Part of Orders of the Day — HIRE-PURCHASE (No. 2) BILL [Lords] – in the House of Commons at 12:00 am on 24 June 1964.
Mr George Darling
, Sheffield, Hillsborough
12:00,
24 June 1964
I am much obliged, Mr. Deputy-Speaker.
This new Clause makes an entirely new proposal which was not mentioned in Another place, on Second Reading in this House or in Standing Committee. We are putting it forward for incorporation in the Bill at this late stage because the finance companies are now arranging certain hire-purchase agreements in such a way as to bring them within the ambit of tax relief on loans, but they did not start these new arrangements until after we had completed our proceedings in Committee.
The arrangements which have been made to give tax relief on the loan part of hire-purchase arrangements, if I may for brevity so describe it, are operated, of course, under our existing legislation, not under the terms of the Bill. We are asking the Government to accept this new Clause because it is very doubtful whether the tax relief arrangements can continue when the Bill is enacted. The doubt arises because of the provisions in the Bill dealing with termination of contracts before all the payments have been completed, a problem on which we have spent a very great deal of time, as the House knows. We are not concerned here with whether or not tax reliefs on loan interest are good or bad or whether they should be permitted or not. The point is that the law governing tax reliefs is not the hire-purchase law; it is the fiscal law under the Finance Acts, and the Finance Acts permit tax relief on loan interest in certain circumstances.
As we have often said in previous debates, hire purchase is a form of money lending, a perfectly respectable form of money lending when the transactions are honestly and properly conducted, as most are. What happens in ordinary hire-purchase transactions is that the customer, in effect, borrows the money to pay for the goods he wants, he pledges the goods as security for the loan, accepting a condition that the goods do not belong to him until he has settled the final repayment of the debt.
If the customer borrowed the money from a bank, he could claim tax relief on the interest charged. One or two respectable finance houses have found a way to provide for similar tax relief on hire-purchase transactions. Therefore, we have a duty here, now that we can do something about it before the Bill leaves us, to recognise these arrangements, which are clearly within our fiscal law, and provide for them suitably in this Bill, because, otherwise, we shall be discriminating between one form of money lending and another. As we have said, hire purchase is the ordinary man's bank loan. If we discriminate by failing to adjust our hire-purchase law to what is now an accepted practice, we shall be discriminating against the less well-off sections of our community. We shall put them at a disadvantage as against those who, because of their substantial bank accounts, can get personal bank loans which they use to buy the goods they need.
If hon. Members have read the new Clause, they will not want me to explain in detail how the arrangement works. If it is necessary to put anything on the record, I would say that, in order to make a hire-purchase transaction a personal loan for the purpose of attracting tax relief on the interest, one has to bring in a third party who goes through the motions of lending the money, the third party being a subsidiary of the finance company which has been set up quite legally and respectably for this purpose. The purpose of this new arrangement, which, as I have said, has come into being since we finished the Committee stage, is to give to the ordinary householder who goes in for hire purchase instead of borrowing money from the bank the same kind of tax relief as he would have if he were to borrow from the bank in order to purchase the things he wanted.
The arrangements which have been made for this purpose have been accepted by the City, by the Bank of England and by the Treasury as being well within our fiscal Laws. If we discriminate against these arrangements by refusing to adapt our hire-purchase law so that they can continue, we shall discriminate in general against the poorer sections of the community. I say "in general" because, of course, the benefit would go to someone who wanted to buy a Jaguar at something less than £2,000 on hire purchase, but, of course, hire purchase is, in the ordinary way, the poor man's money lending arrangement.
I plead with the Parliamentary Secretary, therefore, to accept this new Clause. If he refuses to do so, he will be denying tax relief on interest to poorer people while continuing to allow a similar facility on the personal loans arranged by those who have substantial bank accounts.
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