the end of the year and decides to buy another motorcar this year instead of next year in order to obtain the benefit of the initial allowance and reduce its liability to Profits Tax. That is avoiding tax liability. To buy a car in December instead of January is a perfectly honest and reasonable transaction. If the hon. Member were in charge of business and did not take that opportunity to protect his shareholders, he would be guilty of a breach of duty. That kind of action is caused by this Clause.

Photo of Mr Samuel Silverman Mr Samuel Silverman , Nelson and Colne

Surely such a transaction is not covered by this Clause at all, because by the buying of the motorcar it could not be shown that the main purpose was to avoid taxation.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

I am indebted to the hon. Gentleman's intervention because under subsection (3) the Clause says: "the main benefit which might have been expected to accrue." Well, the main benefit of buying that car in December and not in January was to evade the liability to Profits Tax. There could be many wholly innocent and reasonable transactions whose effect would be a reduction of liability to tax. The Attorney-General has admitted that much. He said that as a matter of practice honest people will be all right; they will have nothing to worry about. That is a paraphrase.

I take it that the Attorney-General was including in honest people the sort of transaction I have referred to. It is not good enough to leave a sort of discretion to the executive which will simply have the effect of ensuring, as a matter of practice, that innocent people are going to be safeguarded. If that was the Attorney-General's intention, he should write into the Clause considerably greater safeguards. One safeguard he must certainly put in, if only for a trial period, is a time limit of three years. We should be very much happier if people who had avoided tax in reasonable and honest circumstances were not at the mercy of the Commissioners ad infinitum. I ask the right hon. Gentleman not to close his mind to that.

Photo of Mr Arthur Colegate Mr Arthur Colegate , Burton

I have frequently heard from the benches opposite doubt cast upon whether any Clause that provides machinery to deal with the genuine tax evader can in no circumstances be used against innocent people. If the Attorney-General will look up his records at the Treasury he will find that we had a very similar case with Sir John Anderson, I think in 1944—the celebrated whisky case. What Sir John Anderson rightly did was to break up the ramp by which unscrupulous people bought from innocent shareholders distillery shares, then liquidated all the companies concerned, and sold at enhanced prices the stock of whisky. The result was that had it not been for Sir John Anderson they would have got away with enormous profit, no Income Tax, and no Excess Profits Tax.

When I and some of my colleagues brought this matter to the attention of Sir John Anderson he made a similar reply at first to that we have heard today, but being a man of great judgment and fairness he promised to look into it. The result was that he found that literally hundreds, if not thousands, of perfectly innocent shareholders had sold their shares utterly legally and were unaware of what was going on. The Clause was modified so that he succeeded in doing what we are try to get today—a Clause that would catch the real tax offenders and would not bother or catch the innocent in any way.

Photo of Mr Reginald Manningham-Buller Mr Reginald Manningham-Buller , Northamptonshire South

I would ask the right hon. and learned Gentleman to give further consideration to this point in view of the arguments that have been advanced. There seems to be great force behind them. No one on either side of the Committee wishes to do injustice as a result of debate at this hour on a complicated Clause like this. The Attorney-General, I appreciate, may want further time to consider this, and I ask him to say that he will look further into the matter.

Amendment negatived.

Photo of Mr Henry Strauss Mr Henry Strauss , Norwich South

I beg to move, in page 20, line 41, at the end, to insert: Provided that this section shall not apply where the transaction or, if there are more than one, all the transactions falls or fall within the scope of section thirty-two of this Act and Treasury consent has been given to it or them under proviso (ii) of subsection (1) of that section. The object of this Amendment is to bring Clauses 28 and 32 into proper relationship. Both of them purport to deal with avoidance of liability. Clause 28 deals with transactions designed to avoid liability to the Profits Tax. Clause 32 deals with the restriction of certain transactions leading to avoidance of Income Tax or Profits Tax. The Amendment I am moving seeks to make certain that the Commissioners do not treat as improper under Clause 28 anything for which the Treasury has given permission under Clause 32. In the absence of this Amendment, there will be nothing to stop their doing so. I think the Amendment is so unanswerably logical that I cannot help having some hope that the right hon. and learned Gentleman may announce the Government's decision to accept it. If he does not do so, it will be necessary to have further discussion, but if he does, we can pass on to subsequent Amendments.

9.30 a.m.

Photo of Sir Frank Soskice Sir Frank Soskice , Sheffield Neepsend

I cannot accept this Amendment. When consent is being given under Clause 32, it may transpire that the full facts were not before the Treasury at all, or that the consent was obtained by some kind of misstatement on the part of the applicant. If that were so, and the transaction was one also within Clause 28, there could be no possible reason for the powers which Clause 28 confers not being exercised. Therefore, I could not accept the Amendment as it is on the Order Paper. Not only is that the case, but we may have a transaction to which consent can be given under Clause 32 and it transpires that there is some subsidiary feature of the transaction which would bring it within Clause 28.

However, on behalf of the Inland Revenue, I am prepared to give the assurance to the Committee that once permission has been given for a transaction under Clause 32, the Revenue would not operate Clause 28 in regard to that transaction, provided that the full facts of the transaction had been before the Treasury when consent was given. That proviso is an important one. If it is complied with, then I think the taxpayer can rest assured that if he has consent under Clause 32, he will be in no danger of further direction under Clause 28.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

Who would be judge as to whether the full facts had been put before the Treasury—the Treasury or the Inland Revenue?

Photo of Sir Frank Soskice Sir Frank Soskice , Sheffield Neepsend

The Inland Revenue would have to decide in considering whether to make a direction.

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

It follows from what the right hon. and learned Gentleman the Attorney-General has said in reply to my hon. Friend that the unfortunate person concerned is not going to have any real security, even when he has obtained the consent of the Treasury, because it will be open to the Inland Revenue to reopen the whole matter under this Clause, if, in the apparently unfettered opinion of the Inland Revenue, he has not given the full facts. For a moment it seemed as if the right hon. and learned Gentleman was making a concession of real value, but the more one considers it, the less value it has. The matter appears to be still back in the position that it is the unfettered discretion of the Inland Revenue which governs it.

I hope that the right hon. and learned Gentleman has not said his last word. In the first place he is assuming that if the applicant makes a misstatement, he may not be able to obtain consent. That seems to convey some reflection on the competence of the officials of the Treasury.

I notice that, perhaps by happy coincidence, there is no representative of the Treasury with the right hon. and learned Gentleman on the Front Bench, other than the technical presence of the Deputy Chief Whip. They certainly should not give their consent under Clause 32 until they have satisfied themselves that they have obtained the necessary information. It would be quite wrong for them to give that consent, vested in them by the Committee under Clause 32, if that Clause becomes law, without making it their business to obtain the full facts.

It seems that the right hon. and learned Gentleman, inadvertently perhaps, is casting some reflection on the Treasury, but the more important point is that it is surely essential in the conduct of any business that those conducting it should be able to obtain some secure and stable basis for their activities. Surely, when a firm has gone to the Treasury and has given them such facts as the Treasury seek to obtain, and has, as a result, obtained Treasury permission and has gone ahead with his plan—it should be quite intolerable that some considerable time afterwards, the Inland Revenue, as a result of the last Amendment, could say, "The Treasury has not obtained the full facts and we are going to re-adjust your affairs." The right hon. and learned Gentleman cannot expect a commercial community to conduct its business on a basis of such insecurity and instability and I think, in his scrupulous care for the interests of the revenue, he is a little inclined to overlook the practical necessities of those who conduct business and commercial affairs in this country.

It is very dangerous—I am sure he appreciates it—to those business enterprises upon which the country depends for its bread and butter to introduce all these instabilities and insecurities which cannot but induce those responsible for business not to indulge in the new enterprises and the new efforts which are in the national interest. I hope he has not said his last word.

I hope he is prepared to have a little more confidence in the competence of the Treasury and I hope he will be prepared to have a little more regard for the financial and commercial interests of this country. If he is, I am sure he will be willing to put something in the Bill which, without including fraud, none the less would give security to the honest man, who has given the Treasury what he thought they requested, against having the matter re-opened by a separate organ of the State years after the most important Department of the State has given him the permission which he sought.

Photo of Mr Nigel Birch Mr Nigel Birch , Flintshire West

We should bear in mind that under Clause 32 (3) very heavy penalties can be imposed on people taking action without the consent of the Treasury—two years' imprisonment and a fine not exceeding £10,000. That is the sort of Clause which often appeals to hon. Gentlemen below the Gangway, when they see the possibility of a few people in jail. The question of fraud on the Revenue is therefore fully covered by such penalties. It seems to me wholly unreasonable and wrong that the Treasury can re-open the whole transaction in a case which does not involve fraud.

The second point of criticism is this. As far as I can see, it is not for a court to decide whether information was fraudulently withheld. It appears to be for the Treasury to take the decision. They will be judge and jury in their own case and will decide whether a transaction should be re-opened. That seems to put a good deal of unnecessary temptation in the way of the Treasury and this Clause is, therefore, not one which the Committee should accept.

Photo of Sir Frank Soskice Sir Frank Soskice , Sheffield Neepsend

Perhaps I may reply to the speeches made so far, because probably I may have introduced a certain amount of misconception. I am sure I am responsible for it.

The hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) said I was casting a reflection on the Treasury, but I was not doing that at all. The Treasury and the Commissioners are very largely dependent on the information which they receive from the applicants seeking permission. They can apply certain checks, but they cannot insist upon the production of documents and, therefore, they are very much at the mercy of the person seeking permission—and I hope that is not over-stating the case. Although they may take every possible precaution and may sift the information according to the means available to them to the best of their ability, it may well be that facts are not disclosed to them which would materially influence their judgment.

Supposing there has been a request for a certificate under Clause 32, which has been granted. The person concerned goes abroad and is not liable to any penalty. Then a situation arises in which the Commissioners, looking further into the transaction, find something new upon which they say, "This was not at all reflected in what was represented to us." When one uses the word "fraud" one is talking about an indefinable thing—a sort of sharp dealing, which is perhaps all right at one end of the scale but which is downright dishonest at the other end of the scale. Hon. Members complain that it is not right that the Commissioners should be able to judge whether they have been fully informed. But who else can?

What would happen if the applicant were granted his permission and then the Commissioners obtained knowledge of the transaction—brought before them for some reason or other? Who else could be made judge in the case? It is not as if it can be submitted to the courts. It is simply a case between the Commissioners and the applicant, so that the only person who can decide must be the Commissioners.

Suppose they make a direction under Clause 28, the court may come in in the shape of the Special Commissioners, and, as hon. Members who have examined subsection (4) know, the powers of the Special Commissioners on hearing an appeal are extremely wide. They have the power simply to say that they do not think a direction ought to have been made in the circumstances, even though there may have been motive, and all the rest of it. They can say, "In all the circumstances we do not think a direction should have been made," so that they can cure anything which requires curing, looked at from that point of view.

They were the only points I wanted to emphasise in reply to the two speeches made from the Opposition. To begin with, the Commissioners and the Treasury must, of necessity, be very much dependent upon the information which is supplied to them by the applicant, and, even if they use the utmost discretion in dealing with that information, they may still be misled unless the person giving the information does so with complete candour and fullness.

Secondly, from the very nature of things the Commissioners must be the judges of whether they think they have been given the full information, because nobody has by then come on the scene; no court has yet come on the scene; it is only when we get to the Special Commissioners that there is some, as it were, outside arbiter who can judge whether they have given full information or not.

Bearing that in mind, I submit to the Committee that the assurance I give on behalf of the Inland Revenue is not a valueless assurance. The assurance is carefully worded, and perhaps I might read it out again: Once permission had been given for a transaction under Clause 32 the Revenue would not operate Clause 28 in regard to the transaction, provided the full facts of the transaction had been before the Treasury when consent was given. I hope the Committee will not think that is a valueless assurance, and that it does afford a reasonable measure of protection.

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

Before sitting down, would the right hon. and learned Gentleman deal with this point? He said that the court does not come into the picture. Under the present scheme of the Bill that is undoubtedly true. But, in view of the fact that he himself appeared to appreciate the difficulty which arises from its being left to the Commissioners, in the first place to decide whether the full facts had or had not been given to the Treasury, and therefore whether they were barred by the right hon. and learned Gentleman's assurance from re-opening the matter, would it not be possible, in these circumstances, to introduce at a subsequent stage an Amendment under which the Commissioners were not invited to do so without leave of the court? That would put the matter in wholly independent and impartial hands, and I think would meet certain of my apprehensions.

9.45 a.m.

Photo of Mr Henry Strauss Mr Henry Strauss , Norwich South

I thank the right hon. and learned Gentleman for the exposition he has given in answer to the Amendment, and I only want to make two or three points quite clear. The first is that we who framed the Amendment have not the slightest objection to the Government taking any reasonable steps against fraud or anything in the nature of fraud. The second point is that what we designed this Amendment to do was to see that a transaction, if approved by the Treasury after consideration, in the absence of culpable non-disclosure, should not be questioned by a different organ of the Government under a different Clause. Because at any rate some part of that demand appeared to the right hon. and learned Gentleman to be reasonable he carefully read out his considered undertaking.

I hope the right hon. and learned Gentleman will not misunderstand me. I do not, of course, treat that undertaking as negligible; nor do I make the slightest charge against the Inland Revenue. Nevertheless, I hope he may consider that the matter is of such importance that, if he asks us to attach value—as I do attach value—to the undertaking that he read out, he will see that it would be even more proper to insert that undertaking in suitable language in the statute. After all, his undertaking, though nobody questions it or doubts it, is an undertaking which is wholly without legal force; it cannot be quoted in the courts; it can be ignored, and, if it is ignored, the subject has no remedy.

I beg the right hon. and learned Gentleman to consider whether he could not put the language in the statute, perhaps in some slightly different form of words from that which he has given the Committee. No reason of any sort has been given why, if it is reasonable to ask us to place reliance on this undertaking, that undertaking should not be given legal force in the ordinary way by being embodied in the statute.

I feel certain that if the right hon. and learned Gentleman would give some hope that the proposal I have made will be properly considered between now and the Report stage with a view to the Government inserting, in its own language, a proper undertaking to prevent the evil of duplication and lack of consistency between two Clauses in the Bill, that would be very much more satisfactory. I wonder whether, in the light of that, the right hon. and learned Gentleman would add anything to what he has said.

Photo of Mr Charles Williams Mr Charles Williams , Torquay

As we have not had an answer to the very reasonable request of my hon. and learned Friend, may I, as a layman, ask the right hon. and learned Gentleman to reconsider the position? How are we, as laymen, having only the assurance of the right hon. and learned Gentleman—which we know is completely and utterly valueless in a court of law—to explain to our constituents exactly what this means and where they stand?

This is an effort by the Government to prevent evasion. If they are to get the support of the Committee in this matter they must make plain, in that legislation, that the matter with which it is dealing so that the ordinary business people understand it. I am not asking the right hon. and learned Gentleman to accept the Amendment now, but I beg him to tell us that he will go into this matter between now and the Report stage. I am sure that there are other Members who take the view which I do, that we ought to have something more. Would the learned Attorney-General be so kind as to do that?

Photo of Sir Frank Soskice Sir Frank Soskice , Sheffield Neepsend

I will undertake, without commitment, to look into this matter, but it may be that I can do nothing to meet the wishes expressed. There are difficulties, and, supposing that nothing comes of my examination, I hope that hon. Members will not think that I have not implemented my promise.

Photo of Mr Henry Strauss Mr Henry Strauss , Norwich South

I am sure that the right hon. and learned Gentleman will fulfil that undertaking, and I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Photo of Mr David Eccles Mr David Eccles , Chippenham

I beg to move, in page 20, line 41, at the end, to insert: Provided that this section shall not apply where the application of the section would conflict with the terms of any of the double taxation agreements authorised under section fifty-one of the Finance (No. 2) Act, 1945. I think that these double taxation agreements, which are of great use to British business, were, on the whole, made at the instigation of H.M. Government. It is all the more necessary, therefore, that we should do nothing in our taxation legislation which might contravene these agreements, and even cause some of the other parties to wish that they had not made them. The purpose of the Amendment is to ensure that that shall not happen. I admit that it is not very likely to happen, and I admit that it is probably rather a small point in the matter of the amount of tax which may be involved. But I think that, from the standpoint of good relations with the countries with whom we have these treaties, that it ought to be put into the Bill.

These double taxation conventions generally provide that a business resident in one of the territories shall not be charged tax in the other territory unless it carries on activities in that other country through a permanent establishment therein. It may happen that with the consent of the Treasury, under Clause 32, a business here may either go abroad, or it may sell a part of its assets to a company overseas. Then at a later date, the Commissioners may come along and say, "Well, you did not sell that, you charged too little. We are going to assess your Profits Tax on the price which we think you ought to have got for that sale."

I am not disputing that that sort of transaction happens. For the sake of the argument, let us suppose that it has happened. If that is so, and a business which is being transferred no longer has an office in this country, and the tax is levied on the vendor, there will arise a situation in which the tax convention will be broken. To put that right, I think that the assurance which we want from the learned Attorney-General, which should be inserted into the Clause, is that there should be a compensating reduction in the amount allowed in respect of whatever dividends or interest it may receive from overseas.

In other words, we want to preserve the position in the double taxation conventions whereby a company's profits are only taxed in one place; and as the conventions are mostly drawn, profits tax does not, I believe, fall on profits earned overseas. That is why it seems to us that there is a possibility that, after a sale or transfer abroad has been effected, the Commissioners might, within the terms of Clause 28, come back and say, "You did not charge enough, and we shall assess Profits Tax." Then, the double convention would be broken. This is more a diplomatic—if I may use the phrase—than a financial Amendment.

We do not want to add to the strains that there are going to be as a result of this Finance Bill as a whole, between overseas Governments and His Majesty's Government. It will be bad enough unless Clause 32 is taken away, and we urge that it is of the greatest importance that we should not lay ourselves open to reproaches from foreign countries and foreign nationals. We should not encourage them to increase their spirit of nationalism, which is making overseas business more difficult; and if we are not carrying out a double taxation convention properly, they will be able to say, "Well, once again it is difficult to do business with these people." I hope that the learned Attorney will say that he is going to give this consideration.

Photo of Sir Frank Soskice Sir Frank Soskice , Sheffield Neepsend

The hon. Gentleman's anxiety lest the application of Clause 28 might result in a conflict with any of the double taxation countries is not well founded. He seeks to procure his desire by a proviso which he suggests should be incorporated in the Bill; but such proviso is unnecessary because Section 51 of the 1945 (No. 2) Finance Act—the exact part is subsection (1)—provides that these double taxation agreements must apply—and here I quote the exact words— notwithstanding anything in any taxing enactment. That, I think, does what the hon. Member seeks to do by his proviso. It would be otiose to include his Amendment in the Bill.

Photo of Mr David Eccles Mr David Eccles , Chippenham

I apologise for not having looked up that particular subsection, and, in view of what the learned Attorney has said, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Photo of Mr William Spens Mr William Spens , Kensington South

I beg to move, in page 21, line 3, to leave out subsection (3).

During the hours that we have listened to discussion on this Clause, we have heard a number of references to this subsection, and in each case that it has been referred to by the learned Attorney-General, he has, I think, used all too much affection and good will. I will now endeavour to persuade him to postpone it, utterly and completely. He must forgive me if, in the course of it, I make some rather stringent criticisms of the manner in which it is drawn and the effect of it.

I do not want to keep the Committee any length of time and I think I can say what I have got to say fairly quickly. On the other hand, even now, after all these hours we have spent on the Clause, I am not at all sure that I really understand the part it plays and how it fits in with subsection (1). I am not certain whether it is anything more than merely a sort of addendum to subsection (1), bringing into the category of main purpose cases, a certain number more under this subsection.

10.0 a.m.

If so, it may be that the proviso to subsection (1) does govern to some extent the provisions of subsection (3), but if it does not, then the first and main criticism that I want to draw the attention of the Committee to is that apparently there is absolutely no time limit whatever during which the transactions or series of transactions referred to in subsection (3) may have occurred. That in itself seems to me a most condemnatory criticism of the subsection. It may possibly be capable of the earlier interpretation and that therefore transactions that have been completed before 10th April, 1951, may be outside the scope of subsection (3).

The next point I do ask for information on is why these three types of transactions are singled out for this special treatment by subsection (3):

  1. (a) the transfer or acquisiton of shares in or debentures of a company; or
  2. (b) a change or changes in the person or persons carrying on a trade or business or part of a trade or business; or
  3. (c) a change or changes in the directors of a company the directors whereof have a controlling interest therein.
Why these three transactions and no more? Would one be rash in speculating that the Commissioners have a certain number of cases in their mind which fall inside one or other of these three categories, and that this is a net laid to catch these specific cases? That has been done before.

Hon. Members have said a great deal about the lack of interest that the party on this side of the Committee takes in the matter of catching tax dodgers. On the contrary, from the very first moment I had the honour of coming into this House in 1933, every year we had subsections in the Finance Bill—I think without exception—aimed at people who in one way or another were tax dodging. A great deal of the difficulty of the subsections and the surprising form they took was often explained by the fact that they were drafted to catch a certain number of cases which the Revenue knew about and which they wanted to stop then and there, at once.

Unless that is the explanation, it does seem utterly unreasonable that three methods of evading this Profits Tax should be singled out for this special treatment. But when I get to the body of the case, I do want quite a lot of help. People have referred to this Clause as being a sort of arrangement under which if the transaction has resulted in the avoidance of taxation, then that fact is taken up by the Commissioners and relying on that fact, they then form the conclusion and the opinion that the main purpose of the transaction was to avoid taxes and all the consequences of the rest of the subsection coming into play. But that is not what the subsection says. The wording of it is quite extraordinary. It provides that if it appears in the case of certain transactions that, having regard to the provisions of the law relating to the Profits Tax other than this section which were in force at the time when the transaction or transactions was or were effected, the main benefit"— not which accrued but— which might have been expected to accrue"— I ask, expected by whom, the Commissioners or the parties to the transaction?— from the transaction or transactions in the three years immediately following the completion thereof was the avoidance or reduction of liability to the tax. … then certain things are to result.

Therefore, the test is not what has happened during three years but what might have been expected by someone to accrue during three years immediately following the completion of the transaction, and irrespective altogether of what has happened. It is enough for someone—and I still do not know who it is—to say, "I should have expected avoidance of tax to have accrued during three years after these transactions were effected." That opinion or expectation having been formed, thereupon the rest of this subsection comes into play and the transaction is then deemed legally to be one of which the main purpose was the avoidance of tax.

I have never seen a subsection like it; I cannot see why the Commissioners should not have to deal with these transactions in exactly the same way as every other transaction. Why should these transactions be put on this special stool ready for punishment by the Revenue? It is utterly unfair, and under those circumstances I suggest that there is every reason in the world why this subsection should be struck from this Clause.

Photo of Hon. Lancelot Joynson-Hicks Hon. Lancelot Joynson-Hicks , Chichester

I want to add one or two words to what my hon. and learned Friend the Member for Kensington, South (Sir P. Spens) has said. This is an exceedingly important and serious subsection, and because there is no way in which it can be sufficiently improved by Amendment, the only thing to do is to delete it. As my hon. and learned Friend has stressed, it is difficult to see what is the object of this, how it will fit into the general structure, and what will be its impact upon the companies which it may or may not affect.

I should like to come back to that point presently because it is an aspect of the matter which does not seem to have been taken into account by the Treasury—the doubt which these provisions will throw upon the operations of perfectly good companies which are trying to get on with the job, to carry on their business or trade. They are becoming increasingly tied up by legislation such as this, and it is becoming increasingly difficult for them to see their way to plan ahead along the lines which it is necessary for them to do if they are to carry on the business of the country satisfactorily.

We probably all recall a speech made some hours ago by the right hon. and learned Gentleman on one of the earlier Amendments to this Clause, in the course of which he quoted, by way of illustration, some four classes of case which he hoped and believed this Clause was designed to catch. In the event of these cases resulting in transactions which would reduce or avoid Profits Tax to these companies. As he went through these cases, it occurred to me—and I may be wrong—that these classes of cases he was quoting were intended to fit in to those three classes of cases that are quoted under (a), (b) and (c) in this subsection.

The frame-work of this subsection had been more or less designed to catch this or other similar classes of cases in which he was anticipating the possibility of the avoidance or reduction of Profits Tax. At that point I came to the conclusion that we were receiving one of the very few mercies we can anticipate in this Bill by having avoided the right hon. and learned Gentleman putting in the most heinous type of provision in this clause by adding a further paragraph, (d), saying, "and such other forms of transaction as the Treasury may prescribe."

If we look at (a), (b) and (c) and these three categories of transactions, it immediately strikes us what an exceedingly wide range of transactions are involved. We have to bear in mind the fact that, if a company enters into not one transaction, but a whole series of them, of which only one falls within the category (a), (b) or (c), then that subsection comes into operation. Therefore I feel, to begin with, it is putting an unreasonable burden upon the directorate of companies to have to interpret all these subsections in order to see whether any transaction or series of transactions in which they may be involved, falls within any of these particular categories.

With regard to the actual effect, as my hon. and learned Friend has said, the point about this subsection is not whether or not there is any intention of avoiding the incidence of Profits Tax either in whole or in part, but whether one of these subsidiary transactions does be found to benefit the company in that particular way. In the event of it benefiting other people in quite another way and having little benefit to the company save, possibly, in some ways the saving of Profits Tax itself, I think it will be caught by this Clause.

It is difficult to quote an illustration, but it can be illustrated by the hypothetical case of the superannuation fund. I am not suggesting that a company would, necessarily, be caught by the subsection, but it is a good type of case to take because, if it were to be within one of the transactions in the three categories, the setting up the superannuation fund, itself would be of benefit to the workers of the company and other people outside, but for the first three years of it coming into operation, it would be very unlikely to be of any substantial benefit to the company, save in regard to avoidance or reduction of Profits Tax.

Therefore, that type of transaction which obviously must be beneficial and to the advantage of all concerned in connection with a company—a perfectly bona fide transaction, much to be commended—will, if it falls within one of these three categories, immediately get caught, not for the intention of avoiding tax but for the fact that its main benefit during the first three years after the transaction is completed will have been found to have had that result.

10.15 a.m.

May I call attention again to those words the main benefit which might have been expected"? Never can I recall having seen in any Bill such an invitation to be wise after the event. The circumstances in which a board of directors may enter into a transaction at the present time are exceedingly difficult to visualise in three years' time, when the circumstances have completely changed. But it is three years after the transaction has been entered into that those who decide this issue turn round and say, "In the light of the circumstances as we see them today, the main benefit which might possibly have been expected three years ago was the avoidance of tax."

I most seriously stress that this subsection is unworkable. It is going to impose an unwarrantable brake upon the activities of commercial concerns, throw doubts upon commercial morality, and in the end be an exceedingly bad precedent for law, particularly because of its retrospective effect on what might have taken place three years before. The only possible thing to do is to delete the subsection entirely.

Photo of Viscount  Hinchingbrooke Viscount Hinchingbrooke , South Dorset

I cannot pretend to so erudite an explanation of this subsection as my hon. Friends who preceded me. But, looking at it as a layman, it does appear that it is the most important and operative section in the whole Clause. The first subsection is not so widely defined and is limited in extent, in that it comes to an end on 10th April, or all transactions completed before 10th April are null and void as regards this Clause.

With subsection three there is no time limit at all. It is wide in extent, because of the definitions given in (a), (b), or (c). I do not know of any sort of transaction involving a capital structure, the managers and directors of a corporation or company, that cannot be classed in one or other of those three definitions. Any tax dodging device involving persons, shares, or debentures is liable to be called in question under them. Therefore, it is subsection three which has the widest implication and anything that has been attempted in the past is likely to be covered.

Secondly, the subsection seems to go back in time over an enormous range of years. It speaks of a transaction or transactions in the three years immediately following the completion of whatever scheme there was and that means that it takes you right back into the past and is violently retrospective in effect. All sorts of innocent schemes which might have been started three or four years ago, initially involving no attempt at evasion of tax, are likely to be caught. I am entirely at one with my hon. Friends in thinking that this subsection is by far the most dangerous of all subsections in this Clause. It must certainly be deleted.

Photo of Sir Kenneth Pickthorn Sir Kenneth Pickthorn , Carlton

I want to ask the right hon. and learned Gentleman two questions which might clarify the discussion of this subsection. It is now generally agreed that transactions, in the plural, means a series of transactions. A question which has not been answered, explicitly or implicitly is: Would any competent lawyer know what are the earmarks of a series for this purpose? If not, can we be given any rule of thumb for knowing what constitutes a series? The second question is this: Is the Attorney-General sure, even from his point of view, that the words in line 16: … might have been expected … are the appropriate words? It seems to me there are two objections to that. One is the general objection to putting these things in the passive—it leaves it dubious who is to do the expecting. The other reason is that it is a very indefinite expression, and does not seem appropriate in connection with the definite article in: … the main benefit. Nor does it seem to be appropriate to the fact that we do not know who is to do the expecting. Am I wrong in thinking that in laymen's language it means that "the Inland Revenue now think that a sensible person would then have expected"? I think that is what it means to the eye of common sense, if I may use that expression without being accused of arrogance—if that is what it is meant to mean, can we be told so, and can we be told whether the Attorney-General is satisfied that this form of words is the best for putting that meaning in the statute.

Photo of Sir Frank Soskice Sir Frank Soskice , Sheffield Neepsend

In reply to the hon. and learned Member for Kensington, South (Sir P. Spens), we had discussed on an earlier Amendment the question whether there was a time limit to subsection (3), and the opinion I had expressed is that undoubtedly there is a time limit. It is to be found in the words of the third line from the end of the subsection: … shall be deemed for the purposes of this section to have been the main purpose. Deeming something to be the main purpose has no effect unless it is within the time limit laid down in subsection (1), so that the time limits in subsection (1) in my view also apply to subsection (3).

The hon. and learned Gentleman asked why it was that the three types of transaction specified in subsection (3) had been selected. The answer is that they are considered typical of the kind of transaction resorted to for this kind of tax evasion. I gave certain examples earlier. Take paragraph (a). That category would include the sort of case in which the director of a director controlled company transfers sufficient of his shares to his wife to bring his personal holding below 5 per cent. of the ordinary shares, thus qualifying himself as a whole-time service director. So there is no limit to the remuneration which can be paid to him which does not count for tax purposes.

Photo of Mr Oliver Lyttelton Mr Oliver Lyttelton , Aldershot

Or by sale to any other party—they can equally be caught.

Photo of Sir Frank Soskice Sir Frank Soskice , Sheffield Neepsend

They cannot equally be caught. They can be caught if the further qualification can be fulfilled, that the main benefit to be expected is a tax benefit.

The third question was: Who was the person who was to do the expecting? The words used come from E.P.T. legislation and have been construed often in the courts. The particular reference to this part of the wording in the analagous section of E.P.T. legislation is a passage in a judgment of a former Master of the Rolls, Lord Greene, in the case to which I have referred, the Crown Bedding Case, in All England Report, 1946, I. The relevant passage reads: The main benefit was the main benefit which might have been expected by a person surveying all the facts and knowing all the law on the subject at the time. In other words, the person who is to do the expecting is a person who stands as it were outside the transaction who is conscious of what is going on and knows all the circumstances of the law.

Photo of Hon. Lancelot Joynson-Hicks Hon. Lancelot Joynson-Hicks , Chichester

Is there anyone who fulfils all these qualifications except Lord Greene himself?

Photo of Sir Frank Soskice Sir Frank Soskice , Sheffield Neepsend

I can assure the hon. Gentleman that that was a careful judgment of Lord Greene, who has done many cases of this sort. He is perhaps one of our most experienced judges, particularly in this sort of legislation. He was giving a workable meaning of the Section of the Act. I should have thought that out of respect for Lord Greene the hon. Gentleman would have been better to have left that remark unsaid.

Photo of Hon. Lancelot Joynson-Hicks Hon. Lancelot Joynson-Hicks , Chichester

I think the hon. and learned Gentleman misunderstood me. I assure him there was nothing disrespectful in what I said. Recognising the supreme qualifications called for, I asked if there was anyone except Lord Greene, for whom I have the highest respect, who could fulfill these qualifications.

Photo of Sir Frank Soskice Sir Frank Soskice , Sheffield Neepsend

We all have respect and affection for Lord Greene and I am sure the hon. Gentleman did not intend any disrespect. The hon. Gentleman said he had never seen a Clause like this, but it has been part of our legislation for no fewer than seven years, and has been constantly explained. Anybody who has anything to do with tax matters knows this very nearly by heart. There have been very many cases in the courts.

The hon. Member for Chichester (Mr. Joynson-Hicks) expressed a number of apprehensions. He thought the Clause was unworkable, that it might throw doubts on the validity of the business community, and that it would cause fear and anxiety. I should think the answer to that is that apparently many members of this Committee who are members of the business community are not even aware that there was already such a section in our existing legislation which has been operating for seven years, and really has not caused any inconvenience and anxiety in the business community.

I never heard complaints about the operation of this Section and so far as I know there are no such complaints. It has operated with dignity and with no inconvenience except to people who wish to avoid paying their proper share of Profits Tax. I think the hon. Gentleman should not have the anxieties which he expressed.

I think I answered the question of the hon. Member for Dorset, South (Viscount Hinchingbrooke) and my answer was that there is a time limit in subsection (1).

Photo of Viscount  Hinchingbrooke Viscount Hinchingbrooke , South Dorset

Would it not be safer to put some proviso to subsection (3) in the Bill on the Report stage, because even the right hon. and learned Gentleman has not been able to show any direct link between subsection (1) and subsection (3).

10.30 a.m.

Photo of Sir Frank Soskice Sir Frank Soskice , Sheffield Neepsend

I do not think there can be much doubt about it, but between now and the Report stage I will consider what the hon. Gentleman has said.

The hon. Member for Carlton (Mr. Pickthorn) asked whether it was possible to say in more precise terms what was meant by a series of transactions or a scheme of transactions. I do not think there is a definition in any Act of what is meant by that expression. There have been references to what is a transaction, and again in judgments in the courts that question has been considered, although not very exhaustively considered, in relation to this kind of context. One cannot get much further than saying that transaction means no more and no less than an ordinary person would understand it to mean.

That is the only answer I can give to the hon. Gentleman because there is no other answer. Some ordinary English terms carry their own meaning on their face, and one does not improve matters very much by trying to get some kind of formal definition. It does not add to their meaning, which ordinary people clearly understand. I think I should use the same observations about the word "scheme," which also carries its meaning on its face.

Those were the questions put to me, and perhaps I may now give the reasons why we thought it necessary to have this subsection. The history of the Excess Profits Tax legislation is that it began in 1941 with Section 35, which simply made this kind of provision in relation to transactions whose main purpose was tax avoidance or reduction. Between 1941 and 1944 it was found that the Section was nothing like strong enough. It was almost impossible to bring people within it.

If anybody said to the Special Commissioners that he had some other plausible motive—other than a tax motive or in addition to it—the Commissioners found that they were obliged to conclude that the Section did not apply to him. They found themselves very nearly powerless, because whether that kind of statement was genuine or false, in practice it was very difficult for them to test it. They had no evidence against it, because it rested very much upon the word of the taxpayer himself and those who gave evidence for him.

It was found necessary in 1944 to strengthen the Section by Section 33 of the 1944 Act, which added to the words "main purpose" the words "or one of the main purposes" and which incorporated a subsection very similar to, although not exactly the same as subsection (3) of this Clause. Subsection (3) is almost word for word the same, although it contains some changes. We thought it was necessary, if the Clause was to operate at all, to strengthen it in exactly the same way as experience has shown that it was necessary to strengthen Section 35 of the 1941 Act.

Photo of Lieut-Commander Joseph Braithwaite Lieut-Commander Joseph Braithwaite , Bristol North West

I confess that I felt a mild alarm when I discovered that in the nineteenth hour of our deliberations we were entering such difficult legal waters as those through which we have just been navigating and it was, therefore, comforting to see piling up behind the right hon. and learned Gentleman some of the legal luminaries of his party, especially the hon. and learned Member for Islington, North (Mr. Moelwyn Hughes) and the hon. and learned Member for Ilkeston (Mr. Oliver). The hon. and learned Member for Gloucester (Mr. Turner-Samuels) is regrettably absent. In the event of either of the hon. and learned Gentlemen flagging or failing, beside one of them sits the former Financial Secretary to the Treasury whose lucidity I though we should need a few minutes ago.

My hon. and learned Friend the Member for Kensington, South (Sir P. Spens) deployed his Amendment to such effect that the learned Attorney-General conceded many of the points. I congratulate the right hon. and learned Gentleman on the extraordinary clarity which he still retains after his very long ordeal and on his good temper; and indeed, on his conciliatory words, although I thought he had a minor lapse when reference was made to the late Master of the Rolls. I thought the right hon. and learned Gentleman felt he must possess the qualities referred to by my hon and learned Friend, and I endorse that; and I hope there is no ill-feeling left after that incident.

I should like to pay tribute to a fellow layman, for I thought the most gifted speech on this Amendment was by my hon. Friend the Member for Carlton (Mr. Pickthorn), to whose penetrating words even the right hon. and learned Gentleman was unable to reply.

Photo of Mr Douglas Houghton Mr Douglas Houghton , Sowerby

Is this the annual prize-giving?

Photo of Lieut-Commander Joseph Braithwaite Lieut-Commander Joseph Braithwaite , Bristol North West

We are, alas, a very long way from that. When the hon. Gentleman has been in the House a little longer he will know that the annual prize-giving comes on the occasion of the Third Reading, and his interventions have not yet qualified him for a prize. If I may say so, he has still time to restore the position and to earn a few good marks, for he has all today. I thought he should have spoken on this Amendment by way of making his way to the prize-giving, but if not on this Amendment perhaps he will speak on later Amendments. I understand that some 40 new Clauses are to be called and I hope the hon. Gentleman will address us on 35 of them. If he does, then by his diligence and good conduct he may well appear at the prize table in due course, when the Third Reading takes place.

I apologise for that digression, which was entirely due to the interruption. I always endeavour to be courteous to my opponents and to give them such information as they may desire. The Committee is now fortified by the entry of the right hon. Member for Dunbartonshire. East (Mr. Kirkwood) who, if I may say so, is one of the best loved of our Parliamentary colleagues. He at least should have decided views on whether subsection (3) should be deleted. I only regret that the right hon. Gentleman is just too late by the twinkling of an eye to hear the speech of his right hon. and learned Friend which, in view of his past activities in the House, he would have found profoundly unsatisfactory. We very much missed the right hon. Gentleman's outbursts. I am told that he has entered the ranks of capitalism and has mellowed somewhat.

We must, however, confine ourselves to the Amendment. I thought my hon. and learned Friend the Member for Kensington, South, made an unanswerable case which was not shaken by the right hon. and learned Gentleman's reply. I feel that the right hon. and learned Gentleman himself seemed dissatisfied with the position because in reply to my noble Friend the Member for Dorset, South (Viscount Hinchingbrooke) he said he would give further thought to the matter between now and the Report stage—and thought on the part of a Socialist Government is always encouraging, even after an all-night Sitting.

I confess that on studying this subsection I had difficulty with its punctuation. I read it with care and studied its semi-colons, intertwined with commas. The grammar is so difficult and varied that I hope the timely arrival of the hon. Member for Stetchford (Mr. Jenkins) will enable us to get extracted from our difficulties. He is always regarded on this side of the Committee as one of the most intellectual if most misguided hon. Gentlemen opposite. When it comes to making our way through somewhat abstruse Clauses—I hope the hon. Gentleman has the Bill in his hand: we are discussing subsection (3) of Clause 28—it is a little difficult to understand the drafting. I was, therefore, comforted when the Law Officer said that he would give further attention to this matter.

In the meantime, we are confronted with the stern decision on what should be done about subsection (3) standing part of the Bill, and I am bound to say that, after listening to all the arguments with the greatest care—it is a little difficult to follow them after this very lengthy Sitting, conscientious though I always am in attending the Committee; I always regard myself as one of the best attenders; I congratulate myself upon that fact, and I followed all the arguments with care—the balance of evidence not only comes down on the side of my hon. and learned Friend, but comes down with such weight that, should he take his views into the Division Lobby, I shall feel it my duty to accompany him thither.

Photo of Mr Oliver Lyttelton Mr Oliver Lyttelton , Aldershot

I can hardly hope to make such an amusing contribution as that of my hon. and gallant Friend the Member for Bristol, North-West (Lieut.-Commander Braithwaite). I wish, first, to say something about the E.P.T. analogy. We have to remember that when talking about legislation dealing with Excess Profits Tax we are dealing with only a portion of the profits of a company which exceed the datum line of the brokerage period, and, therefore, with only one or two small sections of profits —and profits earned in war-time at that. But when it is sought to put into the statute these kinds of provisions, which cover the whole range of profits which may be earned in peace-time, then I suggest that the E.P.T. analogy is by no means a comprehensive answer to our objections to this subsection.

I also am encouraged by the presence of the hon. Member for Stechford (Mr. Jenkins), and I ask him whether he agrees that we are now taking a flight into the pluperfect subjunctive. Is any hon. Member prepared to contradict me when I say that that might be excepted as the pluperfect subjunctive? Certainly it is a pluperfect howler in the statute, because the thing need never have happened at all. Yet, on the presumption that it is even three years, if the effect were to reduce the liability to tax the main purpose is deemed to be to avoid.

These are very dangerous things to have in a statute in peace-time, and I very much hope that the Attorney-General will give us a little more assurance than he gave to my hon. Friend, and that he will look at this, what I might almost call, metaphysical Clause, because there was a moment when I detected the feet of the right hon. and learned Gentleman taking off from the terrestrial sphere and gradually being surrounded by a sort of nimbus of metaphysics. But, after all, we are dealing with a very mundane affair, and I hope that he will look again at this subsection and give us a little more assurance than he has done so far.

10.45 a.m.

Photo of Lieut-Colonel Sir Walter Smiles Lieut-Colonel Sir Walter Smiles , North Down

I wish to call the attention of the Attorney-General to a comparison of two similar companies, one registered in the United Kingdom and the other registered in the Union of South Africa. Those two companies might have identical capital, be pursuing exactly the same interests and have exactly the same directors, but the difference in law under subsection (3) will certainly discourage capital from the United States of America coming to the company registered in the United Kingdom, for those in America would very much prefer to go to the company registered in the Union of South Africa, as they are doing today.

Paragraph (a) says: the transfer or acquisition of shares in or debentures of a company. These big financial mining corporations are continually selling shares in mines that are past their best, and are putting their money into mines which are just developing, as in the Orange Free State at the present moment. We all know that those mines will take some 10 years to develop, during which time no Profits Tax will come into the Chancellor here. The Commissioners of Inland Revenue might read into that transaction that they were dodging Profits Tax—which they are. Their business consists of taking these risks in mines, because they do not know whether they will be successful profitable concerns 10 years hence.

At present, the Clause lays them open to very serious charges. Paragraph (b) says: a change or changes in the person or persons carrying on a trade or business. Directors change; they are bound to from time to time. One has only to read the financial newspapers to see that directors change. They may change for one reason or another, one reason being that their policy is wrong. But the Commissioners of Inland Revenue can read anything they like into it.

I will not now touch on private companies, to which we shall come later, because I believe that most of the laws against them are already well covered. We talk about wanting fresh capital and more commerce in this country, and about developing our Colonies, but this sort of Clause in this sort of Bill will discourage investment in the British Commonwealth.

Photo of Sir Isaac Pitman Sir Isaac Pitman , Bath

Before we leave this Amendment I wish to clear up a possible misunderstanding, and that is in regard to what the Attorney-General said about the 1944 Finance Act. He gave the Committee the impression that the wording of subsection (3) was, word for word, a replica of what appeared in that Act. I do not think he meant that.

Photo of Sir Frank Soskice Sir Frank Soskice , Sheffield Neepsend

I did not say word for word. I said it was nearly word for word, with one or two changes.

Photo of Sir Isaac Pitman Sir Isaac Pitman , Bath

The particular change I had in mind is this. I imagine that the words: the transfer or acquisition of shares in or debentures of a company. were not in the 1944 Act. That is a change from that Act, to which no doubt the right hon. and learned Gentleman wishes us to devote attention.

Photo of Sir Isaac Pitman Sir Isaac Pitman , Bath

That, at any rate, has cleased up that point, and I am most grateful to the right hon. and learned Gentleman for having made it clear. However, it still leaves the question raised by my hon. Friend the Member for Chichester (Mr. Joynson-Hicks) of the superannuation fund. It will be within the knowledge of the Committee that a superannuation fund, when founded, has got to have investments, and it is perfectly clear that the investments of the superannuation fund are likely, at any rate, to be within the transfer or acquisition of shares in or debentures of a company. That seems to me an added reason why we should delete this subsection, because it brings still further within the net of this Clause as a whole any superannuation scheme in the country.

It is perfectly clear that such a superannuation scheme, since its annual payments are a matter of charge against the profits of the company, must inevitably "reduce" or diminish the profits of the company which are subject to Profits Tax. The real trouble, which the learned Attorney-General has not yet faced up to, is the point raised by my hon. Friend the Member for Chichester (Mr. Joynson-Hicks), who asked whether it was not the case that this would inescapably bring within the mischief of this Clause something which we all know in our hearts is right, and which we would not wish this subsection to bring within the Clause.

Photo of Sir William Darling Sir William Darling , Edinburgh South

I do not want to detain the Committee longer than to give an example of what might happen under subsection (3, b) of the Clause. Any action arising under that paragraph may make one liable to special taxation. I have in mind a man who has a business which makes a net profit of £10,000 a year. He proposes to make his five employees profit sharers

and partners by getting rid of the £10,000 a year, which he finds embarrassing because of taxation, by handing it over to those five people who will have £2,000 a year each. But he will not be credited with having put up an entirely altruistic scheme because, under this subsection, it will be considered to be a transaction designed to avoid liability for Profits Tax.

Does the Attorney-General not know of the great march of development in business whereby profit sharing is becoming general in every direction? Does he not think that subsection (3, b) will definitely hinder the philanthropic action which I suggest is possible? Many men in business nowadays have to choose between two things. They cannot keep their profits for themselves.

The Government sees to that. They have to choose between giving them to the Chancellor or to their employees, and so they prefer to give their profits to their employees by distributing their profits under such a scheme as subsection (3, b) seems to prohibit. I know a man running a women's business, of which I have some knowledge, who informed me that he had to choose between giving it to Gertie or Gaitskell. He said, "I will give it to Gertie." I do not blame that gentleman because she has a singularly attractive figure and is a competent business woman.

I may have misread the Clause, but it seems to me that this subsection is capable of wide interpretation. Who can say what is the design which lies behind a single action? It may be desired bona fide to give a larger share of the business to employees. It is true that there will be less tax paid by the owner, but it may well be held against him that he did not do this out of goodwill—no good intentions are ever admitted to members of the capitalist class—but from a desire to poke the Chancellor in the eye. If that is so, it would be very unfortunate.

Question put, "That the words proposed to be left out stand part of the Clause."

The Committee divided: Ayes, 285; Noes, 270.

Division No. 122.]AYES[10.55 a.m.
Acland, Sir RichardAttlee, Rt. Hon. C. RBarnes, Rt. Hon. A. J.
Adams, RichardAwbery, S. S.Bartley, P.
Alien, Arthur (Bosworth)Ayles, W. H.Bellenger, Rt. Hon. F. J.
Allen, Scholefield (Crewe)Bacon, Miss AliceBenn, Wedgwood
Anderson, Alexander (Motherwell)Baird, J.Benson, G.
Anderson, Frank (Whitehaven)Balfour, A.Beswick, F.
Bevan, Rt. Hon. A. (Ebbw Vale)Griffiths, William (Exchange)Mulley, F. W.
Bing, G. H. C.Gunter, R. J.Murray, J. D.
Blenkinsop, A.Hale, Joseph (Rochdale)Nally, W.
Blyton, W. R.Hale, Leslie (Oldham, W.)Neal, Harold (Bolsover)
Boardman, H.Hall, Rt. Hon. Glenvil (Colne Valley)Noel-Baker, Rt. Hon. P. J.
Booth, A.Hall, John (Gateshead, W.)O'Brien, T.
Bottomley, A. G.Hamilton, W. W.Oldfield, W. H.
Bowden, H. W.Hannan, W.Oliver, G. H.
Bowles, F. G. (Nuneaton)Hardman, D. R.Orbach, M.
Braddock, Mrs. ElizabethHargreaves, A.Padley, W. E.
Brook, Dryden (Halifax)Hastings, S.Paling, Will T. (Dewsbury)
Brooks, T. J. (Normanton)Hayman, F. H.Pannell, T. C.
Broughton, Dr. A. D. D.Henderson, Rt. Hon. Arthur (Tipton)Pargiter, G. A.
Brown, Rt. Hon. George (Belper)Herbison, Miss M.Parker, J.
Brown, Thomas (Ince)Hewitson, Capt. M.Paton, J.
Burke, W. A.Hobson, C. R.Pearson, A.
Burton, Miss E.Holman, P.Popplewell, E.
Butler, Herbert (Hackney, S.)Holmes, Horace (Hemsworth)Porter, G.
Callaghan, L. J.Houghton, D.Price, Philips (Gloucestershire, W.)
Carmichael, J.Hoy, J.Proctor, W. T.
Castle, Mrs. B. A.Hubbard, T.Pryde, D. J.
Champion, A. J.Hudson, James (Ealing, N.)Pursey, Cmdr. H.
Chetwynd, G. R.Hughes, Emrys (S. Ayrshire)Rankin, J.
Clunie, J.Hughes, Hector (Aberdeen, N.)Rees, Mrs. D.
Cocks, F. S.Hughes, Moelwyn (Islington, N.)Reeves, J.
Coldrick, W.Hynd, H. (Accrington)Reid, Thomas (Swindon)
Cook, T. F.Hynd, J. B. (Attercliffe)Reid, William (Camlachie)
Cooper, Geoffrey (Middlesbrough, W.)Irvine, A. J. (Edge Hill)Rhodes, H.
Cooper, John (Deptford)Irving, W. J. (Wood Green)Richards, R.
Corbet, Mrs. Freda (Peckham)Isaacs, Rt. Hon. G. A.Robens, Rt. Hon. A.
Cove, W. G.Janner, B.Roberts, Emrys (Merioneth)
Craddock, George (Bradford, S.)Jay, D. P. T.Roberts, Goronwy (Caernarvonshire)
Crawley, A.Jeger, George (Goole)Robertson, J. J. (Berwick)
Crosland, C. A. R.Jenkins, R. H.Rogers, George (Kensington, N.)
Crossman, R. H. S.Johnson, James (Rugby)Ross, William
Cullen, Mrs. A.Johnston. Douglas (Paisley)Royle, C.
Daines, P.Jones, Jack (Rotherham)Shawcross, Rt. Hon. Sir Hartley
Dalton, Rt. Hon. H.Jones, William Elwyn (Conway)Shinwell, Rt. Hon. E.
Darling, George (Hillsborough)Keenan, W.Shurmer, P. L. E.
Davies, A. Edward (Stoke, N.)Kenyon, C.Silverman, Julius (Erdington)
Davies, Rt. Hn. Clement (M'ntg'mery)Key, Rt. Hon. C. W.Silverman, Sydney (Nelson)
Davies, Harold (Leek)King, Dr. H. M.Simmons, C. J.
Davies, Stephen (Merthyr)Kinghorn, Sqn. Ldr. E.Slater, J.
de Freitas, GeoffreyKinley, J.Smith, Norman (Nottingham, S.)
Deer, G.Kirkwood, Rt. Hon. D.Snow, J. W.
Delargy, H. J.Lang, GordonSorensen, R. W.
Dodds, N. N.Lee, Frederick (Newton)Soskice, Rt. Hon. Sir Frank
Donnelly, D.Lee, Miss Jennie (Cannock)Sparks, J. A.
Driberg, T. E. N.Lever, Harold (Cheetham)Steele, T.
Dugdale, Rt. Hon. John (W. Bromwich)Lever, Leslie (Ardwick)Stewart, Michael (Fulham, E.)
Dye, S.Lewis, Arthur (West Ham, N.)Stokes, Rt. Hon. R. R.
Ede, Rt. Hon. J. C.Lewis, John (Bolton, W.)Strachey, Rt. Hon. J.
Edelman, M.Lindgren, G. S.Strauss, Rt. Hon. George (Vauxhall)
Edwards, John (Brighouse)Lipton, Lt.-Col. M.Stross, Dr. Barnett
Edwards, Rt. Hon. Ness (Caerphilly)Logan, D. G.Summerskill, Rt. Hon. Edith
Edwards, W. J. (Stepney)Longden, Fred (Small Heath)Sylvester, G. O.
Evans, Albert (Islington, S. W.)McAllister, G.Taylor, Bernard (Mansfield)
Evans, Edward (Lowestoft)MacColl, J. E.Taylor, Robert (Morpeth)
Evans, Stanley (Wednesbury)McGhee, H. G.Thomas, David (Aberdare)
Ewart, R.McInnes, J.Thomas. George (Cardiff)
Fernyhough, E.Mack, J. D.Thomas, Iorwerth (Rhondda, W.)
Field, Capt. W. J.McKay, John (Wallsend)Thomas, Ivor Owen (Wrekin)
Finch, H. J.McLeavy, F.Thorneycroft, Harry (Clayton)
Fletcher, Eric (Islington, E.)MacMillan, Malcolm (Western Isles)Thurtle, Ernest
Follick, M.McNeil, Rt. Hon. HTimmons, J.
Foot, M. M.Mainwaring, W. H.Tomney, F.
Forman, J. C.Mallalieu. J. P. W. (Huddersfield, E.)
Fraser, Thomas (Hamilton)Mann, Mrs. JeanUngoed-Thomas, Sir Lynn
Freeman, John (Watford)Manuel, A. C.Usborne, H.
Freeman, Peter (Newport)Marquand, Rt. Hon. H. A.Vernon, W. F.
Gaitskell, Rt. Hon. H. T. N.Mathers, Rt. Hon. G.Viant, S. P.
Ganley, Mrs. C. S.Mellish, R. J.Wallace, H. W.
Gibson, C. W.Messer, F.Watkins, T. E.
Gilzean, A.Middleton, Mrs. L.Webb, Rt. Hon. M.