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Charitable Dispositions for Periods Which Cannot Exceed Three Years

Orders of the Day — Finance (No. 2) Bill – in the House of Commons at 8:15 pm on 3rd June 1980.

Alert me about debates like this

Photo of Mr Denzil Davies Mr Denzil Davies , Llanelli 8:15 pm, 3rd June 1980

I beg to move amendment No. 18, in page 36, line 17, at end add ' but so that this section shall not apply to any charity which exists for the advancement of education and where 75 per cent. or more of the gross receipts of such a charity is derived from money payable under the deeds of covenant and payments made by the pupils or by individuals on their behalf.'. This clause deals with deeds of covenant in favour of charities. The law has always been that a deed of covenant that enabled the payer to deduct the amount from his tax had to be for a period of six years or more and generally seven. The clause reduces the period to three years or more. As the Chancellor said in his Budget Statement, there will therefore be a greater incentive to make payments by deed of covenant. Under the clause, payments go to charities. The amendment seeks to prevent the benefits of the clause going to certain educational establishments.

One of the difficulties with charities is the statute of Elizabeth I, which provides that any foundation or institution for the advancement of education is a charity. We therefore have the extraordinary situation of Eton college being a charity because of the anomaly of an Act passed in 1601 or thereabouts. We have not been able to find a more sensible or more modern definition of charities. We could go into the recommendations in the Goodman report, but they do not help all that much. It is a difficult problem. The drafting of the amendment may be somewhat convoluted, but I hope that the Minister of State will not nit-pick at it and will consider the amendment in the spirit in which it was drafted.

It is a rather good amendment, because it seeks to isolate the public school element in education from some of the institutions that exist as the result of he payment of fees, perhaps from local authorities. Schools for the mentally handicapped are, in the main, supported by local authorities who pay the fees of the pupils. The amendment does not seek to strike at those schools.

We seek to deny the benefits of the clause to schools where 75 per cent. of the gross receipts are made up of fees paid by individuals or by deeds of covenant. Most public school receipts are made up of fees paid by individuals and not by deeds of covenant. We say that it is not right that taxpayers should subsidise Eton. The deeds of covenant provision means that the general body of taxpayers subsidises institutions such as Eton out of the general body of taxation. I do not know, any more than do the Government, what proportion of the gross receipts of public schools are made up from deeds of covenant, but there is no case for saying that the general body of taxpayers should subsidise such institutions.

The Government deny subsidies to industry, saying that it must stand on its own feet. Yet the clause gives tax benefits for deeds of covenant for three years-or more which can and will benefit educational establishments that ought to stand on their own feet.

Photo of Alan Beith Alan Beith Opposition Whip (Commons)

The right hon. Gentleman was fearful of the Minister nit-picking on the clause, but he must accept that crucial to whether we can support such an amendment is the question whether a clear line can be drawn between Eton college and, for example, a school in my constituency that provides education for autistic children, most of the fees for whom are paid by their parents, with some being; paid by local authorities. How does the 75 per cent. formula, which includes both money under deeds of covenant and tuition fees, in no particular balance, distinguish between schools, particularly as the right hon. Gentleman does not know the proportions in some of the major public schools?

Photo of Mr Denzil Davies Mr Denzil Davies , Llanelli

That is a fair point. It is the problem that faces us in such circumstances and it is not one to run away from. I believe that in most cases the kind of schools mentioned by the hon. Gentleman would probably be outside the ambit of the clause because 75 per cent. of the gross receipts would not have come from payments by individuals. Much of the income of those schools is made up increasingly by payments from local authorities because parents cannot afford to send their children to these schools. If hon. Members wish the 75 per cent. to become a higher figure, I am prepared to accept such a proposal.

Photo of Alan Beith Alan Beith Opposition Whip (Commons) 9:30 pm, 3rd June 1980

I am trying to find out what the amendment means. I understand that payments made by or on behalf of pupils—which would surely cover those made by local authorities—contribute to the achievement of the 75 per cent. figure. The only kind of institution that could readily be exempt from the provision would be one that had a substantial income from endowments, the very kind of institution that the right hon. Gentleman may be anxious to exclude.

Photo of Mr Denzil Davies Mr Denzil Davies , Llanelli

The last few words of the amendment show that the payments are made by the pupils or by individuals on their behalf. The word " individuals " is chosen with some care to exclude fees paid by local authorities. The 75 per cent. figure may not be the right one. That is why I argue that this clause would not take into account the kind of school to which the hon. Gentleman referred. I chose the word " individuals " deliberately. The payments have to come from individuals and not from local authorities or institutions. The Minister will no doubt say whether the 75 per cent. is too low or too high a figure. If the hon. and learned Gentleman wishes to bring forward an amendment on Report to increase it, we shall examine such a proposal.

We are not debating whether there should be public schools. We are debating the principle whether deeds of covenant that are a form of subsidy should be allowed as a deduction from income. Why should someone be allowed a deduction from his income for tax purposes through making a deed of covenant? Why cannot there be a deduction to make other payments? What is so special about an annual payment or a deed of covenant? It is anomalous that, because someone makes payments from his income, not for any trade or business purpose but under a silly little legal document stating that payments must be made for three years or more, he should be allowed a deduction. If I pay for food with my income I am not allowed a deduction.

Photo of Mr Chris Patten Mr Chris Patten , Bath

It may be an anomaly, but it has existed in one form or another since 1803.

Photo of Mr Denzil Davies Mr Denzil Davies , Llanelli

It is because it has existed since 1803 that it is increasingly becoming an anomaly. The present position arises from the framework of the 1803 legislation and subsequent taxation decisions. It makes no sense in present legislation. A person who makes a covenant for two years does not get the tax deduction. If it is made for three years, he gets the tax deduction. If one forgets to put a piece of candlewax on a piece of paper, although it is for three years, there is no deduction. That shows the ridiculous anomaly.

There are charities that one would wish to support. I am merely saying that this is a subsidy given by the general body of taxpayers. It will go not only to Oxfam and to the Save the Children Fund—one would not wish to do anything to prevent giving to these worthy charities—but to institutions such as public schools that do not need the money and should not have it. Why should they be supported by the general body of taxpayers? If parents wish to send their children to public schools, that is another question. We argue that there should not be this extension on deeds of covenant. It will benefit institutions that do not need such benefit. We do not believe that the general body of taxpayers should subsidise these institutions, as would happen under these deeds of covenant.

Photo of Alan Beith Alan Beith Opposition Whip (Commons)

I listened with some care to the right hon. Member for Llanelli (Mr. Davies) because, as he said, it is not a problem that we ought to run away from. We must consider carefully whether it is right that the covenant system should benefit to a considerable extent the private sector of education.

I became more and more worried, however, as the right hon. Gentleman seemed to expound a policy of general hostility to the principle of the covenant that has been of immeasurable value to the Churches, to the relief organisations, and to charities for which, in an afterthought, the right hon. Gentleman said he welcomed support. He spent a considerable amount of time ridiculing the process by which individuals indicate by means of a document that they will make regular payments over a period of years to benefit a charity and, as a result of that, find that the taxes that they pay on those moneys are reimbursed to those charities. He may find that anomalous. but it has been of considerable benefit to a wide range of charitable organisations.

Photo of Mr Denzil Davies Mr Denzil Davies , Llanelli

The hon. Gentleman is being unfair to the argument. I made it quite clear that we are not objecting to the clause. I said that it was anomalous that someone can give away part of his income and get a deduction merely because he does it under a three-year covenant. There may be social cases in which we may wish that to be done. My argument was that we do not wish it to be done in favour of institutions such as the public schools, which neither need nor deserve the money.

Photo of Alan Beith Alan Beith Opposition Whip (Commons)

I appreciate the right hon. Gentleman's specific argument about public schools, but listening with an open mind to what he said I formed the opinion that he viewed the whole principle of the covenant with considerable scepticism and perhaps disapproval. He says now that there may be social grounds upon which some organisation should benefit, but the whole sphere of charity law has presented us with many problems of definition and it is far from satisfactory now. There are some bodies that do not benefit from covenants which I should like to see benefit. There are bodies that are denied charitable status, particularly in the area of world development and aid—there is the United Nations Association—which put forward causes and therefore fall foul of the present legal definition of " charity ". Nevertheless, they would be regarded by most hon. Members as desirable organisations.

Our present charity law is full of anomalies. It seems to be generous to some groups, which exist mostly for private and limited benefit, and is rather ungenerous to other groups simply because they have to carry their convictions into general public discussion. That is regarded as a political activity. I believe, as the Goodman committee believed, that we ought to have a general review of the law of charities and the various kinds of institutions that should benefit from them.

I am not sure that the amendment carries us far along that road. It seems to be a limited stab at a principle to which the Labour Party has firmly nailed its colours, that charitable reliefs should be withdrawn from the private education sector generally. There are quite respectable arguments for doing so. I have always found it difficult to avoid penalising the giving of money for educational purposes while continuing to encourage, by reliefs, the giving of money for other purposes. We could find ourselves in the ultimate absurdity where a major philanthropist who proposed to give substantial annual donations to an educational body that was recognised as having great value was not given the benifit of a covenant, whereas if he gave the same sums of money to a theatre trust, an orchestra, or any of a number of other organisations, he would get the full benefits of relief. The amendment does not solve many of these problems.

I am anxious to protect the principle that the means by which we encourage private donation in this country should not be pushed out of education altogether. I want to encourage more private donation and support in the State education system. I do not want to replace the essentials that the State system should provide, but I want to give to State schools some of the private benefaction benefits enjoyed by the private sector. That already applies in our universities and some of our polytechnics, as well as in some of those schools whose history has meant that they have moved over the years from private foundations to being part of the State school system.

Many of those schools enjoyed particular benefits and endowments which allowed them to provide extra facilities. I wish to encourage that. I would not like to see it discouraged.

I am not happy that we should use this device to try to change the law on this subject. I was more impressed by the approach recommended by the old Education, Arts and Home Office Sub-Committee—a voice from the past Select Committee system of the House—which produced a detailed report on charities. That Sub-Committee suggested that in order to overcome the problem we should apply a new test to charitable status in education. That test would involve purposes beneficial to the community.

That also presents difficulties and problems, but I think that that is a more fruitful approach than simply saying that now that the Government have decided to broaden the covenant provision we shall create a type of second-class charity that will receive covenant benefits but not on the more extended scale as now proposed by the Government.

That is all that the amendment does. It does not wipe out covenant benefit for public schools; it simply means that they will be on the seven-year covenants that prevail today while other organisations and benefit from the four-year convenant system. It is not even the case that the change from seven to four years will necessarily increase the amount of money paid over by the Exchequer in the form of reimbursed covenants. That will depend on whether individuals take advantage of the new scheme to renew their covenants more regularly.

What, after all, is the purpose of what the Government are doing by this clause? I presume that it is partly to overcome the problem that has made small covenants almost valueless to charities, because by the time the fourth and fifth year are reached inflation has raised the subscription for the people who are still paying on the ordinary basis far above the level of applying to the individual who has covenanted, and above the combined level of the covenant and his subscription and the returned tax that the covenant system provides.

This is a small measure of reform. It is not one to which we can readily attach a major change in the category of bodies that are entitled to the benefits of charity law relief. For those reasons, I am not at all happy about the amendment.

Photo of Douglas Hogg Douglas Hogg , Grantham

I listened with great interest, as I always do, to the speech by the right hon. Member for Llanelli (Mr. Davies). However, I must tell him that I disagree considerably with what he has said to the Committee tonight.

Perhaps I should declare an interest. It will not surprise any hon. Member to know that I went to a fee-paying school or that I intend to send my children to a fee-paying school. If that be an interest, I declare it.

I think that the amendment proposed by the right hon. Gentleman is misconceived. His principle objective is, as I understand it, to isolate the public school element from other classes of charities of an educational nature. I think that that is an extremely dangerous principle to adopt. There is no doubt that the public schools are properly defined as charities within the Act. They fulfil all the essential criteria and the opposition to their inclusion within the scope of charities for the purposes of tax concessions and covenants is largely subjective. I do not mind the right hon. Gentleman opposing the public schools but I dislike his attempt to introduce his particular prejudice into legislation.

Once we decide to make a distinction between charities on the grounds of personal prejudice we establish an extremely dangerous principle which may be followed by others less worthy than the right hon. Gentleman.

Photo of Mr Denzil Davies Mr Denzil Davies , Llanelli

Nobody is seeking to deny charitable status to any of the schools. What I say in the amendment is that tax relief shall not be given to someone who pays money to that particular body. Taxation is always about prejudice or priorities, however one may wish to describe it. That is what taxation is about. It is about choice.

Photo of Douglas Hogg Douglas Hogg , Grantham

The right hon. Gentleman cannot have thought deeply before he made that intervention. The purpose of his amendment is to make a distinction in law and in fact between classes of institutions which otherwise would qualify as charities. He is saying " Because you do not satisfy my personal prejudices, for these purposes you will not rank as a charity, but other charities will." That distinction is not based on law but on subjective prejudice. The Committee should not accept that.

I welcomed what the hon. Member for Berwick-upon-Tweed (Mr. Beith) said. He made two important points. He said that the amendment will catch Eton but that it will also catch the specialist schools. That might be a result of unhappy drafting—

Photo of Mr Denzil Davies Mr Denzil Davies , Llanelli

Can the hon. Gentleman explain which schools will be caught by the amendment?

Photo of Douglas Hogg Douglas Hogg , Grantham 9:45 pm, 3rd June 1980

Once again the right hon. Gentleman did not think carefully before he made an intervention. Clearly, he did not listen to the hon. Member for Berwick-upon-Tweed. He was talking about specialist schools for autistic children. Frequently in our constituencies—although apparently not in the constituency of the right hon. Member for Llanelli—we are involved with specialist schools. I am sorry if the right hon. Gentleman does not know about them, but the rest of the Committee does.

The rationale and justification for the covenant system is important. When somebody puts a portion of his income out of his own disposition for a prolonged period it is wrong that that portion of income should attract tax. That is an important proposition, which has proved highly beneficial to many charities throughout the land. Once again, prejudice comes into the argument. The right hon. Member for Llanelli says that as a general proposition it is jolly good but when it comes to public schools, of which he happens to disapprove, it is jolly bad. The principles basically are indivisible. Once they are weakened in respect of one class of institution or charity, they are weakened in respect of them all.

One can always argue with a degree of respectability that institutions such as public schools should not receive concessions. Such arguments would be more attractive if they were advanced from a party other than the Labour Party. On this matter its prejudice and inherent hostility is well known and, in effect, it disqualifies members of that party from expressing a rational view on matters of some importance.

Photo of Mr Dale Campbell-Savours Mr Dale Campbell-Savours , Workington

The comments by the hon. Member for Grantham (Mr. Hogg) are understandable. He comes from a family of substance, which has sent generations to public schools. He probably feels a family requirement to defend the privileges and the extension of privileges that the public schools seek.

The Newsom report, published in 1968, recommended that action be taken to terminate the fiscal and summary reliefs on schools that are charities but that do not serve a truly charitable purpose. The all-party House of Commons Expenditure Committee which considered the question of charities was chaired by the hon. Member for Plymouth, Drake (Miss Fookes). The Committee's unanimous report of 1975 states: Charitable status should be given to only those institutions which manifestly devote the education they provide towards meeting a clear range of educational needs throughout the whole community. In my view, that is hardly in accordance with the case advanced by the hon. Member for Grantham. I cannot think that he was suggesting—or perhaps he was—that the schools that he was seeking to protect would fall within the criteria laid down in that statement.

A committee on charities under the chairmanship of Lord Goodman, reporting in 1976, subscribed to the view that in some cases charitable status should not be granted. It said that there was considerable feeling in the committee that a point might be reached when facilities offered by an educational establishment were so expensive or in some other way so exclusive that only a tiny fraction of the community could enjoy those facilities. In such cases there is a strong argument for saying that charitable status should not be granted.

The widespread feeling that that point of exclusivity was already reached many years ago was pointedly expressed by a member of the Goodman committee—a former Member of the House, Mr. Ben Whitaker—when he said in his minority report: I fail to see why the community should be compelled to support financially exclusive schools which are restricted largely to those families who are already privileged. I think that, in moving the amendment, my right hon. Friend the Member for Llanelli (Mr. Davies) was trying to produce a form of wording which, prior to a review of charity law, would have the effect of preventing some of the benefits that exist at the moment going to certain educational establishments. I feel that all this begs the question. Although my right hon. Friend felt it necessary to confine himself to the fine print of the financial nature of the amendment, I feel that we should in some way be allowed to widen the discussion a little—perhaps not going into the merits of the public schools but certainly commenting on the reason why certain of us would wish to support the amendment tonight.

In my constituency there is a long tradition of objection on this matter. In 1958 Mr. Fred Peart, now my noble Friend Lord Peart, moved a resolution at a national conference of the Labour Party calling for local authorities to take over all the direct grant schools in their areas, for the abolition of fee paying in any school and the integration within the State education system of all those independent schools which could be made available as part of the general education plan. That resolution on behalf of the Workington constituency Labour Party was defeated by approximately ½ million votes, with a vote against of 3½ million. But why did that resolution come from the Workington constituency Labour Party?

I think that it might be in order to trace some of the origins of the so-called public schools. I have done a little research, and my information is that they were never devised for the so-called affluent in society. On the contrary, they were devised for poor families in given localities where there were problems in education. For example, Eton, which, if my information is correct, was set up in 1440, under Henry IV, was established specifically for young boys of good character but poor—note " poor "—and needy. I wonder how many hon. Members on the Conservative Benches, and, indeed, a few on these Benches, could be said to be——

Photo of Mrs Elaine Kellett Mrs Elaine Kellett , Lancaster

The excellent grammar school that I had the privilege of attending comprised a very high proportion of precisely those youngsters to whom the hon. Gentleman is referring, until the Labour Party insisted on comprehensivisation, in which event, although it was founded only in 1936, it became the exclusive property of those who could pay. In my view, that is totally wrong.

Photo of Mr Dale Campbell-Savours Mr Dale Campbell-Savours , Workington

I do not know about the educational problems of Lancashire. The hon. Lady will recall that on one occasion I was tempted to table a number of questions on the problems of Lancashire. I ask her not to tempt me again with the offer to table more questions on matters relating to her constituency.

The character of the schools has changed. Over the past 70 or 80 years there has been almost a social revolution in Britain in terms of class. With the development of a strong semi-professional nouveau riche class, of which a number of hon. Members are no doubt the products, considerable pressure has been exerted on the institutions of private education to accept the public school as a ladder for social aggrandisement, if that be the word. I think that it was R. H. Tawney who said that the rising middle class, if often uneducated itself, was not unaware of the advantages of education, nor was it lacking in ambition. It looked to the schools to provide an addition to a moral intellectual discipline, a common platform enabling its sons to associate on equal terms with those families who, if increasingly outdistanced in income, still diffused a faint aroma of social security.

It seems that the schools provided for a booming nouveau riche class—the mechanism by which they would clamber in their lust to surface at the top. It was a public schools commission report in 1968 which, commenting on the divisiveness of public school education, said: The public schools are not divisive simply because they are exclusive. An exclusive institution "—

Photo of Mr John Townend Mr John Townend , Bridlington

Will the hon. Gentleman tell the Committee of his personal experience of public schools?

Photo of Mr Dale Campbell-Savours Mr Dale Campbell-Savours , Workington

I shall willingly tell the hon. Gentleman about my personal experience. I attended a direct grant boarding school, and my sister attended a public school. But that does not detract from the fact that we hold certain views, and were elected to the House to express them. I intend to do so. I object to the system. I would like to see the whole system abolished. It is appalling that we perpetuate a system of social divisiveness, and divide children so early in life into divisions that often last for the balance of their lives.

The report went on to state: An exclusive institution becomes divisive when it arbitrarily confers upon its members advantages on a arbitrary selected membership, which starts with an advantageous position in life. There is no sign that these divisions will disappear if the schools are left alone. That is at the heart of the objection of Socialists to the system. It is a privileged system. It is built for people who believe in privilege.

I congratulate my hon. Friends on tabling the amendment. It shows that there is unity of opinion on these Benches that we wish, by one means or another, to phase out these iniquitous institutions to which we positively object. [Interruption.] By the noise coming from Conservative Members, we realise how keen they are to defend those rather ridiculous institutions.

Conservative Members argue that it is a question of freedom. It is an argument about freedom, but freedom in this case is exclusively the ability to pay. It is like saying to people in the Third world that they have freedom in the area of access to health, in the event that doctors are available.

That freedom in this instance is dependent on the size of their pockets and whether they can afford the health care that is available.

10 pm

Over the years the Tories have backed the public schools with financial concessions. What we must do and what I hope we shall increasingly do over the years—I much regret the lack of willingness by the previous Labour Government in this respect—is to intervene in the area of public schools and to introduce changes in taxation and in other areas to phase them out in line with the aspirations of the national Labour Party conference.

Statistics show that with the entry of large numbers of direct grant schools into the public school system as a result of the option offered by the previous Labour Government, an increasingly larger number of children today attend public schools than was the case as little as four years ago.

The charitable status benefits are considerable. They offer a 50 per cent. reduction in rates, and tax exemption which is calculated to be worth £25 million a year. The Independent Schools Information Service—ISIS—assessed that the loss of charitable status and of revenue to the schools which may stem from the loss of such status could lead to an increase of perhaps as little as 5 to 7 per cent. in the fees of those schools. Still, it is a small chip. Eventually the objective will be realised.

I firmly believe that one of the reasons why we have problems in secondary education is that great numbers of people in the army of the British middle class, by buying their way out of the education problems which confront 95 per cent. of the British people and the need to consider such problems for their children, have removed themselves from the central and important area of argument. I hope that when we finally phase out these schools we shall have the pleasure of the company of the British middle class in the secondary education lobby and in our demands for reform in that area.

Photo of Mr Peter Rees Mr Peter Rees , Dover and Deal

The right hon. Member for Llanelli (Mr. Davies), in moving the amendment, was not his usual robust self. He did it with his characteristic charm but he seemed uncertain about the scope and depth of his amendment. Indeed, he encouraged me—these are his words, not mine—not to pick nits over it.

Even accepting that the amendment is perhaps only a peg for a debate—highly charged at times but, on the whole, fairly good-humoured—as it stands it is ineptly drawn. It perhaps reveals some of the difficulties of the problem to which the Labour Party—not so much my right hon. and hon. Friends—should address itself.

The Labour Party has been in technical difficulties both today and last night. Last night we found that we were debating an Opposition amendment designed—although they had not appreciated it until halfway through the debate—to abolish the investment income surcharge. After a perceptible pause, we were told that it was a probing amendment. T think that it is more important for us to probe the intentions of the Labour Party than for the Opposition to probe the Government's intentions, which are clear for all to see.

I should like to correct one or two misconceptions. First, the right hon. Member for Llanelli ridiculed the whole concept of deeds of covenant. He talked in accents that I found a little curious from one who has had a distinguished legal background. He referred to silly little documents with drips of candle grease. It is not for me to speculate on the difference between a document under seal and a document under hand. I know that my hon. Friend the Member for Grantham (Mr. Hogg) would be happy to enlighten me on that matter. I have momentarily given up these arcane pursuits.

The whole concept of deeds of covenant is deeply embedded in the legal system, quite apart from our fiscal system. The fiscal consequences have been recognised for well over a century and a half. In my view, and, I hope, in the view of many hon. Members on both sides of the Committee, the mere fact that a concept has persisted for 150 or 180 years does not of itself mean that we should necessarily scrutinise it censorially with a view to pulling it apart. Of course, we should review these concepts from time to time, but if a person, by some permanent mechanism, disposes of part of his income, perhaps different tax consequences should obtain if he merely gives it away and is able to retract his generosity at any time.

The right hon. Member for Llanelli may have misled himself and the Committee by saying that it was merely some accident of a statute of Queen Elizabeth I—in fact, it was a statute of 1601—that clothed educational establishments such as Eton—I cannot remember whether it was the right hon. Gentleman who singled out that great establishment of learning—with charitable status. The whole question of charitable status has been reviewed consistently by the courts and refined and enlarged over the centuries. [Interruption.] The right hon. Gentleman correctly murmers " Pemsel's case ". It was a great authority at the end of the last century. But we do not always have to return to the statute of Elizabeth I.

I remind the right hon. Gentleman and the Committee that these establishments should not provide purely for the advancement of learning; they should also provide for the benefit of the community. There cannot be too narrow an establishment. It must be shown to have a broad social purpose if it is to achieve charitable status. The right hon. Gentleman took too narrow and too partisan a view of the problem.

I turn now to the particular difficulties of the amendment. I accept the right hon. Gentleman's disclaimer, but I hope that he will recognise that the difficulties that I and other hon. Members—in particular the hon. Member for Berwick-upon-Tweed (Mr. Beith)—identified show that this is a difficult and delicate area, and that one cannot blunder in in the way—dare I say it—that the hon. Member for Workington (Mr. Campbell-Savours) did. I recognise the deep emotions that gripped him as he spoke, but it is not for this Committee to speculate on the reason why he should have been so moved by this problem. It must lie deeply in his past, and it would probably be indelicate of me to speculate. I do not wish to encourage my hon. Friends to probe the hon. Gentleman's past. I am sure that it is an honourable and decent past; nevertheless, he seemed to indicate moments of personal distress and anguish, which I shall not dwell on now.

I should like to draw attention to some of the problems of the amendment that we are being asked to debate. It may be a useful peg for a general debate, but from time to time we are obliged to apply ourselves to the words of these amendments. This amendment would strike a far wider group of establishments than merely those that the right hon. Member for Llanelli and his hon. Friends, presumably, would describe as elitist schools in the private sector. It would hit at and disadvantage those who wish to covenant in favour of denominational schools. That is a perfectly intelligible position, but the Labour Party should make it clear if it wishes to attack denominational schools and those who wish to be generous to them. That is not something that has been borne out in speeches from the Opposition Benches.

It would also disadvantage schools supported by the great livery companies in the City of London, many of which are under the general supervision of ILEA and are not designed to benefit children of the more privileged classes. Since the definition of the advancement of education has been considered by the courts to be wide, it would perhaps discourage covenants in favour of some learned societies—for example, the Royal Institution. I do not know. It is not for me to probe the individual circumstances of individual taxpayers and individual bodies. Again, it might even affect certain private libraries, some of which will no doubt come to mind on both sides of the Committee.

Finally, and perhaps most movingly of all—it was the point so ably made by the hon. Member for Berwick-upon-Tweed—it would affect the independent schools for the handicapped. The same point had occurred to me. I had a little research done. The hon. Member mentioned a school in his constituency. Hon. Members on both sides of the Committee will no doubt, with a little thought, call to mind similar schools in their constituencies.

I give some examples: the Lord Mayor Treloar college at Alton, in Hampshire; Penshurst school; Worcester college for the blind; the Royal West of England school at Exeter for deaf, blind and handicapped children; the Royal Victoria School, Newcastle, for the blind; the Sunshine nursery school for children under 7 years old, blind and handicapped; and the Royal school at Margate for the deaf and handicapped.

I do not know whether each or any one of those has applied for charitable status. I do not happen to know exactly how they would measure up to the rather stringent tests imposed in the amendment.

Photo of Mr Denzil Davies Mr Denzil Davies , Llanelli

The hon. and learned Gentleman does not know?

Photo of Mr Peter Rees Mr Peter Rees , Dover and Deal

Of course I do not know, because it is not for me. This is the kind of confidential information that the right hon. Gentleman, as a former Treasury Minister who has spoken from this Dispatch Box, well knows it would be quite improper for me, unless invited by the school, to ask the Revenue authorities to give me. Like the hon. Member for Berwick-upon-Tweed, I wondered whether the Opposition had seriously thought about the scope of the amendment. Therefore, I searched around to consider the kind of school that would be affected. Perhaps I make the right hon. Gentleman a little uneasy. I hope, therefore, that having considered the arguments, he will not feel obliged to press the amendment to a Division.

The first point that I make to the Committee, and particularly to the hon. Member for Workington, who I know is moved by generous sentiments, is that hon. Members may consider that if they were disposed to support this amendment they might be affecting the prospects of children who attend that class of school.

Photo of Mr Dale Campbell-Savours Mr Dale Campbell-Savours , Workington

Such schools could find a good tax lawyer to get the money back.

Photo of Mr Peter Rees Mr Peter Rees , Dover and Deal

Perhaps, with a certain amount of professional advice—I shall come to this matter—the effects of this rather ill-judged amendment, if it were to be carried into law against the advice that I shall tender to the Committee, could be mitigated. I shall come to such matters shortly. However, it would be a little haphazard in its operation.

Attention has been drawn to the fact that the older esablishments, which on the whole—one is, of course, generalising—perhaps have larger endowments and greater dependence on investment income and less, perhaps, on covenanted income, might be taken outside the scope of the clause. That is a very curious position. The right hon. Member for Llanelli and his hon. Friends may be able to defend it, but they certainly have not attempted to do so up to now.

Since the hon. Member for Workington draws attention to this point, obviously he has focused his mind on it. It could be circumvented to a degree, because, for instance, as I understand it, not many of the denominational schools have covenants made out in their favour. The covenants are usually made out in favour of the diocesan authorities, and therefore the diocesan authorities could perhaps channel the money to the schools without being caught. [Interruption.] The right hon. Gentleman is now indicating that that point had occurred to him all along, but that is a little disingenuous, because if that were so he would doubtless have made the point, with his customary eloquence, at an earlier stage.

Photo of Mr Denzil Davies Mr Denzil Davies , Llanelli

The hon. and learned Gentleman is making very heavy weather of the point. The amendment is drafted, quite clearly, with that in mind, as I pointed out to the hon. Member for Berwick-upon-Tweed (Mr. Beith). That is why the words " by individuals " are specifically included—to exclude payments from a diocesan body and payments from other religious bodies to the schools. This covers only payments specifically made by individuals, and most of the schools that the hon. and learned Gentleman has mentioned would not be caught by the amendment.

Photo of Mr Peter Rees Mr Peter Rees , Dover and Deal

Let me develop my argument a little further and see whether the right hon. Gentleman has thought of this point. Let us suppose that the hon. Member for Workington, moved by a passion for the poor scholars of Eton college—and I know, therefore, that the hon. Member would be totally disinterested on this point—were to decide that he wanted to make a covenant that would only just exceed three years in favour of the poor scholars of Eton college. He could probably circumvent the amendment by making the covenant in favour of a general educational trust. The trust could then make a subvention to Eton. The hon. Gentleman encouraged me to speculate on the type of advice that he might receive should he wish to advantage such schools. I think that I am not overstating the case when I say that, in practical terms, the amendment is a little inept.

10.15 pm

The Labour Party has given vent to deplorable prejudices. I had hoped that those prejudices were worked out of the party long ago. I do not know whether this subject was debated at Wembley. A wide range of subjects was covered. If it was not discussed, the Labour Party will no doubt consider it later. We shall then discover how far its thinking on this subject has developed. If the Labour Party adopts a prejudiced attitude instead of a dispassionate, public-tude instead of a dispassionate, public-to draw the Committee's attention to a certain aspect.

The right hon. Member for Llanelli said that if the amendment were carried subsidies would be given to the private sector of education by the taxpayer. That is a misuse of the word " subsidy ". The right hon. Gentleman said that the Government did not give any subsidies to industry. If tax relief is regarded as a subsidy, subsidies are given to industry. Industry gets capital allowances and stock relief. Both this Government and the previous Labour Administration have reserved fiscal subsidies for industry. However, I think that " subsidy" is a misnomer. Tax relief should not be regarded as a subsidy. It provides relief for those who wish to be generous to charity as a whole.

The right hon. Gentleman and his hon. Friends wish to delineate a small area of charity and to deprive donors of tax relief. However, they should reflect on the fact that private schools save the Exchequer £150 million a year, and probably more. Perhaps the right hon. Gentleman is a little reeptical about my figures. Indeed, I see that the hon. Member for Workington is about to leap to his feet. I derived that information from an answer to a parliamentary question given by a member of the previous Labour Administration.

Photo of Mr Dale Campbell-Savours Mr Dale Campbell-Savours , Workington

The issue depends on how that question was phrased.

Photo of Douglas Hogg Douglas Hogg , Grantham

An answer is an answer.

Photo of Mr Dale Campbell-Savours Mr Dale Campbell-Savours , Workington

Does that figure take account of the large contribution that is made to public schools on behalf of the children of members of the Diplomatic Corps and those of Service personnel overseas? If it does not, it is not a fair reflection.

Photo of Mr Peter Rees Mr Peter Rees , Dover and Deal

It is not for me to reflect exactly how the previous Labour Administration constructed that figure. I know why the hon. Member for Workington raised those points. I have also read the articles in the New Statesman. I do not have a reference for the figure. However if the hon. Gentleman wishes to follow up that point I shall write to him and give him the reference. He can then study the question. I cannot recall whether the right hon. Member for Llanelli or the hon. Member for Newcastle-under-Lyme (Mr. Golding) answered the question. No doubt the hon. Gentleman is on intimate terms with whoever was involved and he can ask how the answer was constructed.

The Goodman report has also been invoked by at least one Opposition Member. I derived some support for my propositions from it. I shall paraphrase page 25 of the report. It states that if the private sector of education is abolished, it should be abolished by a clear political decision, not by nibbling away at its charitable status. That is precisely what the amendment seeks to achieve.

I am a little saddened by the prejudices of the Labour Party. Two out of the four leaders of that great party since the war were educated at public schools. It is not for me to compare them with their successors. However, Lord Attlee, who was a distinguished public servant, was proud to have been educated at Haileybury. As far as I know, Mr. Gaitskell was proud to have been educated at Winchester. It is not for me to speculate, but in a matter of months the Labour Party may be led by the prime flower of Westminster school, no less a person than the right hon. Member for Bristol, South-East (Mr. Benn). That is the delightful prospect for Labour Members.

This is an ill-conceived and prejudiced little amendment. All that we seek to do by clause 53 is to offer a modest measure of encouragement to those who wish to be generous to charities. I believe that we deserve the support of the Committee. I am sure that we shall have the support of the country.

Photo of Mr Denzil Davies Mr Denzil Davies , Llanelli

The hon. and learned Gentleman's reply was not up to his usual standard. He began by pretending that there was a technical defect in the amendment. However, his reply consisted mostly of knock-about stuff. He could not find a technical defect. He said that some schools would be caught by the amendment. I waited for the long list. He refered to denominational schools. I shuddered slightly, because there are many such schools. However, he could give me no evidence that they would be caught. Bearing in mind the way in which the amendment is drafted, it is unlikely that any of them would be caught by it. I have referred to the let-out for individuals.

The Minister passed from denominational schools to livery schools in the City. He mentioned the Royal Institution and one or two schools. He was never able to substantiate his argument. He was never able to break down the basis of the amendment. The amendment contains two safeguards, namely, 75 per cent. of gross receipts and the gross receipts received by individuals. Those safeguards take out most of the schools for the mentally handicapped and the religious schools.

Photo of Mr Denzil Davies Mr Denzil Davies , Llanelli

Indeed. I should say that 75 per cent. of Eton's income comes from the fees paid by parents. However, the hon. and learned Gentleman listed only a few schools and he has not been able to break down the basis of the amendment on technical grounds.

Photo of Mr Denzil Davies Mr Denzil Davies , Llanelli

The hon. Member for Berwick-upon-Tweed (Mr. Beith) made a long speech on the amendment. He initially said that he was in favour of the spirit of the amendment. He subsequently said that he did not like it at all. If the Liberal Party is concerned about this issue it has a good opportunity to table an amendment on Report for the House to discuss and debate.

Photo of Alan Beith Alan Beith Opposition Whip (Commons)

On the point that the right hon. Gentleman has just made, which is not the one on which I sought to intervene, I advocated that we should follow up the recommendations made by the Home Office Sub-Committee of the Expenditure Committee. Those recommendations involved far wider considerations, which could not have been dealt with by the Bill. The Minister and I are concerned about schools that have endowment income exceeding 25 per cent. of total income. The strongest endowed schools would be most likely to be excluded from the penalties contained in the amendment.

Photo of Mr Denzil Davies Mr Denzil Davies , Llanelli

There may well be schools with that high endowment income. I accept that entirely. However, that argument was not really advanced by the Minister. He has all the assistance of the Inland Revenue behind him, but he did not make that point. That is a difficulty that can be overcome.

The amendment covers most public schools. It does not catch denominational schools, religious schools, or most of the schools for the mentally handicapped and disabled, because of the let-out. The Minister was not able to break down the amendment. Therefore, he resorted to the familiar tactics of Treasury Ministers in this Government when they have a weak case, namely, to utter some good knock about stuff about leaders of the Labour Party special conferences, and the various ancillary matters.

Division No. 333]AYES[10.26 pm
Allaun, FrankCowans, HarryFitch, Alan
Archer, Rt Hon PeterCrowther, J. S.Flannery, Martin
Armstrong, Rt Hon ErnestCryer, BobFletcher, Ted (Darlington)
Ashley, Rt Hon JackCunliffe, LawrenceFoot, Rt Hon Michael
Atkinson, Norman (H'gey, Tott'ham)Dalyell, TamForrester, John
Bagler, Gordon A. T.Davies, Rt Hon Denzll (Llanelli)Foster, Derek
Bennett, Andrew (Stockport N)Davis, Terry (B'rm'ham, Stechford)Freeson, Rt Hon Reginald
Booth, Rt Hon AlbertDempsey, JamesGarrett, John (Norwich S)
Bray, Dr JeremyDewar, DonaldGrant, George (Morpeth)
Brown, Hugh D. (Provan)Dixon, DonaldGrant, John (Islington C)
Brown, Robert C. (Newcastle W)Dobson, FrankHamilton, James (Bothwell)
Buchan, NormanDormand, JackHamilton, W. W. (Central Fife)
Callaghan, Rt Hon J. (Cardiff SE)Douglas-Mann, BruceHarrison, Rt Hon Walter
Callaghan, Jim (Middleton & P)Dubs, AlfredHaynes, Frank
Campbell-Savours, DaleDuffy, A. E. P.Heffer, Eric S.
Canavan, DennisDunn, James A. (Liverpool, Kirltdale)Hogg, Norman (E Dunbartonshire)
Carmlchael, NeilDunwoody, Mrs GwynethHolland, Stuart (L'beth, Vauxhall)
Clark, Dr David (South Shields)Eadie, AlexHooley, Frank
Cocks, Rt Hon Michael (Bristol S)Eastham, KenHoram, John
Concannon, Rt Hon J. D.Evans, John (Newton)Hudson Davies, Gwllym Ednyfed
Conian, BernardEwing, HarryHughes, Robert (Aberdeen North)
Cook, Robin F.Field, FrankJanner, Hon Greville

Photo of Mr Denzil Davies Mr Denzil Davies , Llanelli

This is a modest clause and a modest amendment. There is nothing grand about them. The hon. Member for Grantham (Mr. Hogg) became terribly excited. We are saying that there can still be deeds of covenant, and that they can still be made to Eton. All that we are saying is that there cannot be tax relief.

We are talking merely of tax relief on deeds of covenant. Why should there be tax relief? The hon. and learned Gentleman spoke of permanent dispositions of income, but three years is not a long time. There was some rationale for seven years. Perhaps the period should be 10 years. However, having reduced it to three years, the Government may further reduce it to two next year. The hon. and learned Gentleman cannot shield behind a bogus argument about permanent dispositions of income.

A deed of covenant is merely a technical matter. Why should a person who makes a deed of covenant under seal receive tax relief when a person who makes a deed of covenant not under seal does not?

The amendment covers most of our points. We are not debating the virtues of public school education. We merely argue that the taxpayer should not help support such organisations. Let them stand on their own feet, as the Government keep telling everyone else to do.

Question put, That the amendment be made:—

The House divided: Ayes 129, Noes 177.

Jay, Rt Hon DouglasMorton, GeorgeStrang, Gavin
John, BrynmorNewens, StanleyThomas, Dafydd (Merioneth)
Johnson, Walter (Derby South)O'Halloran, MichaelThomas, Jeffrey (Abertillery)
Jones, Barry (East Flint)Palmer, ArthurThomas, Dr Roger (Carmarthen)
Jones, Dan (Burnley)Parry, RobertWatkins, David
Kerr, RussellPrescott, JohnWelsh, Michael
Kilfedder, James A.Richardson, JoWhite, Frank R. (Bury & Radcliffe)
Lambie, DavidRoberts, Albert (Normanton)Whitehead, Phillip
Leighton, RonaldRoberts, Ernest (Hackney North)Whitlock, William
Lewis, Ron (Carlisle)Robertson, GeorgeWigley, Dafydd
Litherland, RobertRobinson, Geoffrey (Coventry NW)Williams, Rt Hon Alan (Swansea W)
Lyons, Edward (Bradford West)Rooker, J. W.Wilson, Gordon (Dundee East)
McCartney, HughSever, JohnWilson, William (Coventry E)
McKay, Alen (Penistone)Silkin, Rt Hon John (Deptford)Winnick, David
MacKenzie, Rt Hon GregorSilverman, JuliusWoodall, Alec
Maclennan, RobertSkinner, DennisWoolmer, Kenneth
Marshall, Dr Edmund (Goole)Snape, PeterWrigglesworth, lan
Mellish, Rt Hon RobertSoley, CliveYoung, David (Bolton East)
Mikardo, IanSpriggs, Leslie
Millan, Rt Hon BruceStewart, Rt Hon Donald (W Isles)TELLERS FOR THE AYES:
Mitchell, Austin (Grimsby)Stoddard, DavidMr. John Coleman and
Morris, Rt Hon Alfred (Wythenshawe)Stott, RogerMr. James Tinn.
Morris, Rt Hon Charles (Openshaw)
NOES
Alexander, RichardGarel-Jones, TristanMitchell, David (Basingstoke)
Alton, DavidGoodlad, AlastalrMoate, Roger
Ancram, MichaelGorst, JohnMolyneaux, James
Arnold, TomGow, IanMorrison, Hon Charles (Devizes)
Aspinwall, JackGower, Sir RaymondMorrison, Hon Peter (City of Chester)
Baker, Nicholas (North Dorset)Gray, HamishMudd, David
Beith, A. J.Greenway, HarryMurphy, Christopher
Bendall, VivianGriffiths, Peter (Portsmouth N)Nelson, Anthony
Benyon, Thomas (Abingdon)Grylls, MichaelPage, Rt Hon Sir R. Graham
Benyon, W. (Buckingham)Gummer, John SelwynPage, Richard (SW Hertfordshire)
Berry, Hon AnthonyHamilton, Hon Archie (Eps'm&Ew'II)Parkinson, Cecil
Best, KeithHannam, JohnParris, Matthew
Bevan, David GilroyHaselhurst, AlanPatten, Christopher (Bath)
Bitten, Rt Hon JohnHawksley, WarrenPattie, Geoffrey
Biggs-Davjson, JohnHeseltine, Rt Hon MichaelPenhaligon, David
Blackburn, JohnHicks, RobertPink, R. Bonner
Blaker, PeterHiggins, Rt Hon Terence L.Pollock, Alexander
Boyson, Dr RhodesHogg, Hon Douglas (Grantham)Porter, George
Braine, Sir BernardHolland, Philip (Carlton)Price, David (Eastleigh)
Bright, GrahamHooson, TomProctor, K. Harvey
Brinton, TimHowells, GeraintRees, Peter (Dover and Deal)
Brocklebank-Fowler, ChristopherHunt, John (Ravensbourne)Rees-Davies, W. R.
Brooke, Hon PeterHurd, Hon DouglasRenton, Tim
Brown, Michael (Brigg & Sc'thorpe)Johnson Smith, GeoffreyRhodes James, Robert
Browne, John (Winchester)Johnston, Russell (Inverness)Rhys Williams, Sir Brandon
Bruce-Gardyne, JohnJopling, Rt Hon MichaelRifkind, Malcolm
Budgen, NickKellett-Bowman, Mrs ElaineRoberts, Michael (Cardiff NW)
Bulmer, EsmondKing, Rt Hon TomRossi, Hugh
Cadbury, JocelynKitson, Sir TimothyRost, Peter
Carlisle, John (Luton West)Langford-Holt, Sir JohnRoyle, Sir Anthony
Carlisle, Kenneth (Lincoln)Lawson, NigelSainsbury, Hon Timoihy
Carlisle, Rt Hon Mark (Runcorn)Le Marchant, SpencerSt. John-Stevas, Rt Hon Norman
Clark, Sir William (Croydon South)Lennox-Boyd, Hon MarkShelton, William (Streatham)
Clarke, Kenneth (Rushcliffe)Lester, Jim (Beeston)Shepherd, Colin (Hereford)
Cockeram, EricLloyd, Peter (Fareham)Silvester, Fred
Costain, A. P.Loveridge, JohnSims, Roger
Critchley, JulianLuce, RichardSkeet, T. H. H.
Dean, Paul (North Somerset)Lyell, NicholasSpeller, Tony
Dickens, GeoffreyMcCrindle, RobertSquire, Robin
Dorrell, StephenMacfarlane, NeilSteal, Rt Hon David
Douglas-Hamilton, Lord JamesMacGregor, JohnSteen, Anthony
Dover, DenshoreMacKay, John (Argyll)Stevens, Martin
Dunn, Robert (Dartford)McNair-Wilson, Michael (Newbury)Stewart, Ian (Hitchin)
Dykes, HughMadel, DavidStewart, John (East Renfrewshire)
Eden, Rt Hon Sir JohnMajor, JohnStradling Thomas, J.
Fairbairn, NicholasMarlow, TonyTaylor, Teddy (Southend East)
Faith, Mrs SheilaMates, MichaelThatcher, Rt Hon Mrs Margaret
Farr, JohnMather, CarolThompson, Donald
Fenner, Mrs PeggyMaude, Rt Hon AngusThorne, Nell (llford South)
Fisher, Sir NigelMawhinney, Dr BrianThornton, Malcolm
Fletcher, Alexander (Edinburgh N)Maxwell-Hyslop, RobinTownend, John (Bridlington)
Fletcher-Cooke, CharlesMellor, DavidViggers, Peter
Forman, NigelMeyer, Sir AnthonyWaddington, David
Fowler, Rt Hon NormanMiller, Hal (Bromsgrove & Redditch)Wakeham, John
Fraser, Rt Hon H. (Stafford & St)Mills, lain (Meriden)Walker, Bill (Perth & E Perthshire)
Fraser, Peter (South Angus)Mills, Peter (West Devon)Waller, Gary
Gardiner, George (Reigate)Miscampbell, NormanWard, John
Watson, JohnWiggin, JerryTELLERS FOR THE NOES
Wheeler, JohnWolfson, MarkMr. John Cope and
Whitney, RaymondYoung, Sir George (Acton)Mr. Tony Newton.

Amendment accordingly negatived.

Clause 53 ordered to stand part of the Bill.

To report Progress and ask leave to sit again.—[Mr. Biffen.]

Committee report Progress; to sit again tomorrow.