Clause 20. — (Capital Gains Accruing to an Individual: Alternative Charge to Tax.)

Orders of the Day — FINANCE (No. 2) BILL – in the House of Commons at 12:00 am on 25th May 1965.

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Photo of Mr Peter Walker Mr Peter Walker , Worcester 12:00 am, 25th May 1965

I beg to move, in page 16, line 12, to leave out "two-thirds" and to insert "half".

This Amendment is designed to be of particular assistance to those on small incomes. The Financial Secretary will, I hope, at last be able to shower upon us some of those concessions we were promised 24 hours ago but which are still not forthcoming, particularly as the granting of this concession will not give any great benefit to people on very high incomes. We have noted from his dealing with previous Amendments that the hon. and learned Gentleman is always unwilling to give any concession affecting millions of small people if it should in any way benefit one or two people of high income.

The Amendment is certainly in line with capital gains tax practice abroad. It has been interesting to see how throughout the day the Financial Secretary has used international comparisons whenever that has suited him, but I noticed that yesterday, when using the United States comparison, he decided that although the Americans had not carried out what he was doing they had thought about it. Today he has told us that although what he was doing was different from the practice in Sweden, the Swedes were thinking of doing it, too. This concession by which 50 per cent. of the capital gain can be put against a person's rate of Income Tax and Surtax has been followed in the United States, and it is one that quite rightly takes note of the fact that people who are paying a low rate of Income Tax or Surtax should not be affected in exactly the same way as those with higher incomes. That is the essence of the Amendment.

I am rather surprised by the lack of realisation on the part of hon. Members opposite of the extent of the ownership of odd shares and other securities by great numbers of people. My hon. Friend the Member for Harrow, Central (Mr. Grant) gave a figure of four million people who owned shares either directly or through unit trusts. That is a very large number. Thinking of it in terms of our constituencies, it amounts to 8,000 in every constituency, probably meaning that 8,000 homes in every constituency are directly affected by and interested in investment.

We on this side of the Committee have always tried to encourage the small investor, and we rejoice in the fact that there has been a considerable increase in the numbers of people taking an interest in investment matters and participating in the ownership of British industry in recent years. We brought in several Measures to assist them, including Measures which basically affected their capital position, such as amendment of Stamp Duty.

The present Government have done just the opposite. They have detracted from the advantages of investment for these people by increasing the standard rate of Income Tax, and now by applying this Capital Gains Tax which makes no concessions for inflation or for anything else. It is surprising that the Government should not only have decided to impose a higher rate of Capital Gains Tax but should, at the same time, have decided to give a lower concession to people on low incomes. This reflects a Government which appear to want to discourage the spread of ownership rather than to encourage it. Perhaps it is a Government that wants the only ownership to be public rather than private ownership. We on this side very much want to encourage the spread of small investment. Therefore, on this point alone there is a very strong argument.

Another major factor is that throughout the afternoon, first the Chief Secretary and then the Financial Secretary have used as an argument against various Amendments the very real concession involved in giving this two-thirds option.

I tried to point out to the Financial Secretary during one of his speeches that in practice this two-thirds option amounted to very little for the person who was paying the standard rate of Income Tax. If instead of paying the 30 per cent. Capital Gains Tax that person decides to go for adding two-thirds of the gain to his income the effect is to reduce the rate of Capital Gains Tax from 30 per cent. to 27½ per cent., a level which we consider to be still very much too high. That reduction, therefore, is a very small concession.

The effect of my Amendment would be that a person paying the standard rate of Income Tax would pay the Capital Gains Tax on something like 21 per cent. It would mean that persons paying no level of Income Tax would have to pay no Capital Gains Tax. I think that there are few hon. Members who would want to see somebody who has such a low income as to be paying no rate of Income Tax if he came across a small capital gain having that gain taxed at 30 per cent. Thus this concession gives a heavy weighting to those on small incomes. It does not in itself encourage the spread of share ownership, because the very imposition of the tax at all discourages that, but it in some way relieves the burden which the Government are putting on the small investor and the people who are affected by the Capital Gains Tax.

In urging the Financial Secretary to accept the Amendment I would point out that so far he has disappointed the Committee in that wherever the Minority Report on capital gains suggests some way of limiting the imposition of this tax he has rejected those proposals but whenever it has gone for the high level of taxation he has acceded to it.

Photo of Mr Niall MacDermot Mr Niall MacDermot , Derby North

Mr. MacDermot indicated dissent— —

Photo of Mr Peter Walker Mr Peter Walker , Worcester

The hon. and learned Gentleman shakes his head, but on the imposition of the short-term tax yesterday, on Amendments put forward by my hon. Friend the Member for Harrow, Central (Mr. Grant) earlier today, and the proposals of the Minority Report which would have helped the small investor the Government have rejected our suggestions. This proposal will not cost the Revenue very much. We have been told the staggering news, and I should have thought surprising news for hon. Members opposite, of how long it will be before any worthwhile revenue will be obtained from the tax.

The staggering reply from the Financial Secretary earlier in the debate was that the figure of £100 million eventually to be raised by this tax will not be reached for at least 12 or 15 years, and the amount of revenue to be raised this year is very small. The Amendment therefore will not cost the Treasury the loss of any great revenue this year. It will directly assist those who are on small incomes and I strongly urge the Government to accept at last an Amendment from this side of the Committee.

Photo of Mr Anthony Grant Mr Anthony Grant , Harrow Central

I support the Amendment. It will be within the Committee's recollection that earlier in the debate the Financial Secretary dismissed rather cursorily and arbitrarily a suggestion of mine that that there might be an exemption from Capital Gains Tax up to the first £400. The reasons which the hon. and learned Gentleman gave for rejecting that Amendment were wholly inadequate. This is an opportunity for him to redress the balance and give some assistance to the small investors on whose behalf I was arguing earlier.

12.45 a.m.

The hon. and learned Gentleman rejected the idea we proposed earlier today on the ground that there was no administrative saving in excluding a band from the lower level of capital gains, and the main weight of his argument seemed to be that he could not give a relatively small but important saving to a very large number of small investors because a few rich tycoons at the top would get some advantage. This is entirely in keeping with the Government's attitude. Their concern is not to assist people, not to further the economic growth of this country, but to catch someone at the top end. Their concern is to soak the rich even though the poor suffer as a result. It is very much like the attitude of the puritan in the seventeenth century whose objection to bear-baiting was based not so much on the pain suffered by the bear as on the pleasure experienced by the baiters. Moreover, the Financial Secretary never explained why, on the one hand, it was right, sensible and administratively practicable to have a band of people at the lower level of Income Tax who were exempt from tax altogether and, on the other hand, it was wholly unacceptable to have a similar approach in regard to capital gains.

The Amendment would go some way to overcome the difficulties which the Government have put in the path of wider ownership and investment. A survey carried out some years ago by, I believe, Mark Abrams showed, quite contrary to the Financial Secretary's view, that the main reason why the small investor went in for investment was to get a capital gain. Those who are starting investment clubs or are thinking of investing for the first time will be astounded to learn that, in the Financial Secretary's view, so far from discouraging them, the Capital Gains Tax will be a positive incentive. I did not understand the hon. and learned Gentleman's argument, and I am certain that the great mass of small investors will not understand it either.

After the very cursory, illogical and inadequate arguments which the Financial Secretary put before us earlier, here is an opportunity for him to redress the balance and show that the Government really mean what they say when they talk about giving a concession. Let them pay rather more than lip-service to the cause of ownership and the small investor in particular by making a concession on the lines suggested in the Amendment.

Photo of Sir John Foster Sir John Foster , Northwich

I support the Amendment on a ground other than that advanced by my hon. Friends. It has been shown clearly in our debates today and yesterday that there are many injustices in the Capital Gains Tax. Let us assume for the moment that it is right for the Government to try to impose injustices on those who are better off. That seems to be their object. When confronted by injustice, they say, "It does not matter; it is not an injustice, There have been a lot of tax fiddles in the past, so let us get on with it". The great justification for the Amendment is that it would reduce the rate of Capital Gains Tax for people of smaller means and, therefore, the injustices which they would suffer would be accordingly reduced.

Here are two examples of injustices which have not hitherto been mentioned. A person from the Commonwealth settles in this country—and by "settles" I mean becomes domiciled or ordinarily resident, using a shorthand term for it. When he gets here be becomes liable to all the capital gains which he has realised from property abroad and sold in the year of assessment before he arrived in this country.

Let us suppose the man has come from Australia where he has sold his sheep farm for £50,000. He finds when he arrives in this country on 1st June that he has to pay Capital Gains Tax on the amount realised on the property sold. That seems to be an obvious injustice. But if he is a small man the justification of this Amendment is that at least before he comes into the country the rate is reduced from two-thirds to a half and the injustice is diminished. The Government are faced with the difficulty of adjusting their Capital Gains Tax to remove the injustice.

In another situation the same small man settles in this country from abroad and sells his assets abroad after he arrived on 1st June. If the capital gain has entirely accrued before the date of his arrival he still has to pay the full tax on the capital gain, even though he can prove that the whole of the capital gain was made before 1st June. This is another obvious injustice which the Government have not yet dealt with. If the rate is reduced the injustice is reduced, too.

The Financial Secretary justified taxing inflation by saying that people with capital or equities benefited from inflation. There is an obvious fallacy in that argument, because if an asset is valued at £100 and towards the end of the period its realisation increases 10 per cent.—it is sold at £100 and realised at £110. Capital Gains Tax is paid on that and it is then found that inflation has been 10 per cent. so the person has not benefited at all. In fact his purchasing power has diminished by the amount of Capital Gains Tax on the increase.

There is no justification for saying he has benefited, even assuming that the inflation is just exactly equal to the increase in the value of the assets. The Government may say that they want to redistribute wealth and see that the wealth of the rich is diminished. We do not agree with that point of view, but the Government are rather shy about coming into the open about it. It can be seen clearly that the instance which I have given of £100 to £110 exactly equalling the inflation is an injustice, and if we reduce the rate from two-thirds to a half we temper the injustice to the small man. We enable him to suffer a little less when he is taxed on the value of the asset which has been raised by inflation.

One could give many instances of the injustices of Capital Gains Tax, even admitting its principle. I am only on the point that, admitting its principle for the purpose of my argument, it results in inequitable injustices to particular individuals. I could give complicated instances of injustices, like trustees, and so on, but I want to confine myself to this Amendment where the rate of tax, if it is reduced to half, will mean that the small man will see that it is still unjust, but the amount of the injustice, which will be measured in terms of £ s. d., will be reduced, and for that reason I urge the Committee to support the Amendment.

Photo of Mr Niall MacDermot Mr Niall MacDermot , Derby North

Sir Samuel, you were obviously much more percipient than I, because it was not until his closing sentence that I realised the relevance of the remarks of the hon. and learned Member for Northwich (Sir J. Foster) to the Amendment. He is anxious to mitigate injustice. The Amendment was moved by the hon. Member for Worcester (Mr. Peter Walker) on the basis that it was intended to help those on small incomes. We are glad to know that the hon. and learned Member for Northwich thinks that it will help the Australian sheep farmer who sells his farm and comes to live in this country.

The hon. Member for Harrow, Central (Mr. Grant) suggested that I had rejected his earlier Amendment—which I hope he will accept I approached with sympathy—on the ground that a few rich tycoons would get some advantage. That was not the reason for rejecting it. The reason was that it would be the rich who would get the most advantage, and this did not seem to me to be a very suitable way of trying to help the small man.

I also pointed out earlier in my speech that I thought that the rate at which we have fixed the tax gives a great advantage to the rich tycoons, because those who will be able to add to what I regard as their total income every year regularly by capital gains, instead of paying at the marginal rate of tax, which may be anything up to 91¼ per cent., will pay it at only 30 per cent. Whatever hon. Gentleman opposite may think, this will be a considerable advantage to the rich tycoons.

That is the starting point when one is looking at the effect of all this on the rich tycoons, and it does not seem that an Amendment which is designed to help the small man is very suitably framed if its effect is to give still more advantage to those gentlemen than to the people whom we want to help.

Photo of Mr Anthony Grant Mr Anthony Grant , Harrow Central

If there is some advantage to the broad mass of small investors, does it really matter that a small number of rich people get some benefit as well? Secondly, perhaps my Amendment was unhappily framed, but surely it would not have been beyond the wit of the Revenue and the Government, with all the resources at their command, to produce something which did not have that effect, but still gave the advantage to the small man?

Photo of Mr Niall MacDermot Mr Niall MacDermot , Derby North

It is not beyond our wit. That is why we provide in the Bill for the alternative basis of tax.

The hon. Member for Worcester said—and I accept the basis on which he moved the Amendment—that it was intended to help those on small incomes. He is accepting for the purpose of this Amendment that our approach is right, but he is saying that we ought to go further, and instead of saying that two-thirds of a gain will be taxed as income, there should be an allowance of a half instead of one-third.

1.0 a.m.

He cites the experience of the United States where they have a concession of a half and he thinks it illogical that we have both a higher rate than the United States and a lower rate of concession. I must go back to what has been characterised in my absence as MacDermot's law; the law that if we are trying to have a fair and equitable tax system, and if we unfortunately live at a time when we need a high rate of Income Tax, then relatively the Capital Gains concession should be lower. What is Heath's law? Is it that the more Income Tax the ordinary wage earner pays, the less Capital Gains Tax the tycoon should pay?

It is not that I like high taxes. I should be delighted if we could lower taxes. But whatever level of taxation we need, the burden should be fairly spread, and if we are to have higher rates of Income Tax than the Americans have, the fair proposal is that we have a higher rate of Capital Gains Tax, too—if we believe that the Americans have found the right relativity between Income Tax and Capital Gains Tax. Hon. Members opposite are apparently asking us to accept that the American relatively is right, and I am pointing out that if it is right, and if we apply it here, since we have a higher rate of personal taxation, the corollary is higher rates of Capital Gains Tax and less high rates of concessions.

Photo of Mr Peter Walker Mr Peter Walker , Worcester

If we have a higher rate under MacDermot's law, whatever the reasons may be, it follows that if we have any regard for the smaller investor we should give a bigger concession because of the higher rate.

Photo of Mr Niall MacDermot Mr Niall MacDermot , Derby North

We all have to bear our share, the small taxpayer as well as the high taxpayer. We have a graduated taxation system. The hon. Member suggests that we are not anxious to encourage small investors but in assure him that the contrary is the case owe welcome that many more people in our society should invest, and invest i equities, so that their savings benefit from the increased growth and prosperity of our society. There is something wrong with a savings system in which only the wealthy are able to save in forms which share this increase and in which the ordinary worker's savings are in a form in which he does not share in the increase.

In his Budget Statement the Chancellor said that a proposal had been made to him for a State unit trust, that he had looked at it with sympathy and would like to give it further consideration, but that as he was introducing a new measure in relation to Post Office savings he felt that he could go no further this year than state that he was looking further into the proposal. That is clear evidence that the hon. Gentleman's charge is false.

What is the correct rate of concession to make? The argument has been made with force that the concession at the two-thirds rate does not give much to the man on the standard rate. The majority of taxpayers do not pay at the standard rate, and there are very many who are paying at the reduced rates. They will gain considerably more benefit but the taxpayers on the standard rate would have their effective rate reduced from thirty to 27½ per cent.—a reduction of only 2½ per cent.

The Chancellor feels that there is considerable force in this point and that there would be a real advantage if we could devise a workable way of conferring a greater degree of benefit than that offered by the alternative basis. But some of the difficulties include, for example, the fact that the proposal for going as low as one-half would mean in effect that such would be the way in which this concession climbs, and such the rapidity with which it climbs, that the alternative basis of charge would then accrue to a very large proportion of taxpayers, including a large proportion of Surtax payers, and there would be very few people indeed paying the basic rate of thirty per cent. This would erode the whole principle of the basic rate, making it a very complicated way of reducing the basic rate from thirty per cent.

We cannot accept the amendment which seeks to reduce the figure to one-half, but we have looked at the possibilities of a further reduction cut off in some way at a given level. However, here the administrative difficulties would be quite appalling. It would involve tapering provisions and, bearing in mind the way in which this tax will have to be administered, and the large number of tax officers involved, it could lead to a grave danger of administrative breakdown. [HON. MEMBERS: "There will be as it is."] Those who will be responsible for the tax advise us that the tax is quite workable but that this plan would be extremely difficult to work.

At the same time, it is possible that we might get a further reduction amounting to a substantial benefit for the taxpayer on the standard rate; a three-fifths reduction, for example, which would, rather surprisingly in my view, reduce the rate for the standard rate taxpayer not to 27½ per cent., but to 24 per cent. It would mean a considerable reduction for him.

Photo of Mr Peter Walker Mr Peter Walker , Worcester

I cannot understand this point. I believe that the lowest rate of Surtax is two shillings, so that a person hitting the lowest rate would pay 10s. 3d. and this so-called concession would be no concession at all.

Photo of Mr Niall MacDermot Mr Niall MacDermot , Derby North

I assure the hon. Gentleman that it would. If he would like to have detailed figures I should be pleased to give them to him. [An HON. MEMBER: "We want them now."] Well, if hon. Members have a thirst for statistics, let me give them some. Let me show what the comparison would be between the two-thirds proposal as it stands in the Clause and the half for which hon. Members opposite are asking. I spoke earlier of the married man with two children with £5,000 a year income and £2,000 worth of investments. He would gain at the maximum rate, £600 a year. If that figure were changed to one-half he would be able to benefit up to a maximum gain of £8,637.

One may wonder whether a concession of that kind is what we have in mind when talking about providing relief for the small man. A married person with two children, both aged 16, and with £2,000 earned income and £500 from investments on the present basis would benefit from the alternative basis of charge up to a maximum gain of £948; on the basis suggested in the Amendment that figure would be £9,322. I could give many other examples, but to take the extreme case at the other end, I would point out that a single person with earnings of £900 and an investment income of £100—perhaps a small shopkeeper—who then realises an exceptional gain on selling a property, would benefit under the present arrangements up to a maximum gain of £2,795, whereas on the basis proposed in the Amendment he would benefit up to a maximum of £13,127.

I hope that hon. Members will see from what I have said that this is not a simple matter to solve. But my right hon. Friend is satisfied that this is a point on which we should yield and find a solution which will give more benefit to the man whom we all want to help and whom we have been calling, for short, the "small man". If the Committee will accept that assurance from me, on behalf of my right hon. Friend, we shall be very glad to give an undertaking to look further at the matter to see what is the best workable solution to put before the Committee which will give the maximum benefit to the people whom we want to help, without getting out of hand by running up the scale. On that basis I shall be glad to give an undertaking to bring forward a further proposal on Report.

Photo of Mr Jo Grimond Mr Jo Grimond , Orkney and Shetland

At this time of night, no one wants to look a gift horse in the mouth, and I understand that this is a gift horse, although it was rather carefully wrapped up. Nevertheless, in the middle of the pill there is a little jam. We welcome that, and I do not want to deter the Government from looking at the matter again.

But whenever what is now called MacDermot's law is mentioned some protest should be made. It is absolute nonsense to say that because personal taxation in this country is so high other forms of taxation must also be high. This is nonsense for everybody. It is not only Liberal or Conservative nonsense; it is Labour nonsense as well. If the Government say that the reason for bringing in this Capital Gains Tax at the present level is Income Tax and Surtax are now at as high level, even those who are in favour of as Capital Gains Tax must think again about it. The whole idea, I thought, was that this would enable us to reduce other forms of tax on income and not to increase them. To put forward the argument that the hon. and learned Member did as a reason for introducing the Capital Gains Tax is to destroy the whole rational basis for it.

Is this argument to apply throughout our taxation system? If we increase the tax on tobacco, must we also increase every other tax? If we increase the tax on alcohol, must we raise every other tax? This is nonsense. If MacDermot's law is now to be Labour policy the sooner the country is aware of this the better.

I started on this debate rather in favour of many of the proposals made in the Budget. I was not opposed to the Corporation Tax or the Capital Gains Tax. But my reason for supporting the Capital Gains Tax was that it would enable us to reduce some of the other taxes; it was not that it would enable us to increase them. Let use suppose that next year we decide to increase the Capital Gains Tax; must Income Tax and all the other taxes be raised as well?

I regret that at a time when the Financial Secretary must make friends and influence people in his direction he should introduce an argument that is more calculated to influence them against the Government than anything else that he could have said. Although I do not want to deter him from making these concessions, whatever his views about the tax may be everybody must repudiate the doctrine that because personal taxes are high the Capital Gains Tax must also be high.

1.15 a.m.

Photo of Mr Peter Walker Mr Peter Walker , Worcester

While agreeing with the right hon. Member for Orkney and Shetlands (Mr. Grimond), the leader of the Liberal Party, in condemning MacDermot's law, I would also condemn the extension of MacDermot's law which we heard in the Financial Secretary's speech. The original MacDermot's law was bad enough, that one should increase taxation in accordance with increases in all other forms of taxation, but now we have the addition to the law, which is that the bigger the tax the smaller the concessions. I join in condemning this.

We must take hope from the attitude of the Financial Secretary on these Clauses, because, although he has now started another doctrine of MacDermot's law which is bad, there are other doctrines in which he persevered to begin with but from which he is now beginning to shift. There was a time when he said that there would be no administrative difficulties in imposing this tax. We now hear that because of the great burden of administrative difficulties we had better not look at other concessions which could be made. We had no concessions at all to people who invest in equities, unit trusts, or any other form of investment.

After the speeches of my right hon. and learned Friend the Member for Chertsey (Sir L. Heald) and my hon. Friend the Member for Harrow, Central (Mr. Grant), there has obviously been a rapid compromise and it has been decided that this is something on which the feeling is strong and perhaps shareholdings are widespread. I accept the Financial Secretary's undertaking that the Government will look at this again. We feel on this side of the Committee that we have done something by our arguments to reduce the penalties which this Government are imposing on the small investors. We shall, of course, examine very carefully the proposals which the Government make and the Amendments which they will presumably bring forward on Report. In view of the promise that substantial concessions will be made, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Photo of Mr Niall MacDermot Mr Niall MacDermot , Derby North

I beg to move, Amendment No. 126, in page 17, line 6, to leave out "on" and to insert: in respect of chargeable gains accruing to". This is a purely drafting Amendment.

Amendment agreed to.

Photo of Mr Niall MacDermot Mr Niall MacDermot , Derby North

I beg to move, Amendment No. 127, in page 17, line 43, to leave out "the" and to insert "an".

I think that it will be evident that this also is a drafting Amendment.

Amendment agreed to.

Question proposed, That Clause, as amended, stand part of the Bill.

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

Before we leave the Clause, I should like the Financial Secretary to explain to me the meaning of subsection (2, a), under which the amount which is allowed to be set off as annual personal reliefs and what is excluded is the annual allowance under the Income Tax Act. The case about which I am thinking particularly is that of a trader who sells up on retirement at a loss on his trading in his final year. I gather that he would probably be kept out of the provisions of this Clause, because he would not be allowed to deduct from his income or his capital gain the trading loss which he had made in his final year.

Another case which illustrates the point which I am making is that of a farmer whom is retiring. Normally, for Income Tax purposes, that farmer is allowed to deduct not only any loss on trading but also depreciation of his assets, and any depreciation, under Section 314 of the 1952 Act, of improvements which had been made to his holding. It looks to me as if this will produce a certain inequity, that those who have made a loss are kept out of the provisions of this Clause, but otherwise ought to enjoy it. I may be wrong about this. It is not clear as the Bill is drafted, and I should be grateful for an explanation.

Photo of Mr Niall MacDermot Mr Niall MacDermot , Derby North

I am afraid that I cannot at this stage do other than merely confirm that the right hon. Gentleman is correct. I will gladly look into the matter and let the right hon. Gentleman know the position, with any other comments I can make, by letter. I will do that when I have had a chance to look into it. At this point all I can say is that the position is that as the Bill is drafted it is the ordinary personal allowances and reliefs which may be taken into account.

Photo of Major Sir Henry D'Avigdor-Goldsmid Major Sir Henry D'Avigdor-Goldsmid , Walsall South

It is verging on the obscene at this hour that we should be discussing a Clause as complicated as this and occupying two and a half pages in the Bill when its purpose could have been served by one sentence.

I was glad that for our benefit my hon. Friend the Member for Worcester (Mr. Peter Walker) repeated the new addition to MacDermot's law, which is that the higher the tax the more important it is not to grant any rebates because of the benefit which some might get from those rebates. It is clear that for the small investor the purpose of the Clause would be served if the first £100 or £200 of the capital gain in any one year were excluded from the charge. This would not take any complicated drafting. However, the argument against it is that the large investor would benefit much more than the small one. We cannot, even at this hour, conduct our national affairs on the basis that all taxpayers pay 94½ per cent. We cannot spend our time legislating about the 94½ per cent. taxpayer because he is a very rare bird indeed.

Surely the Financial Secretary appreciates that there must be a sum—that anybody in any country must appreciate that this is so—below which the law does not pay attention; and does he not consider that £100 would be reasonable? What is happening is that except in cases of death and other forms of involuntary disposal this tax will prevent anybody from changing their investments. People will not incur the tax voluntarily, so it will not arise until death. We can none of us escape death or taxation. We must abhor the introduction into our tax system of a principle which will make the normal conduct of commercial affairs that much more difficult.

Photo of Mr Geoffrey Hirst Mr Geoffrey Hirst , Shipley

I was not altogether happy with the reply of the Financial Secretary, and I hope that he will give some further information, although I appreciate his difficulty. I am always suspicious—and I mean no disrespect to the hon. and learned Gentleman—when rather vague assurances are given. Years of experience in Parliament have made me suspicious of such assurances, particularly since there is a danger that after the matter in question has been looked at further by the Government nothing more is heard about it.

I am not certain that I understood the difference between the rate of 30 per cent. and 24½ per cent. Let us be clear about this and I trust that the Financial Secretary does not imagine that what he has said on this issue will meet our views on Report. It goes nowhere near halfway between the two things. We ought to know whether that was an aside or how the hon. and learned Gentleman was thinking. I am surprised that he could not give a concrete example. I do not expect him to have a whole range of schedules or statistics galore—I am not unreasonable—but when discussion is supposed to have been going on in the Treasury I expect an explanation.

The hon. and learned Gentleman readily admits that it is not quite fair to draw this sort of distinction when anyone on the first shilling or two of the standard rate is given an advantage of only 2½ per cent. Surely, there must be some thinking about what the Treasury is getting at. The drafting may be a bit difficult, but the hon. and learned Gentleman could be a bit clearer about what the Government are thinking about in concrete examples so that we can judge whether it is worth waiting for this matter on Report.

I hate this business, because I have been sold down the river far too many times in my lifetime here on all sorts of Measures on the basis of the Report stage. It is an old one. I do not think that anybody is being directly dishonourable or dishonest, but the fact is that the Government have not thought it out. It is a mehod of pseudo progress with the Bill and sometimes it takes hon. Members "for a ride". I have been taken "for a ride" several times. I am an old soldier, but I have been learning rapidly for a long time, and I do not like it.

The hon. and learned Gentleman should give us an idea about this. I am not happy about it. We have this extraordinary version, to which people are drawn, of the MacDermot law with a sort of superimposed Kaldor kissing ring on top of it which makes one wonder what it all amounts to. It is absurd that a large number of small investors have to suffer in any way whatever because a relatively few rich people might get an odd £100. It is such an idiotic way of approaching the whole thing.

The truth is that the easiest way to deal with this matter would have been on the lines of the Amendment of my hon. Friend the Member for Harrow, Central (Mr. Grant) —

The Chairman:

Order. I am sorry to interrupt the hon. Member, but he must not now discuss Amendments which might have been made to the Clause. We are now discussing the Clause in its entirety and not Amendments.

Photo of Mr Geoffrey Hirst Mr Geoffrey Hirst , Shipley

I appreciate that, Dr. King. I was only showing by example that it would have been an easy way of meeting the Committee had the Financial Secretary come forward with an indication of how the Clause could have been altered to meet the views which have been strongly expressed from this side. We cannot be tied in our context now to any Amendments because none of them would be correct to discuss in detail, but now that we are discussing the Question, "That the Clause, as amended, stand part of the Bill", the hon. and learned Gentleman might have indicated, when he has accepted the principle that there should be a change, the type of thinking that has taken place.

I am only suggesting to the hon. and learned Gentleman a range of ideas. He probably has more fertile ideas in the Treasury than I can think of, but one of them might well have been on the lines of an Amendment which we had earlier, without going into its merits. That would have given us confidence that the Financial Secretary was thinking on lines that we might be willing to accept on Report.

We should not let the Clause go—I certainly shall not be happy about it—unless the hon. and learned Gentleman can be a little bit clearer to the Committee about what he is thinking, so that we may feel the element of confidence that we have a right to feel in the Treasury when its representative makes a statement and the confidence that, I am sure, the hon. and learned Gentleman would like us to feel. We should have a little more idea of what he is thinking about, what the aim and object will be and whether he will go anywhere near the lines of our request or will still be wide of the mark.

Question put and agreed to.

Clause, as amended, ordered to stand part of the Bill.