Clause 53. — (Assessment and Collection, etc.)

Part of the debate – in the House of Commons at 12:00 am on 26th May 1952.

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Photo of Mr Roy Jenkins Mr Roy Jenkins , Birmingham Stechford 12:00 am, 26th May 1952

I beg to move, in page 56, line 37, at the end, to insert: with the substitution for the words three per cent. where they occur in section eight of the Finance (No. 2) Act, 1947, of the words six per cent. All the speeches which have been made and all the Amendments which have been moved by the Opposition have been designed to help the Chancellor of the Exchequer, but that is more manifest in the case of this Amendment than in the case of some others. The Amendment is designed to do two things, both of which should be extremely helpful to the Chancellor. It is designed, first, to enable him to get a small amount of extra revenue in certain circumstances and, second, to extend the general provisions of his financial policy to a field to which they might not otherwise extend.

We propose in the Amendment to relate the rate of interest paid on arrears of tax to the prevailing Bank rate. The idea of charging interest on arrears of tax was first brought into operation in the Finance (No. 2) Act, 1947, which arose out of the Autumn Budget of my right hon. Friend the Member for Bishop Auckland (Mr. Dalton). The rate of interest then proposed to be charged on arrears of tax was 3 per cent. The Clause as drafted proposes to continue to charge 3 per cent. on arrears of the Excess Profits Levy. We are proposing to raise that to 6 per cent.

We propose to do that for these reasons. Obviously, a very great change has come over the monetary climate since the autumn of 1947. It is not my purpose now to argue whether that change is a right change—some of us had very grave reservations about it—but it is nonetheless clear that a change has occurred. When the 1947 Budget was introduced we were perhaps not quite in the heyday of cheap money, but at any rate my right hon. Friend the Member for Bishop Auckland was still Chancellor of the Exchequer and we were pretty near the heyday. We had a Bank rate of 2 per cent., and it was, therefore, reasonable to introduce a rate of only 3 per cent. on tax arrears.

We have moved a long way since then. We have a Bank rate of 4 per cent. There can be no doubt in the minds of any hon. Members who have listened to the Budget speech or the general economic speeches which the Chancellor has delivered since he took office that he regards as an absolutely essential feature of his financial policy the stiffening of credit rates. If there was something in the Budget which gave it any claim to be called an emergency Budget dealing with the balance of payments crisis it was the stiffening of the Bank rate.

Arguments were advanced by the Chancellor, and even more so by the Secretary of State for the Colonies in a speech which he made at the time, about the beneficial effects which would flow to the economy of the country by this stiffening of credit terms, an absolutely essential feature of the country's economic policy. While we cannot agree with the Chancellor, and still less with the Secretary of State for the Colonies, we feel that this credit policy is a wise policy, and while we certainly cannot agree that it is producing the results which hon. Gentlemen opposite claim, we feel that if it is the policy of the Government it ought to be applied consistently and that people who do not pay the tax which they ought to pay ought not to be granted a special exemption from its operation.

What is the position about arrears of tax? To a company arrears of tax are a loan from the Government during the period in which the tax is not paid; it is a loan which the company is able to use for its own business in a great many ways. Yet this Government which believes in dear money is saying that the rate of interest on these loans which it will make to taxpayers who are dilatory in meeting their dues should be charged only at 3 per cent., the old cheap money rate, whereas local authorities who borrow from the Public Works Loan Board and others who have to get money for various purposes have to pay a very much higher rate because of the policy which the Government itself has put forward. We say that if that is so, it is highly desirable that the policy of dear money should be extended to cover people who are very slow in paying their arrears.

6.0 p.m.

I cannot believe that the Government will not accept this Amendment, because it is an Amendment manifestly designed to help them in their purpose, which is to get more revenue from a source which no one will object, and to help them to carry out the central design of their economic policy. I am encouraged by the fact that it appears that the Financial Secretary is about to reply. That means that it is just possible that we may have some help from him on the first occasion, whereas if the Solicitor-General replies we know that we would have to wait at least until he made his fourth appearance at the Despatch Box before getting any glimpse of a concession. Judging by the anticipatory movements of the Financial Secretary, I think we can assume that he is going to reply, and I hope he will accept what I submit is a reasonable Amendment, and a most helpful Amendment from the point of view of hon. Members opposite.