Clause 29. — (Stamping of Foreign Bills of Exchange.)

Orders of the Day — FINANCE (No. 2) BILL – in the House of Commons at 12:00 am on 12th June 1967.

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

Photo of Sir John Hall Sir John Hall , Wycombe

A similar provision to that of this Clause is contained in Section 39 of the Finance Act, 1956, as amended by Section 33(4) of the Finance Act, 1961, in relation to inland bills of exchange and promissory notes. Is there any reason why this Clause should not also apply to promissory notes? Perhaps it was so intended, as, in line 24 on page 35, the words "bills of exchange" are followed by the words "drawn or made". Under the Stamp Act of 1891, bills of exchange are drawn and promissory notes are made, so perhaps it is intended to include them, but I should like the point cleared up.

Photo of Mr John Smith Mr John Smith , Cities of London and Westminster

The Clause deals with bills of exchange drawn outside the United Kingdom and this Clause—even if not some of the others that we have been discussing are not—really is de minimis. We are dealing with a tax of 2d. If a bill of exchange drawn abroad does not have a stamp on it, one sticks on a 2d stamp. The revenue from the tax on these bills and on inland bills and promissory notes all rolled up together amounts to only £540,000 a year. Of course, bills drawn abroad are immensely fewer and of much less value in total than inland bills and promissory notes together, and I feel that the yield from this tax must, therefore, be trifling.

5.30 p.m.

It is another example of a tax which it may pay the Revenue to collect but which, I am sure, does not pay the economy as a whole. The total revenue from all bills of exchange, including cheques, is about £9 million. This revenue is raised in twopences. The Clause goes on to provide that any such instrument, that is, a bill of exchange, may be marked by or on behalf of the banker". What does this operation of marking involve?

I take, because it is the simplest and cheapest and, therefore, the best example from the Government's point of view, the case of a bank which has its own printing works and does its own marking. This operation is the same for inland bills of exchange in the form of cheques. It involves two printing operations and security problems as well. It involves returns from each branch of the bank to its head office of the number of cheques—I call them cheques because that is simpler and people understand it better than bills of exchange—received from the printers, the number issued to customers, and those sent back for destruction.

The printer has to make two returns. He has to make a return of stocks in hand, of the number printed, the number issued to the bank and the number destroyed; and he has to make returns to the chief cashier of the numbers issued to branches. The bank has to keep a revenue account which the printer has to debit and credit, and he has to match that with his own returns.

Even if all those operations cost nothing, let us consider what happens when a bill of exchange marked by the bank is issued to a customer. Anyone who gets a cheque book has his account—

Photo of Mr Thomas Price Mr Thomas Price , Westhoughton

I understood the hon. Gentleman to say a minute ago that about £9 million is collected in odd coppers, in pennies and twopences. My understanding is that bills of exchange are stamped ad valorem according to the value of the bill, and the amounts can be quite substantial. That is what applies to bills of exchange as distinct from cheques, is it not?

Photo of Mr John Smith Mr John Smith , Cities of London and Westminster

To the best of my knowledge, they used to be stamped ad valorem, but that requirement was repealed and they are now stamped on a fixed duty.

I was saying that any ordinary customer of a bank who asks for a book of bill of exchange forms, that is, cheque forms in this case, will have his account debited with the value of the stamps and another account in the bank will be credited with that amount of money. The cost of putting an entry through the books of a bank now is about 4s. So the issue of a cheque book costs at least 8s., and the effect of buying a cheque book, with stamp duty on the cheques amounting to less than 8s., is equivalent to tearing up the nation's money. Even ignoring the rest of this operation, that one part of it costs more than the duty raised.

There are other disadvantages to this trifling duty. Another example is the dividend warrant. Many small companies still have the trouble of sending dividend warrants to the Stamp Office for embossing, and, in my experience, the embossing machine occasionally tears them all up so that one has to start again. Irritations of that kind occur.

Not all countries have this tax. It is noteworthy—not that we should copy foreign countries—that good old Sweden does not have this tax and neither does China, though South Africa does. There is a division of opinion in the world on whether a trifling tax on bills of exchange is worth having at all.

We must watch the growing trend of the Revenue to get the taxpayer to do its work for it. It is not sufficient for the Revenue to say that the cost of collection of the tax is small compared with what it brings in. This is a very good example of what I mean. It costs the Revenue practically nothing to collect this tax—it simply receives large sums from a small number of banks—but the Revenue should not be blind to the cost to the economy of collecting these taxes. The revenue raised by this 2d. tax is just as much lost to the country, owing to the cost of collecting it, as if the money had been torn up.

Photo of Mr John Nott Mr John Nott , St Ives

I support my hon. Friend the Member for the Cities of London and Westminster (Mr. John Smith). I am delighted at the rapid progress which we are making in this country. First, bills of this type had ad valorem duty, and then it was changed to a 2d. duty. Then there was a period when bills had to be stamped at the Stamp Office. That was changed, and they no longer had to be stamped at the Stamp Office. Then there was a period when it was possible to buy a 2d. stamp, lick it and stick it on the bill. That was great progress, too. Now we have reached the stage when the Commissioners agree that banking houses dealing in foreign bills of exchange may compound the 2d. duty, and this, of course, is even more convenient than the previous concessions made.

I hope that the hon. Gentleman will tell us how much is involved in foreign bills of exchange. I doubt that it is much more than £100,000 in revenue. I may be wrong and, perhaps, it is a bit more than that, but the fact that people are delirious with joy now that they may compound the 2d. duty on foreign bills of exchange is an indication of the state to which this country is coming. The Government are congratulated on concessions of this kind, but, surely, the duty could be abolished altogether, thereby enhancing international business of this sort. The Clause is a sad reflection, although progress of a sort is being made, on the way that we in this country are unable to cut through the jungle of stamp duty law and bring some sanity into the situation.

Photo of Mr Harold Lever Mr Harold Lever , Manchester Cheetham

The hon. Member for St. Ives (Mr. Nott) presupposes a state of enthusiastic delirium among those subject to what I admit is a minor concession on the stamp duty. If there is anyone in a state of exaltation at this minor concession, he is not to be found on this side of the Committee.

The arguments of the hon. Member for the Cities of London and Westminster (Mr. John Smith) are always listened to with great care, as he is the Member for the entire Treasury Bench, so far as I know. He is certainly my Member of Parliament, so I always listen to him with great attention, in order to feel sure that I am getting value for money. I am rarely disappointed, but on this occasion I was not so impressed. The hon. Gentleman argued that this tax brings in £9 million and the sum paid is 2d. I should have thought that this was an argument for retaining the duty rather than not. We are always talking in favour of shifting from direct taxation which, it is said, deters effort and the like, to indirect taxation. What is this tax? Not only is it indirect taxation, but it is indirect taxation at its most painless. The number of spectacular examples of malnutrition caused by 2d. having to be paid on a bill of exchange must be very limited. On the whole, I imagine that the Committee would regard it as not unreasonable to retain the duty and accept this welcome concession.

It is a concession, and, while speaking in support of it—we are discussing a concession, not the duty itself—I should tell the Committee that a right hon. Gentleman who was more well known in the House as the Chief Whip of the Conservative Party was the fons et origo of this concession. I do not know why my mood inclines to Latin on this occasion, but I should like the Committee to know that he thought of the idea of making this concession, and the Treasury, with its characteristic open-mindedness on concessions which cost nothing, decided that it was possible to make it.

What we are doing here is granting the right to pay this duty in the most convenient and least costly way, namely, by a franking machine. If hon. Members ask why we should not go further, the answer is that we would readily extend the concession, which is convenient for the Revenue as well as for the taxpayer, wherever incentive to forgery would not arise as a result of the use of a franking machine. If there are other points at which hon. Members can suggest extension, they have the excellent precedent that this proposal came from the former Tory Chief Whip, now Lord Redmayne. There is no reason why hon. Members on both sides should not make similar suggestions for extension.

Photo of Sir Raymond Gower Sir Raymond Gower , Barry

We accept that it is a concession—no one denies that—but there was quite an ominous ring in the Under-Secretary's voice when he said that this is a good tax, that it is a small amount, and that we collect this sum of money. I do not like the sound of that. I do not like the ominous tones, the suggestions that this can be extended. I would far rather get it removed. Anyway, we accept this as a concession, though a very minor one.

Photo of Sir John Hall Sir John Hall , Wycombe

I think that inadvertently the hon. Gentleman omitted to reply to my point about the promissory notes.

Photo of Mr Harold Lever Mr Harold Lever , Manchester Cheetham

I am sorry. I thought that the hon. Gentleman appreciated that I was replying to him. I thought wrongly that it was the hon. Member for the Cities of London and Westminster (Mr. John Smith) who raised the point and I am sorry that I did not realise that this suggestion came from the hon. Gentleman. The position on promissory notes is that we cannot extend the franking permission further until we are satisfied that there is no danger of abuse or misuse of this concession. We will extend the concession in this direction as soon as we can feel reasonably safe about it.

Photo of Mr John Smith Mr John Smith , Cities of London and Westminster

Perhaps I might briefly reply to my constituent. This is not a concession. We must not allow ourselves to be so brain-washed that we treat everything as a concession. It is a way of reducing the cost to the Revenue of raising this tax. It will cost the Revenue much less to collect it in this way. That does not alter the fact that the total cost of collecting the tax, whether it falls on the Revenue or the economy, is greater than the money the tax produces. The reason is that this is a very rare type of tax, a tax on something which costs nothing. A cheque book costs nothing to the customer; he is charged only because of the tax. Therefore, the whole cost of accounting for the wretched thing is part of the cost of collecting the tax. Finally, just how much does this 2d. on bills of exchange drawn abroad raise? I have a little to do with foreign bills, and my experience is that there is not an enormous number of them about. I do not think that it raises very much money.

Photo of Mr Harold Lever Mr Harold Lever , Manchester Cheetham

I may not be able to give the hon. Gentleman the figure. I shall do my best, and if I cannot give it to him this afternoon I will see that he gets it in due course. The fact remains that this is a concession. I do not want to encourage the hon. Gentleman in the insubstantial hope of his winning my vote at the next election. He should not criticise the Revenue for making what is a concession of convenience both to the Revenue and to people who pay the tax. The concession originated from a former Tory Chief Whip, and we at any rate are very grateful to him for this helpful suggestion.

Question put and agreed to.

Clause ordered to stand part of the Bill.