I beg to move Amendment No. 27, in page 21, line 27, to leave out '40' and to insert '37½'.
The Committee will appreciate that this is an extremely important Amendment which seeks to alter the entry in the Finance Bill as it now stands which would set the rate of Corporation Tax at 40 per cent. to a figure of 37½ per cent. Whether this change might be described as a reduction in the rate of taxes on companies I leave the Committee to decide during the course of the debate, but it is at least arguable that this Amendment would merely remove an increase in the Corporation Tax which was imposed last year for reasons which the Government themselves admitted to be transitory.
The crucial question which has arisen in the last two Finance Bills has been the level of the new system of taxation, Corporation Tax and Schedule F, and what their rates will have to be to produce the same revenue as under the old system of Income Tax and Profits Tax.
The Committee will recall that in our debates last year there was considerable dispute about this matter. In the 1965 debates it was generally agreed that the rate of Corporation Tax which would be equivalent in the terms I have described would be about 35 per cent. In the debates last year the Chief Secretary advanced two arguments as to why it should be more than that amount. The first was that there had been some increase in dividends in the period 1965–66 as a result of forestalling; there would be a corresponding fall in dividends in 1966–67 and it was, therefore, necessary to offset this by raising the rate of Corporation Tax. The second point he made was that the new Schedule F would effectively only be collected over 11 months of the year. It would yield, therefore, only roughly 11/12ths of the total amount involved in a full year.
In the debate last year my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) intervened to some considerable effect and I trust that the Committee will excuse me if I quote from those debates to make the argument clear. When one comes back to it after a break it is a fairly complicated matter. In essence, my right hon. Friend said that the estimate of Corporation Tax was £1,000 million a year and that if we reduced the rate from 40 per cent. to 37½ per cent. it would cost roughly £62½ million. He then asked the Chief Secretary what would be the amount which Schedule F would yield.
The Chief Secretary replied that there was no reason why he should not give the figure and added:
… £575 million represents eleven-twelfths, having regard to the period of collection, of a full year's revenue. If we therefore add one-eleventh to get to twelve-twelfths, we are adding about £52 million—in round figures, £50 million. Fifty million pounds is approximately 5 per cent. of £1,000 million. If we add on 5 per cent., we are by this one item alone more than fully accounting for the difference between the right hon. Gentleman's figure of 36 or 36½ per cent. and the figure of 40 per cent. In short, this one item alone fully accounts for the difference.
My right hon. Friend, in reply to the debate, pointed out that the right hon. Gentleman had made what he described as a schoolboy howler. My right hon. Friend said:
The right hon. Gentleman was talking about two quite different things. He said that because £50 million, the eleven-twelfths argument, is one-twentieth or 5 per cent. of £1,000, that alone explains the difference between the old figure and the new. That is quite untrue. It is a different 5 per cent., as anyone can see.
The increase from 35 per cent. to 40 per cent. is an increase of one-seventh, or 14 per cent What the Chief Secretary has done is to commit an error into which a primary schoolboy would not have fallen. He has taken the 5 per cent. of the £1,000 and equated that with a 14 per cent. increase from 35 to 40 per cent"—[OFFICIAL REPORT, 21st June, 1966; Vol. 730, c. 308–14.]
I am sorry that of necessity those quotations had to be a little lengthy, but the point which we need to make is that after my right hon. Friend's intervention in the debate, we then proceeded immediately to a Division. It was subsequently raised on Third Reading, but again the Chancellor of the Exchequer who wound up the debate, did not give a satisfactory reply stating any real reason for fixing the rate of Corporation Tax at 40 per cent. It was not satisfactory for us to have an explanation from the Chief Secretary which failed to explain why the rate should have been fixed at 40 per cent. and for him simply to brush the matter aside. I hope that this evening we shall have a satisfactory explanation.
Lack of an explanation does not increase confidence in the Government. If there was a genuine error, the right hon. Gentleman should say so and should give us what he believes to be the real reasons for the 14 per cent. increase, because that is extremely relevant to the Amendment this evening. I hope that we shall have a clear and straightforward answer.
The reason given last year for increasing the rate from that which has been expected to 40 per cent. were essentially transitory. They were, first, the question of forestalling from one year to another and, secondly, the fact that the revenue from the tax would be collected for only eleven-twelfths of the year. Clearly, those two reasons do not apply to a long period. They are no reason for continuing to maintain the level of Corporation Tax at 40 per cent. indefinitely. One would have thought that if this year the burden of taxation on companies as a whole was to be normal—in some sense —the rate would be reduced. We believe the right figure is 37½ per cent.
The relevant issue which now arises is whether there is, anyway, a case for reducing the level of Corporation Tax. The Chief Secretary made an interesting speech on the Second Reading of this year's Finance Bill when he sought to show that the trend of the burden of taxation on companies had been decreasing steadily over a considerable period. To back up what was in essence the heart of his Second Reading speech, he quoted from a series of figures which had been conveniently produced on the previous day in answer to a Question for Written Answer from someone on the Government side of the House.
One point which needs to be made about that Written Answer is that the information which it contained and which was given considerable publicity the next day in The Times of 3rd May was readily available, with one or two minor statistical corrections, in the ordinary National Income Blue Book. None the less, the figures appeared on the day before the right hon. Gentleman's speech and he made great play with them to show that the burden of taxation on businesses had been declining. Those figures failed to sustain the weight of argument which the right hon. Gentleman put on them, and they are open to at least three serious objections.
The figures which he quoted were essentially taxes on the incomes of companies as a percentage of trading profits, but that is in no sense a measure of the actual burden of taxation on companies, and it is that which he needs to establish to make his main point. The first objection to the figures is that they took no account of the fact that the tax on company profits cannot be seen in isolation, but must take account also of tax paid on company dividends. That tax ought to be included if one is to get a true picture.
We all know that the right hon. Gentleman is very anxious—and he has put this forward as a virtue of the present Corporation Tax—that companies should plough back rather than distribute their profits. This has consistently been a bone of contention between the two sides of the Committee. We believe that we are more likely to get growth in the economy if a higher rather than a lower percentage of profits is distributed through the market to firms which can best use them rather than creating the situation which my right hon. Friend the Leader of the Opposition once described as survival of the fattest. However, whatever the right hon. Gentleman's view may be about that, he cannot seriously maintain that the additional tax on distributed profits should not be included in the actual tax burden falling upon companies.
Secondly, he has not taken account of the fact that it is not simply the tax on the incomes of companies which is relevant to the burden of taxation. One must also take into account what other taxes they pay, for example, Selective Employment Tax. Therefore, he should modify his view of what he believes is the great decline of the tax burden on companies between 1950 and 1966.
The third reason is that the right hon. Gentleman's figures—again, conveniently —did not include allowance for depreciation and, of course, the amount of depreciation which companies pay has tended to go up both as investment has risen and as capital intensity has increased. Therefore, while the gross profit may have been maintained, the net profit after depreciation has tended to diminish. This, again, means that the tendency which the right hon. Gentleman is seeking to prove has, in fact, been less than he says.
That would be much easier to answer if the right hon. Gentleman could me some reliable figures for depreciation, but at all events it cannot be denied that the direction has been that which I have suggested. If the right hon. Gentleman has any figures, I should be glad to hear what they are.
There is a need for us to clarify the classifications which we use when discussing these matters.
Last night, there was some dispute between my hon. Friend the Member for Finchley (Mrs. Thatcher), and the right hon. Gentleman about whether taxes were direct or indirect. For the purpose of debate it would be helpful if we could produce a rather broader classification. We have at least four possible categories. One is direct tax on companies, such as Corporation Tax, another is a direct tax on the individual, such as individual Income Tax. There is a third group of tax on goods and services, and, fourthly, there is a group of taxes on industrial raw materials and other inputs.
I fully appreciate that. The point I am seeking to make is that there is a case for reducing this rate because when we break down the figures in the categories to which I have referred it is the case that we need to shift the burden of taxation from Corporation Tax, and by reducing the rate on to other forms of taxation on companies. We would transfer, for example, more of the cost of social security payments from the direct tax of Corporation Tax to a payroll form of tax. I believe that there is a strong case for altering the basic pattern of taxation in this direction.
Whatever the validity of the right hon. Gentleman's figures, and we would concede that there has been some reduction in the burden of taxation on companies over the period, even on the basis of his figures, this is surely a wonderful testimony, as my hon. Friend the Member for Finchley pointed out in a letter to The Times, to past Conservative Govern- ments. In that period we had a situation in which we had higher economic growth with lower taxes and better social security, which is in marked contrast to the situation that we now have.
The other point which needs to be made is that while the tax burden on companies has been getting less—and the right hon. Gentleman almost seems to want to take credit for the reduction in tax which took place under a Conservative Government—it is quite clear from the figures which he quoted that taxes on income paid by companies are now going up. There is every indication that, for the reasons which I have suggested, the actual burden of Corporation Tax on companies is likely to increase.
If we look at the Budget documents we find that the Budget estimate for 1966–67 for Corporation Tax was £1,000 million. The out-turn was higher at £1,034 million. The estimates for this year was £1,260 million. After a long decline over a period of time from 1950 to 1966, albeit not so steep as the right hon. Gentleman has suggested, the burden of taxation, even on the right hon. Gentleman's narrow definition, is now increasing. This is something which we on this side of the Committee do not believe is likely to lead to growth in the economy or a reasonable economic policy. There is a case for reducing the burden of direct taxation on companies, and it is for this reason that we think it right to put forward this Amendment.
I would like to deal with one or two points about the general economic situation and the way in which reducing taxes on companies is likely to bring about the objectives which the Chancellor says he seeks to achieve. We have been definitely told that he does not want to bring the economy out of the present depressed state by consumer reflation. It has to be either an export-led boom or an investment-led boom. But it is perfectly clear that the trend of the economy is very much one in which investment is not likely to be increased.
We believe that there is a very strong case for altering taxation in the way that I have described. Clearly, the extent to which it is reflationary would depend on what happens to the other variables. As the Committee will well know, we feel that there is scope for considerable economy in various items of budget expenditure, whether it be Selective Employment Tax premium, the cost of the Land Commission, or something else. The extent to which it is refiationary can be varied, but there is no doubt that a reduction in our Corporation Tax would encourage investment, and this is something which the Chancellor is lamentably failing to do.
We also feel that this is particularly relevant, because there has been a change in businessmen's capital budgeting decisions. A "Neddy" report, a short time ago, pointed out that businessmen tended to look at the rate of return before tax, but it is clear now that they are tending to look at it after tax. For this reason a change in Corporation Tax is likely to be more effective in encouraging investment than it would have been a few years ago.
Finally, we believe that the essential thing for this country is not, in terms of the most used cliche, to concentrate on the size of the cake and how it should be split up. The essential thing is that the cake should get bigger. It is the basic philosophy of hon. Gentlemen opposite, who feel that the golden egg which the industrial chicken must continue to lay is in some sense tax revenue, whereas we are quite convinced that it is industrial prosperity, without which we cannot hope to get growth. I believe that it is right that the burden of taxation on companies should be lowered, it certainly should not be increased, which would be the effect if we were to accept the Government's figure in the Finance Bill as it now stands.
The Liberal Amendment, No. 28, which the Chair ruled must be discussed with the Conservative Amendment, flows from an interview published in The Guardian on 2nd March in which my right hon. Friend the Leader of the Liberal Party gave his hopes for the then forthcoming Budget to Mr. William Davis, the City Editor of The Guardian. He made it quite clear that, in a year which we knew to be one of limited manoeuvre, our hope and our top priority was for a reduction of taxation on business success. Unfortunately, our hopes were entirely dashed.
Speaking of private industry in his Budget statement, the Chancellor said:
… I have no intention of killing the goose that lays the golden eggs."—[OFFICIAL REPORT, 11th April, 1967; Vol. 744, c. 989.]
What a signal to send out to hard-pressed industry:
Thou shalt not kill; but need'st not strive Officiously to keep alive."!
It may be that the Chancellor was not sufficiently pressed, because what I took to the definitive statement of hopes from the Conservative side for the Budget, which appeared in the Financial Times on 5th April, over the name of the right hon. Gentleman the Member for Enfield, West (Mr. Iain Macleod), sprang from a history of the Conservatives' last Administration, during which tax on company profits, the old Profits Tax, was increased by no less than 50 per cent., and the standard rate of Income Tax was not reduced at all.
This was not an encouraging background. It may be that the present Chancellor felt that he could get away with it if the Conservative Opposition were already so heavily compromised. For our part, we felt that the Government, and we gave them credit, and to some extent support, at the time, had set the stage for just such a reduction as we proposed. After all, with much pain and sweat, company taxation had already been separated, usefully, we think, from personal taxation, mainly, one would suppose—certainly it was our view—so that business tax could be adjusted when the situation required it, as we think it now does, without at the same time inevitably making changes in the rate of personal taxation. Again the stage was set, because the system of investment grants had removed the old difficulty that any reduction in the general level of business tax automatically reduced the value of Government assistance to those firms which invest. As to the risk of encouraging higher dividends, the climate surely is so much against increased distributions—in recent times we have had lower dividends rather than increased dividends—that the risk should not have weighed seriously with the Chancellor of the Exchequer.
Finally, on the point about setting the stage for a reduction in Corporation Tax, that governor of our fiscal fate, the Inland Revenue Staff Federation, could scarcely object to a reduction to 38 per cent., although it might have reservations about the ½ per cent. which the Conservative Party Amendment seeks to introduce into the computation. The stage was set, not for a reduction which would have meant a very great deal in terms of money when spread over the whole of British industry, but which would have been a signal to efficient and successful British industry that the Government appreciated success in the private sector and were prepared, to the extent that opportunity offered, to allow it its reward.
A reduction in the rate of Corporation Tax is essentially a selective measure. We on the Liberal Bench had hoped from certain small signs in recent months that the Government had learned the enormous benefit of being selective in their treatment of the economy. Again, our hopes have been disappointed, not least during last weekend when, speaking at Leicester, the Chancellor of the Exchequer is reported in the Press to have said, among other things:
During the next 12 months there will be a gentle but progressive improvement in the standard of life of every family in the country.
This is an impossible promise and, in our view, an undesirable one also. What we want to see is those who are in great and proved need and particularly also those who are shown to be contributing to the economic recovery of the country, enjoying an improvement in their standards or resources. We are bitterly disappointed that the Government appear to have retreated from their policy of selectivity, which began to give us some encouragement at the turn of the year. A reduction in Corporation Tax would be an encouragement to those who make profits, whether by winning export orders at the right price and fulfilling them at the right date, or by overcoming all the very great difficulties of coping with an increasingly competitive home market.
As the Chief Secretary is to reply to the debate, I feel that I must take a moment to deal with objections of the sort which I fancy he will take particular delight in bringing forward. It may be said that the rate of Corporation Tax cannot be discussed in terms of an incentive because the profits on which the tax is paid are made before the rate is announced. I hope that the right hon. Gentleman will not use this argument, because surely it is clear that what matters to business is the Government's indication of the climate. In any case, we have not reached the point at which the tax is actually paid before the rate is announced, and a reduction in the burden on companies' liquidity would undoubtedly be an encouragement.
The other argument which I anticipate the Chief Secretary will bring forward is that of comparability with other countries. It has been difficult for a Liberal even to sit still during the recent hours in which the problem of direct taxation in this country has been discussed in terms of comparability with other countries. It is not, and never has been, good enough for this country simply to say that it is not taxing its business concerns any more heavily than most of its competitors. A country which lives by exports must have, generally speaking, a lower rate of direct taxation. If it must raise the revenue, the extra revenue should be raised by tax on costs rather than on profits.
I do not suggest that the modest reduction in Corporation Tax which we propose would of itself push up investment in the private sector. Businessmen will not invest until they can see over the horizon the increased demand for their products. But for the Chancellor of the Exchequer to hoist a flag of encouragement, even on a modest scale, would make directors more alert to spot the possibilities of increased demand and more ingenious in planning their future investment. Encouragement of this kind would have the advantage that by encouraging the more enterprising firms to press ahead, even if only a little earlier, with their investment, we should avoid the very great risk which overhangs the economy that when the private sector starts to expand its investment it will do so on such a great scale that there will be a collision with public expenditure, which cannot be stopped quickly in order to make way for expansion in the private sector.
A reduction of this kind could have a definite effect on the "brain drain" to the United States for tax reasons and for other reasons which the Government appear to forget—sunshine and surf, scenery and an easier life in other parts of the world, even though tax rates there may be fairly high. Whatever might have been said yesterday about the effect or non-effect of extra cash in the pocket of the executive, I firmly believe that executives in this country are greatly influenced by the industrial and financial climate in which they have to work and the atmosphere in their companies. If their companies could feel that at last they were getting encouragement from the Government and the fact that changing times were on the way were signalled to them in a modest fashion, I believe that those whom we can least afford to lose— the most outward-looking and public-spirited of the clever people—would take the hint and would be more likely to stay at home.
I hope that if there is to be a degree of reflation, as I believe there should be, its first fruits will go to those business concerns which are successfully jumping over the enormous hurdles, both in the shape of obstacles to foreign trade and the difficulties of trade at home, because they deserve it.
I regard the Amendment as being most helpful to the Chancellor of the Exchequer, because it is a move to bring some logic into the policy which he appeared to be following when he announced the introduction of Corporation Tax and the change from the previous system. I do not know whether it is in the recollection of other hon. Members, but I believe that it was on Derby Day, two years ago, that we discussed Corporation Tax in Committee on the Finance Bill. Since then, the form shown by the private sector of industry in the investment stakes has been consistently disappointing. It is time that the Chancellor of the Exchequer adjusted the handicap and reduced the weights.
Although that may be a somewhat light-hearted simile, I say very seriously that I am extremely sorry that the Chief Secretary and not the Chancellor of the Exchequer is here to listen to and reply to the debate.
I believe that the Chancellor does not fully understand the effects of Corporation Tax. He may understand its mechanics, and may follow the increase and the yields, but I believe that he is not yet seized of the effect of the tax upon the thinking and attitude of industry. If he did understand it he would never have fixed a rate as high as 40 per cent. for the initial charge. The result of doing so is that industry has suffered from all the possible disadvantages of the tax without being able to enjoy any of the benefits which the Chancellor claimed for it on its introduction, or without even being able to test whether its benefits exist.
I quickly remind the right hon. Gentleman of some of the disadvantages of the tax which would be mitigated, although only marginally, by a reduction. First, it has made it almost impossible for many companies to secure a worthwhile return on new equity, and it is the raising of new equity capital for rapid expansion with which we should be primarily concerned, and where Corporation Tax has its most damaging effect. A company has to earn 14 per cent. on an investment to cover a dividend return of 6 per cent. and provide a reasonable margin of 1·4 times the cover. No wonder many companies shelve investment projects, when they have to have that sort of return merely to maintain their existing market rate.
The hon. Member may look quizzical, but he knows as well as I do that in almost every boardroom resort to equity capital-raising has become an action of last resort. If one can, one resorts to loan capital, and often raises equity capital today only to increase the borrowing power to raise loan capital on a trust deed or loan or debenture stock. These are the not easily measured disadvantages of the tax which must have an effect in reducing the capacity of industry to function flexibly and efficiently.
As usual, the hon. Member is extremely accurate in his arithmetic, but he must bear in mind that any company or board of directors which is considering raising additional finance will not do so if this diminishes the cover for the dividend and reduces the price-earnings ratio of the shares and leads to a fall in the value of the stock on the market. Unless one provides cover as well as meeting the crude cost of servicing the capital, one is not enhancing the circumstances of one's shareholders: one is very likely diminishing them. That is the effect of Corporation Tax.
It has raised the cost of loan capital by 1 per cent. and made it necessary to secure a return on investment about 3 per cent. higher, if financed by equity capital, than was necessary before. There is no wonder, under these circumstances, that apart from other financial considerations private sector investment is falling.
These are primarily the effects of the tax itself, and are only marginal in the matter of the rate. But the Chancellor has failed to appreciate—I have never heard him give any figures showing that he appreciates it—that for the majority of companies variations in the rate of Corporation Tax produce accentuated effects in the level of retained profits. Today, most companies are extremely reluctant to reduce equity dividend. Time and again it has been shown that this operates not only against the interests of the shareholders but against the interests of the employees.
Therefore, in effect, variations in the rate of Corporation Tax are borne entirely by retained profits—certainly, in the first instance—both as regards the proportion of profit which is considered available for redemption and also as regards the proportion of profit which is used to service the equity dividend.
Therefore, in practice a variation of about 2½ per cent. in the rate of Corporation Tax will, for many companies, mean a variation of 12 per cent. in the level of regained profits. This is particularly important when profit rates are tending to fall.
This brings me to the events of 1965–66. I am glad that the Chief Secretary is with us this evening. The Chancellor commended the Corporation Tax primarily on the basis that it would lead to an increase in the financing of industry from retained profits, would impose a check upon any inclination to increase the level of dividends, and provide an inducement to restraint in their payment. Like my hon. Friends, I believe this to be a mistaken policy. The point is, however, that the Chancellor never even gave it a chance to be tested.
With Corporation Tax at 35 per cent., and the continuation of investment allowances over the whole field of industry, there was a real chance that companies would have reconsidered their financial policy, or, at any rate, examined it to see whether there was a case for planning their progress so as to rely increasingly upon retained profits. But by fixing Corporation Tax at 40 per cent. and, at the same time, for much of industry eliminating investment allowances and not replacing them with investment grants, the Chancellor made it absolutely certain that any tendency for industry to rely increasingly upon retained profits as a result of the introduction of this tax would be completely destroyed.
The right hon. Gentleman not only killed the policy towards self-financing which he had propounded; even more important, by fixing the rate at 40 per cent. he gravely damaged the confidence of industry in the general support which it could expect from this Government. In this, the Chief Secretary played his part. The Committee should remember that for 12 months industry played a guessing game about the rate of Corporation Tax. Those who listened to the Chief Secretary in his explanations over and over again of what the likely effect of Corporation Tax would be provided, in accounts prepared before 4th April, 1966, for a rate of 35 per cent., and those who were cynics and listened to the Chancellor's statement that 40 per cent. would be the maximum rate, and said to themselves, "Under the present Government it will be the maximum rate the whole time", provided for a rate of 40 per cent Those who were cautious and prudent thought that they had made adequate provision at 37½ per cent.
I support my hon. Friend's request for some elucidation on why it should be the case that the tax was introduced at a rate of 40 per cent. I, for one, will not pay much heed to arguments which the Chief Secretary advances after listening to so many reasoned statements based on a rate of 35 per cent. It was a blow to British industrial confidence which is still reflected in the general activity and investment of industry today.
It was all the more extraordinary because the Chancellor took this step in a Budget when he had an opportunity to establish his reputation and give confidence to industry. It was the Budget in which he was introducing the Selective Employment Tax, which is a bad tax in many aspects. But, as he was introducing it, he had in his hands an opportunity, because by not paying the premiums to manufacturing industry and by using the revenue that he thus saved to reduce Corporation Tax, he could have established Corporation Tax at a mathematical level of 36 per cent. But it would not have involved his stretching his generosity far to have fixed it at 35 per cent.
For the variety of reasons which I have tried to adduce, and as the hon. Member for Colne Valley (Mr. Richard Wainwright) said, there can be no better tonic for industry than for the Government first to reduce the tax to 37½ per cent., as proposed in the Amendment, and follow that switftly with a reduction to 35 per cent. I believe that there are certain levels in all taxation which are critical and, while we have had little opportunity to test it, I believe that the critical area for Corporation Tax may lie between 35 and 40 per cent.
The hon. Member for Worthing (Mr. Higgins) started his speech by reminding us of some of the lengthy arguments which we carried on last year. I am against an excess of arguments outside the same financial year, but I would point out one of them, and that is the amount which was realised from Corporation Tax. The right hon. Member for Enfield, West (Mr. Iain Macleod) assumed, as many did at that time, that the estimate for Corporation Tax in the Budget of £1,000 million was a guess. Its out-turn at £1,034 million may have been the result of fortunate guessing or an accurate estimate about which we were unaware.
The hon. Member for Morecambe and Lonsdale (Mr. Hall-Davis) mentioned the need to have a 1·4 times cover for any new investment. There is not a great deal separating us on that, because we know that the present Corporation Tax and Income Tax at 41< per cent. is equivalent to the tax paid on distribution as it would be with Income Tax at 41< per cent., and 15 per cent. profits if the dividend was 1·5 times. So the difference between 1·5 and 1·4 is not something about which we should be terribly excited, although it is of marginal significance.
It is a somewhat involved argument, but if the hon. Gentleman examines the basis of calculating cover gross for Corporation Tax and cover net after tax for the previous system, I do not think that a 1·5 per cent. cover will be found to be the equivalent of a 1·4 per cent. cover today.
I think that the hon. Gentleman will find that my calculations in this respect are correct.
The main problem facing many companies at present is to maintain their dividends at a time when profits are under some pressure. The only way in which dividends can be maintained is by increasing profits. The alternative is for a company to be prepared to let the dividend go below what it has been over perhaps a long period of time. Unfortunately, a large number of companies regard their ordinary dividend as something in the nature of a fixed charge and that, if they let it go, their shares will be considered unreliable in some way. That can have certain bad effects if they accept the need to mask the effect of good and bad years and play for safety in the way which I am sorry to see a number of firms behaving.
If Corporation Tax is increased, as a result their dividends ought to be reduced, and I am prepared to see them reduced and take whatever action possible by way of publicity and so on to get a rather better share buying public who understand the reason for it. I should also prefer to see dividends reflecting current profits. Although, in a period of economic difficulty, one must ask for some restraint, this is the only tenable basis over a long period of time.
I do not think that the charge of Corporation Tax should worry us too much in this respect. If we accept that Corporation Tax is a means of raising revenue and indicating the economic climate when it is not good, this should be reflected in the amount of dividends distributed, and when the economic climate is better this, too, should be reflected in the nature of the dividends.
I support the Amendment on four counts. First, I dislike the principle of Corporation Tax, and therefore any reduction is a partial alleviation of something which I regard as an evil. I have no doubt that the principle of Corporation Tax springs from an assumption that it is desirable more easily to identify corporate taxation, and from this I believe will inexorably flow the consequence that there will be increasing emphasis upon corporate taxation.
That is no particularly startling observation on my part. The promise was documented by the articles of the right hon. Member for Sowerby (Mr. Houghton) when he was in opposition, and the story of Corporation Tax so far indicates that it is likely to be a one-way ratchet movement. This is what undoubtedly concerns many in the business community, and the fact that we have demonstrated our hostility to that approach by tabling an Amendment to reduce the rate to 37½ per cent. gives me much pleasure.
I confess that in a perfectionist world I would prefer to see a reduction in corporate taxation to come on distributed profits rather than on retained profits, and therefore in the ideal world it is not quite so much the reduction of Corporation Tax which concerns me, but the rate of tax on distributed profits. None the less, operating within the disciplines within which we find ourselves, I am delighted to have the opportunity to vote for a reduction in the rate of Corporation Tax itself.
My second reason for supporting the Amendment is the belief that the Committee should demonstrate its concern to treat profits somewhat more generously. I am prompted to this view particularly by some recent studies conducted by Professor Merrett and Mr. John Whittaker. The Financial Times of 27th May said:
The effectiveness of the present 'severe' incomes policy is questioned by Professor A. J. Merrett and Mr. John Whittaker, both of the London Graduate School of Business Studies, in the June issue of Accountancy …
They comment that on the basis of a consistent net-of-all taxes series of profit
figures for 1956–66 the return on capital in manufacturing in the United Kingdom was 5·9 per cent,.in 1966 compared with 6·77 per cent. the previous year, the lowest figure since pre-war.
That is a startling revelation, and one which should give us all cause to think furiously, particularly those who believe that profit is the motive power of a free enterprise economy.
I believe in a free enterprise economy. That belief, probably more than any other, accounts for my being on this side of the Committee. I understand that many do not believe in a free enterprise economy but regard profits as some index of efficiency. It is more than that to me. It is the motive part of a free enterprise economy, and once we have rates of corporate taxation, as we now have, which are conducing to the situation which has been described by Professor Merrett and Mr. Whittaker, we see in danger the very principles which we cherish. That is good reason for supporting the Amendment.
The third reason why I support this proposal is because the whole argument of corporate taxation is often presented as though the rate of Corporation Tax and the level of investment grants have some relation to each other. It is an argument which I have seen associated with the hon. Member for Ashton-under-Lyne (Mr. Sheldon), and I believe that it was contained in the advice which he preferred to the Chancellor before the Budget. It is the argument that, generally speaking, one could increase the rate of Corporation Tax and thereby to some extent help finance higher rates of investment grant. This is a harmful argument because it proceeds from an analysis of the relationship of physical investment to our economic performance which I do not accept; and by forcing a Division on an Amendment which seeks to reduce the rate of Corporation Tax, my hon. Friends and I will, at least by implication, be challenging the arguments and premises of the hon. Member for Ashton-under-Lyne.
The fourth reason why I support the Amendment is because at this time the Committee is concerned to see, whatever measures of tax changes are proposed, that the economy will, in the next 12 to 18 months, proceed without a repetition of the crises which have attended periods of reflation in the past. In these circumstances, the Committee should be prudent before making calls for cuts in taxation which might be deemed to be the green light for a speedy and premature reflation. I hope, therefore, that we will be guided to some extent by the kind of advice offered by Mr. Leslie O'Brien, speaking as the Governor of the Bank of England, earlier this week.
The Amendment is the sort of move which could help to restore and sustain business confidence without necessarily introducing some of the harmful consequences of premature reflation.
I enthusiastically support the Amendment and will pursue my support along the lines followed by my hon. Friend the Member for Morecambe and Lonsdale (Mr. Hall-Davis), who expertly and authoritatively demonstrated, as a company director, what it is like to be at the receiving end of what the Chief Secretary is doing. I particularly want to refer to gearing, to which my hon. Friend referred; that is, the proportion of debt in company new issues.
I remind the Chief Secretary of a Financial Times table of sensational revelation. It showed the extraordinary increase in the proportion of debt capital as between, say, 1962, when it was under 50 per cent. of new issues, and 1965, when it had gone up to 90 per cent. This was a direct result of Section 52 of the Finance Act—the benefit which accrues to companies by having a prior charge in the shape of an interest or annuity payment which can be set off against the tax liability.
This is a real disservice at this stage of our economic affairs, because it seems that this change in gearing—it is a change in what one might describe as the "league tables", in which Britain has hitherto had a rather advantageous part in the sense that our capital market had extraordinary opportunities for the raising of risk capital compared with other European countries—and this tendency, under the impact of Corporation Tax, has meant the risk capital market becoming increasingly depressed.
The most serious result is precisely in the direction of risk taking and innovation, upon which the future of our industrial economy depends. I would argue that it is not accidental, not unconnected, that this country should in the past have had perhaps a most highly developed risk capital market and, at the same time, should have shown the most extraordinary capacity for producing innovations, and new ideas and new developments in industry, which a great many industrial countries have copied even if we may not have fully developed them.
These new inventions, ideas and projects have to a great degree come from these small British Isles when there has been a high risk capital market, and the danger in future will be to play safe in industrial investment. Instead of introducing a new idea, or a new kind of technique or a new piece of machinery in an industrial process, the whole tendency will be to reproduce the existing one. The tendency will be that if one wants to extend or expand output one will not produce something new which might go wrong, even though it might bring a good reward, but will merely produce one more of the same thing in order to be sure of a steady return on investment, even if one does not get anything sensational. That must be to our disadvantage.
The remarkable thing is the tendency of the nationalised industries to try to persuade the Government to let them introduce in their capital structure some sort of risk of capital and so have a cushion against innovation and the launching of new projects on which the profits, through low in the short term, may be highly profitable later. They seek the cushion of equity capital. If one's gearing is high and one has increasing interest charges, one cannot launch these initially profitless undertakings which may in the long run be extremely profitable. That is the worst thing to inflict on our economy when facing some of the most competitive expanding and thrusting economies in Europe and Asia.
The other aspect is that the tendency to boost the fixed interest market and depress the risk-taking capital market will make real difficulties for the Government, let alone for the private sector. The pressure on the fixed interest market will become very serious, particularly under the Government's own proposal for floating stock for the huge block of capital needed for the gas industry. The Industrial Reorganisation Corporation and everyone else seems to be going for fixed interest securities. The Government will not get their paper sold, so they will raise a floating debt and so promote inflation and a generally unsatisfactory situation of liquidity. Under the Government's proposals everything is going in precisely the wrong direction, and it is no wonder that confidence is lacking and that industry is stagnant. This Amendment needs the utmost support.
Perhaps I should start from the Opposition back benches and work towards the Front Bench. I start with the hon. Member for Colne Valley (Mr. Richard Wainwright), who, in his typical fashion, took a swipe with his left at the Government and followed it up with a tremendous right at the Opposition. He gave the Opposition a real clouting for their behaviour towards company taxation and challenged their right to criticise in any sense at all. I go with the hon. Gentleman, because he went so far as to say that he accepted the general proposition of separating company taxation from individual taxation, and had a modicum of support for the general principle of the Corporation Tax.
In spite of everything said elsewhere, I think that is now becoming the position of the Official Opposition. Much as they may wish to criticise the tax, may wish to see changes in it, basically it is accepted as part of our tax system.) certainly believe that it is justified and that it will be on the Statute Book for many years to come.
We are not considering the principle of Corporation Tax, but merely the rate. The rate has been criticised (a) that it is excessive in comparison wih other countries and is contributing to the brain drain and (b) that it is excessive in relation to the weight of company taxation which existed under what one might call the old system of Income Tax and Profits Tax which finished up at 56< per cent.
The hon. Member for Oswestry (Mr. Biffen), who always makes short, interesting speeches, revealed today one of the reasons why he sits on the benches opposite. I have often wondered. I welcome some of the things which he said. But I do not wish to do him damage and will leave this aspect immediately. I think that he quoted the United States and said that this was one of the causes of the brain drain to the United States.
Perhaps it was another hon. Member.
One of the causes of the brain drain to the United States was said to be the high level of taxation here compared with the level there, the level of Corporation Tax. I thought that the hon. Member for Oswestry made reference to the high rate of Corporation Tax in comparison with that in other countries.
Then I am clearly mistaken and am attributing to the hon. Member something which was said by another hon. Member in the debate.
More than one hon. Member has referred to the brain drain and comparatively high rates of Corporation Tax. So I imagine that it is my first duty to inform the Committee of the comparative rates of Corporation Tax in other countries, and particularly in the United States. It is said that people leave here to go to the United States where there are lower rates of Corporation Tax. Our rate is 40. per cent. and in the United States it is 48 per cent. In the Netherlands it is 48 per cent., in France 50 per cent., in Canada 50 per cent., in Luxembourg 40 per cent., in Germany 51 per cent. on undistributed profits and 15 per cent.— which works out at 23½ per cent. because of the complexity of the calculation—on distributed profits.
So the first thing I can say, which most people know whether they admit it or not, is that 40 per cent. by international comparison is distinctly on the low side. One cannot accept that kind of argument in relation to the brain drain. Corporation Tax is of course, a tremendous incentive to investment and to ploughing back compared with the old system. As we have said many times, the amount left at the point of paying Corporation Tax is very much greater at the rate of 40 per cent. than the amount which was left under the old system. Under the old system, it was 43¾ per cent., and £43 15s. would have been left and under the new system 60 per cent., a difference of £16 5s. on every £100 or £3 15s. on net retained profits, which is an increase of £16 5s., or an increase of between 35 per cent. and 40 per cent. That is a very substantial increase on retained profits and an encouragement to investing and ploughing back.
Then the argument goes, notwithstanding all this—that it is a lightweight by international standards and an encouragement to investment by comparison with the old system—that the rate is a heavy rate by comparison with what would have arisen had we continued on the old system of Income Tax and Profits Tax totalling 56< per cent. I repeat that this is not so. I will go over the ground again, as there apparently still seems to be an unwillingness to accept the figures with which I have been supplied.
I have given the Opposition the best figures we can produce, both last year and this year, because last year, when the right hon. Member for Barnet (Mr. Maudling) intervened at the very point of time when I was giving the information and asked, "What about the following year?", I said that I would try to give the information for the following year. I have, therefore, given it again for this year.
Let me go over the ground. Last year, in principle, it was stated—I repeat it— that, in a normal year, converting the old system to the new would have produced, as the tax was then shaped, a Corporation Tax rate of 35 per cent. That shape was altered so as to reduce the burden. There was transitional relief of various kinds. Although we could not work this out accurately, it put on about 2 per cent.—between the 35 per cent. and the 40 per cent. in the normal full year.
Then the question arose: what would be the equivalent rate in the first year of Corporation Tax for the yield coming into the Revenue from the money paid out by companies in this first year, which was a very special year, to equalise the yield which would have arisen under the old system? At the time, I said that it was more than 40 per cent. It would have been more than 40 per cent. I have since revised that, in the light of the information we now have this year. An estimate was made, with the best knowledge and calculation that we could make, which showed at that time that it was likely to be more than 40 per cent. to produce an equivalent return for the first year of Corporation Tax. But I have made it clear that, in fact, the figure has turned out to have been something over 45 per cent.
Let me make it quite clear. The rate charged was 40 per cent. The rate that should have been charged to produce the same yield in that first year of Corporation Tax as would have been produced under the combined system of Income Tax and Profits Tax was over 45 per cent. I have said all this. I repeat it all.
I come now to the one element of confusion which the hon. Member for Worthing (Mr. Higgins) and the right hon. Member for Enfield, West (Mr. Iain Macleod) have relied on—I will not say ad nauseam, but time and time again, namely, my schoolboy howler. I am greatly touched by the attention which the right hon. Gentleman pays to my mistakes. I will explain it in a moment. If, after speaking from the Dispatch Box as often and as late as I do, or as early in the morning as I do, on these complicated matters, I can get away with one schoolboy howler in three years, it is a good record.
However, let me make it quite clear that I made a mistake. It is easy to make a mistake when one is at this Dispatch Box. There is nothing easier than to make a slip of the feet when one is standing upon one's tongue. That is very easy to do. That is what happened on that occasion.
I was asked for some information. I, in the normal way, saw to it that it was produced to me. It was produced behind my back on a piece of paper in the normal way. Just as I was rising, it was thrust into my hand. I gave the information, accurately provided by those who advised me. Unfortunately, I then went on, too hurriedly and immediately, to add an interpretation and I gave the figure of 5 per cent.
That was my schoolboy howler. It was my interpretation. There was nothing on the piece of paper about 5 per cent. It was my mistake, and I take full responsibility for it. But it did not affect the statement in the slightest. It merely gave the right hon. Gentleman an opportunity for referring, in his typically courteous way, to my schoolboy howler time and time again, and it gave him the trouble, I am sorry to say, of writing a letter to The Times just to tell its readers that, lo and behold, the Chief Secretary to the Treasury had made a mistake.
The short point is that it would have been necessary to introduce a rate of over 45 per cent. to produce the same revenue for the first year of Corporation Tax as would have been produced by a continuation of the old rates of Income Tax and Profits Tax. A series of items goes into the calculation. The Revenue did its best to anticipate and forecast them correctly. It did not get everything right, and the figure was worked out somewhat conservatively. In fact, the argument was much stronger all the time than the argument which we were at that stage putting to the Committee.
Will the right hon. Gentleman say whether he means that it was the equivalent rate at that moment of time, or it simply happens that that would have been the figure in the light of subsequent events, when actual profits had been considerably depressed by the Government's policy?
It is the application of the rate of Income Tax and Profits Tax to the profits which would come in for assessment this year, that is, profits of a previous period, sometimes going back a little way. That is to be compared with a rate of 40 per cent., and, as I have said, it would have been a rate of over 45 per cent.
The hon. Gentleman is just beginning to think of some of the complications which arise when one attempts to give this information. There are many complications. This is why, to begin with, we did not wish to trouble the Committee too much with the details. But, at all events, looking at it from this end, one can now say with assurance that it would have been over 45 per cent.
I have said, and I repeat, that that was the first year, a special year. This year, to get the equivalent yield as would have arisen on profits coming in for assessment, under Income Tax and Profits Tax at the previous rates, would have necessitated a Corporation Tax rate, as the Corporation Tax law stands at the moment, of 40 per cent., and 40 per cent. is the rate for which we are providing. It follows that I reject completely the whole of the hon. Gentleman's argument.
The point I was trying to make is that the equivalent rate would be the rate which produced the same amount at a given level of profits. Otherwise, to sustain the right hon. Gentleman's argument—if I am not mistaken —every time there was buoyancy in the revenue he would have to reduce the rate of Corporation Tax.
Let me repeat it, in case it is not clear. I am comparing like with like. I am giving the figure which would be required, in terms of the rate of Corporation Tax under the Clause and the Amendment which we are discussing which would produce the same yield on profits coming up for taxation if we were still under the previous system of Income Tax and Profits Tax at the last ruling rate totalling 56< per cent. I cannot be much clearer than that. I hope that I shall be excused from having to repeat it again.
I was not proposing entirely to forget it, because I was going to move on to the next point—the continuing reduction in the burden of taxation falling on companies.
I have now dealt with the argument of the brain drain and the international comparison of the level of 40 per cent. I have dealt with the comparison between our present rate of 40 per cent. and what the yield would have been under the old system, and I have shown that there has not been one penny rise. I now turn to the other figures which I gave during an earlier speech and which I reaffirmed, and which the hon. Gentleman has not said one word to challenge. Those figures are, of course, the gross trading profits, and I intervened because I wanted to know whether he had made an attempt to calculate the total depreciation or capital allowances. We have no means of doing that; there are no figures available for it.
I must therefore give the best figures I can, as I always do to the Committee, and the best figures I can give are the gross figures, which show this continuing trend of such a marked character that, no matter what allowances one makes for error in the figures or the calculation, which I cannot concede were considerable, the story emerges as plain as a bell. It does not matter whether one looks at it in terms of the share of the gross national product at factor cost going in company taxation or whether one looks upon it more accurately in terms of the proportion of company taxation in relation to company gross profits. Whichever way one looks at it, one sees a most marked regular reduction—not precisely each year but if one groups the years together it is a marked reduction as plain as a pikestaff.
I therefore repeat that the burden on company taxation has reduced every few years and has been continually and steadily reducing since the early 1950s. The level of Corporation Tax is no different from what it would have
We are now left in a position where we do not have any explanation why the rate was increased last year because it was based on errors. We appreciate the Chief Secretary's admission that he made a mistake, and we can forgive him, given the admittedly heavy burden he bears. Whether the taxpayer can forgive him for not having an explanation why it went up is another matter.
In these circumstances, I hope that my hon. Friends will register their views in favour of the Amendment, which we feel is important, by voting on it.
|Division No. 351.]||AYES||[9.10 p.m.|
|Allaun. Frank (Salford, E.)||Corbet, Mrs. Freda||Forrester, John|
|Alldritt, Walter||Craddock, George (Bradford, S.)||Fowler, Gerry|
|Allen, Scholefield||Crawshaw, Richard||Fraser, John (Norwood)|
|Anderson, Donald||Cronin, John||Galpern, Sir Myer|
|Archer, Peter||Cullen, Mrs. Alice||Gardner, Tony|
|Armstrong, Ernest||Davidson, Arthur (Accrington)||Garrett, W. E.|
|Atkins, Ronald (Preston, N.)||Davies, G. Elfred (Rhondda, E.)||Ginsburg, David|
|Atkinson, Norman (Tottenham)||Davies, Ednyfed Hudson (Conway)||Cordon Walker, Rt. Hn. P. C.|
|Bagier, Cordon A. T.||Davies, Harold (Leek)||Gourlay, Harry|
|Barnett, Joel||Davies, Ifor (Gower)||Gray, Dr. Hugh (Yarmouth)|
|Baxter, William||Davies, S. O. (Merthyr)||Greenwood, Rt. Hn. Anthony|
|Beaney, Alan||Delargy, Hugh||Griffiths, Rt. Hn. James (L[...]anelly)|
|Bellenger, Rt. Hn. F. J.||Dell, Edmund||Hamilton, James (Bothwell)|
|Bence, Cyril||Dewar, Donald||Hamilton, William (Fife, W.)|
|Benn, Rt. Hn. Anthony Wedgwood||Diamond, Rt. Hn. John||Hannan, William|
|Binns, John||Dobson, Ray||Harper, Joseph|
|Blackburn, F.||Doig, Peter||Harrison, Walter (Wakefield)|
|Blenkinsop, Arthur||Driberg, Tom||Hart, Mrs. Judith|
|Booth, Albert||Dunn, James A.||Haseldine, Norman|
|Bowden, Rt. Hn. Herbert||Dunwoody, Mrs. Gwyneth (Exeter)||Hazell, Bert|
|Braddock, Mrs. E, M.||Dunwoody, Dr. John (F'th & C'b'e)||Hoffer, Eric S.|
|Bradley, Tom||Eadie, Alex||Henig, Stanley|
|Bray, Dr. Jeremy||Edwards, Rt. Hn. Ness (Caerphilly)||Herbison, Rt. Hn. Margaret|
|Brooks, Edwin||Edwards, William (Merioneth)||Hobden, Dennis (Brighton, K'town)|
|Broughton, Dr. A. D. D.||Ennals, David||Hooley, Frank|
|Brown, Hugh D. (G'gow, Provan)||Ensor, David||Horner, John|
|Buchan, Norman||Evans, Ioan L. (Birm'h'm, Yardley)||Houghton, Rt. Hn. Douglas|
|Buchanan, Richard (G'gow, Sp'burn)||Faulds, Andrew||Howie, W.|
|Callaghan, Rt. Hn. James||Finch, Harold||Huckfield, L.|
|Cant, R. B.||Fletcher, Raymond (Ilkeston)||Hughes, Emrys (Ayrshire, 8.)|
|Carmichael, Neil||Fletcher, Ted (Darlington)||Hughes, Roy (Newport)|
|Chapman, Donald||Foley, Maurice||Hunter, Adam|
|Coe, Denis||Foot, Sir Dingle (Ipswich)||Irvine, A. J. (Edge Hill)|
|Coleman, Donald||Ford, Ben||Jackson, Colin (B'h'se & Sp'nb'gh)|
|Concannon, J. D.|
|Jackson, Peter M. (High Peak)||Molloy, William||Ross, Rt. Hn. William|
|Jones, Dan (Burnley)||Morgan, Elystan (Cardiganshire)||Rowlands, E. (Cardiff, N.)|
|Jones, J. Idwal (Wrexham)||Morris, Alfred (Wythenshawe)||Sheldon, Robert|
|Jones, T. Alec (Rhondda, West)||Morris, Charles R. (Openshaw)||Shore, Peter (Stepney)|
|Kelley, Richard||Moyle, Roland||Short, Mrs. Renee(W'hampton,N.E.)|
|Lawson, George||Newens, Stan||Silkan, Hn. S. C. (Dulwich)|
|Leadbitter, Ted||Noel-Baker, Francis (Swindon)||Silverman, Julius (Aston)|
|Lestor, Miss Joan||Noel-Baker, Rt.Hn.Philip(Derby,S.)||Slater, Joseph|
|Lewis, Arthur (W. Ham, N.)||Ogden, Eric||Snow, Julian|
|Lewis, Ron (Carlisle)||O'Malley, Brian||Spriggs, Leslie|
|Loughlin, Charles||Oram, Albert E.||Steele, Thomas (Dunbartonshire W.)|
|Lyon, Alexander W. (York)||Orbach, Maurice||Symonds, J. B.|
|Lyons, Edward (Bradford, E.)||Orme, Stanley||Taverne, Dick|
|MacColl, James||Padley, Walter||Tuck, Raphael|
|MacDermot, Niall||Page, Derek (King's Lynn)||Varley, Eric G.|
|Macdonald, A. H.||Paget, R. T.||Wainwright, Edwin (Dearne Valley)|
|McGuire, Michael||Pannell, Rt. Hn. Charles||Walden, Brian (All Saints)|
|Mackenzie, Gregor (Rutherglen)||Park, Trevor||Walker, Harold (Doncaster)|
|Mackie, John||Pearson, Arthur (Pontypridd)||Watkins, David (Consett)|
|Mackintosh, John P.||Peart, Rt. Hon. Fred||Whitlock, William|
|Maclennan, Robert||Pentland, Norman||Williams, Alan (Swansea, W.)|
|MacMillan, Malcolm (Western Isles)||Perry, George H. (Nottingham, S.)||Williams, Clifford (Abertillery)|
|McMillan, Tom (Glasgow, C.)||Price, Christopher (Perry Barr)||Williams, Mrs. Shirley (Hitchin)|
|MacPherson, Malcolm||Price, Thomas (Westhoughton)||Willis, George (Edinburgh, E.)|
|Mallalieu,J.P.W.(Huddersfield,E.)||Price, William (Rugby)||Wilson, William (Coventry, S.)|
|Manuel, Archie||Probert, Arthur||Winnick, David|
|Mapp, Charles||Pursey, Cmdr. Harry||Winterbottom, R. E.|
|Marquand, David||Rees, Merlyn||Woof, Robert|
|Mason, Roy||Rhodes, Geoffrey||Wyatt, Woodrow|
|Millan, Bruce||Robinson, Rt.Hn.Kenneth(St.P'c'as)||Yates, Victor|
|Miller, Dr. M. S.||Robinson, W. O. J. (Walth'stow, E.)|
|Milne, Edward (Blyth)||Rodgers, William (Stockton)||TELLERS FOR THE AYES:|
|Mitchell, R. C. (S'th'pton, Test)||Rose, Paul||Mr. Alan Fitch and|
|Mr. Neil McBride.|
|Alison, Michael (Barkston Ash)||Harrison, Col. Sir Harwood (Eye)||Onslow, Cranley|
|Allason, James (Hemel Hempstead)||Harvey, Sir Arthur Vere||Osborn, John (Haliam)|
|Awdry, Daniel||Harvie Anderson, Miss||Osborne, Sir Cyril (Louth)|
|Berry, Hn. Anthony||Hawkins, Paul||Page, John (Harrow, W.)|
|Bessell, Peter||Heseltine, Michael||Percival, Ian|
|Biffen, John||Higgins, Terence L,||Pounder, Rafton|
|Bossom, Sir Clive||Hiley, Joseph||Ramsden, Rt. Hn. James|
|Boyd-Carpenter, Rt. Hn, John||Hill, J. E. B.||Renton, Rt. Hn. Sir David|
|Braine, Bernard||Hirst, Geoffrey||Rossi, Hugh (Hornsey)|
|Brewis, John||Holland, Philip||Royle, Anthony|
|Brinton, Sir Tatton||Hordern, Peter||Russell, Sir Ronald|
|Buchanan-Smith,Alick(Angus,N&M)||Hornby, Richard||Scott, Nicholas|
|Buck Anthony (Colchester)||Hunt, John||Sinclair, Sir George|
|Bullus, Sir Eric||Irvine, Bryant Godman (Rye)||Smith, John|
|Campbell, Gordon||Jenkm, Patrick (Woodford)||Stainton, Keith|
|Carr, Rt. Hn. Robert||Jopling, Michael||Stodart, Anthony|
|Chichester-Clark, R.||King, Evelyn (Dorset, S.)||Stoddart-Scott, Col. Sir M. (Ripon)|
|Cooke, Robert||Kirk, Peter||Summers, Sir Spencer|
|Costain, A. P.||Kitson, Timothy||Taylor, Sir Charles (Eastbourne)|
|Crosthwaite-Eyre, Sir Oliver||Lambton, Viscount||Taylor, Frank (Moss Side)|
|Dance, James||Lewis, Kenneth (Rutland)||Temple, John M.|
|Davidson,James(Aberdeenshire, W.)||Macleod, Rt. Hn. Iain||Thatcher, Mrs. Margaret|
|Dean, Paul (Somerset, N.)||McMaster, Stanley||Thorpe, Rt. Hn. Jeremy|
|Deedes, Rt. Hn. W. F. (Ashford)||Macmillan, Maurice (Farnham)||Tilney, John|
|Dodds-Parker, Douglas||Maddan, Martin||van Straubenzee, W. R.|
|Doughty, Charles||Maginnis, John E.||Vaughan-Morgan, Rt. Hn. Sir John|
|Eden, Sir John||Maude, Angus||Wainwright, Richard (Colne Valley)|
|Elliott, R.W.(N'c'tle-upon-Tyne,N.)||Mawby, Ray||Walker, Peter (Worcester)|
|Errington, Sir Eric||Maydon, Lt.-Cmdr. S. L. C.||Ward, Dame Irene|
|Fortescue, Tim||Mills, Peter (Torrington)||Webster, David|
|Galbraith, Hon. T. G.||Mills, Stratton (Belfast, N.)||Whitelaw, Rt. Hn. William|
|Gilmour, Ian (Norfolk, C.)||Miscampbell, Norman||Wills, Sir Gerald (Bridgwater)|
|Gilmour, Sir John (Fife, E.)||Monro, Hector||Wilson, Geoffrey (Truro)|
|Glover, Sir Douglas||More, Jasper||Winstanley, Dr. M. P.|
|Gower, Raymond||Morgan, Geraint (Denbigh)||Wolridge-Gordon, Patrick|
|Grant, Anthony||Morrison, Charles (Devizes)||Wood, Rt. Hn. Richard|
|Grant-Ferris, R.||Mott-Radclyffe, Sir Charles||Worsley, Marcus|
|Gresham Cooke, R.||Munro-Lucas-Tooth, Sir Hugh||Wylie, N. R.|
|Gurden, Harold||Murton, Oscar||Younger, Hn. George|
|Hall, John (Wycombe)||Nabarro, Sir Gerald||TELLERS FOR THE NOES:|
|Hall-Davis, A. G. F.||Nicholls, Sir Harmar||Mr. Reginald Eyre and|
|Harris, Reader (Heston)||Nott, John||Mr, Bernard Weatherill.|
|clause ordered to stand part of the Bill.|