I beg to move Amendment No. 107, in page 81, line 26, at end insert:
'(3) This part of this Schedule, so far as it increases any duty chargeable under or by reference to the heading "Conveyance or Transfer on Sale" in First Schedule to the Stamp Act 1891, shall not apply in any case to transfers of debenture stocks and bonds issued or to be issued by the Agricultural Mortgage Corporation Limited and the Scottish Agricultural Securities Corporation'.
The amendment has the double honour of being the last amendment to be selected for debate and the occasion of my maiden speech on this year's Finance Bill. I therefore hope that at this late hour and in these remarkable circumstances the Government will apply their generosity. The moment has arrived for magnanimity.
As the amendment is concerned with agriculture, I must register a protest that yet again there is no agriculture Minister sitting on the Government Front Bench. This is an indication of the Government's lack of interest in agriculture. The Government protest that they are in favour of agriculture, more particularly of agricultural expansion. Only too often their words, unfortunately, have been belied by their actions. Even in the absence of an agriculture Minister, or perhaps because of it, the Government now have the opportunity to show willing and to do agriculture a good turn.
The objective of the amendment is simply to exempt the Agricultural Mortgage Corporation Limited and the Scottish Agricultural Securities Corporation from the increase in stamp duty proposed for this year—in other words, to retain the stamp duty at 1 per cent. instead of 2 per cent. In fact, there are very good arguments for total exemption of the AMC and the SASC from stamp duty. The AMC is the only company in the near-gilt market, and that privilege has been accorded to it in deference to its mandate to lend on the most favourable terms, but the benefit of that privilege has been considerably reduced by the incidence of stamp duty.
Then again the AMC is virtually the only borrower, and certainly the only regular and substantial borrower, in the near-gilt market whose stocks are subject to transfer duty. That means that if it is to compete and get the best from the market it has to bear the duty itself, the cost of bearing the duty is a capital item for tax purposes and, therefore, the AMC has to raise loan capital, not for capital investment which could be expected to yield profit, but as a stock in trade. This means that any increase in incidental costs to be retailed on to borrowers, grossed up for corporation tax.
I could expound at greater length on the case for total exemption, but I will not do so at this late hour. I know that some of my hon. Friends wish to make some comments in a moment, but because the case for total exemption has been made by the AMC and turned down in the past on no fewer than eight occasions, it did not seem to me that it would be wise to press the Government for total exemption on this occasion. Therefore, my amendment has the much more limited objective which I have described.
However, I think it is important to recall that, as it seems to me, in the past the case for exemption has been turned down for fear that exemption might create some sort of band wagon effect, but I do not think that case is particularly strong any longer because some of the others who might have been exempted have been exempted already. Local authorities were exempted in 1963 and others which might be exempted now include virtually only the SASC, which, in any case, is included in this amendment, and a few harbour and other public boards. They, in fact, borrow infrequently and relatively insignificant sums.
At the annual general meeting of the AMC—and perhaps I should declare an interest here—[An HON. MEMBER: "About time."] I have not got an interest in the AMC, but the chairman is one of my constituents. He said:
Because AMC borrows in the section of the market in which these other borrowers are exempt from stamp duty, AMC has for long been advised it can borrow more cheaply by paying the stamp duty itself. This is done by compounding the stamp duty payable at a rate of 20 pence per cent. per annum on the nominal amount of its outstanding borrowings. it has undertaken that £216 million of its debenture stocks and bonds already issued will be transferred free of stamp duty in this way.
Therefore, the increase in stamp duty, in the light of what the chairman said, means that about £1 million of AMC's income before tax will be required to meet the burden of stamp duty.
In consequence, new borrowers from the AMC—this is an important matter—will have to bear not only the cost of the stamp duty incurred in the raising of funds from which their loans are made but also the cost of the increased duty on past issues of debentures the proceeds of which have already been lent at fixed rates to past borowers. Therefore, the AMC lending rate for new borrowers will for the foreseeable future have to include no less than 0·64 per cent. on account of this item alone.
If the Government accept the amendment, they will help reduce the charges on capital improvement. They will help to reduce the charges on farmers' working capital. They will make it easier for farmers to expand their acreage, and they will make it easier for tenants to purchase their farms. They will make it easier for farmers to buy new farms. They will make it easier for farmers to repay their loans from other sources.
The amendment is plainly worth while, and the cost to the Treasury would be small, though the benefit in its effect on farm production would be valuable, and that ultimately means a benefit in terms of indirect economic effect from the Treasury's point of view. The amendment would have beneficial results, and I very much hope that the Government will accept it.
I strongly support what has been said so clearly and effectively by my hon. Friend the Member for Devizes (Mr. Morrison). This is a most inopportune time even to contemplate increasing a duty of this kind. On both sides of the House, we recognise that agriculture has many difficulties. In my experience, one of the limiting factors in many instances preventing farmers from helping themselves is the shortage of capital. It is highly desirable that the maximum help should be available from a corporation of this kind which, although not a public body, is closely analogous to a public authority.
The same principles as have permitted certain concessions to be made in respect of local authorities, for example, should be extended in toto to the AMC. What we are asking for here is merely half what should be sought. I strongly support the amendment and I hope that the Government will accept it.
I am grateful for that welcome to my brief intervention. I support my hon. Friend the Member for Devizes (Mr. Morrison) in this amendment. I must declare the extent of my interest. I have never had a loan from the AMC. I have had to find my loans from other sources.
My hon. Friend gave a technical explanation. I shall not be technical. I shall put the practical case and show how farmers will be affected. The AMC will have to alter its lending rate to new borrowers. That will be unfortunate at this time because agriculture is already bearing heavy burdens, especially financial burdens. There is no good purpose in adding to those burdens even by this small amount.
We have had to cope with record rates of interest, although I admit that they are a world problem, but why make matters worse? Finance for agriculture is extremely difficult and I see no point in adding to the problems. That would act as a disincentive to invest more capital in the industry. It would hold back increased home production since farmers must borrow money for buildings and improvements if they are to increase their production. I am not overstating the case. Labour Members may well be feeling the pinch in months to come.
Labour Members are for ever complaining about the rate of interest at which people have to borrow money to buy their own homes, but they have no sympathy for people buying businesses even of the most basic nature like agriculture.
My hon. Friend is correct. Whether we like it or not, home production must be increased on products like milk, butter, cheese, cream, cereals, sugar beet, pigs and even beef. There may be a surplus of beef now, but in the months ahead we shall need to increase production.
I am also concerned about the effect of the Bill on young farmers. It is already difficult enough for young men to start in farming. They may have to borrow from the AMC to pay out their fathers if they are going to take over the farms. It it, therefore, in the interest of the country for the Government to look into this matter carefully.
This is an auspicious occasion because the Chief Secretary, who, I understand, will reply to the debate, and I first entered the House on the same day and this is the first time we have ever debated together from the Front Benches. He was my loyal pair, and I hope I was loyal to him, for the first six years we were in the House. I hope that in view of that he will show his well-known benevolence and generosity tonight in a helpful answer. I hope that my hon. Friend's speeches will have softened his heart. I sometimes wonder whether the Treasury understands the problems.
I am rather surprised that nobody is present on the Front Bench from the Ministry of Agriculture. I am surprised that the Whips have not gone out to fetch a Minister from that Department. The 'Minister of State at the Ministry was standing at the Bar of the House about five minutes before the discussion on agriculture began, but he seemed to slink away just before the debate started.
I hope that the Financial Secretary in reply will not say that the Government cannot afford to meet the amendment. Within the last week the Government have saved a great deal of money on what they thought they had been let in for. The House will recall that when we debated agriculture on 26th June last, the right hon. Gentleman the Minister of Agriculture announced that in future the price of beef would not fall below £18 per cwt. for clean cattle. I understood that the Government were going to stand the price of that arrangement. But when the Minister came from Brussels last Wednesday, he said that the Community would pay for a great deal of the scheme to support beef. In regard to new slaughtering premiums, the Minister said that Her Majesty's Government would have to pay at the low rate and that the Community would pay 50 per cent. against the new scheme in November, rising to 70 per cent. in February. Therefore, the Government are not committed to spending as much money on agriculture as they thought. I hope the Minister will not say that the Government have not the money available, for they have had a bonanza in the last week and the money must be there.
Nobody is seeking to claim that the amendment will cure all the industry's problems. The effect of the Bill, as it stands, is that new borrowers—those wanting to buy farms for themselves and expand—will be paying additional stamp duty in dealing with the Agricultural Mortgage Corporation or its Scottish counterpart in respect of debentures originally floated to finance existing borrowers. It cannot be fair that as a consequence of the Bill those waiting to borrow money now should have to finance the effect of the Bill since they borrowed the money in more prosperous days.
Nobody would argue that this is a time to stamp on people who want to expand their economic activities. Indeed, I read a ministerial speech last week stating that it was Government policy to encourage expansion. It is strange that the Government should now be seeking to stamp hard on people who do not have their own resources and have to go to the Agricultural Mortgage Corporation.
I shall not weary the House with a full list of how the money lent by the corporation is used. Suffice it to say that 9 per cent. of the money goes on capital improvement schemes to farms; 8 per cent. to extending working capital; 29 per cent. on the purchase of extra land; and 10 per cent. on the purchase of land for newcomers to farming. A good deal goes to sons of farmers, and so on. These are just the people whom the Government should be helping at present. I hope the Government will not be piqued by the success of the Opposition over small businesses last week. I cannot understand why these new starters and people who are keen to expand should be forced to pay an extra 0·64 of 1 per cent.
I end by explaining what that means. It does not sound very much.
If the hon. Member for Islington, South and Finsbury (Mr. Cunningham) will contain himself, I shall explain in fairly dramatic terms what it means.
Nowadays it is not a very big farm, certainly not in my part of England, the North-West, that is 150 acres. A man with 150 acres is not a farming tycoon. If a man wants to buy a farm of 150 acres at £600 and acre and wants to borrow £90,000, which is a very considerable risk, he is forced by the Bill to pay an extra 0·64 per cent., which means that he will have to pay an extra £576 per annum in interest. That is an extra charge on his farming of almost £4 per acre, and to a working farmer that is a great deal of money. That is the extent to which this part of the Bill will penalise people with moderate sized farms.
There are not enough people in agriculture, thanks to the ministrations of the present Government, who have the bravery to want of expand at this time, and surely this is not the moment to discourage the few geese we have who are prepared to lay a few golden eggs. We shall listen to the Financial Secretary with great care and then decide our course of action. I very much hope that he will encourage these people. This is not time to penalise them. We shall listen carefully to what he has to say and then decide what action to take at the end of the day.
It is something of a novel experience for me to venture into what is developing into an agriculture debate, although I cannot pretend to match the expertise in these matters of those hon. Members who have spoken so far. The hon. Member for Devizes (Mr. Morrison) was candid enough to say that an amendment not in precisely these terms but seeking to relieve debentures of these two corporations from duty entirely had already been moved on eight occasions in the past with a singular lack of success. So I accept at once that he is not trying to make a partisan point.
Cost is not an argument that I would advance in resisting the amendment, and no doubt cost was not a factor on those previous occasions when somewhat more modest amendments along these lines were moved by the hon. Member or one of his hon. Friends. As the cost is not particularly great, it follows that the benefit to agriculture is not very great.
I have to tell the hon. Member that there is a considerable technical defect in his amendment concerning the people he is trying to help, but I shall not rest my objection to his proposal on that technical defect. However, he should be aware of it in case he seeks to move an amendment with this aim on another occasion.
I am advised that the issued debentures and bonds of the AMC total some £246 million and that no less than £216 million worth is covered by compounding arrangements, with which I am sure the hon. Member is familiar. The duty has been doubled on transfers of debentures whether or not they come under compounding arrangements.
The effect of the amendment is to relieve from the increase in the duty only that sector of about £30 million of the £246 million not covered by the compounding arrangements. No doubt unintentionally, the effect of the amendment is much narrower than the hon. Gentleman originally had in mind. I do not rest on a technical defect, and the hon. Gentleman would be right in saying "At least let us have this even if it does not go as far as we had hoped."
The root of the difficulty is that the near-gilt market is not a self-contained compartment which can be dealt with in isolation—just the AMC and the Scottish Agricultural Securities Corporation. The near-gilt market is a spectrum that, as soon as one leaves local authority and gilt-edged stock, ranges through the Agricultural Mortgage Corporation and the Scottish Agricultural Securities Corporation to small corporations, which may be less frequent borrowers on the market but are comparable in status with the two corporations we are discussing, such as the ports and harbour boards, water companies, the Manchester Mortgage Corporation, and the Commonwealth Development Finance Corporation. The difficulty is that, once one breaches the principle, the dam is breached in revenue terms and is capable of almost indefinite extension.
Do not the other institutions to which the hon. Gentleman referred, particularly the Commonwealth Development Finance Corporation and the Scottish Agricultural Securities Corporation, and one other, collectively enter the market in a very small way in comparison with the Agricultural Mortgage Corporation?
I am not suggesting that the bodies I have listed are as big as or such frequent borrowers as the two bodies we are discussing. The point is how they are selected. Once the principle is breached, the "salami" problem arises, and a bit more is nibbled away each year. That is the difficulty which the Conservative Government found in trying to meet this point.
Closely ranged behind the bodies I have mentioned is the Industrial and Commercial Finance Corporation Ltd., a company under the Companies Act owned by the clearing banks which borrows in the market for on-lending to industrial enterprises. Its operation is similar to the financial operation in which the two institutions engage.
I have taken very seriously the points raised by the hon. Member for Devizes and his hon. Friends. I do not rest on the technical weakness in the amendment. nor on the fact that the amendment does not go so far as the hon. Member for Devizes would like, nor on the cost, but I advise the House that because of the principle involved the amendment should not be accepted.
I beg to move Amendment No. 178, in page 87C, line 13, at end insert:
'Provided that nothing in this sub-paragraph shall be taken to require any person who has acted as counsel or solicitor for any person to disclose any privileged communication made to him in that capacity'.
The amendment ensures that any person who has acted as counsel or solicitor for a person shall not be required to disclose any privileged communication made to him in that capacity. The need for the amendment arises consequentially from the other provisisons for doubling stamp duty.