New Clause. — (Savings (Pay as You Earn).)

Part of Orders of the Day — Finance Bill – in the House of Commons at 12:00 am on 30 June 1964.

Alert me about debates like this

Photo of Mr William Clark Mr William Clark , Nottingham South 12:00, 30 June 1964

I beg to move, That the Clause be read a Second time.

It will be remembered by the House that a similar Clause was moved on 3rd July, 1961, when we were fortunate in having the support of the Opposition Front Bench. No doubt tonight we may enjoy the same privilege. The arguments put forward on that Clause appear in column 1176 of the OFFICIAL REPORT of 3rd July, 1961. We should get it clear for the sake of subsequent speakers that this is a Conservative new Clause, and that the proposal was made as far back as 1955 at a Conservative Party Conference at Bournemouth.

What we must remember is the position and importance of savings in the country, particularly, as we have seen since the end of the last war, with our method of deficit financing. It is salutary to remember that in 1945 the National Debt was some £21,000 million, and that in 1951 it had increased to £26,000 million—over the five or six years. I assure the Opposition that I am not necessarily making a party point. The National Debt has continued to increase because of our deficit financing, and the latest figures show that it is just over £30,000 million, it having increased by just over £4,000 million over the last 13 years because of deficit financing. If we compare the nearly £5,000 million in the six years between 1945 and 1951 and the just over £4,000 million in the subsequent 13 years, we get into perspective how deficit financing even under the present Administration has been less than under the Labour Administration after the end of the war.

No party can afford to ignore the small savers. Here again, the figures are indicative. Between 1945 and 1951, the total savings—and I agree that it was a difficult time—amounted to £558 million. Since 1951, the total is £14,300 million. In 1951, about £100 million a year was being saved whereas last year the figure was about £1,900 million.

All these savings are not made by millionaires. They are made by small investors. There are 3 million investors on the Stock Exchange and 1 million in unit trusts. I am sure that the Chancellor will agree that we cannot continue the capital expenditure programme unless savings—that is, small savings—remain as high as in the last few years.

What we need, however, is a new approach to savings. I am delighted that my right hon. Friend introduced the National Development Bonds but I wish he had grasped the nettle more firmly and given a tax incentive for all contractual savings, no matter what type. However, a step has been taken in the right direction.

We must remember that some people find it extremely difficult to save although they have the will. Through our P.A.Y.E. system, about 24 million people have code numbers. One is given a code number according to personal allowances and each week, depending on one's income, one's employer looks up the tables and deducts the tax accordingly. For instance, one's code number may be 35, with a salary of £15 a week and tax at £2.

Surely it would not be beyond the wit of the Inland Revenue to extend this excellent machinery for collecting money to the collection of savings. It would be quite easy for that person on a code number of 35 to reduce it to 9 and instead of paying, say, £2 a week, to pay £3 a week instead. Through this manipulation he could pay £1 a week into savings. The beauty of such a scheme is that the saver would always have the money under his own control. If the saver found after a while that he could not save £1 a week but only 10s. he need only revert to a higher code number.

It should not be difficult to introduce such a scheme. I agree that it would be administratively difficult but only for the Inland Revenue. But the Inland Revenue should not be given the sort of consideration one necessarily gives to industrialists because, for the Exchequer, it is essential that our savings increase and anything that would give ease of saving should be operated by the Government.

The National Savings Movement does an excellent job in industrial savings. It has about 50,000 schemes throughout the country, covering about 3 million employees with savings of about £100 million a year. But we must remember that a firm cannot operate an industrial savings scheme unless it has at least 200 employees. If there are fewer than 200, such a scheme is not economic. It does not warrant the appointment of a savings officer to look after an industrial savings scheme. It should be remembered that many firms employ fewer than 200 people, so that, no matter how much good the National Savings Movement does, it does not catch those firms.

The Clause goes on to say that interest should be allowed. So that the Clause shall be kept in order, that interest has to be proposed at the Post Office rate of 2½ per cent., but that is a very low rate of interest. It also proposes an exemption limit of £25 for the interest. It is wrong that a man who saves through the Post Office should get up to £15 a year interest tax-free, while a man who saves through unit trusts does not get the same exemption. There is no difference between the two kinds of savers. If a man prefers to save through the Post Office, let him do so, but if another prefers to save through unit trusts, he should have the same sort of exemption. I know that it is rather late in this Budget for my right hon. Friend to do anything about it, but I hope that he will think about this subject and do something for savers when he introduces next year's Budget.

Savings must be made administratively simple for the saver. I am sure that hon. Members opposite will agree with me that the next requisite is that savings should be secure. I hope that hon. Members opposite will forgive me if I say that their suggested wealth tax could not possibly give confidence to the small savers.