Clause 27. — (Conveyances and Transfers on Sale: Reduction of Duty, and Amendment of Provisions for Exemption.)

Orders of the Day — FINANCE (No. 2) BILL – in the House of Commons at 12:00 am on 28th June 1967.

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Photo of Mr Richard Wainwright Mr Richard Wainwright , Colne Valley 12:00 am, 28th June 1967

I beg to move Amendment No. 28, in page 33, line 8, to leave out "£5,500" and to insert "£6,700".

Photo of Dr Horace King Dr Horace King , Southampton, Itchen

With this Amendment, we art discussing Amendment No. 29, in line 8, leave out "£7,000" and insert "£8,960", and Amendment No. 30, in line 9, leave out "£5,500" and insert "£6,700".

Photo of Mr Richard Wainwright Mr Richard Wainwright , Colne Valley

This Amendment arises partly from a strong concern for house ownership, which I believe is shared in almost all parts of the House, partly from an equally strong concern for the least possible interference with the mobility of skilled labour, which again commands the assent of most hon. Members, and also from a strong feeling amongst Liberals against the whole survival of stamp duties. That is a point which I must not pursue, but which I mention by way of background information.

Clearly, this is not a year, economically speaking, in which to press for the abolition of the whole of the stamp duties, but we are concerned to conduct a holding operation to try to make sure that at least the drag of these duties on the freedom of the economy should not get any worse, because that is exactly what they will do unless the exemption limits are kept in line with the price level of housing.

It is true that a change is provided in the Bill. The Budget statement referred to an upward change in the exemption limits for stamp duty purposes in respect of house purchase. However, the Chancellor did not explain the figures on which he hay hit for this purpose, and he was not able to claim, nor did he, that his new figures keep pace with the rising cost of houses. It seems to me that he has taken some advice—

Photo of Mr Eric Lubbock Mr Eric Lubbock , Orpington

Did not the Financial Secretary say, in answer to an intervention by me, that he did not even know whether these figures kept pace with the rise in the cost of housing?

Photo of Mr Richard Wainwright Mr Richard Wainwright , Colne Valley

That reinforces the point which I was about to make that the Government seem to have taken advice from G. K. Chesterton, that if a thing is worth doing it is worth doing badly.

Additional reasons why it is of great importance to the citizen that these limits should be kept in line with contemporary prices are, first, that in this matter there is no provision—and I am not suggesting there should be—for marginal relief. At the moment, if the entirety of a house purchase transaction goes above the precise figure of the exemption limit, duty becomes payable on the whole transaction. For instance, under the Government's proposed exemption limit of £5,500 the stamp duty for a transaction certified at that figure will be nil, but for a house purchased at £5,600 the stamp duty will be £28. Looked at in one realistic way, this is a duty at a rate equivalent to 28 per cent., because the addition of only £100 to the purchase price creates a liability to duty of £28. I could go on with similar examples.

The second additional reason which I wish briefly to adduce is the unfairness of the proposed, too small, exemption limits as between different regions of the country. Let me consider a man in the middle range of skill or management—these are the people whose housing needs we are discussing—who is moving from the North to the South. He will, in all likelihood, dispose of his house in the North to a buyer who will not suffer any stamp duty, but when he himself buys a house anywhere in the Home Counties to suit a man on his salary scale, he will almost certainly buy a property at above the exemption limit. We believe that the exemption limit should have a proper relationship at least to the average cost of homes which are being exchanged on the private market.

The best information available to us—the Government may have superior sources of information—is from the Monthly Digest of Statistics. An index is kept of the average value of new dwellings mortgaged by private owners. This covers land as well as construction, and refers only to dwellings on which building societies have advanced mortgages. Using these figures, and making what seems to be a reasonable assumption in respect of the latest quarter-year to bring us up to the date on which the Government's new exemption limits will take effect, namely, 1st August this year, our contention is that to keep pace with the rising cost of private housing the exemption limit from all stamp duty should be at least £6,000, and not £5,500 as in the Bill, and the exemption limit for half-rate duty should be at least £8,000 and not £7,000. This, to the best of our information, would bring the citizen into an equitable position as at 1st August of this year.

It may be asked why rather curious figures appear in the Amendment. They were, frankly, intended to attract some attention because of their precision. We believe that although the round figures I have mentioned would put the Government in some sort of respectable light, real justice demands that the limits should be raised further, in anticipation of the almost inevitable further increase in house prices.

It appears to be a fact that it takes about four years for this House, or any Government, to get round to tackling the exemption limits afresh. We have, therefore, taken a mean date two years from now, and extrapolated our figures so that date. It is this calculation which leads to the figures in the Amendment. If, in 1963 when the House, without any contention between the three parties agreed to increases in these exemption limits home ownership was considered to be important enough to encourage, and if the mobility of skilled people was considered to be a prime need for the economy, we contend that these objectives are as desirable, if not more so today.

3.45 p.m.

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

The Amendment is a step in the right direction, and I support it for the reason just touched on by the hon. Member for Colne Valley (Mr. Richard Wainwright).

I do not think that this duty produces any net yield to the Revenue at all. I know that the Financial Secretary will produce impressive figures for the apparent yield of this duty. Questions have been asked about this, which I have checked. None of them is exactly on this point, but there is sufficient to indicate that the apparent yield can be made to look quite impressive.

I do not think that the Government have studied sufficiently the way in which stamp duty reduces the yield of other taxes. The chief example, which we have touched on before, is the stamp duty on cheques. The information which I have gathered makes me believe that the cost to the banks who have to account to the Revenue for this duty, and the cost to the firms who pay it on their cheques, reduces the profits of the banks, and the firms who are their customers, by an amount which, in turn, reduces the tax they pay by a greater amount than the stamp duty raises. This is a matter to which I shall return next year.

The precise form of stamp duty dealt with in the Amendment is related to the provisions of Schedule 11 to the 1963 Finance Act. This Schedule sets out the rates at which stamp duty is paid on these small transactions. There are seven rates in that table where the duty raised is less than 1s. on each transaction, and 21 rates where the duty raised is less than £1 on each transaction. In the second part of the Schedule, dealing with stamp duty on leases, the duty is charged in 32 different categories, of which the smallest is 1s., and the largest is £12.

I think it likely that every one of these transactions costs the Revenue money, and there are a great number of them in any year. All these documents, which will no longer have to go to the Stamp Duty Office if the Amendment is accepted have at the moment to be presented for stamping, and in most cases the cost of taking them to the Stamp Office—for example, in my constituency I think that it is to Moorgate or to Bush House—of dealing with the payment of duty, paying the Revenue, debiting the clients in the solicitor's ledgers, and of recovering the money from the client, must far exceed the duty raised.

That brings me to the prime reason which I first mentioned for abolishing the duty on the transactions described in the Clause. Solicitors charge fees for conveyancing at a fixed rate, and therefore the cost of getting a document stamped comes directly off the profits of the partners in the firm. I am not a solicitor, but I understand that there are some present. I hope they will not mind my saying that solicitors, on the whole, earn quite a good living, and pay quite a high rate of tax, and that therefore the cost of getting the documents stamped comes directly off the taxes paid by the solictors concerned.

There is also a further point of this nature, which is that the introduction of the Capital Gains Tax has effectively reduced the yield of stamp duty on conveyancing in all cases where the transaction is liable to Capital Gains Tax from 1 per cent. to ⅔ of 1 per cent., because when a property is sold the stamp duty which was involved in its original purchase is a deduction for Capital Gains Tax purposes.

Photo of Dr Horace King Dr Horace King , Southampton, Itchen

I hate to interrupt the hon. Member, but it seems to me that he is discussing stamp duty in general, and lie must link what he has to say to the three Amendments specifically before us.

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

I must apologise, Mr. Speaker. I am afraid I am tremendously bad at keeping in order. I feel it is more an art than a science. My point was that this Amendment deals with two types of transaction. It deals with those people who are buying their own houses, where of course Capital Gains Tax does not arise, but it also deals with other transactions of the same size on which Capital Gains Tax will be payable. What I am saying is that if Capital Gains Tax is payable then the true yield of stamp duty is reduced from 1 per cent. to ⅔ of 1 per cent.—and in other cases from ½ per cent. to two-thirds of that, and therefore it is not as important to the Revenue as I think it is possible the Financial Secretary may indicate.

Further, many of these transactions, small though they are, may take the form of gifts, and will have to be adjudicated for stamp duty purposes; and the cost of adjudication is very great. I think I am right in saying that adjudication is now done by the Estate Duty Office rather than as in the past. It costs no more to adjudicate a value for an 80 per cent. tax, as in the case of Estate Duty, than it does to adjudicate for the duty we are considering here involving ⅔ of ½ of 1 per cent. Therefore, the cost to the Revenue of settling some of the matters included in this Amendment is relatively over 80 times as great as the cost of settling other similar transactions.

Sir Stafford Cripps, to his great credit, abolished the 1d. stamp duty on proxies. He took an enormous administrative burden from the backs of the entire community and released their energies for better purposes. If the Financial Secretary would agree to take these two first resistant Liberal steps towards abolishing stamp duty altogether, and certainly on the transactions included in this Amendment, he would produce no less a saving than did Sir Stafford Cripps in wasted time, in wasted labour, in wasted money and in wasted tax.

Photo of Mr Niall MacDermot Mr Niall MacDermot , Derby North

The hon. Member for Colne Valley (Mr. Richard Wainwright), in moving his Amendment, said that the purpose of it was to keep the raising of the exemption limit for this branch of stamp duty in line with increases in the price levels of houses. That was his object. With respect, I think that the Government proposals in the Bill do achieve that, and that what he is proposing would go much beyond it.

The hon. Gentleman the Member for Orpington (Mr. Lubbock) suggested in an intervention that I had pleaded ignorance to the movement in the cost of housing. I did not. What I pleaded ignorance to was the specific figure which I was asked to give, which was the increased building costs, which is a different matter.

To come, first, to the position of the cost of housing and the Government's proposal, it is proposed that the limit of complete exemption should be raised from the £4,500 figure at which it was fixed in 1963 to £5,500, and there is the corresponding increase in the lower rate of ½ per cent. or £6,000 to £7,000. Of course, the prices of houses vary in different parts of the country, but if one takes the national average, a house worth £4,500 in 1963 is worth £5,400 in 1967, so what we have done is to raise the limit slightly higher than would have been justified by the national average in the increase in housing costs.

We have had in mind, of course, the fact which was referred to by the hon. Gentleman in moving the Amendment, that house prices, in the South-East in particular, are higher than the average, and that more people will be in the position of moving from North to South. If we compare it with the figures which were available to us from the Co-operative Permanent Building Society's index of London prices—according to that—a £4,500 house in 1963 was worth £5,600 at the end of December, 1966—again, very close to the figure in the Government's proposal.

The hon. Gentleman the Member for Orpington, as I say, inquired last time when we were discussing this in Committee about the increase of building costs. I have those figures now. I think that the base date is 1954 for the purpose of these figures. One takes 1954 prices as being 100, and on that basis the increase of building costs was 126 in 1963 and was 140 in 1966. So it will be seen, again, that the measure of increase in our proposals is considerably better than the increase in building costs. The reason for this is, of course, that the increase in building costs does not reflect in full the increase in house prices, because of the increase in the value of land.

I hope that I have satisfied the House that our proposals do keep pace, and slightly more than keep pace, with the average house purchase costs throughout the country.

Photo of Mr Richard Wainwright Mr Richard Wainwright , Colne Valley

I interrupt only to inquire whether all the figures the hon. and learned Gentleman has given the House in the last few minutes go only up to December, 1966. Or is he able to assure us that they go up to 1st August, when his limits start to take effect?

Photo of Mr Niall MacDermot Mr Niall MacDermot , Derby North

I think that the figures are up to December—certainly, the Co-operative Permanent Building Society one which I gave. No, I think that the £5,400 figure I gave is at 1967. I am unable to tell the hon. Gentleman which month—how far into 1967 it goes.

The hon. Member for the Cities of London and Westminster (Mr. John Smith), in an ingenious argument, sought to persuade the House that stamp duties are really counter-productive and that the Revenue would benefit by abolishing them. I do not know whether he persuaded his hon. Friends, but his arguments did not persuade me. Apart from the ingenious countervailing factors he suggested, the additional costs of what is proposed in this Amendment would be as follows. I should give the House revised figures of the estimates I made of the Government's proposals when we were in Committee.

As a result of further information which has since become available it is now estimated that the cost of the Government's proposals would be £4 million in a full year and £3 million this year; and the additional cost of what is proposed in this Amendment would be another £3½ million in a full year, £2½ million this year, making a total of £7½ million in a full year and £5½ million this.

So my answer to the hon. Gentleman the Member for Colne Valley is that the Government's proposals do pass the test which he suggested should be applied to the increase which it is right to make now in the present circumstances; and that it would be only in the extreme cases, in areas in the South-East, where prices have risen to the highest degree, that our proposals would not keep pace. I suggest that we have got to take a national view of this, and that to raise the limit to an extent which would ensure that everyone would be in the same position as he was in 1963 would involve raising the limit far too high in other parts of the country and in particular in the North.

For these reasons, I must advise the House to reject the Amendment.

4.0 p.m.

Photo of Mr Eric Lubbock Mr Eric Lubbock , Orpington

I am afraid that the Liberal Party cannot possibly accept the Financial Secretary's argument. In particular, although I mentioned building costs in an intervention in Committee, he must have realised since then—as he pointed out rather in passing—that building costs have not increased nearly as much as the cost of new house mortgages and that therefore this index is not suitable for this purpose.

I agree that the figures show that, on the index which started in 1954, there has been an increase only from 126 to 140 over the relevant period, but, in the same publication, the Monthly Digest of Statistics, I find that the increase in the average value of new dwellings, as mentioned by my hon. Friend the Member for Colne Valley (Mr. Richard Wainwright) was 30·1 per cent. from August, 1963, when the limits were last amended, to the first quarter of this year. I would, therefore, like to know where the hon. and learned Gentleman gets his figures of a house costing £4,500 in 1963 being worth only £5,600 in 1967. This figure lacks precision, and I wonder whether he has merely estimated it himself.

Upon inquiring of the Building Societies Asociation, I discovered that it had figures only up to the end of last year, and the hon. and learned Gentleman admitted that the figures of the Cooperative Permanent Building Society went only up to December, 1966. This is not adequate, because, as he knows, the limits will not be raised until August 1st and he should, therefore, multiply the difference in costs between £4,500 and £5,600. which he said was typical of London, by 4½/3 so as to extrapolate the increase in building costs which we all know will take place over this period.

This would not be enough to satisfy us, however. We do not want merely to turn the clock back to August 1st, 1963. The opportunity should be taken to compensate house purchasers who acquire dwellings over the next few years for the inevitable rise which they will face. Therefore, if one assumes that it will be another four years before these limits are changed, we thought that it would be reasonable to estimate what the difference will be two years hence. That is what we have done, and the hon. and learned Gentleman did not reply to that at all.

I should like to make one or two constituency points in support of this argument. The hon. and learned Gentleman admitted that the cost of housing in the South-East and the Home Counties is very much larger than elsewhere, but I should like to tell him that one cannot get anything like a reasonable modern house for the prices mentioned in the Bill and that the houses which are beyond our own limits in the Amendment are nothing very spectacular. They are not the sort of thing in which one would expect millionaires to live.

I will give some examples. A house on Crofton Road, a detached, three-bedroomed bungalow with garage, is £6,300 and I can give one or two similar examples. A semi-detached, three-bedroomed house in Broughton Road, with two reception rooms and a garage, is £5,950. Going up a little, a three-bedroomed detached house with two reception rooms and a garage in Tubbenden Lane is £7,450, and another in that neighbourhood, in Tubbenden Close, a three-bedroomed house with through lounge and garage, is £8,000.

I can assure the hon. and learned Gentleman that, if he came to my constituency, he would find that these are not outrageous prices or very much larger than the district's average. These are typical examples of the sort of house in which the young executive has to live when he comes down to London. I am amazed, when I see young married couples with children living in these houses, that they can possibly afford the enormous repayments involved—

Photo of Mr Frederick Bellenger Mr Frederick Bellenger , Bassetlaw

Is the hon. Gentleman quoting asking prices or sale prices?

Photo of Mr Eric Lubbock Mr Eric Lubbock , Orpington

In this case, they would be the same, because their source is an estate agent in the Orpington area, whose name I do not wish to mention, but who, I can assure the right hon. Gentleman, is one of the most successful in my constituency. It is, therefore, reasonable to assume that, although these are asking prices, purchasers will be able to pay them. I am not surprised that the right hon. Gentleman expresses doubts, but, if he came to my constituency, I would prove to him quite simply, by taking him around a typical housing area, that these prices are by no means exceptional.

The Financial Secretary's reply was entirely unsatisfactory. Of course, we would like ultimately to sweep away the stamp duties on house purchase entirely, but we are not going that far. We thought that the suggestion in the Amendment and in the two related ones was a reasonable one for him to accept in a year of financial stringency. Because his reply was so disappointing, I must ask my right hon. and hon. Friends to accompany me into the Lobby to express our protest.

Photo of Mr Charles Fletcher-Cooke Mr Charles Fletcher-Cooke , Darwen

I shall certainly accompany the hon. Member for Orpington (Mr. Lubbock) into the Lobby. It is clear from the Financial Secretary's reply that, so far from this being a reforming Clause, it barely keeps up with the tide of events sweeping over the Treasury, that the figures are already out of date and that, in real terms, people would be paying more stamp duty than they were last year or at any rate in 1963.

The Financial Secretary was very frank and did not put this forward as a reforming measure. Nor could he, in view of subsequent Clauses, which seek to increase the incidence of these dreadful duties. He did not answer the point of my hon. Friend the Member for Cities of London and Westminster (Mr. John Smith) about the expenses of adjudication, which are monstrously high in proportion to the yield. Nor could he, because he knows that that is the case.

Nor did he answer the general point—this is in order and relevant on the

Amendments—namely, that the stamp duty, of all duties, because of its ancient and barbaric origin, is the easiest to evade, because it is a duty on documents and documents alone. Anyone who puts his mind to it can produce simple evasions—

Photo of Dr Horace King Dr Horace King , Southampton, Itchen

Order. With respect, the hon. and learned Gentleman should link his point about evasion to the variation of sums proposed in the Amendment.

Photo of Mr Charles Fletcher-Cooke Mr Charles Fletcher-Cooke , Darwen

Certainly I will, Mr. Speaker. People who are concerned in these financial brackets are the people who cannot, on the whole, evade, because they are ordinary people and therefore obliged to pay the tax, because they have not the financial and legal expertise at their elbow which people indulging in much larger transactions often have. It is, therefore, monstrous that the higher figure—which is in fact not very high—suggested by the Liberal Party, should not be accepted.

Question put, That "£5,500" stand part of the Bill:—

The House divided: Ayes 204, Noes 138.

Division No. 398.]AYES[4.10 p.m.
Allaun, Frank (Salford, E.)Crosland, Rt. Hn. AnthonyGreenwood, Rt. Hn. Anthony
Alldritt, WalterCrossman, Rt. Hn. RichardGregory, Arnold
Allen, ScholefieldDalyell, TamGrey, Charles (Durham)
Anderson, DonaldDavies, Dr. Ernest (Stretford)Griffiths, David (Rother Valley)
Archer, PeterDavies, G. Elfed (Rhondda, E.)Griffiths, Rt. Hn. James (Llanelly)
Armstrong, ErnestDavies, Ifor (Gower)Griffiths, Will (Exchange)
Atkins, Ronald (Preston, N.)Davies, S. O. (Merthyr)Hamilton, James (Bothwell)
Atkinson, Norman (Tottenham)Delargy, HughHamilton, William (Fife, W.)
Bagler, Gordon A. T.Dempsey, JamesHarming, William
Barnett, JoelDiamond, Rt. Hn. JohnHannan, William
Baxter, WilliamDickens, JamesHarrison, Walter (Wakefield)
Beaney, AlanDobson, RayHart, Mrs. Judith
Benee, CyrilDoig, PeterHaseldine, Norman
Blnns, JohnDunn, James A.Hattersley, Roy
Bishop, E. S.Dunwoody, Dr. John (F'th & C'b'e)Herbison, Rt. Hn. Margaret
Blackburn, F.Eadie, AlexHorner, John
Boardman, H.Edelman, MauriceHowarth, Robert (Bolton, E.)
Booth, AlbertEdwards, Rt. Hn. Ness (Caerphilly)Howie, W.
Bowden, Rt. Hn. HerbertEdwards, Robert (Bilston)Huckfield, L,
Braddock, Mrs. E. M.
Bray, Dr. JeremyEdwards, William (Merioneth)Hughes, Emrys (Ayrshire, S.)
Brooks, EdwinEnglish, MichaelHughes, Roy (Newport)
Brown, Rt. Hn. George (Belper)Ensor, DavidHunter, Adam
Brown, Hugh D. (G'gow, Provan)Evans, Ioan L. (Birm'h'm, Yardley)Jackson, Colin (B'h'se & Spenb'gh)
Brown, Bob (N'c'tle-upon-Tyne, W.)Faulds, AndrewJackson, Peter M. (High Peak)
Buchan, NormanFernyhough, E.Janner, Sir Barnett
Buchanan, Richard (G'gow, Sp'burn)Finch, HaroldJohnson, James (K'ston-on-Hull, W.)
Butter, Herbert (Hackney, C.)Fitch, Alan (Wigan)Jones, J. Idwal (Wrexham)
Callaghan, Rt. Hn. JamesFletcher, Ted (Darlington)Kelley, Richard
Cant, R. B.Foot, Michael (Ebbw Vale)Kerr, Dr. David (W'worth, Central)
Carmichael, NeilFord, BenKerr, Russell (Feltham)
Castle, Rt. Hn. BarbaraForrester, JohnLeadbitter, Ted
Chapman, DonaldFowler, GerryLee, Rt. Hn. Frederick (Newton)
Coe, DenisFraser, Rt. Hn. Tom (Hamilton)Lector, Miss Joan
Coleman, DonaldGalpern, Sir MyerLever, Harold (Cheetham)
Concannon, J. D.Garrett, W. E.Lewis, Arthur (W. Ham, N.)
Crawshaw, RichardGinsburg, DavidLewis, Ron (Carlisle)
Lipton, MarcusNoet-Baker, Rt. Hn. Philip (Derby, S.)Spriggs, Leslie
Lomas, KennethO'Malley, BrianSteele, Thomas (Dunbartonshire, W.)
Loughlin, ChariesOram, Albert E.Stewart, Rt. Hn. Michael
Luard EvanOswald, ThomasStrauss, Rt. Hn. G. R.
Lyon, Alexander W. (York)Owen, Dr. David (Plymouth, S'tn)Swain, Thomas
Lyons, Edward (Bradford, E.)Owen, Will (Morpeth)Swingler, Stephen
McBride, NeilPaget, R. T.Symonds, J. B.
McCann, JohnPalmer, ArthurThomson, Rt. Hn. George
MacColl, JamesPannell, Rt. Hn. CharlesTomney, Frank
MacDermot, NiallPark, TrevorTuck, Raphael
Macdonald, A. H,Parkyn, Brian (Bedford)Urwin, T. W.
Mackenzie, Gregor (Ruthergten)Pavitt, LaurenceWainwright, Edwin (Dearne Valley)
Mackie, JohnPearson, Arthur (Pontypridd)Watkins, David (Consett)
Mackintosh, John P.Perry, Ernest G. (Battersea, S.)Watkins, Tudor (Brecon & Radnor)
McMillan, Tom (Glasgow, C)Price, Thomas (Westhoughton)Wellbeloved, James
McNamara, J. KevinPrice, William (Rugby)Wells, William (Walsall, N.)
MacPherson, MalcolmProbert, ArthurWhite, Mrs. Eirene
Mahon, Peter (Preston, S.)Rankin, JohnWhitlock, William
Mallalieu, E. L. (Brigg)Rees, MerlynWilley, Rt. Hn. Frederick
Mallalieu, J. P. W. (Huddersfield, E.)Rhodes, GeoffreyWilliams, Alan Lee (Hornchurch)
Manuel, ArchieRoberts, Albert (Normanton)Williams, Clifford (Abertillery)
Mapp, CharlesRobertson, John (Paisley)Williams, Mrs. Shirley (Hitchin)
Millan, BruceRobinson, Rt. Hn. Kenneth (St. P'c'as)Williams, W. T. (Warrington)
Miller, Dr. M. S.Robinson, W. O. J. (Walth'stow, E.)Willis, George (Edinburgh, E.)
Mitchell, R. C. (S'th'pton, Test)Rogers, George (Kensington, N.)Wilson, William (Coventry, S.)
Morgan, Elystan (Cardiganshire)Sheldon, RobertWinnick, David
Morris, Alfred (Wythenshawe)Shinwell, Rt. Hn. E.Winterbottom, R. E.
Morris, Charles R. (Openshaw)Short, Mrs. Renée (W'hampton, N. E.)Woodburn, Rt. Hn. A.
Moyle, RolandSilkin, Rt. Hn. John (Deptford)Woof, Robert
Murray, AlbertSilkin, Hn. S. C. (Dulwich)
Neal, HaroldSilverman, Julius (Aston)TELLERS FOR THE AYES:
Newens, StanSlater, JosephMr. Harold Walker and
Noel-Baker. Francis (Swindon)Small, WilliamMr. Joseph Harper.
Baker, W. H. K.Griffiths, Eldon (Bury St. Edmunds)Morrison, Charles (Devizes)
Balniel, LordHalf, John (Wycombe)Munro-Lucas-Tooth, Sir Hugh
Bell, RonaldHall-Davis, A. G. F.Murton, Oscar
Bennett, Sir Frederic (Torquay)Hamilton, Michael (Salisbury)Nicholls, Sir Harmar
Biffen, JohnHarris, Frederic (Croydon, N.W.)Noble, Rt. Hn. Michael
Blggs-Davison, JohnHarris, Reader (Heston)Onslow, Cranley
Birch, Rt. Hn. NigelHarrison, Brian (Maldon)Osborn, John (Haltam)
Black, Sir CyrilHarrison, Col. Sir Harwood (Eye)Osborne, Sir Cyril (Louth)
Bossom, Sir CliveHarvey, Sir Arthur VerePage, Graham (Crosby)
Boyd-Carpenter, Rt. Hn. JohnHarvie Anderson, MissPeel, John
Braine, BernardHeald, Rt. Hn. Sir LionelPeyton, John
Bromley-Davenport, Lt.-Col.Sir WatterHill, J. E. B.Pike, Miss Mervyn
Brown, Sir Edward (Bath)Hirst, GeoffreyPink, R. Bonner
Bruce-Gardyne, J.Hogg, Rt. Hn. QuintinPrior, J. M. L.
Buchanan-Smith, Alick (Angus, N&M)Holland, PhilipPym, Francis
Bullus, Sir EricHooson, EmlynRamsden, Rt. Hn. James
Campbell, GordonHowell, David (Guildford)Ridley, Hn. Nicholas
Carr, Rt. Hn. RobertHunt, JohnRidedale, Julian
Cary, Sir RobertHutchison, Michael ClarkRossi, Hugh (Hornsey)
Channon, H. P. G.Irvine, Bryant Godman (Rye)Royle, Anthony
Clegg, WalterJenkin, Patrick (Woodford)Scott, Nicholas
Cooke, RobertJennings, J. C. (Burton)Sharples, Richard
Costain, A. P.Johnston, Russell (Inverness)Shaw, Michael (Sc'b'gh & Whitby)
Crosthwalte-Eyre, Sir OliverKaberry, Sir DonaldSmith, John
Cunningham, Sir KnoxKershaw, AnthonyStodart, Anthony
Currie, G. B. H.Kimball, MarcusStoddart-Scott, Col. Sir M. (Ripon)
Dance, JamesKing, Evelyn (Dorset, S.)Tapseil, Peter
Davidson, James (Aberdeenshire, W.)Kirk, PeterTaylor, Sir Charles (Eastbourne)
Dean, Paul (Somerset, N.)Kitson, TimothyTaylor, Edward M.(G'gow, Cathcart)
Dodds-Parker, DouglasLambton, ViscountThatcher, Mrs. Margaret
Doughty, CharlesLangford-Holt, Sir JohnTurton, Rt. Hn. R. H.
Douglas-Home, Rt. Hn. Sir AlecLegge-Bourke, Sir HarryWalker, Peter (Worcester)
Elliott,R.W.(N'c'tle-upon-Tyne,N.)Lloyd, Rt. Hn. Selwyn (Wirral)Wall, Patrick
Walters, Dennis
Eyre, ReginaldLongden, GilbertWard, Dame Irene
Farr, JohnMcAdden, Sir StephenWeatherill, Bernard
Fletcher-Cooke, CharlesMacleod, Rt. Hn. IainWebster, David
Fortescue, TimMcMaster, StanleyWhitelaw, Rt. Hn. William
Foster, Sir JohnMaginnis, John E.Wills, Sir Gerald (Bridgwater)
Galbraith, Hon. T. G.Marples, Rt. Hn. ErnestWilson, Geoffrey (Truro)
Gibson-Watt, DavidMaude, AngusWinstanley, Dr. M. P.
Gilmour, Ian (Norfolk, C.)Mawby, RayWolrige-Gordon, Patrick
Gilmour, Sir John (Fife, E.)Maxwell-Hyslop, R. J.Worsley, Marcus
Glover, Sir DouglasMaydon, Lt.-Cmdr. S. L. C.Younger, Hn. George
Gower, RaymondMills, Peter (Torrington)
Grant, AnthonyMills, Stratton (Belfast, N.)TELLERS FOR THE NOES:
Grant-Ferris, R.Monro, HectorMr. Eric Lubbock and
Gresham Cooke, R.More, JasperMr. Richard Wainwright

Photo of Mr Niall MacDermot Mr Niall MacDermot , Derby North

I beg to move Amendment No. 31, in page 33, line 38, to leave out from the beginning to end of line 16 on page 34 and to insert: (3) The said section 42 shall not apply to any instrument executed on or after the said 1st August unless it is also shown to the satisfaction of the Commissioners that the instrument was not executed in pursuance of or in connection with an arrangement whereunder—

  1. (a) the consideration, or any part of the consideration, for the conveyance or transfer was to be provided or received, directly or indirectly, by a person other than a body corporate which at the time of the execution of the instrument was associated within the meaning of the said section 42 was either the transferor or the transferee (meaning respectively, the body from whom and the body to whom the beneficial interest was conveyed or transferred), or
  2. (b) the said interest was previously conveyed or transferred, directly or indirectly, by such a person, or
  3. (c) the transferor and the transferee were to cease to be associated within the meaning of the said section 42 by reason of a change in the percentage of the issued share capital of the transferee in the beneficial ownership (within the meaning of that section) of the transferor or a third body corporate;
and, without prejudice to the generality of paragraph (a) above, an arrangement shall be treated as within that paragraph if it is one whereunder the transferor or the transferee, or a body corporate associated with either as there mentioned, was to be enabled to provide any of the consideration, or was to part with any of it, by or in consequence of the carrying out of a transaction or transactions involving, or any of them involving, a payment or other disposition by a person other than a body corporate so associated.This subsection shall, as respect instruments executed on or after the said 1st August, have effect in substitution for section 50 of the Finance Act 1938. This Amendment has been put down in pursuance of an undertaking I gave in Committee to bring forward a new provision replacing the present subsection (4). Subsection (3) becomes unnecessary, and will disappear.

The House will remember that subsection (4) is intended to counter a device under which the relief from transfer duty on a transfer between two associated companies can be obtained for a transfer paid for, in effect, by a person outside the group and forming part of an arrangement under which the transferee leaves the group. The way in which the device is countered at present in the Bill is by providing that the transferor and the transferee companies must remain associated with the group for at least a year after the transfer.

That was criticised by the hon. Member for Wycombe (Mr. John Hall) on the ground that the Bill should provide only against the transferee leaving the group; and that there were many innocent transactions in which the transferor might wish to leave a group after making the transfer so that some of the assets might be retained in the group. When we discussed the matter in Committee, I accepted the validity of the criticism and suggested that we would seek to bring forward an Amendment based on the existing Section 50 of the Finance Act, 1938, strengthened in relation to this particular problem. That is what the Amendment does. The Confederation of British Industry, which was concerned about the original drafting in the Clause, has, I think, been consulted and I think I can say that it is content with the proposals in the Amendment.

Photo of Sir John Hall Sir John Hall , Wycombe

It is pleasant to be able to congratulate the Government on introducing an Amendment in furtherance of a promise given in Committee. As the Financial Secretary said, the Clause as originally drafted was likely to penalise innocent transactions and we attempted to put this right by our Amendment No. 175 in Committee. We are grateful for the opportunity to support the present Amendment and to thank the Financial Secretary for honouring his pledge with respect to it.

Amendment agreed to.