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Orders Of The Day

Volume 477: debated on Tuesday 4 July 1950

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Finance Bill

As amended (in the Committee, and on re-commital), further considered.

New Clause—(Depreciation Of Commercial Buildings)

Section eight of the Income Tax Act, 1945 (which defines an industrial building or structure for the purpose of Part I of that Act) shall be amended by the insertion in subsection (1) thereof, after paragraph ( f), of the following paragraphs:—

"(g) for the purposes of a trade consisting in the sale or distribution of goods or materials;
(h) for the purposes of a trade or profession in the provision of services;"

and subsection (3) thereof shall be amended by the omission of the words "retail shop, showroom, hotel or office," in both places where they occur, and in connection with any building or structure described in paragraphs (g) and,h) above, the limitation of the balancing charge provided in subsection (5) of section three of the Income Tax Act, 1945, shall be reduced as if the words "or exceptional depreciation allowances" were omitted from the said subsection.—[ Mr. Eccles.]

Brought up, and read the First time.

3.50 p.m.

I beg to move, "That the Clause be read a Second time."

This Clause stands in the name of my hon. Friend the Member for Edgbaston (Sir P. Bennett) who is, unfortunately, delayed, or he would have moved it in his usual convincing manner. It falls to me to take his place. Last night the Solicitor-General resisted our new Clause to give the depreciation allowance to temporary premises in blitzed areas. The right hon. and learned Gentleman rested his case partly on the ground of principle, reminding the House that the Income Tax Act, 1945, confined the allowance for buildings to industrial buildings, whereas the new Clause we were moving last night would have brought in shops and offices. I then suggested that a better opportunity would arise today to debate the large principle of drawing an arbitrary line between the industrial buildings and other buildings which are used for the purposes of a trade or profession; and that is the purpose of this new Clause—to extend the principle embodied in the 1945 Act.

The general underlying idea of the 1945 Income Tax Act is that the cost of any asset acquired or provided for the purposes of a trade and used up or depreciated in that trade should be allowed as a charge for tax purposes over its useful life. I think that there is no dispute in the House that that is a sound principle. Where it is necessary to purchase a machine, a tool, or a building—all that comes into the costs of production, and if it is right to give an allowance upon one of the factors of production, it is right to give it upon all of them.

However, Sir John Anderson, when he introduced the Act in 1945, made a deliberate exception from that principle of buildings other than industrial buildings defined more or less as they are in the 1929 derating Act. There was no logic in the distinction drawn by Sir John Anderson, and he freely admitted that during the Debates upon his Act. He was attacked from all sides of the House at that time. Some hon. Members said that there was no point in withholding the allowance from an asset, a building, which was as essential as anything else in the long process of converting raw materials into the finished goods in the hands of the final consumer.

They instanced the case of a factory which attracted the allowance and had a head office in a neighbouring town which did not attract the allowance. They pointed out that it was necessary to have a sale room in which to exhibit goods and from which to sell them which did not attract that allowance. They pointed out that such buildings as garages were very necessary in modern times for the service of capital goods, and that there was no logic in excepting these buildings from the allowance. Sir John Anderson was also attacked for withholding the allowance from hotels. It was said then in 1945—and it has surely been borne out since—that the hotel industry was one way by which this country could earn foreign exchange.

Sir John Anderson was also attacked, especially by Members of the Labour Party at that time, on what I suggest one may call general social principles, and that attack was lead by the present Minister of Health. The right hon. Gentleman first of all drew a picture of his own experience as a butcher's errand boy at the age of 12, and of the distressing conditions under which he worked, and he said:
"There is another argument which I think ought to be conclusive. We ought to encourage shopkeepers and distributive organisations of all kinds to modernise their buildings if only for the sake of the people who are employed in them. I do not see why, assuming that the advantages supposed to be conferred by this Bill are beneficial, the very large number of workers engaged in the distributive industry should be denied those benefits."—[OFFICIAL REPORT, 27th April, 1945: Vol. 410, c. 1163.]
My recollection is that the right hon. Gentleman was loudly applauded by his own side at that time, and I hope that that will mean that we shall be supported in bringing forward this Clause today.

Sir John Anderson resisted the principle of the Clause which I am moving on two grounds. First, he said that production had a clear priority over distribution. I think he was right. There is no doubt that in 1945 the essential thing for this country was to re-establish the volume of production. There were very few difficulties in selling anything that we could produce, and I myself agreed with him at the time. His second point was that the administrative difficulties of extending the allowance to non-industrial buildings were so great that we should not put this added burden upon the Inland Revenue. Either he or the Financial Secretary, my right hon. Friend the Member for Leeds, North (Mr. Peake), I forget which, told us that the introduction of P.A.Y.E. was causing such a burden of work that we ought not to go further than he did in his original Bill. That, I think, was also a sensible point.

The administrative difficulties which he talked about then—and I have no doubt we shall hear of them again today—were. for instance, the difficulty of dealing with a shop which is also a dwelling house; the difficulties of defining what is a hotel and what is a boarding house. Also there would be, no doubt, difficulties in discovering whether a building is 50 years old, and what was the original cost of a shop that was built in 1901. All this we fully admit, but we do not think the difficulties are by any means insuperable. Sir John Anderson was right to stop where he did at that time, and I made two or three speeches during the debate on that Measure in modest support of what he was doing. He was right because production was of such vast importance, and also because it is a sound principle to introduce large reforms by stages. If the present Minister of Health had followed that principle with the National Health Service, we should have a better and cheaper Health Service today. Although Sir John Anderson had my full support at that time, he did not say that the restriction he was putting upon this allowance was something which he considered should be final.

4.0 p.m.

In the last five years the Government—and I think the Solicitor-General himself—have argued as though this restriction of the allowance to industrial buildings was something of a sacred and untouchable principle, and they have often based their arguments on the words of Sir John Anderson at that time. Now that is a complete misconception, as I can very easily show by quoting a few words used by Sir John Anderson on 27th April, 1945. He said:
"I submit to the Committee that hon. Members must really make up their minds whether they are prepared to have this, which everyone admits is good so far as it goes, and be content for the time being to stop there."
At that point in the Debate Sir George Schuster intervened and put this point to the then Chancellor of the Exchequer:
"If I could get from my right hon. Friend an assurance that he recognises the principle, and that we are merely being asked now to take a first step, an extension of which may perhaps be considered later, then, speaking for myself, the whole position is changed."
Sir John Anderson gave him that assurance, and the Debate ended with these words from Sir George Schuster:
"I am satisfied with that. We have established the case, and I beg to ask leave to withdraw the Amendment."—[OFFICIAL REPORT, 27th April, 1945; Vol. 410, c. 1181-2.]
The principle of that Amendment was precisely the same as that contained in the new Clause which I am proposing today. I have troubled the House with this little matter of history because it is not right to argue that in the beginning this was considered a final settlement of the allowances upon buildings.

Where are we now? We are in a different position than we were in in 1945. Production has almost caught up with demand; salesmanship is now of supreme importance; the servicing of our goods is one of the ways in which we shall maintain the markets that we got very easily in the early years after the war; and I think the whole House would agree that the hotel position is acute. We know that the hotel position is acute, and to realise its importance we have only to think of 1951 and the Festival of Britain.

Therefore, my view is that the reasons which were good in 1945 for stopping at industrial buildings no longer hold, and I ask the House to look at this as a sensible proposition designed both to assist the earning of foreign exchange and also to reduce the final cost of goods to the consumer. There is no doubt at all that many of our shops are old-fashioned; many of our hotels are old-fashioned, and we should be wise to encourage a "scrap and build" policy. As there was no logic in 1945 in giving an allowance to one part of the whole chain of costs of production, so there is no logic now, and I hope that in moving this new Clause we may have the general support of the House.

I beg to second the Motion.

It seems to me that this is one of those matters which so often arise in the course of a Finance Bill, where there is a principle generally accepted by both sides of the House and yet difficulties of practice are raised by the Government spokesmen. I think there must be agreement on the principle, which is surely this: that where any capital asset is used up in the course of earning a profit, that profit is not a true profit, and in order to ascertain the true profit a deduction must be made equivalent to the amount of wastage of the capital asset. That principle was applied by the 1945 Act to industrial buildings but not to commercial buildings, and I do not think anyone could defend its restriction to industrial buildngs on any grounds of principle or theory. It can be defended only on grounds of practical difficulty.

The two arguments of practical difficulty which have been advanced in the past are those to which my hon. Friend the Member for Chippenham (Mr. Eccles) has referred. First, there is the question of what Sir John Anderson called priorities, and secondly, there is the question of practical administration. On the question of priorities, I would argue that there has been an undoubted shift between 1945 and 1950, between the emphasis on physical production and the emphasis on costs, and particularly distributive costs, and also the emphasis on the importance of services—commercial services, hotel services, and so on—to our balance of payments. I would ask whoever replies for the Government to give some estimate of the amount that this new Clause would cost the Treasury, because that will assist the House in arriving at some estimate of the priorities involved.

Certainly it is true that since 1945 the question of the cost of living and the cost of goods has acquired very much more prominence. We have heard many speeches from hon. Members opposite about the importance of reducing distribution costs, and obviously one of the best ways of encouraging a reduction in the costs of distribution is to encourage improved distributive equipment. After all, equipment is needed in distribution, perhaps not so much, in degree, but certainly as well as in production. Indeed, if rumour and the "Sunday Observer" are accurate, the question of reducing distribution costs will be one of the major appeals to be placed before the country by the party opposite at the next General Election. Well, here they have a wonderful chance of proving that they really mean what they say by a practical measure designed to assist in the reduction of distribution costs.

The second practical objection is based on the difficulty of distinguishing between, for example, the part of an individual building used for dwelling purposes and the part used for shop-keeping purposes. I wonder whether that objection has quite the same force now as it had in 1945? Is it not true, for example, that on a number of occasions it is necessary to distinguish between the value of the shop part of the premises and the value of the dwelling part of the premises for the purposes of the Rent Restrictions Acts? If that can be done for those purposes surely it can be done for purposes of depreciation allowances.

If the objection is based, not on the difficulty of doing it at all, but on the amount of work involved in doing it for all the shops in the country, will not that problem have been made simpler by the new centralised arrangements for the valuation of property by the Inland Revenue themselves, which are being introduced as a result of recent legislation? On those grounds, it seems to me that the practical objections to the extension of this unassailable principle have diminished very much in force since 1945, and for that reason I second this Motion.

I wish to support this new Clause, so ably proposed and seconded by my hon. Friends. Hon. Gentlemen opposite make frequent use of the hotels in my constituency, and have shown their appreciation of Scarborough, so they will not be surprised if my interest is particularly in the hotels' participation in this new Clause, as that is the chief industry in the constituency I represent. Hoteliers have to spend a lot of money on equipment and on modification and modernisation of their buildings if they are to maintain their position, because they are dependent upon constant variations in public taste, and the smaller hotels often consist of converted houses which must continually be altered and improved to be brought up to date.

The hon. Member for Chippenham (Mr. Eccles) referred to the difficulties which the hotel industry is in today; and that is very true. There is a contraction to some extent in public spending which they are unable to offset by any drastic reduction in their own expenditure. Wages used to take about 12 per cent. before the war of their gross receipts. Today, wages are taking about 25 per cent. The Catering Wages Act has added, not only in wages but in the necessity for extra staff, a very great deal to the expenses of hotel-keeping. Unlike shops which can buy equipment free of tax, they have to pay Purchase Tax on all they buy. For all these reasons, it is very difficult for hotels to reduce their expenditure and to increase their net profits so that they can pay out of net profits for these improvements.

Bearing in mind what a great contribution the hotels can make in obtaining foreign currency through the tourist trade, and the necessity of seeing for that purpose that they are really up to date, I add my plea that the Financial Secretary will consult with the Chancellor of the Exchequer to see whether sympathy cannot be given to this very important industry.

I should like to support the plea for the hotel industry. I make it a practice when I see United States citizens on a visit to this country—and I travel with them a good many times—to find out what sort of time they have had, how they have enjoyed themselves, and whether they have been comfortable. As soon as one gets to know them a little, they generally come out in the course of conversation with some criticism of our hotels; and there is no doubt that, generally, the standard of comfort and luxury demanded by the visitor and tourist in the United States is higher than we have here. United States visitors are also apt to say that hotels on the Continent give a better standard of comfort than our own.

When I meet hoteliers and managers in this country and ask them how it is that they cannot improve their hotels and bring them up to something like the standard of those in France or the U.S.A., the answer is "Taxes and the fact that depreciation is not allowed to us." I am quite certain that any help that the Chancellor of the Exchequer can give to our hotels will probably mean an increase in the amount of dollars spent in this country, which is most essential to us, and greater friendship and greater ties between the United States and ourselves.

4.15 p.m.

I want to add my plea to what has been said on this subject. I hope that the right hon. and learned Gentleman will have something favourable to say on all three aspects of this question in relation to shops, offices and hotels. There is no doubt that today the retail trade is suffering under a very heavy burden and finding it extremely difficult to distribute the goods produced from the factories. Any easement of these burdens which can be given will, I think, add to the prosperity of the country.

Apart from the retail trade, I want to refer particularly to the hotel industry because that is one body on which it is admitted on all sides of the House we depend very largely to increase our dollar earnings. It is unnecessary to repeat the arguments which have been used on this subject. There is no doubt whatever that the hotels of this country are suffering from heavy burdens, particularly in relation to Purchase Tax, because a large number of things which it is necessary for them to buy are subject to very heavy Purchase Tax. They are suffering from other disabilities which not all other industries have, particularly as the result of the Catering Wages Act and the regulations made thereunder. That legislation has thrown a discriminatory burden on that industry, and it is rather surprising that an industry to which the Government attach so much importance is selected for treatment in this way.

The principle, as the hon. Member for Chippenham (Mr. Eccles) has pointed out, has been admitted in relation to factory production. I hope that the right hon. and learned Gentleman will realise that in the tourist trade, which has such an important part to play in our economy, the hotel is the factory, and if this benefit is already extended to the factory, it should equally be extended to the hotel which plays no less important a part in our prosperity.

I do not want to repeat the arguments already used, but I would remind the House that 10 days ago we devoted a whole Friday to a Motion moved from the other side of the House which met with very general approval. The purpose of it was to ask His Majesty's Government to give better facilities to the hotels, boarding houses and the holiday industry generally. It was not then possible for the Government to make any statement which would give any satisfaction to those interests. They were unable to indicate that they would reduce Purchase Tax, ease the burden on the industry, facilitate transport or do any of the other things which we ask them to do. They were unable to indicate a quick settlement of the catering wages difficulty which is familiar to all of us.

The day ended with an appeal from all sides of the House to the Government, in the words of the Motion," to facilitate this industry," and to facilitate holidays, and that, of course, meant facilitating the operations of all those engaged in the industry. As they were unable to do anything to meet the wishes of the House and particularly the wishes of their own Members on that occasion, cannot they now take advantage of this opportunity to do something?

In all our constituencies there are many small distributors on whom this country must rely to help in the even flow of trade. Many of them sink the whole of their capital in a small shop. They want to keep abreast of the time in order to help the local community to buy their goods in pleasing surroundings and as well as possible. Yet they are not helped by the Government, and there are some who are unable to raise sufficient capital to buy their shops. All they can do is to buy the leases of the shops, and as they are unable out of their gross profits to provide for depreciation for that purpose, they have to do it out of net profits, and when the lease comes to an end they have nothing left. I hope that the Government will take that into consideration.

The principle on which the 1945 Act was fixed was very fully canvassed during the discussion upon it in the 1945 Parliament. The hon. Gentleman who moved this new Clause referred to certain passages in speeches which were made in that Debate. He conveyed the impression that the matter had been left rather in this way: That it was on the whole illogical to select these industries for initial relief and to exclude commercial buildings, and the Chancellor of the Exchequer found difficulty in defending the position he had taken up. If that was the impression that the hon. Gentleman intended to convey, I do not think it was a fair summary of what took place. The then Chancellor of the Exchequer, Sir John Anderson, adopted a very clear principle, which I should like to read out in the words in which he expressed it. He took as the basis of his argument these remarks, which he uttered on the Second Reading of the Income Tax Bill:

"Let me, at this stage, say quite frankly, that I know there will be some disappointment that the new allowances for buildings are to be confined in general to buildings used in productive industry and that, for example, offices and hotels are excluded; but I made it quite clear in my Budget speech of last year that my proposals would be deliberately framed in this way, in order to benefit productive and creative industry. The reasons that have led me to make this distinction will, I think, commend themselves to the House. I propose to the House that we should, as an act of conscious policy, deliberately weight the scales in favour of those forms of capital investment which are most necessary to the industrial strength of the community. It is productive or creative industry that provides in the main industrial employment and is the foundation of our national prosperity."—{OFFICIAL REPORT, 14th March, 1945; Vol. 409, c. 258-9.]
In framing Section 8 of the 1945 Act, he worked upon that basis, saying that the industry which was entitled to the allowance was the industry which could be stated to be part of the manufacturing, processing or extractive industries or part of the transport, water and power industries. He did not leave the matter in any uncertainty. He was not hard pressed to justify something which was an illogicality. When he said this it was broadly speaking true, and I submit it is just as true now. [HON. MEMBERS: "No."] Broadly speaking, it is.

I am not suggesting that there are not certain changes in the situation, but, broadly speaking, it is true to say that it is the re-equipment of those industries which is still most pressing. I do not believe that any Member of the House would differ from me if I say that, as between new industrial buildings, such as mills, factories, power stations and so on, and commercial buildings, such as shops, offices, hotels and so on, there cannot be the least doubt that it is the former, which are by far the most important in our national prosperity and in the building up of our national resources. That was true in 1945, and that was the reason which actuated Sir John Anderson then It is still true now.

I quite agree with the hon. Member for Chippenham (Mr. Eccles) that salesmanship now is more important, because there are much more things to sell but—and this is the whole point which this Debate raises have we reached the stage at which we can and ought to depart from the principle that our major effort must still be concentrated in the equipment of our basic industries?

If the hon. Gentleman will allow me to finish my argument I will give way in a moment. As I was saying, the question is, ought we to depart from the principle that our major effort must still be concentrated on the re-equipment and capitalisation of those basic industries to which I have referred? That should be the first charge on our resources. We have gone a long way to re-equip and recapitalise, but we have still a long way to go, and I would urge upon the House that the moment has not arrived when we can properly and with due regard to the national interests, extend allowances to the large extent which it is proposed in this new Clause.

The Clause would have the result of extending the allowances to shops, showrooms, offices, hotels, and even things like cinemas. These are all very necessary in themselves, and most of us are cinema-goers, but the question is still one of priorities. It was proposed in the Debates in 1945 that the allowance should be extended to hotels. The hon. Member for Chippenham and some of his hon. Friends slightly misconceived the reason which was given against the proposal to extend allowances to hotels. It was not so much an administrative difficulty. It was suggested that the reason we should extend the allowances to hotels is that hotels were very important dollar earners, and that is particularly the case now. The difficulty is that if this is applied to hotels, to which foreign visitors with dollars in their pocket resort, it is very difficult administratively to end it there.

Indeed, as a matter of justice as between one hotelier and another it is not possible only to give the relief to those hotels which entertain foreign visitors. It has to be extended generally, and to the boarding house as well as everybody else. Therefore, as a matter of justice between one hotel proprietor and another, the relief would have to be given to all sorts of hotels, including boarding houses, and if one is committed to that, then one is committed to the question—has the time arrived when the function for which all hotels generally stand—not only the dollar earners but everyone of them—is such that it has reached the necessary high order in the list of priorities?

This is a fallacy which the Government have used in argument before. Is it not a fact that the more the relief that is given to these hotels, the more hotels will qualify to attract dollar tourists. This is the sort of relief which a certain number of hotels, which do not attract dollar tourists now, require in order to equip themselves to attract dollar visitors.

I promised earlier on to give way to the hon. Member for Scarborough and Whitby (Mr. Spearman) and I will do so after I have answered the hon. and learned Member for Hove (Mr. Marlowe). If this relief is given it has to be extended to boarding houses and to such other establishments, which would be most unlikely ever to be used by foreign visitors. The hotel industry is a very large one and we could not limit any relief in the sense suggested. I quite agree that if the relief is extended more hotels would qualify in point of attraction and amenity to draw foreign visitors, but a very large number of them—and I do not know how many roughly but very much more than has been suggested, because there are a limited number of foreign tourists to this country—would never entertain foreign tourists with hard currency in their pockets.

If one were to concede the principle that hotels should come within the purview of relief, might we not have to go much further than the national interests could possibly justify at the present moment? I am not suggesting that Sir John Anderson, in the course of his speech, meant to imply that this was a final or immutable principle. It was not so at the time, and I am not suggesting now that it is a principle to which we must always adhere hereafter. The point that I am putting to the House is that the moment has not arrived yet when we should diversify the number of buildings which qualify for relief by extending them in the very large sense which this new Clause proposes.

The House should remember that so far as offices are concerned, they are already to some extent within the purview of the Act, because an office which forms part of an industrial building qualifies for the allowances, if the cost of its construction does not amount to more than one-tenth of the cost of the construction of the whole of the building. So office accommodation in industrial buildings is, subject to these limits, accommodation which already qualifies.

I was asked what the cost would be. If the Act were extended in the sense proposed, we think the cost would be in the region of £10 million, which is a substantial amount, but the basic answer which I make to this is not that this is one of administrative difficulty or any- thing of that sort but whether we can still afford the relief mentioned. The House must bear in mind that there has been very substantial increases in the initial allowance in the case of industrial plant. We have gone very far, but we cannot afford the relief in the wide sense that this Clause proposes, because the first call upon our national assets in the matter of capital re-equipment must be industrial buildings in the productive and creative sections of industry. It is for that general reason that I regret to say that we feel we cannot accept this Clause. I promised earlier to give way to the hon. Gentleman the Member for Scarborough and Whitby, and I will do so now.

4.30 p.m.

I thank the Solicitor- General very much for his courtesy, which we are accustomed to expect from him. I want to ask him whether he has had in mind the amount of labour that would be saved in the modernisation of hotels, which would thus release labour for other purposes. Shortage of labour is the great deterrent to production in the country today.

We have borne that point in mind. Of course, if we afforded the relief and there was large- scale equipment of hotels, that would absorb a large amount of the labour in the first place. Wherever we could afford relief, it would eventually have the effect which the hon. Gentleman indicated. All those matters have been borne in mind. I have advanced reasons which,.at the moment, seem to us to lead inevitably to the view that the proposed new Clause cannot be accepted. I do not say that they are reasons which will always prevail or that there are the same conditions now as existed in 1945. The question is whether conditions have so changed that we can, consistently with the national interest, depart from the principle, which was to prefer the basic, creative and productive industries. I suggest that that point has not arrived.

The Solicitor-General is always very courteous but I do not know why he was put up to make that speech. It was not on a legal point at all. The right hon. and learned Gentleman talked about "this relief." That is being subsidy-minded. We are discussing Income Tax.

We are discussing additional allowances in computing profits for Income Tax. I should have thought it was generally described as a relief.

That is using the term "relief" in the sense of a subsidy. Income Tax is a tax on income. In arriving at a man's income we should deduct all the charges against him. What Sir John Anderson said in 1945 or what Gladstone said in 1867 has no bearing on the matter. Sir John Anderson thought it was right to grant a kind of subsidy for certain branches of productive industry. The attitude of the Solicitor-General is that the time has not yet arrived to give this relief to other sectors of industry.

The complication of the Income Tax system arises from the difficulty of defining income. There are marginal cases. Certain charges against a business would be allowed if the proposed new Clause were passed and which are disallowed now. In other words, we are taxing income which is not true income but is hypothetical income. As far as is humanly possible a man or a corporation ought to be taxed on the true income and not on some creation of the law.

The Solicitor-General talked about hotels to which people go with hard currency in their pockets. I do not know what my hotel would do if I tried to pay my bill in dollars. They would not know what to do with them. They would probably ring up the Treasury. The black market rate in New York is different from what it is here. These matters ought to be argued on principle, and the principle is that a man ought not to be taxed on something which is not income but is an expense. That is the fundamental principle behind this Clause, which has been rejected. There are 10 million reasons, and each of them counts for £1.

I agree with my hon. Friend the Member for Croydon, East (Sir H. Williams) that it is very strange how the Solicitor-General is put up to deal with economic problems. The Debate has largely turned on the tourist trade, and I should have thought that that was more within the purview of the President of the Board of Trade than of anybody else.

The right hon. and learned Gentleman did it very well.

He always does these things very well, but they do not always satisfy us. The argument is very nicely balanced on the proposed new Clause. I listened to the Solicitor-General with much attention to see what line he would take.

I very well remember the Debates in 1945 in the time of Sir John Anderson. Time has marched on. That is two Parliaments ago now. The principle which the then Chancellor of the Exchequer sought to introduce into legislation was one of priorities, the first of which was, broadly speaking, of relief for creative and manufacturing industry. In April, 1945, when the war was still going on, that was obvious. Any reference to the tourist trade was not well treated at that time by hon. Gentlemen opposite. If they would like to be really amused I suggest that they should read a speech by the hon. Member for Aberavon (Mr. Cove) on 27th April of that year, when he made use of these phrases after my hon. Friends had been talking about the need for developing the tourist industry after the war:
"It shows a complete lack of virility"—
I do not know why it should show that—
"to depend upon foreigners coming to our hotels in order to benefit foreign exchange and the standard of life of our people. What nonsense. What a defeatist attitude to take towards the future."—[OFFICIAL REPORT, 27th April, 1945; Vol. 410, c. 1197.]
We have had nothing but appeals in later years from the Government that tourists should come here. We are glad to see that they are coming in increasing number.

The Solicitor-General must not fall into the error of thinking that it is only a matter of the large and luxurious hotel. We find more and more that visitors are not the millionaires of years ago but people of medium or almost lower range incomes who want to come and study this country and who, because of the nature of their income, mut live in humble hotels or even in boarding houses. Let us not try to make a distinction between one kind of hotel and another kind which will receive visitors.

Although the Debate has largely turned on the question of hotels, of course, as the Solicitor-General has pointed out, the proposed new Clause is much wider than that. It touches offices, shops, showrooms, cinemas and a variety of other buildings. That is what brings me into some personal difficulty. I wish we could find some way of helping the hotel industry, because that is one of the good ways of earning foreign exchange. We all agree from our travels up and down the country—there is no hon. Member who does not have to stay in a hotel at some time or other in the course of his public duty—that there is room for considerable improvement in our hotels. That is not the fault of the individual hotel owners but of the run-down during the war and of the difficulty of re-equipping and modernising them in keeping with what is required in 1950, which is not what was required in 1920, 1910 or 1800.

The House must be very careful not to go too wide in present circumstances. That is why I was rather surprised when the right hon. and learned Gentleman estimated that the cost of the proposed new Clause would be £10 million in the first year. As I understand it, the rate is 10 per cent. in the first year and therefore £10 million would represent a building programme of £100 million in the first year, which I should have thought highly improbable. However, the right hon. and learned Gentleman gives that figure. I merely query it, but I do not put my argument on that.

I will give my view. I am afraid that it may displease some of my hon. Friends, but I ask them to consider this. When my hon, Friend the Member for Chippenham (Mr. Eccles) was saying that it was wise to encourage a "scrap and building policy" now for shops and hotels, I agreed. I should like to encourage a "scrap and building policy" now for shops and hotels in order to modernise them, but when I reflect upon the complete failure of the Government to deal with houses I am left in some doubt whether at the moment we ought to go too far in encouraging the provision of new shops and new hotels. Indeed, I know that we ought to concentrate far more on the building of houses.

That is, of course, within the scope of the Minister of Health and not that of the right hon. and learned Gentleman, but it brings up in a very vivid form, if I may call that in aid to the argument, the question of what are the right priorities. While, again, we all admit that just as better hotels are more necessary now so is salesmanship more important than it was in 1945, although I am not so sure that it is salesmanship at home which is so very much more important. It is selling our goods overseas which is the vital issue today, and probably shops at home can manage for a little longer if as a result of their holding back their claims and our not passing the Clause today more can be done for the housing of the people.

The right hon. and learned Gentleman did not close the Government's mind to the problem. As I understood it, he was merely saying that whereas in 1945 it was right in his view, as it was in our view—and we were all working together in the same administration—to limit the first benefits of the Act to creative industry, so now the time had not yet come for a relaxation, but I do not think that he said anything to demonstrate that in the view of the Government it should not be done sooner or later. That is certainly our view. We should like to see this extended as soon as may be, but whether this is the right moment or not I do not know. One can dogmatise on these matters, but my feeling is that it would not perhaps be right this year to insert a Clause like this in the Finance Bill.

I should like the matter to be kept very much in mind, and I should like the Government to say whether there are other ways in which they can assist the hotel industry in particular. As my hon. Friend the Member for Morecambe and Lonsdale (Sir I. Fraser) said, we had a Debate on this subject within the last fortnight and nothing at all was forthcoming about it from the Government's Front Bench. If the Government would devote some attention to the main objective which my hon. Friends have had in mind in their speeches today, which is to help modernise the hotel industry so that it may be able to attract more tourists, and if they can find some other ways of dealing with this—there are other possibilities but it would not be in order for me to discuss them—and, above all, say that they intend to try to seek some alleviation of the industry's difficulties within the next 12 months, I should be satisfied to leave the matter where it is.

However, I am certain that the time is not far distant when a Clause on these lines will, in common fairness, have to be put in the Finance Bill. It was not that Sir John Anderson turned it down: he merely said that it was not appropriate in 1945 when we had other problems and other priorities. My opinion is that in view of the deplorable handling of the housing situation I should not like by inserting this Clause to give the Government a means of blurring their responsibilities or their failure in that direction.

Therefore, let us all accept what the Solicitor-General has said, not that he turned us down and not that he thinks this is wrong, but merely that he does not think that it is right to do it this year. If he persuades the House in that direction, which he may well do, I think that the least the Government can do is to put on their thinking caps, if they have any, and see what they can do to help the hotel industry during the next 12 months, because that is really at the bottom of the arguments which my hon. Friends have put forward. I hope that my hon. Friends will not press the Clause today beyond the point to which they have carried it.

4.45 p.m.

I am in some confusion about this matter. We heard elaborate arguments adduced in the interests of hotels and shops by the supporters of the right hon. and gallant Gentleman the Member for Gainsborough (Captain Crookshank) and then at the close of the race he tells us that he differs very considerably from them. I do not know whether his hon. Friends are persuaded by his eloquence and wish to withdraw the Clause, but it seemed to me that there was much cogency in what the right hon. and gallant Gentleman had to say. While I would not agree with him that the Government's housing policy has been so lamentably poor as he seemed to imply, I would agree with him if he meant that we should devote our energies and resources primarily to the building of houses rather to the developing of hotels and shops.

Several hon. Gentlemen said that the poor condition of our hotels was due to the heaviness of taxation. These complaints about the inferior condition of our hotels which are said to come from overseas visitors are a very hardy annual. I remember that my compatriot, the great novelist, Arnold Bennett, compared the miserable conditions which he saw in hotels in this country with the conditions in France and other parts of the world. These complaints cannot be firmly based on the failure of the Government to reduce taxation in this way.

I agree that the time has not yet arrived when productive and creative industry has done all the work that we wanted it to do and when we should switch over to the modernising of our shops—the hon. Member for Chippenham (Mr. Eccles) used the word "scrap"—and when we should go in for a big capital expenditure programme at the seaside or elsewhere. Certainly, a great deal of improvement is necessary in our hotel and lodging accommodation, but it is not a new state of affairs. The people in the trade are doing pretty well in terms of income today—many of them are doing better than they have ever done before—but they are not doing as well as they might do in present circumstances.

Despite the shadow-boxing of the Opposition, which is done for obvious purposes, I hope that the Government will stand their ground and not give way.

Question put, and negatived.

New Clause—(Exemption From Estate Duty Of Buildings Of Historic Or Artistic Interest)

Subsection (3) of section forty of the Finance Act, 1930 (which exempts from estate duty objects of national, scientific, historic or artistic interest), shall be amended by inserting the words "and houses and other buildings whether or not yielding income," after the word "income."—[Mr. Colegate.]

Brought up, and read the First time.

I beg to move, "That the Clause be read a Second time."

I am very grateful to have the opportunity of raising again at this stage, a matter which I raised in Committee by moving three new Clauses or Amendments. When he replied then, the Solicitor-General said that he could not see his way to accept my proposals, mainly on the grounds that the Gowers Report was just about to be published. That was a fact of which I had not been aware and, naturally, I accepted it and, with the permission of the Committee, my Clauses or Amendments were withdrawn.

Since then the Gowers Report has been published, and what it says, and the conclusions which it draws, make the matter very much more urgent than I thought it was when I put forward my proposals during the Committee stage. In that connection may I quote one or two sentences? In the first place the Report points out that
"It is not too much to say that these houses represent an association of beauty, of art and of nature—the achievement often of centuries of effort—which is irreplacable, and has seldom, if ever, been equalled in the history of civilisation."
A little later this Committee—the appointment of which is due to the Chancellor and I am grateful to him for having appointed it—says:
"The great houses of this country represent the highest achievements since the Renaissance of the arts and crafts associated with building…."
Then they sound a note of urgency:
"Now, owing to economic and social changes, we are faced with a disaster comparable only to that which the country suffered by the Dissolution of the Monasteries in the 16th century."
In view of those statements I do not think it can be believed that it is premature to raise this subject at as early a date as possible. No doubt the Solicitor-General can quote precedents, of which he and his learned Friends are masters, to show why my Clause should not be accepted, but some of us come here not to quote precedents. We come here to create them, and this is a case where we should create a precedent. Instead of adhering to that dreadful tradition that Royal Commissions and committees sit and report and year after year drags on with nothing done, we should adopt an entirely different attitude and say, "Here we have an opportunity to do something immediately; let us do it now."

The recommendations of the Gowers Committee are three-fold. First, they propose the creation of an historic buildings council. I hope that in the next few months that will be created by legislation. The other two recommendations are that there should be exemption from Death Duties—a recommendation made in almost the very words I suggested before I saw the Report—and that there should be some relief from Income Tax and Surtax as regards certain approved expenditure.

The question may be asked, "If you are so keen on this subject and think it so urgent, why do you not move a new Clause on tax relief?" That requires careful consideration. The Report indicates a number of safeguards and suggests means by which that should be done. Although the Report was signed on 30th March, I can understand that it is reasonable of the Treasury to wait until next year. So we get this programme: first, exemption from Death Duties. Let us carry that out now. Then, within a few months, let us create the historic buildings council and, thirdly, in next year's Budget let us deal with the question of relief for approved expenditure on these houses.

If we give relief from Death Duties now, it will be an earnest to anybody concerned with these houses that they should do nothing hasty, but should hold their hands if it is a question of disposal or demolition. And it will be recognised by everybody concerned as an evidence that the recommendations of the Gowers Committee will be carried out. When, previously, I moved three Amendments, the defence was made that the Gowers Report was about to be published, and it was on that ground alone that I asked for the leave of the Committee to withdraw the Amendment. There are, however, certain arguments I should mention.

Neither in the Gowers Report nor in my new Clause is there any question of vast estates escaping tax. As a matter of fact, the least valuable part of large estates today is the mansion. The difference between 3,000 or 4,000 acres with or without a house is not great. In any case, the cost to the Treasury would necessarily be small because the amounts concerned are not large and only a few houses will be found to be exempted from Death Duties—sometimes in a whole year not a single house will be exempt.

Therefore, I urge the Chancellor to accept this new Clause. I know when a thing is urgent, and this is urgent. I do not profess to be a parliamentary draftsman and I shall be content with any drafting amendment he cares to make to the Clause. Because the right hon. and learned Gentleman appointed the Gowers Committee in 1948, it would be a matter of gratification to us all if he would accept the principle now, because it would not only carry out the first part of the Gowers Report but would be an. indication that the Government intend to carry out the rest of its recommendations in a short time.

I beg to second the Motion.

Although many people have said it might be desirable that these houses should pass into the hands of institutions, the Gowers Report definitely says that that would be unsatisfactory in the public interest. Therefore, if it is desirable to implement the policy of that Report, this is an additional argument in favour of the case put by my hon. Friend.

In a humble capacity I have been connected with the matter under discussion and have had some experience, admittedly rather remote, of the dealings of the Chancellor with it. As far as I can judge, the right hon. and learned Gentleman has shown the greatest sympathy in the matter of preserving historic houses. Quite apart from setting up the Gowers Committee, he has encouraged the work of the National Trusts for both England and Scotland—and encouraged them in a practical way.

5.0 p.m.

In so far as the Clause is designed to impress upon the Chancellor the urgency of the matter and to give him an opportunity of showing an earnest of his future intentions, I certainly support it. It is quite clear, however, that the problem is very much bigger than the Clause can possibly tackle. For one thing, in the Gowers Report it is made quite clear that unless some relief is given from duties on the funds by which these houses are maintained, they will deteriorate even though they may remain in the same hands; it is the expense of upkeep which now bears so heavily upon the owners. Secondly, there is the likelihood that if relief from Death Duties is given, the result may be to increase the market value of the houses with the consequence that one object of the Gowers Committee may not altogether be achieved. That Committee recommended that the historic owners of the properties should be encouraged to remain in them. This Clause, taken alone, might lead to the houses changing hands.

There is also the question of town houses, which some of us consider to be equally important. The houses in the great terraces and squares of our towns, however, will hardly be touched by the Clause. Lastly, there is the public relations aspect. I am associated with the National Trust for Scotland. Although we are a voluntary body, we have the greatest difficulty in persuading certain sections of the community that we are not an extremely wealthy investment trust and in convincing others that we are not a nationalised industry.

There is also a third section of opinion which says, not unnaturally, "Why should we pay people to live in their own houses?"A very important public relations point is involved in this matter. and the Gowers Committee have done a great deal to smooth away misconceptions and to give the Chancellor a basis upon which he can act. My feeling is that if there is any possibility of the Clause being taken either as the final word or being represented as a gift, so to speak, to people already in a comparatively favourable position, it would be very unfortunate; but in so far as it impresses the urgency of the matter and may be regarded as a token of future legislation along the lines recommended by the Gowers Committee, it is to be welcomed.

No one will regret that the hon. Member for Burton (Mr. Colegate) has once again brought this matter to the attention of the House. It is a matter which is very difficult and complicated. There are many different ways in which our great national heritage in houses of this kind might be preserved, and it was because of that multiplicity of possibilities that I appointed the Gowers Committee to look into this special matter.

I think it would be a very bad thing if we were to hurry forward with a partial solution of this matter before the country and the House had had time to consider fully the whole of the Gowers Report. Certainly, the Government do not wish to arrive at a quick decision on it until they have had an opportunity of seeing the reaction of different sections of the population to the Report. This is a matter in which, as the House will appreciate, everybody does not necessarily take the same view, yet it is very important that if we are to do something it should be something which is generally accepted as being the wise and proper way of dealing with the matter.

I assure the hon. Member that I am very anxious to go ahead and to complete dealing with what is undoubtedly a great and, I think, an urgent problem. Many of these great houses are so historical and beautiful that we just cannot afford to lose them; they are too much a part of our history for us to afford to lose them. Whatever way we choose of preserving them, however, must be a way which broadly meets the views of all the population. It is because I wanted everybody to have an opportunity of examining the problem that we appointed the Gowers Committee, and I want now to allow time for the Report to be studied and discussed; then I hope that we shall be able to come to a conclusion, and that if legislation is necessary we shall be able to undertake it next year.

In view of the statement which the Chancellor has made, I beg to ask leave to withdraw the Motion.

Motion and Clause, by leave, withdrawn.

Clause 2—(Hydrocarbon Oils (Excise))

I beg to move, in page 2, line 45, after "Treasury," to insert:

"so however that during the period of twelve years from the relevant date the amount of the deduction shall not be less than ninepence a gallon."
Clause 2, as will be remembered, deals with the rebate in respect of home produced hydrocarbon oils and prescribes that that rebate or deduction shall be
"ninepence a gallon or such other amount per gallon as may from time to time be directed by order of the Treasury."
I moved an Amendment to the Clause during the Committee stage, but that took place at 2.30 a.m. on 15th June. If nothing else is agreeable, it is at any rate agreeable that we are discussing the Clause on this occasion at a rather more seemly time of day. In the early hours of the morning on 15th June, the point which was mainly dealt with was the constitutional one with which the next Amendment of the Chancellor to some extent seeks to deal. During the Debate upon it, however, two of my hon. Friends—the hon. Members for Hall Green (Mr. Aubrey Jones) and Esher (Mr. W. Robson-Brown)—made speeches on rather wider aspects which had such great force in them that after consultation with my two hon. Friends I have put down this further Amendment which raises the whole question of the guarantee that the deduction will not be diminished for a period of 12 years. The precedent for this is contained in the Finance Act, 1938. when a margin was guaranteed for 12 years and provision was made for a sliding scale. This, I think, had the effect, in certain circumstances, of reducing the amount of the deduction, but it preserved a definite deduction for a fixed period. The purpose of that was to encourage production of motor spirit and associated light oils at home. It enabled the industry to plan ahead and was of very considerable benefit.

The industry is now at a critical phase of its development and re-equipment, and the need for security is still considerable. The Chancellor of the Exchequer dealt with this matter in his Budget speech on 18th April. He referred, as I have just done, to the Finance Act, 1938, and he then went on to make this statement:
"I do not think that it would be right to ask the House to undertake, by legislation, that this margin should remain unchanged for a further period of years."
But the right hon. and learned Gentleman gave no reason why he was not willing to continue to give a guarantee. He did, however, say:
But there would, of course, be no question of modifying it, without very careful consideration of the circumstances prevailing at the time and then only after giving the interests concerned an opportunity to put forward their case."—[OFFICIAL REPORT, 18th April, 1950; Vol. 474, c. 76.]
That, although helpful, is nothing like as helpful, as the Chancellor himself would admit, as a guarantee for 12 years.

I suggest that even at this late stage the right hon. and learned Gentleman should consider the question of giving a guarantee for a term of years, because if the preference is diminished, or disappears, the effect will be that the financial return from benzol will be diminished. I am told that the consequences of that might be very substantial; that, for example, it would make the home production of benzol uneconomic, the effect of which, in turn, would be that benzol would no longer be extracted from coal gas and, therefore, more oil would have to be imported, which might well entail the expenditure of more dollars. Another consequence would be that distillation and recovery plants might well have to close. Third, the profitability of coke oven plants would be affected, and if the whole of the deduction were eliminated, it might well mean an increase of between 2s. and 3s. a ton in the price of coke.

It should be obvious to all Members of the House that that would have a serious effect upon steel costs, which have recently been so adversely affected by the increased costs of transportation. I am told that if the financial yield from benzol were to be diminished, as I have suggested, it might well affect the whole of the development plan for coke ovens and would also have an indirect effect upon our chemical industry.

This is a matter of considerable substance and I ask hon. Members opposite for once to engage in a little practical planning. We hear a great deal of airy platitudes about planning in general and the super planners. Here is an opportunity to do a little practical planning for there could be nothing more practical than to give this guarantee for 12 years. Those in the various industries would know where they were and would be able to make their plans and benefit to the community would be assured.

I beg to second the Amendment.

The purpose of the Amendment is to fill what I consider to be an unaccountable gap in the Bill. As my hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) reminded the House, we have to deal with a preference established originally for 12 years and which now expires. I think it reasonable to expect that the Finance Bill should contain an arrangement to take the place of that now defunct provision. It seems to me that the Bill as constructed leaves nothing but a vacuum. The Bill provides that the preference may be either decreased or annulled at a moment's notice, which means that the future of this industry—the home production of hydro-carbon oils—is enshrouded in a question mark.

It is reasonable to ask that we should have something more definitive and more clarified than that.

The Amendment rests on certain assumptions which I do not think the Treasury Bench would contest. Briefly, they are that, first, we need the home production of hydro-carbon oils for economic and defence reasons. If we recognise that we have to face the problem that there will always be a disparity between the cost of home produced hydro-carbon oils and that of imported hydro-carbon oils. Somehow or other the disparity has to be bridged. There are only two ways of bridging it. The first is by a direct subsidy and the second is by a preference. The 1938 Act opted for the principle of a preference and in the Debates on the present Bill so far no one has contested that principle. But a preference is pointless and fails of its purpose unless in some measure it is a continuing preference.

A short while ago, in reference to one of the proposed new Clauses, the Solicitor-General spoke of the need for re-equipping some of our basic industries. We are concerned here with the re-equipment of a basic industry and if a preference is terminable at a moment's notice, as it is as the Bill now stands, clearly there is no inducement for the industry to re-equip itself. That is the argument for some stability.

We have inserted the figure of 12 years partly because 12 was the figure given in 1938 and partly because 12 years represents the average life of the necessary plant. Granted the principle of stability, we have then to determine the amount of the preference. We have to devise a formula which is not too rigid and which is adaptable to changing circumstances. The 1938 Act dealt with the matter quite skilfully. It established a maximum and a minimum and allowed for the variation of the preference between those two in accordance with changing circumstances.

The fault of the 1938 Act was that it was guilty of an error of foresight. The Act provided that as the price of imported petrol increased and so the disparity of cost between home produced and imported hydro-carbon oils diminished, so, equally, the preference could contract. But that is not how things turned out. They turned out quite differently. What happened was that the price of home coal was raised relatively to the price of im- ported petrol and the assumption of the 1938 Act was destroyed. That is the position we have now reached. In view of these changed circumstances, I suggest that what was then reasonable to regard as the maximum, of 9d., it is now reasonable to regard as the minimum. For that reason the Amendment provides for a stable minimum of 9d. In so far as the cost of home coal increases further it is open to the Treasury to enlarge the preference, if they want to.

5.15 p.m.

In the past 24 hours we have heard various objections to new Clauses and Amendments, the objection, for instance, that the Clause or Amendment in question would cost something to the Revenue. This Amendment would cost nothing to the Revenue. We have heard the objection that a Clause or Amendment is imperfectly drafted. I would be the last to contend that this Amendment is impeccably drafted, but if hon. Members opposite do not accept the exact terms, I do not think it is too much to ask them to accept that, in place of the now defunct provision, there must be some more enduring arrangement than that contained in the Bill as at present constructed and, secondly, that if we are to devise a new arrangement that arrangement must recognise the changed circumstances. It must recognise that the cost of producing hydro-carbon oils at home is relatively much greater than it was in the halcyon days of 1938.

This Amendment seeks to give a statutory guarantee for 12 years for the 9d. preference at present enjoyed by indigenous hydro-carbon oils. We entirely agree that in present circumstances a case is made out for continuing this preference, but we do not agree that there is any need to continue the unique statutory guarantee given to the industry in the past. That guarantee was given in 1934 and continued, as the hon. and learned Member for Wirral (Mr. Selwyn Lloyd) said, by the Finance Act of 1938, for 12 years. It was a unique guarantee in that it was laid down statutorily that the preference should remain in force for 12 years. That has not been done, as far as I know, in the case of any other import duty or in the case of any preference for the product of any other British industry.

We have considered this carefully in the past year and have come to the conclusion that there is a case, in present circumstances, for continuing the preference. I think most of the arguments used by the hon. and learned Member for Wirral and the hon. Member for Hall Green (Mr. Aubrey Jones) were really arguments for continuing the preference, with which we entirely agree, and not arguments for continuing the statutory guarantee. It was said by both hon. Members that it gave a greater basis of security for planning ahead if the industry, with its large programmes of capital expenditure, had this peculiar form of guarantee. Of course, that could have been argued by those in the iron and steel industry in 1945 when they embarked on a £200 million capital expenditure programme. They could have said they must have a guarantee, of this kind, that the import duties on steel would continue. They did not do so, but embarked. with very great success, on their capital expenditure programme under the practical planning of the Government, of which the hon. and learned Member spoke.

The fact is that looking at this from the point of view of the industry their security rests not so much on any guarantee of this kind but on the good sense of future Governments and Parliaments. After all. the Government cannot guarantee that Parliament will never take any action in the matter. The security to the industry is the reasonable expectation that this Government, no more than any other Government, will not remove this preference so long as it is required. I am not sure whether it is realised that only 3-id. of the present 9d. preference is actually derived from the statutory guarantee.

I agree. The greater part of the preference remains in force as a result of the decision of the Government that it should continue to do so as a matter of policy.

I would point out that we are proposing, a little later on the Order Paper, to alter the procedure so that this preference can be reduced in future only by an affirmative resolution of the House. That, of course, gives the House an opportunity to express an opinion on any proposal to reduce the preference.

My right hon. and learned Friend said quite clearly, both during the Committee stage and in his Budget speech, which has been quoted, although the subsequent and more crucial sentence was not quoted, that there is no intention of altering this preference without the fullest consultation with the industry. That undertaking stands. In all the circumstances, I do not think there is any need to continue this unique guarantee.

I do not see why the Financial Secretary should not agree to this Amendment. It will not do him any harm. Curiously enough, it does not bind Parliament, because Parliament can repeal any Act that has been passed. The point is that it stops the Treasury from monkeying about on their own. I agree that the Government's proposal will very much improve the situation, because if they propose to increase the tax they will have to do so by affirmative resolution, whereas if they increase the preference it will be by the negative procedure. I can see the difficulty about amending a Bill. The only time that a Bill is easily amended is before it is printed, because the people who produce it are so proud of it, that they hate to accept any Amendments.

This provision is very well drafted. because I can understand it without consultation with the Solicitor-General. Why not put it into the Bill, therefore, and give these people the satisfaction and assurance that as far as possible there is this guarantee? We know that Dicey, in his "Constitutional Law" said that Parliament could do everything except make a man into a woman and a woman into a man. But fashion has already done that, so perhaps he is out of date As I said, the point is that we are taking this out of the hands of the Treasury Therefore, I ask the Financial Secretary to think again, because this will cost nothing and will give great satisfaction. If that is not the cheapest way of giving satisfaction, then I do not know what is

I wish to add my plea to those that have been made to the Financial Secretary. When we reach the last lap of the Report stage of a Finance Bill we find that the Government are increasingly reluctant to make these minor alterations. We were told only a few moments ago that the reason the Government could not take a certain course was because a certain committee had not reported, but when a committee has reported they say that is a reason why they can do nothing about it.

What are the objections to inserting these words in the Bill? The Financial Secretary did not give one reason for it, although I saw him looking rather nervously over his shoulder when he pointed out that he could not bind future Governments from altering an Act of Parliament, thereby indicating that an election is extremely imminent. The House of Commons does not function in that way. Governments are bound to have regard to Acts of Parliament, and the House of Commons is generally reluctant to pull legislation about. I should have thought it was a very simple operation to close this very narrow gap between us.

The Financial Secretary said in his first sentence that the Government agree that this preference should continue. All he objected to was saying so in the Bill. I should have thought the most businesslike thing to do was to put this on record and give confidence to the industry. I am still hoping that it will be possible to insert this provision.

I hope that the Chancellor will reconsider this matter for the reason my hon. Friends have given—namely, that there does not seem to be any difference between us. I have the

Division No. 55.]


[5.30 p.m.

Amory, D. Heathcoat (Tiverton)Boyd-Carpenter, J. A.Cranborne, Viscount
Arbuthnot, JohnBracken, Rt. Hon. BrendanCrookshank, Capt. Rt. Hon. H. F. C
Ashton, H. (Chelmsford)Braine, B.Cross, Rt. Hon. Sir R.
Assheton, Rt. Hon. R. (Blackburn, W)Braithwaite, Lt.-Comdr. J. G.Crosthwaite-Eyre, Col. O. E.
Astor, Hon. M.Bromley-Davenport, Lt.-Col. W.Crouch, R. F.
Baker, P.Browne, J. N. (Govan)Crowder, Capt. John F. E. (Finchley)
Baldock, J. M.Buchan-Hepburn, P. G. TCrowder, F. P. (Ruislip-Northwood)
Banks, Col. C.Bullock, Capt. M.Cundiff, F. W.
Baxter, A. B.Bullus, Wing-Commander E. ECuthbert, W. N.
Beamish, Maj. T V H.Burden, Squadron-Leader F. ADarling, Sir W. Y. (Edinburgh, S.)
Bell, R. M.Butcher, H. W.Davidson, Viscountess
Bennett, R. F. B. (Gosport)Butler, Rt. Hon. R. A. (S'ffr'n W'ld'n)Davies, Rt. Hn. Clement (Montgomery)
Bennett, W. G. (Woodside)Carr, L. R. (Mitcham)Davies, Nigel (Epping)
Bevins, J. R. (Liverpool, Toxteth)Channon, Chair, S.
Birch, NigelChurchill, Rt. Hon. W. S.Deedes W. F.
Bishop, F. P.Clarke, Col. R. S. (East Grinstead)Digby, S. Wingfield
Black, C. W.Clarke, Brig. T. H. (Portsmouth, W.)Donner, P. W.
Boles, Lt.-Col. D. C. (Wells)Clyde, J. L.Douglas-Hamilton, Lord M
Boothby, R.Colegate, A.Drayson, G. B
Bossom, A. C.Cooper, A. E. (Ilford, S.)Drewe, C.
Bowen, R.Cooper-Key, E. M.Dugdale, Maj. Sir T. (Richmond)
Bower, N.Craddock, G. B (Spelthorne)Duncan, Capt. J. A. L.

Chancellor's Budget speech in front of me, in which he said:

"After consultation with my right hon. Friend the Minister of Fuel and Power, I propose to continue this margin unchanged."

Then, as the Financial Secretary drew our attention to it, he went on to say:

"There would, of course, be no question of modifying it, without very careful consideration of the circumstances prevailing at the time….—[OFFICIAL REPORT, 18th April, 1950; Vol. 474, c. 76.]

That would be only after consultation.

The Financial Secretary has asked, when that has been said and with the slight change proposed in the procedure, why we want the continuance of the preference in statutory form. The answer to that is perfectly clear. It is not only the position of the industry which has been so clearly put by my hon. Friends today and by my hon. Friend the Member for Esher (Mr. W. Robson-Brown) on a previous occasion, but the fact that if there has been a statutory preference which is then taken away, it alters a position of strength into one of comparative weakness, because it means relying upon an indefinite statement. If there is any purpose we should be pleased to hear it, but no such intention has been explained. In the circumstances, the result must be to weaken the position of the industry in regard to its future planning. If the Chancellor is not prepared to meet us on this point, I must ask my hon. Friends to divide the House.

Question put, "That those words be there inserted in the Bill."

The House divided: Ayes, 252; Noes, 275.

Duthie, W. S.Lennox-Boyd, A. TRenton, D. L. M.
Eccles, D. M.Lindsay, MartinRoberts, Emrys (Merioneth)
Eden, Rt. Hon. A.Linstead, H. N.Roberts, P. G. (Heeley)
Elliot, Lieut.-Col. Rt. Hon. WalterLlewellyn, D.Robertson, Sir D. (Caithness)
Erroll, F. J.Lloyd, Rt. Hon. G. (King's Norton)Robson-Brown, W. (Esher)
Fisher, NigelLloyd, Maj. Guy (Renfrew, E.)Roper, Sir H.
Fletcher, W. (Bury)Lloyd, Selwyn (Wirral)Ropner, Col L.
Fort, R.Lockwood, Lt.-Col. J. C.Ross, Sir R. D. (Londonderry)
Foster, J. G.Longden, G. J. M. (Herts, S.W.)Russell, R. S.
Fyfe, Rt. Hon. Sir D. P. M.Low, A. R. W.Ryder, Capt. R. E. D
Galbraith, Cmdr. T. D. (Pollok)Lucas, Major Sir J. (Portsmouth, S)Sandys, Rt. Hon. D
Galbraith, T. G. D. (Hillhead)Lucas, P. B. (Brentford)Scott, Donald
Gammans, L. D.Lucas-Tooth, Sir H.Smiles, Lt.-Col. Sir W.
Garner-Evans, E. H. (Denbigh)Lyttelton, Rt. Hon. O.Smith, E. Martin (Grantham)
Gates, Maj. E. E.McAdden, S. J.Smithers, Peter H. B. (Winchester)
Glyn, Sir R.McCallum, Maj. D.Smithers, Sir W. (Orpington)
Gomme-Duncan, Col. A.McCorquodale, Rt. Hon. M. S.Snadden, W. McN.
Gridley, Sir A.Macdonald, A. J. F. (Roxburgh)Soames, Capt. C.
Grimond, J.Macdonald, Sir P. (I. of Wight)Spearman, A. C. M.
Grimston, Hon. J. (St. Albans)Mackeson, Brig. H. R.Spence, H. R. (Aberdeenshire, W.)
Grimston, R. V. (Westbury)McKibbin, A.Spens, Sir P. (Kensington, S.)
Harden, J. R. E.McKie, J. H. (Galloway)Stanley, Capt. Hon. R (N. Fylde)
Hare, Hon. J. H. (Woodbridge)Maclay, Hon. J. S.Stevens, G. P.
Harris, F. W. (Croydon, N.)Maclean, F. H. R.Steward, W. A. (Woolwich, W.)
Harris, R. R. (Heston)MacLeod, Iain (Enfield, W.)Stewart, J. Henderson (Fife, E.)
Harvey, Air-Codre. A. V. (Macclesfield)MacLeod, John (Ross and Cromarty)Storey, S.
Harvey, I. (Harrow, E.)Macpherson, N. (Dumfries)Strauss, Henry (Norwich, S.)
Hay, JohnManningham-Buller, R EStuart, Rt. Hon. J. (Morav)
Head, Brig. A. H.Marlowe, A. A. H.Studholme, H. G.
Heald, L. F.Marshall, D. (Bodmin)Summers, G. S.
Henderson, John (Cathcart)Marshall, S. H. (Sutton)Sutcliffe, H.
Hicks-Beach, Maj. W. W.Maude, A. E. U. (Ealing, S.)Taylor, W. J. (Bradford, N.)
Higgs, J. M. C.Maudling, R.Teeling, William
Hill, Mrs. E. (Wythenshawe)Medlicott, Brigadier F.Thompson, K. P. (Walton)
Hill, Dr. C. (Luton)Mellor, Sir J.Thompson, R. H. M. (Croydon, W.)
Hinchingbrooke, ViscountMolson, A. H. E.Thorneycroft, G. E. P. (Monmouth)
Hirst, GeoffreyMoore, Lt.-Col. Sir T.Thornton-Kemsley, C. N.
Hogg, Hon. Q.Morris, R. Hopkin (Carmarthen)Thorp, Brigadier R. A F
Hollis, M. C.Morrison, Maj. J. G. (Salisbury)Tilney, John
Hope, Lord JMorrison, Rt. Hon. W. S. (Cirencester)Touche, G. C.
Hopkinson, H. L. D'A.Nabarro, G.Tweedsmuir, Lady
Hornsby-Smith, Miss P.Nicholls, H.Vane, W. M. F.
Horsbrugh, Miss F.Nicholson, G.Vaughan-Morgan, J. K
Howard, G. R. (St. Ives)Nugent, G. R. H.Vosper, D. F.
Howard, S. G. (Cambridgeshire)Oakshott, H. D.Wakefield, E. B. (Derbyshire, W.)
Hudson, Sir Austin (Lewisham, N.)Odey, G. W.Wakefield, Sir W. W. (St. Marylebone)
Hudson, W. R. A. (Hull, N.)Ormsby-Gore, Hon. W. D.Walker-Smith, D. C.
Hulbert, Wing-Cdr. N. J.Orr, Capt. L. P. S.Ward, Hon. G. R. (Worcester)
Hutchison, Lt.-Com. Clark (E'b'rgh W.)Orr-Ewing, Charles Ian (Hendon, N.)Ward, Miss I. (Tynemouth)
Hyde, H. M.Orr-Ewing, Ian L. (Weston-super-Mare)Waterhouse, Capt. C.
Jeffreys, General Sir G.Osborne, C.Watkinson, H.
Jennings, R.Perkins, W. R. D.Watt, Sir G. S. Harvie
Jones, A. (Hall Green)Peto, Brig. C. H. M.Webbe, Sir H. (London)
Joynson-Hicks, Hon. L. W.Pickthorn, K.Wheatley, Major M. J. (Poole)
Kaberry, D.Pitman, I. J.Williams, C. (Torquay)
Keeling, E. H.Powell, J. EnochWilliams, Gerald (Tonbridge)
Kerr, H. W. (Cambridge)Price, H. A. (Lewisham, W.)Williams, Sir H G. (Croydon, E.)
Lambert, Hon. G.Prior-Palmer, Brig. O.Wills, G.
Lancaster, Col. C. G.Profumo, J. D.Wilson, Geoffrey (Truro)
Langford-Holt, J.Raikes, H. V.Winterton, Rt. Hon. Ear
Law, Rt. Hon. R. K.Rayner, Brig. R.
Leather, E. H. C.Redmayne, M.


Legge-Bourke, Maj. E. A. H.Remnant, Hon. P.Sir Arthur Young and
Major Conant.


Acland, Sir RichardBlenkinsop, A.Chetwynd, G. R
Adams, RichardBlyton, W. R.Clunie, J.
Albu, A. H.Boardman, H.Cocks, F. S.
Allen, A. C. (Bosworth)Booth, A.Coldrick, W.
Allen, Scholefield (Crewe)Bottomley, A. G.Collick, P.
Anderson, F. (Whitehaven)Bowden, H. W.Cooper, G. (Middlesbrough, W.)
Awbery, S. S.Bowles, F. G. (Nuneaton)Cooper, J. (Deptford)
Ayles, W. H.Braddock, Mrs. E. M.Cove, W. G.
Bacon, Miss A.Brookway, A. FennerCraddock, George (Bradford, S.)
Baird, J.Brook, D. (Halifax)Cripps, Rt. Hon. Sir S
Balfour, A.Brooks, T. J. (Normanton)Crosland, C. A. R.
Barnes, Rt. Hon. A. JBroughton, Dr. A. D. D.Crossman, R. H. S
Bartley, P.Brown, T. J. (Ince)Cullen, Mrs. A.
Bellenger, Rt. Hon. F. JBurke, W. A.Daggar, G.
Benson, G.Burton, Miss E.Daines, P
Berwick, F.Butler, H. W. (Hackney, S.)Dalton, Rt. Hon. H.
Bevan, Rt. Hon. A. (Ebbw Vale)Carmichael, JamesDarling, G. (Hillsboro')
Bing, G. H. C.Castle, Mrs. B. A.Davies, A. Edward (Stoke, N.)
Blackburn, A. R.Champion, A. J.Davies, Ernest (Enfield. E.)

Davies, Harold (Leek)Jeger, G. (Goole)Rankin, J.
Davies, R J (Westhoughton)Jeger, Dr. S. W. (St. Pancras, S.)Rees, Mrs. D.
Davies, S. O. (Merthyr)Jenkins, R. H.Reeves, J.
de Freitas, GeoffreyJohnston, Douglas (Paisley)Reid, T. (Swindon)
Deer, G.Jones, D. T. (Hartlepool)Reid, W. (Camlachie)
Delargy, H. J.Jones, Frederick Elwyn (West Ham, S.)Rhodes, H.
Diamond, J.Jones, William Elwyn (Conway)Richards, R
Dodds, N. N.Keenan, WRoberts, Goronwy (Caernarvonshire)
Donnelly, D.Kenyon, C.Robertson, J. J. (Berwick)
Driberg, T. E. NKey, Rt. Hon. C. W.Robinson, Kenneth (St. Pancras, N.)
Dye, S.King, H. M.Rogers, G. H. R. (Kensington, N.)
Ede, Rt. Hon. J. C.Kinghorn, Sqn.-Ldr. ERoss, William (Kilmarnock)
Edelman, M.Kinley, J.Shackleton, E. A. A.
Edwards, John (Brighouse)Lang, Rev. G.Shinwell, Rt. Hon E
Edwards, Rt. Hon. N. (Caerphilly)Lee, F. (Newton)Shurmer, P. L. E.
Edwards, W. J. (Stepney)Lee, Miss J. (Cannock)Silverman, J. (Erdington)
Evans, Albert (Islington, S.W.)Lever, L. M. (Ardwick)Silverman, S. S. (Nelson)
Evans, E. (Lowestoft)Lever, N. H. (Cheetham)Simmons, C J
Evans, S. N. (Wednesbury)Lewis, A. W. J. (West Ham, N.)Slater, J
Ewart, R.Lewis, J. (Bolton, W.)Smith, Ellis (Stoke, S.)
Fernyhough, E.Lindgren, G. S.Smith, H. N. (Nottingham, S.)
Field, Capt. W. J.Lipton, Lt.-Col. M.Snow, J. W.
Finch, H. J.Logan, D. G.Sorensen, R. W.
Fletcher, E. G. M. (Islington, E.)Longden, F. (Small Heath)Soskice, Rt. Hon. Sir F
Follick, M.MoAllister, G.Sparks, J. A
Foot, M. M.MacColl, J. E.Steele, T.
Forman, J. CMcGhes, H. G.Stewart, Michael (Fulham, E.)
Fraser, T. (Hamilton)McGovern, JStrauss, Rt. Hon. G. R. (Vauxhall)
Freeman, J. (Watford)McInnes, J.Stross, Dr. B.
Freeman, Peter (Newport)Mack, J. D.Summerskill, Rt. Hon. Edith
Gaitskell, Rt. Hon. H. T NMcKay, J. (Wallsend)Sylvester, G. O.
Ganley, Mrs. C. S.Mackay, R. W. G. (Reading, N.)Taylor, H. B. (Mansfield)
Gibson, C. W.McLeavy, F.Taylor, R. J. (Morpeth)
Gitzean, A.MacMillan, M. K. (Western Isles)Thomas, D. E. (Aberdare)
Glanville, J. E. (Consett)McNeil, Rt. Hon. H.Thomas, George (Cardiff)
Gordon.Walker, Rt. Hon. P. C.MacPherson, Malcolm (Stirling)Thomas, I. O. (Wrekin)
Greenwood, A. W. J. (Rossendale)Mainwaring, W. H.Thomas, I. R. (Rhondda, W.)
Greenwood, Rt. Hn. Arthur (Wakefield)Mallalieu, E. L. (Brigg)Thorneycroft, Harry (Clayton)
Grey, C. F.Mann, Mrs. J.Thurtle, Ernest
Griffiths, D. (Rother Valley)Manuel, A. C.Timmons, J.
Griffiths, Rt. Hon. J. (Lianelly)Marquand, Rt. Hon. HTomlinson, Rt. Hon G.
Griffiths, W. D. (Exchange)Mathers, Rt. Hon. GeorgeTomney, F.
Gunter, R. J.Mellish, R. JTurner-Samuels, M.
Hale, J. (Rochdale)Messer, F.Usborne, Henry
Hale, Leslie (Oldham, W.)Middleton, Mrs. L.Vernon, Maj. W. F
Hall, J. (Gateshead, W.)Mikardo, IanViant, S. P.
Hall, Rt. Hn. W. Glenvil (Colne V'll'y)Mitchison, G. R.Wallace, H. W.
Hamilton, W. W.Moeran, E. WWatkins, T. E.
Hannan, W.Monslow, W.Webb, Rt. Hon. M. (Bradford. C.)
Hardman, D. R.Morgan, Dr. H. BWeitzman, D.
Hardy, E. AMorley, RWells, P. L. (Faversham)
Hargreaves, A.Morris, P. (Swansea, W.)Wells, W. T. (Walsall)
Harrison, J.Morrison, Rt. Hon. H. (Lewisham, S.)West, D. G.
Hayman, F. HMort, D. L.Wheatley, Rt. Hn. John (Edinb'gh, E.)
Henderson, Rt. Hon. A (Rowley Regis)Moyle, A.White, Mrs. E. (E. Flint)
Herbison, Miss M.Mulley, F. W.White, H. (Derbyshire, N.E.)
Hewitson, Capt. M.Nally, W.Whiteley, Rt. Hon. W.
Hobson, C. R.Oldfield, W. HWigg, George
Holman, P.Oliver, G. H.Wilkins, W. A.
Holmes, H. E. (Hemsworth)Orbach, M.Willey, O. G. (Cleveland)
Houghton, DouglasPadley, W. E.Williams, Ronald (Wigan)
Hoy, J.Paling, Rt.Hon. Wilfred (Dearne V'lly)Williams, Rt. Hon. T. (Don Valley)
Hubbard, T.Pannell, T. C.Williams, W. T. (Hammersmith, S.)
Hudson, J. H. (Ealing, N.)Pargiter, G. AWinterbottom, I. (Nottingham, C.)
Hughes, Emrys (S. Ayr)Parker, J.Winterbottom, R. E. (Brightside)
Hughes, Hector (Aberdeen, N.)Paton, J.Wise, Major F. J.
Hughes, Moelwyn (Islington, N.)Pearson, A.Woodburn, Rt. Hon. A
Hynd, H. (Accrington)Peart, T. F.Woods, Rev. G. S
Hynd, J. B. (Attercliffe)Poole, CecilWyatt, W. L.
Irvine, A. J. (Edge Hill)Popplewell, EYates, V. F.
Irving, W. J. (Wood Green)Porter, G.
Isaacs, Rt. Hon. G. A.Price, M. Philips (Gloucestershire, W.)


Janner, B.Pryde, D. J.Mr. Collindridge and Mr Royle.
Jay, D. P. T.Pursey, Comdr. H

I beg to move, in page 4, line 22, to leave out the second "or," and to insert "and."

This Amendment corrects a misprint in the Bill as it was originally before us, and meets the request of the House that that misprint should be put right on Report.

Amendment agreed to.

I beg to move, in page 4, line 34, to leave out from "be," to the end of line 35, and to insert:

"laid before the Commons House of Parliament after being made and—
  • (a) if it increases the rate of duty under this section, shall cease to have effect on the expiration of a period of twenty-eight days from the date on which it is made, unless at some time before the expiration of that period it has been approved by a resolution of that House (but without prejudice to anything previously done thereunder or to the making of a new order); and
  • (b) if it does not increase the rate of duty under this section, shall be subject to annulment in pursuance of a resolution of that House.
  • In reckoning any such period of twenty-eight days as aforesaid no account shall be taken of any time during which Parliament is dissolved or prorogued or during which the Commons House is adjourned for more than four days."

    On a point of order. There is on the Order Paper, as you are no doubt aware, Mr. Deputy-Speaker an Amendment in the names of my hon. Friends and myself dealing with the same subject as the Amendment put down by the Chancellor of the Exchequer. I would appreciate your guidance whether you propose to call that separately or whether it is your wish that the subject matter should be discussed with the Amendment of the Chancellor.

    In page 4, line 34, to leave out from "be," to the end of line 35, and to insert:

    "laid in draft before Parliament and shall not take effect until a resolution approving the draft has been agreed to by the Commons House of Parliament."

    They may both be discussed together if that is the will of the House, but if the hon. Member is referring to the proposed Amendment in line 34, Mr. Speaker is not proposing to select it.

    It is, of course, dealing with the same subject matter, though differently; and I take it that the effect of your Ruling is that those who wish to raise this issue should raise it on the Amendment of the Chancellor.

    This Amendment honours the undertaking we gave in the Committee stage to substitute the affirmative resolution procedure for the negative procedure in any case where it was proposed to increase the rate of duty on home produced hydro-carbon oils. It is in accordance with the undertaking we gave, and I do not think it requires any further explanation.

    5.45 p.m.

    The Financial Secretary has indicated that this Amendment is intended to carry out a pledge given at about 3 o'clock in the morning of 15th June, and although it does obviously amount to some advance on the position as it was under the Bill as drafted, two objections to it remain. In the first place, the pledge itself does not, in my view, go anything like far enough, and secondly, contrary to the Financial Secretary's statement, this Amendment does not carry out the pledge as given. I would remind the hon. Gentleman of the words of the Minister of State for Economic Affairs on this issue. The right hon. Gentleman said:

    "However, we have listened to the arguments put forward and agree that there is something to the point that there ought to be an absolute guarantee of adequate discussion, which, I think, was the main burden of the Opposition speeches, and will put down an Amendment on Report providing that the Treasury Orders which have the effect of increasing taxation should be subject to an affirmative Resolution."
    So far, so good; but the right hon. Gentleman goes on to say:
    "That, I think, is a reasonable proposal, because it enables the Treasury, if it becomes necessary between the two Finance Bills to make a change in the preference which has the effect of increasing taxation to do so; but only after discussion by Parliament"—[OFFICIAL REPORT, 14th June. 1950; Vol. 476. c. 447-448.]
    This Amendment makes no such provision. By adopting the form of the affirmative procedure other than the one which the right hon. Gentleman's words clearly indicated that he had in mind, it does not provide that these changes resulting in increases in taxation can only take place after discussion by Parliament. If hon. Members will look at the words on the Order Paper in the Amendment of the Chancellor they will see that the effect of the Amendment is that the Orders, when made, can take effect at once or on any such day as the Treasury may determine; that they remain in force and only lapse if, after 28 days, they have not been approved by affirmative resolution. That is to say, they remain in force during 28 days but what is important, and I would ask the attention of the House on this point, is that the Amendment includes the words:
    "In reckoning any such period of twenty-eight days as aforesaid no account shall be taken of any time during which Parliament is dissolved or prorogued or during which the Commons House is adjourned for more than 'four days."
    Let us assume that one of these Orders which have the effect of increasing taxation is made in the first week of August. That Order could remain in force and taxation be levied under it until the next assembly of Parliament say at the end of October and then for 28 days thereafter, without any Motion being approved by this House. What is more, if one looks again at the terms of the Amendment one sees that even though this affirmative resolution is not carried and the Order lapses, it is without prejudice to anything done under it while it was in force.

    The effect, then, is that for some period which, if the House is in Session, will be for 28 days, and which if the House is not in Session could be for unlimited period, taxation could be increased by one of these Statutory Instruments, not only without the approval of this House, but without the discussion which, in the words I have quoted, the Minister of State for Economic Affairs expressly promised should precede the levying of this taxation.

    Therefore, leaving out the general question as to whether it is right either under affirmative or negative procedure to impose increased taxation, I must make the protest that the Amendment now before the House, and offered to the House by the hon. Gentleman with becoming brevity on the grounds that it did fill a pledge, does not, in fact, fulfil that pledge. The pledge would be honoured if the other form of affirmative procedure, the form in which the Order is made in draft and does not come into effect until approved by resolution, had been adopted; and that is the solution suggested in the Amendment in the name of my hon. Friends and myself, and which, as you, Sir, have been good enough to indicate will not be called.

    It is perfectly true that that Amendment goes further than the Government pledge in that it applies this procedure also where taxation is reduced. But on the actual subject matter of the Government pledge, the only way in which it could be carried out in the words used by the Minister would be to adopt that other form, that alternative form, of affirmative procedure in which the Order is laid in draft and does not come into effect until the House has approved the draft. That is a form with which hon. Members are perfectly familiar, and which is suggested in the Amendment which appears in my name. Our first protest must be that that pledge made originally at 3 o'clock in the morning—and I say that in extenuation of the Government, although it was not our fault that it was made at 3 o'clock—has not been carried out. That leaves the whole position to all intents and purposes as unsatisfactory as it was when the Bill was first presented to this House.

    All the objections then put forward, those for example voiced by my right hon. and learned Friend the Member for West Derby (Sir D. Maxwell Fyfe), remain as valid as they were, since the change, although it may be a move in the right direction, is to the less effective form of affirmative procedure. I must urge that this Amendment does not meet the real charge that the Government are trying to by-pass the accepted procedure under which increased taxation is only imposed after proper and full debate in this House with the possibility of amendment and discussion at various stages.

    It seems to me that the Financial Secretary, not only by the subject matter of this Amendment but, still more, by the manner in which he moved it, does not appreciate the fact that there are many hon. Members to whom the conferring upon the Government of power to increase taxation by this insidiously easy system of delegated legislation remains objectionable on constitutional principle, undesirable in its application and wholly inconsistent with the traditional control by this House of the taxation of the people.

    I shall not weary the House by making the speech which I should have made, very much worse, if I had been the first speaker, and which seems to me unanswerable. I would only, if I may, add two considerations. The first is this: I have not read very carefully the Debate on the Committe stage, but I have perused it, and I think it fair to say that nobody with that Debate before him could doubt that this point was in the minds of this side of the Committee. /t really is difficult to see how Ministers and their advisers, in preparing this Amendment to meet the pledge there made, could have failed to see the distinction insisted upon by my hon. Friend, or could have failed to see that the Amendment as drafted would be inadequate to that distinction. I think that really anyone who remembers at all clearly the Debate we then had, or who has read it since, will bear me out in that.

    Secondly, I should like to say one small thing. I have been reminded by a Friend, not technically but otherwise extremely learned, who sits near me, that the House is very rapidly, rather strikingly in the last few days, especially if this Amendment goes through as it stands, turning backwards on the procedure by which it achieved greatness. All the procedure by which the House in the 14th and 15th centuries—[Interruption.] They were just as important as the 20th century in their time, and if they had not been there then, we and the 20th would not be here now. All the procedure by which the House then established complete control over legislation, by making it necessary that the Executive should do it by a Bill containing in itself the form of the act intended, instead of by merely indicating a general intention and leaving it to the Executive to do the thing by Order in Council, Proclamation, and so on—all that procedure is being turned back again.

    Just as we saw yesterday on the Entertainments Duty, we are turning back the whole procedure, which was then contemporaneous, or a little earlier, by which it was insisted that in fiscal matters the Crown should deal with the whole nation at once, and should not deal with the F.B.I. one moment, the wool importers another moment, the cloth exporters another and so on. It may seem a smallish thing here, just as the distinction between "and" and "or" may seem a smallish thing. Incidentally, I thought that manners might have led to some expression of gratitude from the Treasury Bench to those who pointed out that the Bill was in a small respect nonsense unless that alteration was made, last time.

    Now this may seem as small a point, but it is a point very great in consequence, both on the ground that in so far as the Treasury Bench may, as I think it may, be reasonably accused of not meeting its pledges, there is no excuse on the ground of inattention. They ought, if they looked at the earlier Debate, to have known what they were doing. Secondly, it is a matter of great importance, because it goes deep into the history of the power of this House. Hon. Gentlemen who regard that as a matter for mere inarticulate facetiousness are really making a grave error.

    In reply to the hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) I frankly agree that. taking literally the words of my right hon. Friend, spoken, as he says, at three o'clock in the morning, it might be held that we had undertaken that the change in tax should not come into force, even for a few days, until discussion had taken place in Parliament.

    Does the Financial Secretary suggest that we should not take literally the words of a Minister? On what other basis are we to take them?

    I was going on to say that, equally frankly, I think our proposals are entirely in the spirit of what my right hon. Friend said and in the spirit of the general argument put forward that morning by the Opposition. It is true that under this procedure there will be a period of days, and perhaps weeks, in which the tax will be in force before the discussion has taken place in Parliament. But the essential point is that it cannot remain in force for any long period of time until there has not merely been discussion but actual approval by Parliament. That, as I understood it, was the substance of the request made. That is why it seems to me that we have, in spirit and in substance, fulfilled the undertaking.

    I should also like to explain why it is impossible in practice to adopt the alternative procedure.

    Before the hon. Gentleman passes from that point, would he, as he now has the advantage of having the Minister of State for Economic Affairs beside him, tell the House what is the meaning of the words:

    "… but only after discussion by Parliament."
    Under this procedure the tax can take effect without discussion by Parliament.

    I agree that literally, on the small point of the short period of time, the hon. Gentleman was perfectly correct, but in substance this provision carries out the undertaking we gave. Perhaps I might explain why it is impracticable to adopt the alternative procedure even if we wished to do so. That cannot be done, and has never been done in matters of taxation, because it would give notice to various persons concerned in buying and selling the product, whatever it was. that there was to be a change in taxation at some future date. That would give rise to forestalling and would involve us in all the same difficulties as a premature disclosure of a Budget proposal would cause.

    For that reason, this precisely similar procedure has been followed both in the case of import duties under the Import Duties Act and in the case of Purchase Tax, under the procedure for making small changes by order, which the House approved two years ago. Therefore, when hon. Members raise these important questions of Parliamentary control over taxation, which we all regard as of the greatest importance, I entirely agree that it should be clear that we are merely introducing here the only practical procedure. Exactly the same procedure has been in force for a long time both for import duties and Purchase Tax

    Finally, since we are discussing this Amendment. I would emphasise the fact that what the Government are doing is to take a step in the direction of fuller, and not less full, Parliamentary control.

    Does not the hon. Gentleman remember the fiasco there was over Christmas cards when an order was brought out and catalogues had to be changed, and then the order was never agreed to by this House? That is the very sort of thing we want to avoid.

    6.0 p.m.

    I am astonished by the speech of the Financial Secretary to the Treasury. It has been pointed out, and, indeed, it must have been obvious to the Minister and his advisers, that the proposal which they are now putting forward was not in accordance with the pledge. Nor do I follow the point that this is somehow excusable because it was done in the middle of the night. Since the Government do insist on working throughout the night, they must, presumably, take it upon themselves to be compos mentis for the whole period. They really must not treat lightly the ignoring of a pledge. If it was sought to ask the House to forgive them for not honouring the pledge, I think the Chancellor himself might have been here to make the request personally.

    Apart from that altogether, the assumption in the speech of the Financial Secretary is that it is necessary to have the power to make these orders by subordinate legislation. That is not admitted on this side of the House at all, it was not admitted in Committee, and it is not admitted by any student of the constitution. If the Government have this great difficulty in doing it by the action suggested by my hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter), and if the Government are right in their objections to that course, that is only an argument for deleting this suggestion altogether and proceeding in the ordinary way, which is the proper method for taxation, by a Bill which eventually becomes an Act of Parliament. That is in accordance with the traditions of this House, it is in accordance with the interests of democratic government, and it is in accordance with the desire of those interested in liberty that their liberties should be preserved. It is idle to pretend that this is not an extremely important issue.

    There is only one other matter of which I wish to remind the House. The Financial Secretary to the Treasury referred to the procedure in the matter of the import duties. As was pointed out in the Debate on the. Committee stage, whatever else it did, the procedure under the Act providing for import duties did provide certain safeguards which are not provided here at all. I do not wish to repeat any of the arguments put before the Committee, because those interested can read them, but it really does not afford a precedent for this. On account of the constitutional importance of this matter, and on account of the importance of the fact that the Government are breaking a pledge and know that they are breaking it, whether they knew it or not when the Financial Secretary first rose, I beg them now, in the interests of the honour of this House, to reconsider their decision.

    I want to make a suggestion to the Financial Secretary which might meet the difficulty in which he says he finds himself about the draft Order in Council announcing the change in taxation as only coming into effect later, if these Amendments were agreed to. My suggestion may not be acceptable, but I should like to hear the Government's view of it.

    When one introduces taxation legislation, the Bill makes the change operative usually from the day when it is introduced, as with the Finance Bill. I suggest that the draft Order in Council should follow that practice and should say that, as from 1st July, 1950, the tax shall be so-and-so, and then the Order in Council will not come into effect until approved by Resolution of this House. I think that would meet the hon. Gentleman's point, because it is just like legislation. We shall know that the change in taxation will start from a given date, and, therefore, people will not be able to take avoiding action, because, if the Resolution is passed, the tax starts from the date when the Order in Council is drafted.

    In other words, it is making the procedure of the Order in Council fit in with that of a Bill, and I think that would meet the Financial Secretary's point when he says that the Opposition Amendments are not acceptable, because the change in taxation would be announced prematurely. I ask him to say whether that suggestion would not meet this difficulty, and whether he could not then agree to our point of view regarding the undertaking given by his right hon. Friend that taxation would only be imposed after discussion.

    I am very sorry that we should have come to disagreement on this point. As my hon. and learned Friend the Member for Norwich, South (Mr. H. Strauss), has pointed out, it illustrates the great danger of departing from the constitutional and correct procedure of imposing increased taxation only by means of a Bill and subsequent Act of Parliament.

    I do not want to state again the reasons why I think that is the correct position, but, after considerable discussion, covering a wide field, the Minister of State gave us the clear assurance that the taxation would not be increased before it was discussed in this House. The words have been quoted twice, the right hon. Gentleman himself has bobbed in and out of the Chamber, but he has been here sufficiently long to hear his own words read, and we have waited, with an expectation which has been growing every moment, to hear how even his subtle casuistry would make the course taken by the Government accord with the words which he spoke and which are now on record.

    I feel that, on this matter, even now we ought to try to reach agreement. My hon. Friend the Member for Kingston-on-Thames (Mr. Boyd-Carpenter) has made it quite clear that, although he drafted the Amendment which has not been called and to which he has referred, he would be quite prepared—and everyone on this side of the House will be quite prepared—that his procedure should apply to an increase in the rate of duty. If that was done, it would meet our point of view.

    The Financial Secretary said that the second form, the wider and more generous form of the affirmative resolution, was never used in taxation matters. Curiously enough, on today's Order Paper that form is used with regard to double taxation relief, as the hon. Gentleman himself will see if he looks at page 1650. Therefore, once again, the width of language of the representatives of the Treasury is found to be insupportable, although I quite agree that there is a difference between the two things.

    My hon. and learned Friend the Member for Northwich (Mr. J. Foster) has indicated one way in which the matter could be dealt with, and I am quite sure that it is not beyond the wit of the draftsmen or those who study the procedure of the House to meet that point. On the spur of the moment, my hon. and learned Friend gave one way in which to meet the point, and there are others that will occur to anyone familiar with the procedure of the House.

    I have tried to put this as moderately as I can and to suggest the best via media I can to meet the matter, but pledges given between the Committee stage and the Report stage are a vital matter for the running of this House. I put that to the right hon. Gentleman because it is one of the most important conventions by which our business can be carried on. If we get an undertaking, almost in 99 cases out of 100 it stops discussion. We try and leave the matter because we know that in the vast majority of cases—I find it difficult to remember exceptions even at this moment—the undertaking will be carried out or else the Minister will come and say that he has done his best, but finds it impossible, and explains his reasons to the House.

    Here we have an undertaking which has been met by the stony silence of the right hon. Gentleman who gave it, and if that position continues then the only way that we can mark our resentment of the sense in which the House has been treated is to divide against the Amendment and the refusal to carry out the undertaking given by the right hon. Gentleman the Minister of State.

    Perhaps with the leave of the House I may say one further word in response to the right hon. and learned Gentleman. I attempted to argue this matter on the substance and in the spirit of the Amendment, but if hon. Members opposite wish to rest it on the literal words of my right hon. Friend, I am bound to point out what I would not otherwise have done, that my right hon. Friend, in fact, withdrew his offer in the last sentence of his speech. He actually said:

    "I have made an offer, but if the Opposition are not prepared to accept that, all I can say is we withdraw the offer, and we can take the matter to a Division."—{OFFICIAL REPORT, 14th June, 1950; Vol. 476, c. 448.]

    If there is any validity in that contention, why did the hon. Gentleman move the Amendment now before the House on the express ground that it was to carry out this undertaking?

    Because, as I said, in our view this carries out the spirit and the substance of what we are trying to do. But if hon. Members opposite were really to argue that it is a matter of the literal wording of the pledge, then we are bound to point out that, literally, the offer was withdrawn. However, I prefer to rest our case for the Amendment on our belief that we are here doing the right thing, and are going as far towards meeting the request for the affirmative resolution procedure as is, in fact, practical in matters of taxation.

    Are we not to hear the Minister on this matter? I see he is smiling; he obviously thinks it extremely funny. I think it a very serious matter that when a Minister makes a categorical pledge he does not, for some reason best known to himself, carry out that pledge, and does not defend the position himself, but puts up the Financial Secretary to do so. We take a serious view on this because we think it undermines the general conventions by which we try to carry on our business. Not only that; it is an affront to this House for a Minister who has palpably not carried out a pledge not to explain to the House the reasons for the course he has taken.

    I think the right hon. Gentleman is being quite needlessly discourteous to my hon. Friend the Financial Secretary who has explained perfectly plainly the position of the Government in this matter. It is quite true that I used the words quoted by the hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) and others. It is equally true that towards the end of the Debate I withdrew that offer, and it is quite ridiculous for the right hon. Gentleman to say that I have broken a pledge, and that it is contrary to the conventions of the House, when he knows perfectly well that the Opposition did not accept our proposition and insisted on taking the matter to a Division.

    6.15 p.m.

    As far as the fulfilment of pledges is concerned, it would have been quite unnecessary for us to put down the Amendment. Despite the fact that I withdrew the offer, we considered that it was as well to have an affirmative resolution. But, for the reasons given by my hon. Friend, we considered it most desirable that we should not allow forestalling to take place, and that we should therefore follow the usual procedure with orders of this kind. It is on those lines that we have proceeded.

    I do not think we can allow the right hon. Gentleman or his colleague to get away with that. I think it is a shabby, shoddy attempt to shuffle out of an obligation. When the Financial Secretary moved this Amendment, he said it was to honour the undertaking given. Either it was to honour that undertaking or it was not, and, if not, why begin by saying it was? When we look at the undertaking, leaving out of account the other aspects of the matter, we find that the right hon. Gentleman said that he thought it reasonable that taxation should only be altered under those circumstances after discussion by this House. I do not know whether he was here, but during the earlier portion of the Debate it was shown quite clearly that, in certain circumstances, taxation could be altered over a period of at least four months without any discussion at all in this House. It might well be that time before the House had an opportunity of discussing it. Therefore, the Amendment put before the House does not meet the criterion which the right hon. Gentleman put forward, that alterations should only take place after discussion in this House.

    The plain fact is that if it is impossible for the Government to carry out that which the right hon. Gentleman said was reasonable, then they ought to revert to the old system. It really reinforces the argument we originally put forward, that there ought to be a reasonable guarantee to people in this industry, or that the rate of taxation should only be altered each year in the ordinary way by the machinery of the Finance Bill. That is the plain issue, and the Government in refusing to attempt to do what they admitted was reasonable, are dishonouring themselves and abusing the processes of the House.

    I regret that the Minister of State for Economic Affairs should have used the words he did. In his opening remarks, the Financial Secretary was quite obviously trying to carry out a pledge. That he did not go far enough is the cause of the difference of opinion between us. We do not think the pledge has been fully honoured. On the other hand, he has gone a certain way towards it.

    We then had the Minister of State for Economic Affairs getting up and referring to the fact that he said he would withdraw the pledge. Most of us who heard it, I think, rather took the line that that was one of his little outbreaks of temper, in which he often indulges to the amusement of the Financial Secretary to the Treasury, and that the Government thought that this was an incident not very creditable to the House or to the right hon. Gentleman and decided to draw a veil over it,

    Division No. 56.]


    [16.23 p.m.

    Amory, D. Heathcoat (Tiverton)Baldock, J, M.Birch, Nigel
    Arbuthnot, JohnBanks, Col. CBishop, F. P.
    Ashton, H. (Chelmsford)Beamish, Maj. T V HBlack, C. W.
    Assheton, Rt. Hon R (Blackburn, W)Bell, R. MBoles, Lt.-Col. D. C. (Wells)
    Astor, Hon. MBennett, R. F B. (Gosport)Boothby, R.
    Baker, PBevins, J R. (Liverpool, Toxteth)Bossom, A C

    as almost everyone would like to have done. I certainly would. It was not a creditable outbreak. It is a very bad thing if when a pledge is made it is not carried out in the spirit in which the whole Committee believed it would be carried out at that time. It is far worse when one has a comparatively senior Minister taking the line that was taken just now.

    The other point is the Financial Secretary's reference to the import duties. I happen to have been in the House at that time. We had then a different purpose in mind. We were dealing with the whole question of protection. This proposal does not do that in any way. It is absolutely false to base the argument on the question of Import Duty. If any of us had known at that time, at 3 o'clock in the morning, that this was going to be the attitude of the Minister of State for Economic Affairs, our attitude to the rest of that Debate would have been very different.

    I bitterly regret that the Chancellor of the Exchequer and the senior Members of the Government are not here now. I feel it is absolutely certain that if they had honoured the House with their presence, or rather if they had done their duty and been in the House when the Government has been accused by two very senior Members on this side of not carrying out their pledge, they would have been obliged and indeed would have been the first to wish, to carry out that pledge. They would have seen that this Amendment. was properly amended to carry it out. P is all very well for the Financial Secretary to the Treasury to treat pledges in a light. hearted way, but that is not the strength of our Parliamentary constitution, and that is why, sooner or later. he is likely to take the same road as hi; unfortunate predecessor.

    Question put, "That the words proposed to be left out stand part of the Bill."

    The House divided: Ayes, 244; Noes, 276.

    Bower, NHogg, Elan. Q.Osborne, C.
    Boyd-Carpenter, J. A.Hollis, M. C.Perkins, W. R. D.
    Bracken, Rt. Hon. BrendanHope, Lord JPeto, Brig. C. H. M
    Braine, B.Hopkinson, H. L. D'A.Pickthorn, K.
    Braithwaite, Lt.-Comdr. J. G.Hornsby-Smith, Miss P.Pitman, I. J.
    Browne, J. N. (Govan)Horsbrugh, Miss F.Powell, J. Enoch
    Buchan-Hepburn, P. G. T.Howard, G. R. (St. Ives)Price, H. A. (Lewisham, W.)
    Bullock, Capt. M.Howard, Gerald (Cambridgeshire)Prior-Palmer, Brig. O.
    Butins, Wing-Commander E. E.Hudson, Sir Austin (Lewisham, N.)Profumo, J. D.
    Burden, Squadron-Leader F. A.Hulbert, Wing-Cdr. N. J.Raikes, H. V
    Butcher, H. W.Hutchinson, Geoffrey (Ilford, N.)Rayner, Brig. R.
    Butler, Rt. Hon. R. A. (S'ffr'n W'ld'n)Hutchison, Lt.-Corn. Clark (E'b'rgh W.)Redmayrte, M.
    Carr, L. R. (Mitcham)Jeffreys, General Sir G.Remnant, Hon. P.
    Channon, H.Jennings, R.Renton, D L. M.
    Clarke, Col. R. S. (East Grinstead)Johnson, Howard S. (Kemptown)Roberts, P. G. (Healey)
    Clarke, Brig. T. H. (Portsmouth, W.)Johnson, James (Rugby)Robertson, Sir B. (Caithness)
    Clyde, J. L.Jones, A. (Hall Green)Robson-Brown, W. (Esher)
    Colegate, A.Joynson-Hicks, Hon. L. WRoper, Sir H.
    Conant, Maj. R. J. E.Kaberry, D.Renner, Col. L.
    Cooper, A. E. (Ilford, S.)Keeling, E. H.Ross, Sir R. D. (Londonderry)
    Cooper-Key, E. M.Kerr, H W. (Cambridge)Ranier, Capt. R. E. D.
    Craddock, G. B. (Spelthorne)Lambert, Hon. G.Sandys, Rt. Hon. D.
    Cranborne, ViscountLancaster, Col. C. G.Scott, Donald
    Crookshank, Capt. Rt. Hon. H. F. C.Langford-Holt, J.Smiles, Lt.-Col. Sir W
    Cross, Rt. Hon. Sir R.Law, Rt. Hon. R. K.Smith, E. Martin (Grantham)
    Crosthwaite.Eyre, Col. O E.Leather, E. H. C.Smithers, Peter H. B. (Winchester)
    Crouch, R. F.Legge-Bourke, Maj. E. A. H.Smithers, Sir W. (Orpington)
    Crowder, F. P, (Ruislip-Northwood)Lennox-Boyd, A. T.Snadden, W. McN.
    Crowder, Capt. John F. E. (Finchiey)Lindsay, MartinSoames, Capt. C.
    Cundiff, F. W.Linstead, H. N.Spearman, A. C. M.
    Cuthbert, W. N.Llewellyn, D.Spence, H. R. (Aberdeenshire, W.)
    Darling, Sir W. Y. (Edinburgh, S.)Lloyd, Rt. Hon. G. (King's Norton)Spens, Sir P. (Kensington, S.)
    Davidson, ViscountessLloyd, Maj. Guy (Renfrew, E.)Stanley, Capt. Hon. R. (N. Fylde)
    Davies, Nigel (Epping)Lloyd, Selwyn (Wirral)Stevens, G. P.
    de Chair, S.Lockwood, Lt.-Col. J, C.Steward, W. A. (Woolwich, W.)
    Deedes, W. F.Longden, G. J. M. (Hems, S.W.)Stewart, J. Henderson (Fife, E.)
    Digby, S. WingfieldLow, A. R. W.Storey, S.
    Donner, P. W.Lucas, Major Sir J. (Portsmouth, S.)Strauss, Henry (Norwich, S)
    Douglas-Hamilton, Lord MLucas, P. B. (Brantford)Stuart, Rt. Hon. J. (Moray)
    Drayson, G. BLucas-Tooth, Sir H.StudIvolme, H. G
    Drove, CLytleIton, Rt. Hon. OSummers, G S
    Dugdale, Maj. Sir T. (Richmond)McAdden, S. J.Sutcliffe, H.
    Duncan, Capt. J. A. L.McCallum, Maj. D.Taylor, W. J. (Bradford, N.)
    Duthie, W. S.McCorquodale, Rt. Hon. M. S.Teeling, William
    Eccles, D. M.Macdonald, Sir P. (I. of Wight)Thomas, J. P. L. (Hereford)
    Eden, Rt. Hon. A.McKibbin, A.Thompson, K. P. (Walton)
    Erroll, F. J.McKie, J. H. (Galloway)Thompson, R. H. M. (Croydon, W.)
    Fisher, NigelMaclay, Hon. J. S.Thorneycroft, G. E. P. (Monmouth)
    Fletcher, W. (Bury)Maclean, F. H. R.Thornton-Kemsley, C N
    Fort, R.MacLeod, lain (Enfield, W.)Thorp, Brigadier R. A. F
    Feeler, J. G.MacLeod, John (Ross and Cromarty)Tilney, Jahn
    Fyfe, Rt. Hon. Sir D. P. M.Macmillan, Rt. Hon. Harold (Bromley)Touche, G. C
    Galbraith, Cmdr, T. D. (Pollok)Macpherson, N. (Dumfries)Tweedsmuir, Lady
    Galbraith, T G. D. (Hillhead)Manningham-Buller, R. EVane, W. M. F.
    Gamer-Evans, E. H. (Denbigh)Marlowe, A. A. H.Vaughan-Morgan, J K
    Gates, Maj. E. E.Mercies, A. E.Vesper, D. F.
    Glyn, Sir R.Marshall, D. (Bodmin)Wakefield, E. B. (Derbyshire, W.)
    Gomme-Duncan, Col. A.Marshall, S. H. (Sutton)Wakefield, Sir W. W. (St. Marylebone)
    Gridley, Sir A.Maude, A. E. U. (Ealing, S.)Walker-Smith, D. C.
    Grimstan, Hon. J. (St. Albane)Maudling, R.Ward, Hon. G. R. (Worcester)
    Grimston, R. V. (Westbury)Medlicatt, Brigadier FWard, Miss I. (Tynemouth)
    Harden, J. R. E.Mellor, Sir J.Waterhouse, Capt. C.
    Hare, Mon. J. H. (Woodbridge)Matson, A. H. E.Watkinson, H.
    Harris, F. W. (Croydon, N.)Moore, Lt.-Col. Sir T.Watt, Sir G S. Harvie
    Harris, R. R. (Heston)Morrison, Maj. J. G. (Salisbury)Webbe, Sir H. (London)
    Harvey, Air-Codre. A. V. (Macclesfield)Morrison, Rt. Hon. W. S. (Cirencester)Wheatley, Major M. J. (Poole)
    Harvey, Ian (Harrow, E.)Nabarro, G.Williams, C. (Torquay)
    Hay, JohnNicholls, H.Williams, Gerald (Tonbridge)
    Head, Brig. A. H.Nicholson, G.Williams, Sir H. G. (Croydon, E.)
    Heald, L. F.Nugent, G. R. H.Wills, G.
    Henderson, John (Cathcart)Nutting, AnthonyWilson, Geoffrey (Truro)
    Hicks-Beach, Maj. W. W.Oakshott, H. DWinterton, Rt. Hon. Ears
    Higgs, J. M. C.Odey, G. W.Wood, Hon. R.
    Hill, Mrs. E..(Wythenshawe)Ormsby-Gore, Hon. W. D
    Hill, Dr. C. (Luton)Orr, Capt. L. P. S.


    Hinchingbrooke, ViscountOrr-Ewing, Charles Ian (Hendon, N.)Brigadier Mackeson and
    Hirst, GeoffreyOrr-Ewing, Ian L. (Weston-super-Mare)Lieut.-Colonel Bromley-Davenport.


    Acland, Sir RichardAllen, Scholefield (Crewe)Bacon, Miss A
    Adams, RichardAnderson, F. (Whitehaven)Baird, J.
    Alhu, A. H.Awbery, S. S.Balfour, A.
    Allen, A. C. (Bosworth)Ayles, W. H.Barnes, Rt. Hon. A. J.

    Bartley, P.Griffiths, D. (Rother Valley)Mort, D. L.
    Bellenger, Rt. Hon. F. JGriffiths, W. D. (Exchange)Moyle, A.
    Benson, G.Gunter, R. J.Mulley, F. W.
    Beswick, FHale, J. (Rochdale)Nally, W.
    Bevan, Rt. Hon A. (Ebbw Vale)Hale, Leslie (Oldham, W.)O'Brien, T.
    Bing, G. H. C.Hall, J. (Gateshead, W.)Oldfield, W. H.
    Blackburn, A. R.Hall, Rt. Hn. W. Glenvil (Colne V'll'y)Oliver, G. H
    Blenkinsop, A.Hamilton, W. W.Orbach, M.
    Blyton, W. R.Hardman, D. RPadley, W. E.
    Boardman, H.Hardy, E. A.Paling, Will T. (Dewsbury)
    Booth, A.Hargreaves, A.Pannell, T. C.
    Bottomley, A. G.Harrison, J.Pargiter, G. A.
    Bowden, H. W.Hayman, F. H.Parker, J.
    Bowen, R.Henderson, Rt. Hon. A. (Rowley Regis)Paton, J.
    Bowles, F. G. (Nuneaton)Herbison, Miss M.Pearson, A.
    Braddock, Mrs. E. M.Hewitson, Capt. M.Pearl, T. F.
    Brockway, A. FennerHobson, C. R.Poole, Cecil
    Brook, D. (Halifax)Holman, P.Popplewell, E.
    Brooks, T. J. (Normanton)Holmes, H E. (Hemsworth)Porter, G.
    Broughton, Dr. A. D. D.Houghton, DouglasPrice, M. Philips (Gloucestershire, W.)
    Brown, T. J. (Ince)Hoy, J.Pryde, D. J.
    Burke, W. A.Hubbard, T.Pursey, Comdr. H.
    Burton, Miss E.Hudson, J. H. (Ealing, N.)Rankin, J.
    Butler, H. W. (Hackney, S.)Hughes, Emrys (S. Ayr)Rees, Mrs. D.
    Carmichael, JamesHughes, Hector (Aberdeen, N.)Reeves, J.
    Castle, Mrs. B. A.Hughes, Moelwyn (Islington, N.)Reid, T. (Swindon)
    Champion, A. J.Hynd, H. (Accrington)Reid, W (Camlachie)
    Chetwynd, G. RHynd, J. B. (Attercliffe)Rhodes, H.
    Clunie, J.Irvine, A. J. (Edge Hill)Richards, R.
    Cocks, F. S.Irving, W. J. (Wood Green)Roberts, Emrys (Merioneth)
    Coldrick, W.Isaacs, Rt. Hon. G. ARoberts, Goronwy (Caernarvonshire)
    Collick, P.Jay, D. P. T.Robertson, J. J. (Berwick)
    Collindridge, F.Jeger, Dr. S. W. (St Pancras, S.)Robinson, Kenneth (St. Pancras, N.)
    Cooper, G. (Middlesbrough, W.)Jenkins, R. H.Rogers, G. H. R. (Kensington, N.)
    Cooper, J. (Deptford)Johnston, Douglas (Paisley)Ross, William (Kilmarnock)
    Cove, W. G.Jones, D. T. (Hartlepool)Royle, C.
    Craddock, George (Bradford, S.)Jones, Frederick Elwyn (West Ham, S.)Shackleton, E. A. A.
    Cripps, Rt. Hon. Sir S.Jones, Jack (Rotherham)Shurmer, P. L. E.
    Crosland, C. A. R.Jones, William Elwyn (Conway)Silverman, J (Erdington)
    Crossman, R. H. S.Keenan, WSilverman, S S. (Nelson)
    Cullen, Mrs. A.Kenyon, CSimmons, C. J
    Dagger, G.Key, Rt. Hon C WSlater, J.
    Daines, P.King, H. M.Smith, Ellis (Stoke, S.)
    Dalton, Rt. Hon. H.Kinghorn, Sqn.-Ldr E.Smith, H. N. (Nottingham, S.)
    Darling, G. (Hillsboro')Kinley, J.Snow, J. W
    Davies, A. Edward (Stoke, N.)Lang, Rev. G.Sorensen, R. W
    Davies, Harold (Leek)Lee, F. (Newton)Soskice, Rt. Hon. Sir F
    Davies, R. J. (Westhoughton)Lee, Miss J. (Cannock)Sparks, J. A.
    Davies, S. O. (Merthyr)Lever, L. M. (Ardwick)Steele, T.
    de Freitas, GeoffreyLever, N. H. (Cheetham)Stewart, Michael (Fulham, E.)
    Deer, G.Lewis, A W J. (West Ham, N.)Strauss, Rt. Hon. G. R. (Vauxhall)
    Delargy, H. J.Lewis, J (Bolton, W.)Stross, Dr. B.
    Diamond J.Lindgren, G. S.Summerskill, Rt. Hon. Edith
    Dodds, N. N.Lipton, Lt.-Col MSylvester, G. O.
    Donnelly, D.Logan, D. G.Taylor, H. B. (Mansfield)
    Driberg, T. E. NLongden, F. (Small Heath)Taylor, R. J. (Morpeth)
    Dye, S.McAllister, G.Thomas, D. E. (Aberdare)
    Ede, Rt. Hon. J. C.MacColl, J. E.Thomas, George (Cardiff)
    Edelman, M.Macdonald, A. J. F. (Roxburgh)Thomas, I. 0. (Wrekin)
    Edwards, John (Brighouse)McGhee, H. G.Thomas, I. R. (Rhondda, W.)
    Edwards, Rt. Hon. N. (Caerphilly)McGovern, JThorneycroft, Harry (Clayton)
    Edwards, W. J. (Stepney)McInnes, J.Thurtle, Ernest
    Evans, Albert (Islington, S.W.)Mack, J. D.Timmons, J.
    Evans, E. (Lowestoft)McKay, J (Walisend)Tomlinson, Rt. Hon. G
    Evans, S. N. (Wednesbury)Mackay, R. W. G. (Reading, N.)Tomney, F.
    Ewart, R.McLeavy, F.Turner-Samuels, M.
    Fernyhough, E.MacMillan, M. K. (Western Isles)Usborne, Henry
    Field, Capt. W. J.McNeil, Rt. Hon. H.Vernon, Maj. W. F
    Finch, H. J.MacPherson, Malcolm (Stirling)Viant, S. P.
    Fletcher, E. G. M. (Islington, E.)Mainwaring, W. H.Wallace, H. W.
    Follick, M.Mallalieu, E. L. (Brigg)Watkins, T. E.
    Foot, M. M.Mann, Mrs. J.Webb, Rt. Hon. M. (Bradford. C.)
    Forman, J. C.Manuel, A. C.Weitzman, D.
    Fraser, T. (Hamilton)Mathers, Rt. Hon. GeorgeWells, P. L. (Faversham)
    Freeman, J. (Watford)Mellish, R. J.Wells, W. T. (Walsall)
    Freeman, Peter (Newport)Messer, F.West, D. G.
    Gaitsketl, Rt. Hon. H. T. NMiddleton, Mrs. L.Wheatley, Rt. Hn. John (Edinb'gh, E.)
    Ganley, Mrs. C. S.Mikardo, IanWhite, Mrs. E. (E. Flint)
    Gibson, C. W.Mitchison, G. RWhite, H. (Derbyshire, N.E)
    Gilzean, A.Moeran, E. WWhiteley, Rt. Hon. W.
    Glanville, J. E. (Consett)Monslow, W Wigg, George
    Gordon-Walker, Rt. Hon. P CMoody, A. S.Willey, F. T (Sunderland)
    Greenwood, A. W J. (Rossendale)Morgan, Dr. H. B.Willey, O. G. (Cleveland)
    Greenwood, Rt. Hn. Arthur (Wakefield)Morley, R.Williams, Ronald (Wigan)
    Grey, C. F.Morris, P (Swansea, W.)Williams, Rt. Hon. T. (Don Valley)

    Williams, W. T. (Hammersmith, S.)Wise, Major F. J.Yates, V. F.
    Wilson, RI. Hon. J. H. (Huyton)Woodburn, Rt. Hon. A.
    Winterbottom, I. (Nottingham, C)Woods, Rev. G. S.


    Winterbottom, R. E. (Brightside)Wyatt, W. L.Mr. Hannan and Mr. Wilkins.

    Question, "That those words be there inserted in the Bill" put, and agreed to.

    Clause 10—(Amendment As To Relief From Import Duties Of Certain Machinery)

    I beg to move, in page 8, line 4, to leave out "delivery of the consignment to," and to insert:

    "receipt of the consignment by."
    This is not a matter of high political principle, nor is it a matter that involves the Government in any great expense or even in any great amount of redrafting, but I submit it is a slight alteration that would be of great help to those business people who have to import certain machinery into this country. The question of delivery appears to be very difficult to define as the Clause now stands. If a certain consignment be shipped f.o.b. New York, does delivery take place on the receipt of documents by the importer, or at what stage does it take place? I believe that some reasonable doubt would arise in almost every case.

    My feeling is that these oases would have to be referred to His Majesty's Customs or to the appropriate authority for a decision as to when this rather mysterious point of delivery actually took place. My hon. Friends and I feel that if for the word "delivery" the word "receipt" was substituted there would then be an actual physical occurrence at a definite point. We would have the physical receipt of this machinery in the importer's warehouse, or at the Customs wharf, or perhaps even at the dockside. That is a definite physical point of time, whereas the question of delivery is a vague term which would often have to be interpreted.

    The sole purpose of this Amendment is to try to clear up this small point and make it easier for the importer to have some definite point of receipt, instead of some rather vague method of delivery which would necessitate him going to the Customs or some other authority and getting a ruling in each case. This Amendment would cost the Government nothing and it would not involve a great deal of redrafting. After the little political upheaval that we have had on the previous Amendment, this may even be considered a matter of no great importance, but I can assure the Government that the acceptance of this Amendment will be of great assistance to many business people who bring machinery into this country, and thus of assistance to the Government in acquiring a little credit for very little trouble.

    I beg to second the Amendment.

    I should emphasise that this Amendment means the changing of a few words only, but such a change would make the Clause very much clearer. To the layman the actual physical receipt of the machinery is definite, as my hon. Friend has pointed out; it is much more definite than the nebulous term "delivery to" which might be spread over many weeks and might involve reference to His Majesty's Customs. To us this seems a reasonable request. It would certainly tidy up this Clause and would make it more definite. We say that the Amendment is reasonable, and on those grounds alone we hope it will be accepted.

    A reasonable plea has been made and I shall be equally reasonable in reply, but I am afraid it will be a disappointing reply in the view of the hon. Member for Woking (Mr. Watkinson). However, I think he will agree when I explain that what he is trying to do would not be in the best interests of industry. We have made progress from the previous position. Now as a result of the new Clause application can be made for duty-free import when goods have come to the Customs; I think the hon. Gentleman will agree that that is an advance.

    To take the matter further would lead us into administrative difficulties. There are two difficulties. First, the date of the receipt by the importer would not be ascertainable from the official records and this might result in all kinds of disputes and difficulties. Then if the Customs were unable to satisfy themselves by examining the goods that they were cleared from the official charge, I am sure it will be agreed that difficulties could arise there.

    I do not think the actual physical receipt could be in doubt. After all, the physical receipt is off-loading from the ship or delivery in the customer's works or the importer's works. It is for that very reason that we think the word "receipt" would make the position clearer than the word "delivery."

    That certainly would not be so because we could not be sure whether the goods which had been received at the factory were the goods claimed as suitable for release from import duty. We should have no official record, and disputes and difficulties might arise. Not only might the Amendment lead to administrative difficulty, but it is doubtful whether the importers themselves would welcome it, for the reasons which I have advanced. I do not think importers generally would like the Amendment; it would not enable business to progress smoothly and I should have thought that there was general agreement on both sides that we do not want to create unnecessary difficulties for importers.

    I apologise for interrupting again, but the Minister has completely missed the point I made. I made considerable researches into the question with importers of machinery before I put this Amendment on the Order Paper and I found that the importers with whom I talked would welcome it.

    I have the contrary information and I have had an opportunity of meeting a good many representatives. In that sense I offer my observations to match those of the hon. Gentleman. We are always prepared and anxious to assist in bona fide cases and there is provision for an extension of time if an importer is able to show that there are reasonable difficulties. In those circumstances, I ask the hon. Member not to press the Amendment.

    I hope the Parliamentary Secretary will not adopt that line indefinitely, because the Amendment seems to me to be a reasonable one. The main argument which the Parliamentary Secretary adduced against the Amendment was that it would not be easy to ascertain the date of the receipt of the goods. If it is difficult to ascertain the date of receipt, is it not far more difficult to ascertain the date of delivery. which is the word used in the Clause?

    The Minister probably knows that in law the word "delivery," in connection with the assignment of goods, sometimes has a different meaning from that of the ordinary, everyday, common language of our country. Sometimes it means not the delivery of the actual goods themselves but of the documents of title and things of that sort. All sorts of complications arise if we use this technical expression "delivery." I should have thought the Amendment was one which the Government would accept with open arms because it makes quite clear what the Clause intends.

    If I understood him correctly, the Parliamentary Secretary said that his information was that importers themselves were not particularly keen on this change being made. I do not know whether he has made a large number of investigations to see whether importers, as a whole, do not like the use of the word "receipt," but the experience of my hon. Friend the Member for Woking (Mr. Watkinson) is experience on which I should be prepared to rest on a matter of this kind. This is a small point, but it makes the Clause far clearer than it is at the moment and I hope the Government will reconsider their attitude towards it.

    I do not profess to understand the interpretation of these words, but what I do understand is that the secretary of the Machine Tool Trades Association came to see me yesterday on a different matter and, when we had completed our conversation on that matter, he drew my attention to this Amendment. As that association represents all the large importers as well as all the manufacturers. I think they are in a position to judge the situation, and they were very largely responsible for drafting this Amendment, The Parliamentary Secretary suggested that importers generally did not want the Amendment very much, but those who represent a very large proportion of importers actually drafted it.

    Amendment negatived.

    Clause 11—(Duty Free Importations For Industrial Research)

    6.45 p.m.

    I beg to move, in page 9, line 14, to leave out subsection (4).

    This subsection deals with the right of the Customs and Excise to confiscate any goods imported under this Clause which have not been properly used for industrial research and have thus escaped duty which, had they been properly imported, they would have attracted. I know it is a well-established tenet of Customs' procedure that the Customs should retain the right of forfeiture of goods upon which duty has not been paid or upon which there has been an improper transaction, but I submit that in this case there is very little likelihood of such a matter arising, and it seems rather ridiculous to retain this right of forfeiture for certain contingencies which are never likely to arise.

    Secondly, I question whether it will be practicable for the Customs to confiscate the goods, which were imported for research purposes, when they discover that the goods have been improperly used. In any event, articles which are likely to be imported under this Clause will be in small quantities. The only possible type of loophole is where, perhaps, a length of new fabric is imported, ostensibly for research purposes, and some of it finds its way into the importer's house for private purposes. Surely it will not be worth-while for the Customs solemnly to trace the ultimate destination of the improperly imported article and then demand its forfeiture. It is not as though forfeiture were the sole penalty under the Clause. The Customs will have the usual right to attempt to secure other penalties. In this case, the use of forfeiture seems to be carrying a principle, which is possibly understandable and justifiable in other cases, much too far in connection with the imports permitted under the Clause.

    I appreciate that the hon. Member for Altrincham and Sale (Mr. Erroll) is moving this Amendment in order to attempt to simplify the procedure, but I am afraid we do not agree that it would be wise to take away this right of forfeiture. The Clause makes a considerable concession in permitting duty-free imports for certain defined purposes and it is subject to certain safeguards and conditions. It is, as I say, a substantial concession to permit duty-free imports of certain goods which are normally subject to import duties, and it has always been the procedure, and has been found to be necessary, to impose conditions and safeguards in those cases and also to have some sanction which, in the last resort, can be used if those conditions are not fulfilled.

    The hon. Member has in mind cases which he quoted in an earlier debate where it may be physically impracticable for the Customs to seize the goods. I think his fears are exaggerated and perhaps misconceived because, although the Clause gives the Customs the right and power to seize goods in the relevant conditions, it does not compel them to do so. They retain the discretion to refrain from seizing the goods in cases where it is impracticable to do so, or where it would be foolish or undesirable to do so.

    As the hon. Member will observe, the Clause says that the goods "shall be forfeited." That does not necessarily mean that they shall be seized. What the words mean is that the Customs have the right to seize the goods in question if they wish to do so, but that they retain discretion not to do so if it seems inappropriate to do so. We feel, therefore, that this is a standard provision which has always been included in cases of this kind, and which is necessary, and that there is no serious danger of abuse or of impracticability in procedure.

    There is one point in connection with this about which I should be grateful to have an explanation. The Financial Secretary can speak again only by leave of the House. However, I think it is a point that can be referred to the Solicitor-General. The Financial Secretary has explained in the most painstaking fashion the discretion which the Customs hold in this matter. The point I want to ask the learned Law Officer is this. Who decides? Are the Customs here judges in their own case, or is there, in fact, appeal to the courts? I think it is important. I am sure my hon. Friend who raised this matter will agree it is important. Before the House decides that this subsection is to remain in the Clause, despite what the Financial Secretary said about there being no compulsion for the powers to be exercised, and all the rest of it, hon. Members on both sides would like to know whether, in fact, such powers are exercised or whether there is an appeal to the courts available.

    The Clause provides that goods shall be forfeited, but there is an appeal to the courts against that, that is to say, where the courts can investigate whether circumstances have arisen which give rise to the forfeiture. I think that that answers the question.

    Amendment negatived.

    Clause 13—(Excise Licences For Tractors, Etc)

    I beg to move, in page 11, line 36, at the end, to insert:

    "and after the word 'agricultural' there shall be inserted the words or woodland ';".
    This Amendment and some subsequent ones in the name of my right hon. and learned Friend have been put down in pursuance of an undertaking that I gave during the Committee stage—and which was not subsequently withdrawn—in response to an Amendment moved by the hon. Member for Westmorland (Mr. Vane). We have, I think he will probably agree, gone all the way to meet him. The Amendments cover not only the case of the farm which has woodland produce, but also extends to land occupied with the farm and also to forestry estates.

    It is rarely possible to say, "Thank you," to Ministers for having made a concession during the Committee stage and then implementing it as fully as, I believe, the right hon. Gentleman has done. It always seems to me that the words proposed by the Treasury are so much more obscure than those which Private Members put on the Order Paper. On this occasion, they are certainly a great deal longer. I have read them carefully, however, and I believe that the right hon. Gentleman has genuinely made an attempt to go the whole way my hon. Friends and I asked him to go, and I should just like to say how grateful we are to him for his having cleared up what was, undoubtedly, a confused and unfair situation.

    Amendment agreed to.

    I beg to move, in page 11, line 39, after "within," to insert "a radius of."

    I have a consequential Amendment down, in page 11, line 39, to leave out "of a" and to insert "from the boundary of the." If this Amendment and the consequential one are agreed to by the Government that line will then read:
    "… for hauling, within a radius of fifteen miles from the boundary of the farm…."
    I feel that it is the wish of both sides of the House that the drafting of this important Bill should be as clear as possible, and remove any opportunity for petty infringements and frustrations which would cause ill will. By the drafting of the Clause as it is at the moment the farmer is in a very difficult situation. His tractor is not fitted, as far as I am aware, with a milometer, and yet if he goes outside 15 miles from the farm he will be penalised.

    When the Government speak of 15 miles, do they speak of 15 miles from the farmhouse or from the boundary of the farm? There may be quite a substantial difference on some farms. Then the farmer is allowed to cross fields, I take it, without going outside the 15-mile regulation; but he may be going on and off roads. I think it would be much easier for the farmer, and the authorities who have to impose this regulation, if it could be clearly defined that it is a radius of 15 miles from the boundary of the farm.

    This is an alteration in drafting which would cost the Treasury nothing. The alteration would be quite an easy one to make and the insertion of the proposed words would make for a clear under• standing of what distance from the farm the farmer may travel. I feel that the Government and, I am sure, the Opposition do not want a number of petty cases of infringement of this kind to arise, and that if they will agree to the Amendment they will help to an easy working or this Clause.

    I beg to second the Amendment.

    It is very desirable that these matters should be made very clear to the farming community. Furthermore, in country districts, where roads tend to wind a good deal and there are farms in very narrow valleys, it is difficult to judge whether the concession means 15 miles of road distance or 15 miles radius. In any event, it is very important that the matter should be made a good deal clearer, and I hope the Government will accept the Amendment.

    We have considered whether these words are necessary or not, and I am advised by the Solicitor-General that they are not necessary. The hon. Member will probably recall raising with me during the Committee stage the question of what the words meant exactly, and I think I then said that it was 15 miles from the boundary of the farm in any direction. That is the case. Apparently the words "a radius of" are not necessary because Section 34 of the Interpretation Act, 1889, define distance as being

    "… measured, unless the contrary intention appears, in a straight line on a horizontal plane."
    It means, as the crow flies.

    Quite true. It is due to the configuration of the earth. If one measures with a tape measure up a hill, the distance may be six miles, whereas it will be much less if measured along a straight plane. That is what the Interpretation Act means.

    I am much obliged to the hon. Member for reminding me of the shape of the earth. However, I think the hon. Member will appreciate that this is a well understood phrase, and that it is unnecessary, therefore, to put in the words "a radius of." Equally, it is not necessary to put in the words "from the boundary of," because clearly one would not measure the distance from a farm as from the centre point of the farm, or some point in the farm. It is clearly from the borders or the boundaries of the farm. I think it is a well recognised principle that we do not add words that are unnecessary. That being so, I suggest that we do not do so on this occasion.

    It is quite true that we never put in words that are unnecessary, but can the right hon. Gentleman explain why the distance is necessarily from the edge of the farm? Is there a legal definition somewhere, or in the Interpretation Act, about that?

    I am advised, again by my right hon. and learned Friend, that it would not be taken to mean anything else.

    As the Minister's remarks were based on a scientifically inaccurate interpretation of the Interpretation Act—[HON. MEMBERS: "No."] Yes, he talked about a horizontal plane. We know all about that; but that has nothing to do with the point at issue. He said it was "as the crow flies." That surprised me very much. I thought they had only rooks at the Treasury.

    7.0 p.m.

    I wish to thank the right hon. Gentleman for his explanation, in view of which I beg to ask leave to withdraw the Amendment.

    Amendment, by leave, withdrawn.

    Further Amendments made: In page 11, line 41, leave out "produce of," and insert:

    "or woodland produce of that farm, or agricultural or woodland produce of land occupied with."

    In page 12, line 5, at end, insert:

    "or for hauling articles required by that person for land occupied by him with a farm;
    (v) for hauling, within fifteen miles of a forestry estate in the occupation of the person in whose name the vehicle is registered under this Act, agricultural or woodland produce of that estate or fuel required for any purpose on that estate or for domestic purposes by persons employed on that estate by the occupier of the estate, or for hauling articles required for such a forestry estate by the occupier of the estate;.—[Mr. Gaitskell.]

    I beg to move, in page 12, line 22, at the end, to insert "or nursery."

    If I take up only a very short time in proposing this Amendment I am sure it will not be taken as showing any lack of appreciation of the importance of this proposal to the people concerned. This Amendment does not arise from any recollection of my childhood days, but refers to nursery gardens, and arises from what I regard as an anomaly and an unfairness, although I would not go so far as to say a hardship, which has crept in during the consideration of this Bill. There are, of course, many nursery gardens, and those which I think are very deserving of the help I now propose should be given are those which are mainly horticultural; in other words, those concerned mainly with growing fruit trees, soft fruit bushes, vegetable seeds, and things of that sort.

    There are other nursery gardens in respect of which that horticultural aspect is only a minor one, but I hardly think the present moment is the opportune one to discuss exactly what is a horticultural or nursery garden. In my submission, that has been already decided on three grounds. First, the wages and hours of work are already decided by the same machinery which fixes the hours of work and wages of agricultural workers. Secondly, the tractors which are the subject of this Amendment are used in almost identically the same way as agricultural tractors; that is to say, they are used for ploughing, harrowing, mowing, muck carting, taking stuff from one end of the garden to the other, and also for station work.

    The third ground, which to my mind is rather a telling one, is that hitherto—certainly in my constituency—they have been classified as deserving the 5s. rate. Under this Clause, as I read it—and I should be delighted to be told that I am reading it incorrectly—tractors on a market garden will not go from 5s. to £2, but will go to the only alternative rate available to them, which is the hauliers' rate of £25, which seems a very big change in actual cash value on a small number of tractors, and is in fact a change in their status.

    It may be that, while the right hon. Gentleman does not wish to include these particular words in the Bill, he does intend to leave it still open to the local taxation officers to decide in which category they should come. If that should be so with the various types of horticulture and, say, ornamental work carried out by these nursery gardens, I should have considerable sympathy with him, and he would have gone a long way to meet the cases which I seek to alleviate by this Amendment. Acceptance of this Amendment would cost him very little. There is only a small number of men involved, and I therefore believe the Amendment to be one to which, no undertaking whatever having been given, it will be comparatively simple for the right hon. Gentleman to accede.

    I beg to second the Amendment.

    We were very grateful when the Chancellor agreed to put down these Amendments to cover what was suggested by my hon. Friend the Member for Westmorland (Mr. Vane), and we therefore feel that we need have no hesitation in asking him to go just that little bit further to make the picture perfect. My hon. Friend has made the case perfectly clearly and fully, and there is only one small item I should like to add to reinforce his argument. It is in relation to nurseries which consist of young trees such as Scotch firs, oaks or beeches, or anything else which may be wanted for forest plantations. I think that perhaps strawberries, blackcurrants and raspberries, and so on, would be covered by the words "market garden." Whether Scotch firs and other small trees are covered by "woodland produce" I very much doubt. I do not think that they are woodland produce; they are rather the things which produce the wood, and we must have nurseries in which to raise those small trees. I therefore hope that this small Amendment will be accepted, and that the reduced taxation will apply to those nurserymen who are raising trees.

    When the hon. Member for Westmorland (Mr. Vane) moved his Amendment in Committee, I explained the great difficulty of drawing a line in this business, and I warned hon. Members that we should have to be careful not to let in too many people by the concessions we were making for something fairly specific, namely, woodland produce and forestry. I am afraid that we cannot accept this Amendment because, in our opinion, it really would carry the concession much too far. It is quite true that some nurseries produce fruit trees and other plants for farmers, and, though I would hesitate to give an opinion—and would not be qualified to do so on this—I suppose that if they were producing agricultural produce only they would get the benefit of the new provision.

    It is clear that nurseries are engaged on many other things as well, and are predominantly concerned with producing various shrubs, trees, roses and other things for gardens. They even engage in quite a lot of landscape gardening work, which is very far removed from agriculture. I really do not feel that we can reasonably bring them into the concession without justifiably exciting the criticism of the hauliers, whose position in this matter we must also bear in mind. It is not fair to extend the concession, I think, beyond the limits to which we have already gone, and I am afraid that I must ask the House to reject the Amendment.

    I quite appreciate the desirability of not extending the concession but if the term were "forest nurseries," which is what they are usually called, would that not protect the situation?

    Though I would hesitate to give an opinion on this matter, I should have thought that if it were concerned solely with forestry work it would probably be covered by the Amendments already made.

    I raised the question of the discretion of the local taxation authorities. Do I take it that that is withdrawn?

    I understand that there will be no question of the discretion of the local taxation authorities. It would, of course, be a matter for the courts if somebody infringed the Act and were summoned; he would have a right of appeal in the ordinary way, and it would be for the courts to decide whether or not the case was covered.

    Would the right hon. Gentleman tell us what would happen in the case of a farmer who, as is sometimes the case, also runs a nursery that is part and parcel of the farm. If it is a separate part of it, it would undoubtedly come under the heading of nursery and not farm.

    I think that it is difficult to decide a case of that kind. If part of the farm, it would be covered by the Amendment already agreed, but if it were a separate nursery, it probably would not.

    Amendment negatived.

    Further Amendments made: In page 12, leave out lines 23 and 24, and insert:

    "(b) any reference to woodland produce includes the wood and other produce of trees which are not woodland trees."

    In line 25, after "farm," insert "forestry estate or other land."

    In line 27, after "farm," insert forestry estate or other land."

    In line 31, at end, insert:

    "and the reference to articles required for land occupied with a farm shall include only articles required for the land in connection with the doing on the land of any agricultural or forestry work (including the getting and carrying away of any woodland produce)."—[Mr. Gaitskell.]

    Clause 16—(Road Vehicles And Road Vehicle Chassis (Purchase Tax))

    I beg to move: in page 15, line 24, to leave out "may be determined by the Commissioners," and to insert:

    "the Commissioners, having regard to the meaning of body 'and `chassis' in subsection t5) of section two of the Transport Act, 1947, may determine."
    The purpose of this Amendment is to define precisely those parts of a chassis-less vehicle or integral vehicle which are to be taxed. As the Bill now stands, it is left to the Commissioners to determine what it is in the chassisless vehicle that is to be taxed. The exact wording of the Bill is:
    "The expression 'road vehicles chassis' shall include so much of a chassisless road vehicle as may be determined by the Commissioners to be in effect chassis, and references to a vehicle's chassis shall be construed accordingly."
    During our discussion on the Committee stage, attention was drawn to the unsatisfactory nature of this Clause. Members drew attention to the fact that the House was not carrying out its responsibility by not precisely defining what ought to be taxed. Hon. Members stated that it was wrong it should be left to an outside body—the Commissioners—to determine that part of a chassisless vehicle which ought to be taxed.

    The unsatisfactory nature of this Clause and the lack of adequate definition was admitted, I think, on all sides of the House. Indeed, the Solicitor-Generaland I think it would be for the convenience of the House if I quoted his words precisely—when referring during the Debate to a chassisless or integral vehicle, said:
    "When there is a strength in a body it includes the chassis as part of it."
    He went on to say:
    "A composite structure of that sort constitutes a strengthened body, which incorporates a chassis, but the chassis cannot really be separated from the body because it is part of one and the same structure. Thus we are imposing a tax which notionally subdivides the vehicle, and we have to ask ourselves what portion of this composite structure is to be regarded as a chassis. If that is not done it is not known what is to be charged. What is to be charged is the wholesale value of the chassis, and that is the object of this paragraph."
    The difficulty was pointed out by many Members that there was no clear definition, and it was quite wrong that the Clause in its present form should be passed by the House. I go on to quote a few further words of the Solicitor-General:
    "I accept that this is extremely complicated drafting, and I wish it were possible in some form or another to draft it in more simple language. I can assure hon. Members that I have said to the draftsmen very much the same as hon. Members have said to us this afternoon."—[OFFICIAL REPORT, 20th June, 1950; Vol. 476, c. 1110-11.]
    That is a very clear statement by the Solicitor-General of the difficulty in which he himself, and, indeed, the whole Committee found itself in discussing this Clause.

    7.15 p.m.

    It so happens that there is a very clear definition available of the chassisless vehicle or, as the trade calls it, the integral vehicle, to be found in the Transport Act, 1947. In that Act there is a definition stated for the purpose of the manufacturer, and in defining "chassis" two definitions are given; one for a chassis which is normally understood to be the framework on which a body can be built, and the other relating to the chassisless or integral vehicle. This is what the second definition says in Part 1. Section 2 (5):
    "In relation to a vehicle in which the framework to which the major components are attached forms an integral whole with the body-structure, the complement of major components required in order to complete that body-structure, when new, as a road vehicle."
    It goes on to define what a "major component" is:
    "'Major component' means the complete power unit, complete transmission system, complete suspension system, complete steering gear, complete braking system or complete axle of a vehicle."
    There we have a very exact and precise definition. I suggest to the House that that definition ought to be inserted in the Bill in that form. If that is done, there will be no vagueness, no obscurity, no need for Commissioners to be called upon to define what part of a chassisless vehicle should or should not be taxed. In the Bill will clearly be stated those parts which are to be subject to tax. I suggest that definition provides the simplified form of words which the Solicitor-General complained were not available in the Committee stage.

    There may be some objection that if this definition were used there would be certain parts taxed in an ordinary chassis which would not be taxed by this definition in a chassisless vehicle, and, in consequence, there may be some objection that taxation is influencing design, or that perhaps between the two types of vehicles, the chassis vehicle and the chassisless vehicle, there may be difference of taxes. That is bound to be the case even when we have the Commissioners trying to decide this matter. I suggest that should such an objection be put forward there is a clear answer, and that is, whether, for a chassisless vehicle or whether for a vehicle with an ordinary chassis, the same component parts are used for taxation purposes. We will then have these major component parts clearly defined for taxable purposes.

    I suggest that if this Amendment is accepted, we shall be doing a useful and tidy bit of legislation, and carrying out the kind of thing which this House ought to do on the Report stage, following the discussions which have taken place in Committee. I hope that the Solicitor-General will see his way clear to accept the Amendment.

    I beg to second the Amendment.

    There is in the Bill no definition of the term "chassis." In the subsection to which this Amendment relates the decision is simply left to the Commissioners. It is true that subsection (4), which follows it, refers to the Fourth Schedule, but there is nothing to connect this subsection with subsection (4). The Fourth Schedule contains a definition of what are additions to a chassis, but no definition of a chassis itself. There is, in a recent Statute, a definition of the term "chassis," and it would be more satisfactory if that definition were imported into this Bill by a definite reference.

    The difficulty about the proposal of the hon. Member for St. Marylebone (Sir W. Wakefield) is that if the definition in Section 2 of the Transport Act of 1947 is incorporated in the Bill, it results, in the case of a chassis-less vehicle, in the chassis being the component part whereas in the case of an ordinary vehicle the chassis is the component part plus the frame. The definition gives a different meaning to the word "chassis" according to whether we are talking about an integral vehicle or an ordinary type of vehicle. The result of that would be that one would be giving a very distinct tax advantage to the chassisless method of construction. When chassisless vehicles were built there would, in effect, only be Purchase Tax on the component parts. In the case of the ordinary type of body, where the chassis is not an integral part of the body, not only would the component parts be taxed but also the frame.

    That would be quite unfair as between one manufacturer and another. It would mean that a tax consideration would have a determining influence on the nature of the vehicles that were produced, and that would have a distinctly bad result. That is not only the opinion of the Government but also. I am in a position to tell the House, that of the motor trade itself. The motor trade has been consulted on this kind of point and it suggested that it should be left to the determination of the Customs and Excise to say how much of the chassisless vehicle was to be treated as a chassis for the purpose of assessing the tax.

    Why cannot the same components, which are scheduled for taxing in the case of the chassisless vehicle, be scheduled for taxing in the case of the ordinary chassis vehicle? That would overcome the objection, and there would be precisely the same components in the chassisless vehicle for taxing as there would be in the ordinary chassis vehicle.

    The effect of incorporating the Amendment in the Bill would be to include the frame of the vehicle in one place and not in another, and that is what the motor trade thought would be undesirable. It would be most unfair between one manufacturer and another and would have a deleterious effect on the trade. It is for that reason that the motor trade itself, which is a very good judge of this kind of thing, would prefer, in the case of these integral vehicles, for it to be left to the Customs and Excise to determine what part should constitute the chassis. I suggest to the House that the Clause is better as it stands. It falls in with the wishes of the motor trade, and it does not involve the difficulty which the adoption of the definition undoubtedly would create. For those reasons I hope the House will agree that at any rate this is not the desirable way to simplify this Clause, and that the Clause should remain as it stands.

    The House will appreciate the argument which the right hon. and learned Gentleman the Solicitor-General put fairly and properly in front of us, namely, that there would be a distinct advantage in favour of the chassisless vehicle if the Amendment as it stands were accepted. As I understand it, the Commissioners are allowed to charge an arbitrary sum to the tax which is imposed upon the component parts in order to allow for the frame which is not there.

    That is the effect of what the right hon. and learned Gentleman has said, and the motor trade, quite properly, has said they would rather have the whole of their design. The right hon. and learned Gentleman shook his head. Does he wish to say anything?

    It is not quite accurate to say that the tax in the case of the chassisless vehicle is composed on component parts, but on the component parts and, as it were, on the chassis which is itself part of the body.

    That is precisely what I was saying. The difficulty arises for this reason: it is quite easy to tax the component parts of a chassisless vehicle, but to play fair between the chassisless vehicle and the one with a chassis an arbitrary sum has to be added, which represents the frame which is not there. The motor trade—and I am not blaming them; probably they are right—in order not to have their design altered by this rather extraordinary method of taxation, would prefer that the tax itself should be imposed so that it does not give a special advantage to one side or the other.

    There is another alternative, which is to tax the same components and parts in both the chassisless vehicle and the one which has a chassis. It gets over all these difficulties of leaving it to the Commissioners to imagine what a frame would have been if it were there, which it is not. I feel that that is a method which the right hon. and learned Gentleman and his associates in the Treasury must have considered very carefully, and I think we ought to be told why that method was rejected.

    With the permission of the House I should like to answer the point which the hon. Gentleman has just put. Since he raised it I have not had an opportunity of consulting the experts, but, obviously, a different tax would be imposed if it were imposed on the component parts and not on the frame. Further, it would be a lesser tax.

    Amendment negatived.

    Clause 17—(Extension Of Purchase Tax Exemption For War Memorials)

    I beg to move, in page 15, line 45, to leave out

    "within the period hereinafter mentioned,"
    and to insert:
    "whether before or after the coming into force of this section."
    This Amendment goes with that to the same Clause, in page 16, line 7, and together they carry out fully and completely the undertaking which we gave on the Committee stage. The effect of the Amendments is to make permanent the exemption from Purchase Tax enjoyed by war memorials in places of worship. According to the Bill as introduced, that exemption was to be continued for five years, but in response to requests from hon. Members on the Committee stage we undertook to make it permanent. I should only like to emphasise that war memorials are, of course, fairly widely defined in the Bill as including articles of
    "furniture, plate, or textile material or an ornament."
    We regard it as exceptional treatment of Purchase Tax to grant permanent exemptions in this form. In the obviously very exceptional circumstances of war memorials, we think that is justified.

    7.30 p.m.

    We are much obliged to the Government for having acceded to the suggestion that we made. I hope that Purchase Tax will not be with us in five years' time in one form or the other but, on the Government's estimation that horrors have to go on for ever, I think they are wise in making this exemption permanent. Ten years from the end of the war seems a very long time for war memorials still to be put in' places of worship, but no doubt many churches which were destroyed by bombs will not have been replaced in the ten years' period and it is just in those places that congregations are likely to put up war memorials. Because of the delay, that is bound to occur, and it must be plain to many hon. Members. We are very much obliged to the Government.

    As one who took part in the original discussion on this matter in 1947, when the present Minister of Town and Country Planning introduced an autumn Budget in which the concession was made, and who took part the other day in the Debate during the Committee stage of the present Bill, I would add my grateful thanks to the Government for having taken this course. It was obvious that hon. Members on all sides disliked very much the idea of war memorials carrying Purchase Tax in any circumstances. To have got rid of the whole thing in one sweep is a matter upon which we ought to congratulate ourselves.

    I would remind the Financial Secretary that he has a certain safeguard in regard to what the concession will cost the Treasury. War memorials in churches cannot exist without a faculty obtained—and not easily obtained—from the ecclesiastical authorities. The authorities are very careful, before granting a faculty, to make sure that the war memorial is of a genuine nature desired by the people in the area. The Financial Secretary can feel that the concession will not be abused in any way and that it will give great satisfaction to the people of the country.

    Amendment agreed to.

    Further Amendment made: in page 16, line 7, leave out subsection (2).—

    [ Mr. Jay.]

    Clause 18—(Supply Of Duty Free Goods To Hm Ships)

    Amendment made, in page 17, line 9, after "instrument," insert:

    "which shall be subject to annulment in pursuance of a resolution of the Commons House of Parliament."—[Mr. Jay.]

    Clause 23—(Surtax To Be Charged On Consideration For Certain Restrictive Covenants, Etc)

    I beg to move, in page 18, line 33, at the end, to insert:

    "(c) the Commissioners of Inland Revenue having valued the said undertaking decide that the whole or part of the sum paid is or was or will be paid not as the appropriate capital value of the said undertaking but as remuneration or additional remuneration to the said individual; and."

    There are three Amendments on the Paper and they go together, if I am right in my understanding of them. They can therefore be conveniently discussed at the same time. I would also suggest that the Amendment in the name of the hon. Member for Bath (Mr. Pitman), in page 20, line 12, at the end, to insert a new subsection (6) might also come into a general discussion. If the Amendment in the name of the Chancellor of the Exchequer, in page 19, line 21, after "that" to insert a new paragraph (a) is carried, then the Amendment in the name of the hon. Member for Bath would be out of order, because the point would already be covered.

    It would be more convenient, and make for the clarity of the discussion, if we discussed together the three Amendments standing in my name which all proceed upon one basis, and then we discussed the Chancellor's Amendment later on. I am not sure how my hon. Friend the Member for Bath (Mr. Pitman) feels about his Amendment, but I am sure that he would like to move it, as at present advised. We have considered very carefully the procedure which you, Sir, suggest and there are two approaches to the problem.

    I quite agree and I quite understand. Let us take these three together. Then we will discuss the Chancellor's Amendment. If it is carried, I cannot call the Amendment of the hon. Member for Bath. In its proper place, it should be before the Chancellor's Amendment and it will be only right if it were discussed with the Chancellor's Amendment.

    If I am right, we may discuss my Amendment before the Chancellor's Amendment, after the first three have been taken.

    We shall discuss it together with the Chancellor's Amendment. I cannot put it out of its place on the Order Paper.

    We now come to the much-discussed question of the taxation of payments in respect of restrictive covenants. We are trying to find a method of approach which does justice and equity in this difficult field. Perhaps I may first say a word or two about what the three Amendments do. The first Amendment, which I am moving, makes it a condition of tax attaching that the Commissioners of Inland Revenue, who are, in fact, the taxing authorities of the Crown, should have first valued the undertaking, that is valued the restrictive covenant, and decided that the whole or part of the sum paid in respect of the said undertaking was paid not for its capital value but as remuneration.

    The second Amendment, in page 18, line 41, after "follow." to insert:
    "in respect of such part of the said sum as the Commissioners shall decide represents remuneration or additional remuneration."
    attaches the tax to the amount, whether the whole or part of the amount paid, which is paid as remuneration, that is, the balance of the amount paid for the value of the restrictive covenant.

    The third Amendment is in page 19, line 9, at the end, to insert:
    Provided also that any individual who is aggrieved by a decision of the said Commissioners under paragraph (c) of this subsection may by notice in writing to that effect given to the said Commissioners within twenty-one days from the date on which the notice of the decision is given to him make an application to have the matter determined by the Special Commissioners. Where any such application as aforesaid is made, the Special Commissioners shall hear and determine the application in like manner as an appeal against an assessment to surtax, and all the provisions of the Income Tax Acts relating to such an appeal (including the provisions relating to the statement of a case for the opinion of the High Court on a point of law) shall apply accordingly with any necessary modifications.
    This gives to the taxpayer the usual right of appeal against the decision of the Revenue authorities in their first fixing, that is, an appeal to the Special Commissioners and from the Special Commissioners to the courts. The Amendment merely attaches the ordinary procedure of Income Tax which is used in getting a decision on a question of tax and thereafter taking it to the courts on a question of law.

    With those three points in mind, I would ask the House to come to the statement of the Chancellor of the Exchequer of two years ago merely to see what was the evil at which the Chancellor was aiming. His words were:
    "to dress up what really is remuneration in a non-taxable capital form for instance, as compensation for loss of office, or as payment in consideration of a restrictive covenant on an individual's employment."—(OFFICIAL REPORT. 6th April, 1948; Vol. 449, c. 70.]
    There is absolutely no difference among the different quarters of the House on the point that everyone wants to tax remuneration. It is one of the things which ought to be taxed. No one wants to tax a genuine payment for a capital asset. We say that the obvious thing to do is to get at the value of the restrictive covenant. The question that arises, and which we must face is: Can this be done?

    The problem is to arrive at the value to a company of, to take an easy example, the fact that A. B. should not go off to an American competitor of the company. A. B. naturally takes a high view of the covenant restricting his future employment because, human nature being what it is, he takes a high view of his own indispensability, and the company agree on the basis that they do not want to run the risk of losing A. B. The factors which would be taken into account in valuing that restrictive covenant would be the trade carried on by the company, the experience and the potentialities of A. B. in his particular job, the length of his service and the results of the trading during the time that he has been with the company. There would be other factors which hon. Gentleman might suggest, but, clearly, these would be the main ones.

    Obviously, it would not be fair to mention names, but on a cursory examination of the problem I could give at least a dozen names of accountants in London who would not have the slightest difficulty in making that valuation, and I am sure that anyone who has had to consider similar points must have heard practically all the gentlemen I have in mind making valuations on far more difficult subjects with far less material. I ask the House to consider this as a practical problem. I know that at first sight valuation appears to be difficult, but, after all, most of us have had experience of valuation in practically every field of human affairs and I think that when one has had that experience one comes to the conclusion that it is possible, with a reasonable margin of error, to get the valuation extraordinarily accurately done.

    This is what is in my mind. First of all, the Commissioners of Inland Revenue can rely upon their own accountants, who are very experienced and knowledgeable persons, or they can consult one of the great firms of accountants for which London is so famous, and in that way they make their valuation. Then, if the taxpayer disagrees with their apportionment of the sum, he appeals to the Special Commissioners who will then decide the matter as a question of fact. The Special Commissioners would have the advantage of the Inland Revenue's case in the matter and of hearing the accountants that they have consulted, they would also hear the taxpayer's accountant, and, of course, they would have before them the whole history of the company and the history of the employment of the man in question.

    The right hon. and learned Gentleman talks of valuation. Does he mean valuation of some capital asset in a person, valuation of his enlarged earning capacity or valuation of a sum paid to him for the sacrifice of that enlarged earning capacity?

    The hon. Gentleman was right first time, and that was what I said. It was the valuation of the capital asset which is the restriction on the future employment of that man—the value of that to the company. The hon. Member will appreciate that that is what the company purport to be paying for. What we want to know is if they have paid the right sum. If they have paid more than the right sum, then we say that should be treated as concealed or dressed up remuneration. I have tried to point out the procedure by which it could be done and I say that there is no difficulty at all in valuing what the effect on the company would be if A. B. left it and went to a competitor or if A. B. was restricted in so doing.

    7.45 p.m.

    The hon. Member for Sowerby (Mr. Douglas Houghton) has experience in these matters from a certain angle, I believe, and he must know, just as well as I do, that one of the problems which the Special Commissioners have constantly before them is distinguishing between remuneration and expenses of a peculiar and a difficult kind. A case which comes to my mind is when somebody takes either a flat in London or a house in the country and says that it is something which is used for the purpose of the company in order to deal with customers or intending customers. Quite often, as the hon. Member knows, one has had the flat question of fact that these are not expenses at all but are concealed remuneration, and that has been decided. It is not a difficult question and, having seen valuation in a variety of forms, I believe that a great deal of nonsense is talked about the difficulty of valuation. It is amazing how one gets to the truth of the matter and how easily that can be done.

    As I understand that the practicality of this matter is an issue between us, we ought to consider what it is of which the Government are really afraid. I mean what sort of dodge—I want to put it quite bluntly—they are afraid of in this matter.

    If the hon. Member receives the compliment of catching your eye, Mr. Deputy-Speaker, he will then be able to explain to us what is "jiggery" and what is "pokery," but that pleasure must be reserved. At the moment, I want to consider what the fears are.

    Let us take the two examples which may be in the minds of the Government. In the first case, let us say that we have a company, which may be a private company. Suppose the fear is that they are going to use such profits as they have been able to accumulate to make a payment to one of the main shareholders. Let us just see the difficulties which, if our Amendment is accepted, lie in their way. In the first place, there is the fact that the agreement by which it is agreed to pay a capital sum to one shareholder has to be examined and valued, which means that it will be impossible to put forward a shareholder who has not at any rate the ability to stand up to cross-examination before the Special Commissioners as to whether he is really necessary to the company or not. That is essential through our Amendment.

    I should be quite prepared to accept the view of the Government that this should be permissible on a person leaving the company, because the payment that I have in mind in this case is the payment that is made in order to prevent him going elsewhere when he leaves. However, let us take the next step which would be necessary if the profits are to be directed to this man. There would have to be, on the basis that it was being used wrongly, a winding-up of the company in order to make the accumulated profits capital in the hands of the company and a payment in this way. That is completely fantastic because it postulates not only that the recipient—who is of necessity someone with knowledge and experience and expertise—is to give up his job, but that the company will give up their line of action. That is a fantastically absurd suggestion of abuse.

    Let us take a simpler case, which I am sure hon. Members are considering, where we get someone who receives a job from a company at £x a year and, at the same time, there is a provision that if he will undertake, after serving the company for a number of years, that he will not go to a competitor he will get £y as a capital sum. It might be suggested that this is open to abuse in that he is getting disguised remuneration in the £y under the guise of a capital sum. But look again at the safeguards under our Amendment. Again it has to be valued as to whether £y is a proper valuation for the restriction on his services.

    On that basis the man who goes into the agreement, whose asset—and the whole hypothesis is that he has this asset—is a knowledge of this business or this trade which makes it useful to restrict his future movements, will have his future movements restricted. He is barring himself from performance and further activity in the matter in which he has skill and expertise and "know-how." I am quite prepared to accept the position, implicit in the Amendment of the Government, that he has to leave the company. Again it seems to me that abuse is remote and fantastic. Here we have a man giving up his own skilled occupation, and we are prepared to submit to a very experienced tribunal of fact—because I do not think anyone who has experience would say that the Special Commissioners are not experienced and knowledgeable in these matters—deciding whether it is a fair amount for the restriction.

    I put these examples because I should not like hon. Members opposite to think that we have not considered the difficulties and the possible abuses in these matters. What we have tried to do—and after all this is a duty of the House—is to attach the taxation to what is dressed-up remuneration and not to what is a fair payment for the capital asset of restricting a man's future employment. One great advantage is that it extricates the House from a position which none of us relish, as the Solicitor General said, of indulging in retrospective legislation. Because you will see, Mr. Deputy-Speaker, that the effect of this is to distinguish between the payment under the restrictive covenant and the remuneration and, therefore, we are taxing remuneration.

    Of course, we must tax remuneration. We can always tax additional remuneration. We can always go back six years under the Inland Revenue Acts and do it. We are saying that we should tax what is truly remuneration and, therefore, there is not really the retrospective element in the taxation. What there is, and what we are all prepared to advocate as being the fair and equitable way of dealing with it is: here is a fair procedure, a workable procedure, for distinguishing between a true payment and the bogus dressing-up of remuneration under another name.

    As I have said, we have considered this as carefully as we can. We are bringing before the House our united experience in this matter. We have no tenderness whatsoever for dressed-up remuneration but we have discovered the way of finding out where it exists, and when we find out that it exists, we are prepared to say that it should be taxed as, of course, it ought to be taxed. I am sorry on the Report stage to have taken a little time to develop this matter, but these three Amendments hang together and constitute our solution of this problem. We believe it is a just solution and it is in that spirit that I move the Amendment.

    The great attraction of the three Amendments dealt with by my right hon. and learned Friend is that they will help the Solicitor-General to carry out the pledge he gave on the previous occasion when this matter was discussed. I would remind the right hon. and learned Gentleman of what he said on that occasion when he gave this undertaking:

    "We shall try, if we can, in respect of the retrospective effect of this legislation, to find words between now and the Report stage which will except what I have broadly described as innocent transactions, that is to say transactions which were not entered into with a view to tax evasion."—[OFFICIAL REPORT, 19th June, 1950; Vol. 476, c. 881.]
    That is exactly what this Amendment seeks to do and, as I suggest, does it effectively.

    As my right hon. and learned Friend has said, we are all hostile to anything in the nature of tax evasion, but there is no better way of determining whether there is tax evasion or not than by submitting the case to the Commissioners and thence by appeal to the Special Commissioners, with the protection of the court beyond that. Although every one of these cases must turn on a question of fact, as to whether it is really disguised remuneration or not, if a man has endeavoured to defeat the tax laws of the country by avoiding payment on an income on which he should be paying tax, it is not retrospective if we then take him before the courts and determine whether he has defeated the law or not. As hon. Gentlemen know, I feel strongly on the question of retrospective legislation, and I do not at all abandon my views on that. Here, instead of creating a new tax on something that has passed, we leave it to the court to decide whether there has been tax evasion or not, as has always been the law.

    It is necessary to find out what it is we really want to achieve in this legislation. The hon. Member for Sowerby (Mr. Houghton) put it in what I suppose is Parliamentary, if somewhat inelegant, language, in saying that he wanted to avoid jiggery-pokery. What better way is there of doing that than by submitting the matter to the court? There could be no better way of giving it a fair trial than before those best qualified to judge as to whether there has been jiggery-pokery or not. I take it, from what the hon. Member said, that he would be satisfied with that because it would achieve the object which he says he wants to achieve.

    The second test we always want to consider in matters of this kind is: Do we want to adhere to the usual principle of taxing income or do we want to introduce a new principle of taxing a capital payment made in respect of a covenant? Here, again, these Amendments provide the answer. We have always understood—indeed, it is a fundamental principle of the Finance Acts so far as they relate to tax upon income—that they deal with tax upon income and do not create some new kind of tax upon capital.

    8.0 p.m.

    What the Clause does as it stands is to create an entirely new tax upon some capital payment. By the suggested method proposed by my right hon. and learned Friend, we would avoid that anomaly and adhere to the true principle of taxing income. Although there may be difficulties in determining how much of a sum was really in respect of income and how much was disguised remuneration, those difficulties are certainly not insuperable; they could be overcome and then the tax would be paid upon the appropriate amount.

    The difficulty into which the Government have got in this matter from the start is that instead of adhering to principles, they were actuated by political considerations. It was because there was some antipathy with regard to two particular cases that the Clause ever came into being at all. It is rather lamentable that the Solicitor-General narrowed down that issue by admitting that that had been the case, because, having said the words to which I have drawn attention, he went on to say that the Government would see that although their Clause excepted genuine cases they would make quite sure that it did not except those two particular cases. The right hon. and learned Gentleman was saying, therefore, that those two particular cases were offences and that they were disguised remuneration. Quite apart from those two par- ticular cases, we are much more concerned with the general principle of whether an opportunity shall be given for an appropriate authority to determine whether the case is a genuine one or not.

    Am I right in thinking that the hon. and learned Gentleman has now conceded that there have been some cases, not necessarily these two, in which payments made by way of covenant and, therefore, hitherto treated as capital, have, in fact, formed additional remuneration?

    I know nothing about that. It is not my business to investigate who has evaded the tax law. I have not the remotest idea whether there have been such cases. Very likely there have been, but I certainly do not know of any. I should think that the hon. Member, in his capacity as a solicitor, could give more information on that matter than I can. It has not come within the range of my practice to deal with such cases.

    I am really much more concerned with the general issue as to whether it is right that we should alter the law to tax capital payments and to ante-date the law to that effect. I will not again go over the argument on something which I find offensive. The method we propose obviates that altogether, because it does not tax something that was not taxable. If a certain payment was genuine income and should have been subject to tax, then, of course, the law remains the same throughout and a proper tax is levied upon what was, in fact, income.

    I withdraw nothing of my abhorrence to retrospective legislation, although I was not able to convince hon. Members in the majority, of its offensiveness. I know, of course, the extent to which hon. Gentlemen opposite are actuated by certain political motives in this matter. [HON. MEMBERS: "Oh."] I do not think that they really accept the principle to which they pretend they adhere.

    Let me give an illustration. Hon. Members opposite may know that when salaries of Members of Parliament were increased by the House in 1945, there were a number of people on this side who took exception to and did not approve of the change which was being made. Suppose that there was a change of Government and a Conservative majority adhered to that view and said, "We are now going to cancel the £1,000 a year for Members of Parliament and date the change back to 1945, because we think that that is a proper thing to do." Would hon. Gentlemen opposite approve of that or not? I think that all those who were called upon to pay back £5,000 would feel a little uncomfortable about it, and I doubt whether then they would support the principle which they supported last time. They would have second thoughts about it. It is rather different, of course, when the matter affects one's own pocket. Hon. Members opposite have not the least compunction about acting contrary to these principles when somebody else's pocket is affected, but they would be fairly vociferous if it began to touch their own pocket.

    This Amendment is by no means difficult. We are all agreed that we do not like tax evasion. The Solicitor-General has endeavoured to meet particular circumstances by introducing a rather complicated Clause, which we shall come to discuss later and to which I shall not refer now. He has given a classic example of the difficulties which can be encountered once the Government embark on ad hoc legislation, and once they try to hit particular persons without any idea of the general principle of the law for the country as a whole. Once the Government begin to select particular classes or persons for the penalty of the law, they immediately begin to get into difficulties; this case illustrates that very clearly. The Solicitor-General should be very grateful to my right hon. and learned Friend for endeavouring to extricate him from the difficulties into which the Government have got themselves.

    The three Amendments achieve that purpose and do so with something which we should do our best to support—they do it with justice; they give the subject the opportunity of having his case considered on its merits, of having it taken before skilled persons accustomed to determining these questions and deciding whether there has been a tax evasion or not and deciding that the true principle of Income Tax law shall be applied if there has been evasion. That is to say, that that part of the payment which was income shall be decided and taxed in accordance with the true principles of Income Tax law, and that so much of the payment as was a genuine capital payment should not be subject to Income Tax. The three Amendments, taken to-gether, resolve all the existing difficulties, and I hope that the Solicitor-General will accept them.

    The right hon. and learned Solicitor-General will remember that on the Committee stage I withdrew an Amendment which I had moved, on his undertaking that he would in revised wording give full effect to it, and in his speech he also made it clear that he was going to meet to some extent the next Amendment on the Order Paper, which actually never fell to be discussed, but stood in the name of my right hon. and learned Friend the Member for West Derby (Sir D. Maxwell Fyfe).

    Before I withdrew my Amendment I thought it fair to the Government to make it clear that the new words which the Government proposed to bring forward could not satisfy the points of principle for which we stood unless they satisfied two conditions. The right hon. and learned Gentleman had made it clear that he proposed to protect innocent transactions. I ventured to point out that by "innocent transactions" I understood transactions which would be perfectly legitimate on the principles enunciated by the Chancellor of the Exchequer himself when he gave the warning which has been so often quoted. The second point which I ventured to make clear before I withdrew my Amendment was that the Government must lay down the principle which they considered just and that the question whether any particular persons fell within that principle or not must be determined by the Commissioners and the courts.

    In supporting the Amendment so ably moved by my right hon. and learned Friend the Member for West Derby I hope to satisfy hon. Members in all part of the House that, unless this Amendment is adopted, there will be no attempt whatever to carry out the principle enunciated by the Chancellor of the Exchequer in his original warning. The original warning, which has been so often quoted, was against remuneration being dressed up as something else. The Chancellor made it clear that he would not hesitate to hit at what was, in fact, in the words of the hon. Member for Sowerby (Mr. Houghton), jiggery-pokery. I was grateful for that intervention of the hon. Member. I think he was right.

    I think what this Clause ought to try to do is to hit jiggery-pokery, and it is precisely because I believe that to be right that I am satisfied that we can convince him that, unless this Amendment, or something like it, is introduced, the Clause will not be limiting itself to jiggery-pokery at all, but will be hitting at perfectly innocent transactions against which no warning of any kind has ever at any time been given. If no such Amendment as is now proposed is introduced, what happens? With the exception of certain transactions mentioned in the Amendment in the name of the Government, to be considered later, which it would be out of order to discuss in detail now, all payments made for restrictive covenants will be hit.

    If the Chancellor had intended anything of that kind there were two previous Budgets in which he could have done it. There was nothing to stop the Chancellor, either in 1948, or 1949, saying that if anybody entered into a restrictive covenant and received a sum of money for it he was going to treat that sum of money as income or remuneration. The Chancellor of the Exchequer did not do so, for, among other reasons, I suppose, the obvious reason that it would be an incredibly silly thing to do, as I shall show that this Clause as it stands is incredibly silly without this Amendment. The Chancellor did not do that. What he warned people against was, if I might again adopt the words of the hon. Member for Sowerby, jiggery-pokery. I quoted the words of the Chancellor on 15th June and the essential thing is that he warned people against the device of wrapping up remuneration as capital payments and the rest of it. The warning has so often been quoted in full that I will not weary the House with it now.

    But the Clause as it stands, without our Amendment, has not a word about dressing up transactions as something else. It hits every transaction in the way of a restrictive covenant—all transactions in the nature of restrictive covenants when the man remains in the business. That has no relevance whatever to the warning of the Chancellor of the Exchequer.

    A great deal has been said about the retrospective effect of this Clause. That is one of the matters which has attracted most attention. Even as regards the retrospective effect and the two cases which have been so often quoted, I wish to make my position absolutely clear. The Amendments in favour of which I have spoken, and in favour of which I speak tonight, will not prevent the Government from treating as remuneration the sums received in respect of the restrictive covenants by the two persons whose cases have been so often quoted if, but only if, they can prove in a court of law that those transactions fall within the warning of the Chancellor, that they constitute, in fact, concealed remuneration and not bona fide payment for a restrictive covenant.

    8.15 p.m.

    I have no objection whatever to words—that is to say I certainly should not oppose the Government putting forward a Clause—which, in terms, enabled them to get the tax they seek to get from these two persons, if they can prove their contentions in a court of law. But I say that those two persons, just as much as anybody else, are entitled to be heard. They are entitled to say What we received was bona fide payment for a restrictive covenant against which no Chancellor of the Exchequer, or anybody else, has ever issued any warning whatsoever." If the Amendment to which I have put my name is adopted, or any similar Amendment, in a slightly different form, which the Government might prefer, it would still be possible for them to obtain the tax they seek if they are right, but the individuals will at least be entitled to have their case heard by the courts of the land and to prove that they were not guilty of jiggery-pokery, but that what they received was a bona fide valuation of that which they were giving up, namely, their right to work for other concerns.

    So far, I have dealt with the retrospective effect of the Clause in connection with the two named persons. But suppose for a moment that the House should take the view, "We know so much about those particular cases that we do not mind if words are adopted which will certainly hit them without any doubt." I hope hon. Members in all parts of the House would reject any such step, because I think it important that we should do justice. and appear to be doing justice.

    I think hon. Members in all quarters of the House prefer that, even if their suspicions about these two cases are correct, the correctness of those suspicions should be tested in a court of law. But of course this Clause, as it will stand if the Amendment is not adopted, is not confined to those two cases of which we at least know something. It will hit innumerable cases of which, at the moment, we know nothing at all. It will hit every case where a gentleman has given a restrictive convenant for a payment of money, or money's worth. restricting him from entering into other employment. A man may have refused a genuine offer, perhaps from the dollar area, to work for a rival and he may have received no more than the due amount that that covenant was worth to those who paid him for it. He will be hit, and hit although no warning has ever been given against the sort of transaction into which he has entered and although there is nothing morally or legally wrong about it.

    I hope hon. Members in all parts of the House realise that the retrospective effect of this Clause, although the most serious from the point of view of any lover of justice, is not the only objection to the Clause as it will stand if no such Amendment as is proposed is adopted. Are hon. Members on the Government side quite certain that they desire it to be impossible for any English company to make it worth while for a man to enter into a restrictive covenant of this kind? If payment for a restrictive covenant, notwithstanding the fact that it is in reality capital, has to be treated as income and taxed at the present level of taxation, the effect will be that no payment can be offered for such restrictive covenants which will make it worth while for the recipient to accept. That might be no great evil, if that is the result desired.

    But are the Government sure that that is their desire? Are they sure they wish our rivals in hard currency areas to pay for the services of any inventive genius at present working in this country, and for it to be impossible for any British company to offer any payment which gives the man concerned the incentive to refuse that offer? I suggest that as regards the future that is a result they will not desire. I say that it is foolish and contrary to the public interest, even if we were to confine it to the future. The matter becomes much more serious, of course, when we realise that what we are doing also has a retrospective effect.

    The Government, by their Amendment, have fully met the proposal I put forward and subsequently withdrew as to the date of the agreements after which alone they can fall within the provisions of this Clause. But the other matter has not been dealt with at all. The Chancellor, in his warning, quoted the case of dressing up remuneration in a capital form. He said that if there is a specious undertaking, or merely a colourable legal transaction, he will disregard the form and look at the substance. I think that the Chancellor has a good defence, or a defence which has often been thought good in this House, for such an attitude, and, if he adopted that attitude in this Clause, I should not think it necessary to go into the Lobby against the Government.

    The fact is that the Clause as it stands has no provisions of any kind about transactions that are colourable or specious, or dressed up in some form other than the true one. He has dealt with what the hon. Member calls "jiggery-pokery" in the same way as he has dealt with genuine transactions, which is contrary to the interests of the country, of the House and of justice. My right hon. and learned Friend the Member for West Derby has put forward what I believe to be a solution to this difficulty. It may be that the Government, with all their resources of skilled draftsmanship, can think of some better words, but the main point I put to the House is that they must try to meet the intentions behind our proposal, even if they do not approve of the exact wording.

    I understood, when I withdrew my Amendment on the last occasion and stated my two conditions, first about a transaction being innocent if it fell outside the warning of the Chancellor and secondly, about the Government laying down the general principle in the Clause and leaving it to the courts to determine whether any particular transactions fell within it, that Ministers on the Government Front Bench nodded and showed their acquiescence. Therefore, I waited to see their Clause on the Order Paper, which, of course, does not meet those points at all. For all these reasons, I strongly support the Amendment that has been moved, and hope that, if the Government do not accept it, the House will.

    Several Members opposite have referred to me, and, not unexpectedly, more attention has been paid to my intervention than to the questions I addressed to the right hon. and learned Gentleman the Member for West Derby (Sir D. Maxwell Fyfe). I have been asked what is jiggery-pokery." I would say that when an unscrupulous taxpayer and an astute lawyer put their heads together to defeat taxation, there we have jiggery-pokery. There has been a plentiful supply of it during the 100 years that we have had Income Tax. The purpose of Income Tax is obviously to tax income, but it is a quest that the legislator and the Revenue authorities have been pursuing for 100 years without being certain whether they have even yet succeeded.

    We have to consider here what is income, in the general sense of the term, by reference to considerations of equity as well as legal and technical distinctions and definitions. For instance, if an employer were to say to a worker, "If you will agree to work for me for three years without drawing any wages, at the end of three years I will pay you a capital sum," that, we should all agree, would be income. It would be a substitute for income. What the legislature is constantly seeking to check is the use of substitutes for income to escape the taxation levied on income.

    We are at one in trying to stop "jiggery-pokery," which means that we are out to check specious restrictive covenants and out to stop bogus ones. If a managing director, a chairman of directors, or anyone in an influential or controlling position in an undertaking, sees a way of escaping tax by coming to an agreement, almost with himself, in return for a promise that he will remain in his present position, receiving a large capital sum for doing so, when all the time there has been no real risk that he would leave, or any desire on his part to leave, but merely the determination to use this device to avoid paying his proper share of taxation, we are all agreed that that is something we want to stop.

    8.30 p.m.

    Very well, then, although I am not a lawyer, I am going to apply this simple test. The test of what is income is whether or not the money is a profit arising from a contract of employment. That seems to me to be a fairly good test of what is income. It is not original; it was, in fact, part of a judgment by the Master of the Rolls in an interesting case reported in "The Times" this morning about a certain Colonel de Soissons, in which certain payments of a capital nature at the conclusion of service were challenged by the Inland Revenue and regarded as income, a contention which was upheld by the Master of the Rolls in his judgment yesterday.

    But the hon. Gentleman will note that the existing machinery of the law is perfectly adequate to deal with such sums.

    Yes, and I am coming to the suggestion that the existing machinery of the law, if the Amendment which my right hon. and learned Friend proposes to include in the Finance Bill is carried, will be capable of looking after the distinction between the genuine and the specious.

    I want to come now to the genuine case, and here I wonder whether Members opposite really are in accord with what we want to do on this side of the House. I do not agree with the hon. and learned Member for Norwich, South (Mr. H. Strauss) that, as regards the future, my right hon. Friend the Chancellor is confined to the specific terms of the warning given two years ago.

    I quite agree. For the future, the right hon. and learned Gentleman is only bound by what is wise and is only affected from the point of view of wisdom, but, following the interesting argument which the hon. Gentleman has put forward, I hope he realises that, unless he says that no restrictive covenant of a capital nature is proper for a man who remains in a business, he is bound to admit that the Clause as it stands attacks what he called "jiggery-pokery" and genuine transactions equally.

    Not only is it the intention of the Chancellor to attack "jiggery-pokery," but it is his intention also to check the use, albeit in a less objectionable form, of capital payments as a substitute for income. What I think I detected in the speech of the hon. and learned Gentleman was the suggestion that the Chancellor is bound by the strict terms of his warning of two years ago in framing his proposals now. I do not accept that view, if it is held by the hon. and learned Gentleman.

    I thank the hon. Gentleman for giving way again. If what I said could be understood in that way I must have expressed myself very badly. The Chancellor, as regards the future, is not in the least bound by the terms of the warning which he gave two years ago, because the House can do what it is wise to do, but, regarding the retrospective proposal, it is quite wrong to go outside the terms of his warning.

    The hon. and learned Gentleman will agree that the substance of the objections to the retrospective proposal have now been largely removed, and, at all events, the Bill is proposing to check the use of capital payments in substitution for income, when, otherwise. it would be income liable to taxation in the ordinary way.

    For the sake of illustration, let us take the so-called genuine case of an executive or director who has received an offer to transfer his services elsewhere—an attractive offer, let us say—and his present employer or board of directors desire to retain his services. They make a proposal to him that, in return for an undertaking to remain, they will pay him a lump sum. That is a restrictive covenant, and, so far as I can judge from what hon. Gentlemen opposite have said, they would regard that as a genuine case and would say that such a lump sum payable in those circumstances should quite legitimately escape taxation.

    Let me finish. I feel that already I am rather usurping, with great humility, the functions of my right hon. and learned Friend the Solicitor-General, and I am not qualified to do that. By their interruptions, hon. Gentlemen opposite are drawing me into a much longer argument than it was my purpose to make.

    I suggest that if an offer of a lump sum to remain is payable in those circumstances, it is really a substitute for higher remuneration—a payment in return for a promise to remain—whereas, otherwise. the man could go elsewhere and earn more money. It is really a substitute for income, and that is why I asked the right hon. and learned Gentleman who moved the Amendment what was the valuation which he was seeking to have made in the first of the proposals on the Paper. A valuation of what? A capital asset, he said. A capital asset to whom? To the firm? If so, is it to be shown in the balance sheet? It is surely a capital asset in no different sense from that of an employee who has become an experienced and skilled man in the service of his employer, and who says to his employer, "I have the offer of a better job at more money," and when the employer, who wishes to keep him, says, "Whatever you have been offered elsewhere I will pay you here."

    He pays wages or salary, and does not pay a lump sum. If he did, then I think we should have a widespread growth of this alternative method of retaining the services of workers whose value to their present firms was increased by their experience, their skill and their length of service with their employers. That would be a widespread device, and it would be tax evasion. It is one of the things which the Chancellor seeks to check. The right hon. and learned Gentleman who moved the Amendment seemed to assume that there are cases of that kind which should be protected, and which would be protected under his Amendment. Nobody opposite has given us an illustration of what they would regard as a genuine restrictive covenant which should escape the net that my right hon. and learned Friend desires to throw round the whole area of these transactions.

    I shall gladly take up the request and challenge of the hon. Member for Sowerby (Mr. Houghton) to give specific instances in this case, but, first of all, I think he must get a little of his Income Tax law right. If I am the manager of the milk department of a Co-operative store and I have a rounds-man, I understand that if I wish to sack him, or if he becomes redundant in any way, I have got to pay him his wages under whatever are the terms of contract, and that that part of any payment that I make to him is income. On the other hand, if I have a soft heart and wish to be a good employer and pay more than the amount under the agreement, I can give him compensation for loss of office, and that is, as at present under the law of this country, not income for taxation purposes, but capital. I maintain that the Clause that we are discussing, whether amended by this Amendment or not, in no way alters that situation.

    If I may now be allowed to talk as an ordinary business man—and this may help the Solicitor-General as well as the hon. Member for Sowerby and the House—who has paid compensation of more than the amount due under such agreement, and who feels that he has got a certain value for money in return for that payment, I will explain why I think that. What possibly is dividing the House at this moment and worrying the Government is that they cannot conceive that, in any circumstances, a restrictive covenant can be any good at all. We would all be in general agreement that any restrictive practice on employment, whether by a trade union or by an employer, is subject to suspicion. It has to prove its worth.

    I maintain that in this particular field, however, we have an enormous safeguard in the courts of the land, because the courts are most careful that no employer shall improperly restrict any of his employees on leaving his service. Suppose that I was a dairyman and there was a new dairyman going up and down the same road that my milk roundsman served. I might say to my roundsman, "I will give you three or six months wages, in addition to the amount you are entitled to under your agreement, provided that you agree with me that you will not go away and immediately, or within the next six weeks, go and work for that one particular competitor who is selling milk down that particular street." I think the courts would say that was a proper restrictive covenant. In every case under the Amendment as now proposed, the valuers would take into account whether the restriction paid for had been a legal and properly enforceable restrictive covenant. Therefore, I maintain there is no possibility of any jiggery-pokery if the valuation Clause with the Amendment proposed by my right hon. and learned Friend the Member for Liverpool, West Derby (Sir D. Maxwell Fyfe) is accepted by this House.

    In what circumstances is a restrictive covenant desirable in the public interest? Obviously, although I have picked a case of wages and a milk roundsman, restric- tive covenants occur more frequently in cases where there are long-term agreements for salary rather than weekly wages. In other words, they apply to salaried people, and chiefly to people of very great skill and personal ability—cases where it is the person concerned that is the important factor.

    I maintain that, initially, when making or renewing a service agreement a restrictive covenant is proper and right. Where a chairman or the board of directors of a company engage a man, who is a good man, for a long period of office, it is a good thing to keep him from looking over the hedge. If he knows he has in his agreement a restrictive covenant, into which he has entered entirely freely, he settles down to do a job well and honestly and is not constantly worrying and being worried by other people who come along and say, "Why don't you think of working for us instead of those people?" In other words, it tends to make and keep a person happy in his job.

    Secondly and initially, when entering into a long-term agreement with such a man, it very often happens that one is not in a position to give an agreement of sufficiently long term to satisfy him. He might very well say, "I want a five or 10-year agreement"; and the employer might say, "We cannot guarantee that this venture is going on for more than two or three years." In that case they put in a counter proposal that if, at the end of two or three years, the business is going to fold up or they are not going to be able to employ the man for any reason, they will pay him a lump sum of —x in addition to what he was entitled to as salary under his agreement. It is surely wise and right that there should be that payment and that there should be a quid pro quo in the form of restriction.

    The mere fact that the Government, in the employment of their own Civil Service, have specially passed an Official Secrets Act, shows that they are well aware of the fact that in the transfer of employment, at a high level, one transfers something beyond the skill and the muscular effort of a pair of hands. There is a great deal of knowledge taken away in the memory and experience of the employee; and I have found that the Civil Service are most restrictive in every way in regard to what happens after a person has left their service. Therefore, there cannot be any objection by the Government to the principle of restrictions.

    8.45 p.m.

    There is also great value finally as well as initially in such a payment when parting company with an employee. One can, for instance, part company on the ground of redundancy, and should not the party opposite be very sympathetic in matters of redundancy? Should not people who are made redundant in any circumstances be entitled to a little consideration? In that case it is often right and proper to pay more than the legal time minimum written into the agreement. If one pays it and if there is a cause for restriction which the courts would uphold, surely it is only right and the correct conduct of business that in return for such a payment one should get something. Unless this Amendment is passed one will indeed continue to be able to make the payment, but one will not be able to insert into the transaction what is a very reasonable restriction on the future employment of the employee in question.

    This applies equally when an employer and employee part company on bad terms. My father early in my life told me that in employment, as in matrimony, there was no certainty of continual harmonious relations. They have got to be worked for on both sides. When an employer takes on a man for five or 10 years under a contract the employer's side of the bargain is laid down in black and white. He has to pay the man so much money on certain days and he has to give him so many days holiday, and so forth. In return the employee should really put his spirit into the job. My father said that the employer is always at a great disadvantage because inherently the first part of the agreement is ponderable and can be enforced by a court of law, whereas the second part is spiritual and imponderable and the employer just does not know where on earth he is.

    My father gave me a piece of advice which I have consistently followed throughout my business life, namely, "Whenever you enter into any real longterm employment of this kind, for goodness sake put in a clause under which it can be brought to an end." If that is done and if there is an element in which the Official Secrets Act or anything else of the sort might arise, and where a restriction is within the public interest, then surely one is right in getting in return for such a payment that reasonable quid pro quo.

    I fully support the Amendment. I think the hon. Member for Sowerby has failed to appreciate that every case of "jiggery-pokery" is covered by Clause 23 as we hope it will be amended, and we trust that the remarks of the Solicitor-General will be favourable to our case.

    It is with some diffidence that I take up the challenge of the hon. Member for Sowerby (Mr. Douglas Houghton) who invited us to name some innocent transactions which might be caught by the Chancellor's Clause if it were not amended in the way we suggest. Quite clearly the right hon. and learned Gentleman himself has in mind that there are innocent transactions which might be caught, for has he not provided that in retrospect some of these transactions are to be exempt? I should have thought, with my limited experience of this House, that it would have been for the Treasury Bench to tell us what are these innocent transactions which will be caught in what is, after all, their device and not ours. I should have thought they would have told the House not only that, quite obviously, we are seeking here to name the individuals; I should have thought, that with all the resources, experience and statistics at their command, they would have been able to tell us—" and incidentally we catch this sort of case and that sort of case."

    Unless some sort of filter is introduced through which the innocent may pass but which the guilty cannot pass, I believe that the Clause as it stands will ultimately catch a very wide variety of cases none of which has so far occurred to hon. Members. After all, it is the duty of the Revenue, once a Clause is in a Finance Act, to exploit it to the full. If the Revenue can conceive that this Clause, once on the Statute Book, will catch new kinds of case which we in this House have not considered, then it is the duty of the Revenue to catch such cases.

    I will suggest one or two instances which occur to me, with my limited resources, and I hope we shall be told whether these cases will be caught. I do not think it matters what the answer is in respect of these individual cases, but I hope to be able to give some idea of the types of case which might be caught. Of late, somewhat regrettably, professional footballers have been in the minds of some of us. It happens that from time to time a professional footballer is transferred, by arrangement, from one club to another. When he joins his new club he signs a contract which contains a clause and I have in mind the wording the Clause as it stands—which restricts him as to his future conduct and activities. In consideration of that, or as part of the bargain which he seals when he seals the contract, £20,000 may pass from his new club to his old club. I suggest that the Clause as drawn imposes upon him the obligation to pay Surtax on the sum which is represented by £20,000 when Income Tax is deducted from it. Surtax is not payable by either of the clubs, but it is payable by the player, because the Clause says that the same consequences shall flow as if the payment had been made to the player. I do not know whether it is the intention of the Government that such transactions should be taxed, but hon. Members on either side must ultimately justify their conduct to their constituents. We should, therefore, be interested to know whether that is the intention, and, if not, why not. Quite clearly, if the Amendment we are discussing were incorporated in the Clause it would not operate in that way, because nobody could say, whatever else they may say about the transfer system, that the transfer fee forms part of the income of the player.

    Perhaps I may mention one other instance which occurs to me and, again, perhaps, we may be told whether the Government intend to catch such a case. I know of people, professional clients of mine, who are proprietors of businesses, shops, in a town of moderate size. They own the freehold of the premises. Perhaps they are partners or perhaps they have a private limited company. They carry a considerable stock. They may be ironmongers or clothiers, but it is quite a modest business in one way or another which will stand on the balance sheet at £30,000 to £40,000, including the freehold.

    I know of cases where people like that employ a manager at £8 or £10 a week with, perhaps, a bonus. It may be that after some years of service they will say to him, in round terms, "We would like to make you a partner with us. We will, therefore, take you into partnership." If it takes the form of a private firm, then it will be a partnership fee, but if it is a private limited company the manager will be given some shares. The result of that transaction is to give to that manager a third of the business. As I say, it may be of moderate size, and the sum may be £10,000—a third of £30,000. The manager will, of course, sign an agreement, whether by way of subscribing to the memorandum and articles of association, which will restrict his future conduct and activities, or by signing a partnership deed, and that will be part of the consideration for which he acquires the £10,000.

    Is he then to pay Surtax on £17,000 or £18,000 which is the gross sum represented? If so, I think we ought to know, because I do not think it is in the minds of hon. Members that a transaction such as that would be caught. I cannot see where it is excluded from the very wording of the Clause as it stands, even allowing for the Amendment which the Chancellor of the Exchequer intends to propose as to the future.

    There are many other cases of a similar kind which we can imagine. I will mention only one more. It happens that in the part of the world which I know, in the Black Country, firms of manufacturers have in their employ men of experience in their businesses, and one of these firms, for example, may say to the manager, "We make buckets. We will establish you in a little place of your own to make the handles for us. We will give you the necessary money to set yourself up in that business, but we shall expect you to enter into an agreement in turn by which you will continue to serve us with your business." Quite a substantial sum may pass under an arrangement of that sort to enable the manager to set up the business in exchange for a covenant restricting his activities to serve his employer in that way.

    Now, the money which passes is in no sense income; it is in no sense spending money, which is, after all, what is at the back of the minds of hon. and right hon. Gentlemen opposite. Nevertheless, as I read this Clause as it stands, unless our Amendment be incorporated in it, that money will be caught, and the money which has passed to the man for the purpose of starting a business will. in fact, be subject to Surtax.

    We must always remember when we are considering this Clause that the sum which passes has to be very nearly doubled before we see upon what sum we are going to impose Surtax. These are practical considerations—the practical way in which I approach this Clause. It is not only a question of what right hon. Gentlemen on the Treasury Bench want to do, or of what the House as a whole wants to do. What we have to ask ourselves is, What does this Clause do?

    We have had an interesting Debate upon the proposal which the right hon. and learned Gentleman the Member for the West Derby (Sir D. Maxwell Fyfe) has put forward in his Amendment. The Amendment itself merely raises a comparatively narrow issue, namely, whether the method suggested is one which would adequately differentiate cases in which it could be said that the motive was primarily a tax evasion motive, and cases in which the motive could be described as a commercial motive. The Amendment does not go beyond that. Further, issues of a wider character have, however, been introduced into the Debate, and I should, I think, in deference to what has been said, express my own view, quite shortly. of some of the topics that have been raised.

    To begin with, this Amendment does not raise directly the question as to whether the Government's proposal is open to criticism on the ground that it is too retrospective in effect. This proposal not only would affect past transactions but future transactions, and I would propose, as I think it would probably meet the convenience of the House, to speak rather more fully on the retrospective aspect of this legislation when I move the next Amendment which appears in the name of the Chancellor of the Exchequer.

    9.0 p.m.

    Disregarding the question of retrospection or non-retrospection, I would simply say this in general. No doubt cases can be broadly distinguished between, on the one side, those where the person who pays and the person who receives payment are actuated by the motive of evading tax which they know they ought to pay, and, on the other side, cases where what really actuates them is something which can be described as a genuine commercial motive, and the kind of cases referred to by the hon. Member for Bromsgrove (Mr. Higgs) and others can be brought to mind. There are, I suppose, a very large number of cases —possibly the majority, although it is impossible to form any accurate estimate —where the motive is twofold, where there is a commercial motive, but where it has also prominently to be borne in mind that the payment made to the person who leaves the employment in question is one which he will get free of tax, whereas he could not by any other method obtain that particular sum without having to pay tax.

    I should like to make this general observation. After all, if all these payments are made subject to tax, as this Clause in its unamended form would do, it is not really so unreasonable. Clearly, it is perfectly reasonable—and I think all those who have spoken desire it—that tax evasion payments should be made subject to tax. Even if the Clause remains as it is and brings within its scope those payments where the motive is purely or wholly a commercial motive, I would suggest to the House that that really is not so unreasonable. [HON. MEMBERS: "Oh!"] Yes, may I say why? What are these payments that are made in return for a restrictive covenant? They are payments which are paid in lieu and which take the place of the remuneration the person who receives the payment could otherwise have earned by doing the very work which he is to be precluded from doing. That is what they are in essence. That being so, inasmuch as the recipient of the payment says, in effect, to his ex-employer, "I will not earn my living as I would otherwise have done if I had not given up this employment, but I will, instead, take from you a sum of money for not earning my living, and draw income by so doing," it is not unreasonable, I suggest, if one looks at it in the general context of tax legislation that that sum should be treated as really and truly in essence what it is, namely, income.

    May I just complete my argument? Some of these payments are received in one year; but many of these payments are made by instalments over a period of years —instalments the continued payment of which is conditional upon the continued observance of the covenant. Although it is again difficult to form any arithmetical estimate, perhaps even more cases of restrictive covenants are those in which no lump sum payment is made at all, but where the restrictive covenant is given in return for an annuity or pension; and frequently the annuity, as in the case of periodic payments, is itself made conditional upon the continued observance of the covenant.

    In all those cases—and there are very many of them in which what the employee gets is an annuity or a pension—under the existing law he has to pay tax; it is an ordinary annuity or pension which is taxable under Case III of Schedule D. That is the law as it stands, and what we are doing is bringing into the same category as the annuities and pensions which are at present paid for these restrictive payments, lump sums or payments which are paid not in one lump sum but in, say, three, four, five or six instalments. That is what we are doing, and I would suggest that we are not doing anything which is very violently in contradiction with what has been done by the current flow of legislation.

    This is a fundamental point, on which I think the right hon. and learned Gentleman is wrong when he says that the payment is to recompense income which the man would not receive during the next period for his work. For instance, in the case of my milk rounds-man, it may be said to him, "You can work for any other milkman in the world except this particular one. You can even work for a butcher in the same street," and the probability is that in a period of full employment that fellow will get a job tomorrow. He is paid that remuneration not to disturb that particular business, and it is a capital sum.

    I do not think that I ought to alter what I said. I think that what I said was right. In the case which the hon. Member mentioned, what that person is getting is something which stands in the place of the remuneration he could have earned by doing the work which he undertakes not to do. [HON. MEMBERS: "No."] I think that is the case.

    May I continue the argument that I was embarking upon? My argument had been that, after all, we were not doing anything which was violently revolutionary from the tax point of view, and we were following the current trend. There is, in addition, this circumstance to be considered: this method of payment, as, unfortunately, has been shown to be the case, has been used—and no doubt will be used again once it has become apparent, supposing we do not pass this Clause, that it is a means by which one can get payment without having to pay tax upon it—as a pure tax evasion method.

    I am sure that both Houses, quite irrespective of any personal feeling about it, would like to stop that and would be determined to stop that. The right hon. and learned Gentleman says, in effect, "Let all that be conceded. I propose a method by which we can distinguish those cases in which the motive is a genuine commercial motive, such as two businessmen might enter into who have no thought of trying to evade payment of their fair share of the country's taxation —I can distinguish those cases from the tax evasion cases." It is with that in mind that he has put down his Amendment.

    What is the Amendment? It is that the Special Commissioners should be asked to look at the sum which is paid in return for one of these restrictive covenants and evaluate the value to the company of the restrictive covenant or any parts or part of it, but only impose the tax on any amount in excess. If that proposal is to work, it seems that it is, in fact, practically impossible to call upon the Commissioners to make a valuation of that sort. We all agree on that. I earnestly submit to the right hon. and learned Gentleman and to other hon. Gentlemen who have spoken in support of his proposal that that really is practically quite impossible.

    The right hon. and learned Gentleman who held the position which I hold longer, I think, than I have held it, and with far more distinction, will remember the experience we had with Section 35 of the Finance Act, 1941. That was the Section which imposes upon the Special Commissioners the task of trying to discern, in the case of a particular transaction, whether it was really brought about by an Excess Profits Tax evasion motive. It was found by experience that it was putting on the Special Commissioners an almost intolerable burden, and this would be doing exactly the same thing. I will say why.

    Will hon. Members put themselves in the position of Special Commissioners who have one of these cases coming before them? They have the evidence of persons in the company who are closely associated with the company and who know the company far better than they do. They know the value of the person far better than the Commissioners could ever hope to know it, and they are called upon to judge on that evidence. They are, I submit, almost powerless in the face of that evidence. They may be suspicious, but how can the Special Commissioners be asked to evaluate the value to a particular company of a robust' and vigorous personality; of a person whose judgment has been relied upon for many years: how can they evaluate what the value to the company is of the wisdom of a particular director? How can they say, as may be alleged by particular witnesses, that if such and such a person leaves a company, who has for many years guided the counsels of the board of directors and whose counsel has always turned out to be wise, it is a very serious loss to the company to be deprived of his services and a serious threat to the company if he enters into competing service?

    One hon. Member said, "You might get a person who was offered a post with an American company and he was leaving the services of the British company. In that case surely it should be possible to evaluate his services?" What would the Special Commissioners have to consider? They would have to see how far the offer was a serious and genuine one. Secondly, if it were still in the negotiation stage, they would have to try to form an estimate of the likelihood of it reaching fruition and a final contract. They would have to try to estimate how much harm the ex-employee or director would do to the company he would be leaving in this country if he entered the service of a company in the United States. That would have to be estimated by a rough calculation over a period of years.

    I quite realise that accountants and juries in courts of law have to do their best to try to make estimates of that kind. Judges and juries have to evaluate the loss the person suffers through serious injury, and so on. All these things are very difficult to estimate, and experience has shown how difficult it is. It would be throwing a great burden upon the special commissioners to expect them to try to tackle this kind of task.

    The right hon. and learned Gentleman has mentioned the question of motive, and has referred to a case where one had to find out the purpose. I am sure he has in mind that in the original Amendment which we drafted for the Committee stage, and which we did not move in view of what happened there, we suggested that the test should be the purpose for which the sum was paid. We withdrew that approach and substituted something objective in order to get out of the difficulty which the right hon. and learned Gentleman has mentioned. I am sure he appreciates that we had that difficulty in mind, and sought to meet it.

    I am very much obliged to the right hon. and learned Gentleman. When I was addressing the Committee when we were discussing the retrospective action of the Clause, I said we would not in any event be able to accept the motive test. I accept that he has done his best to avoid that difficulty, but I think he has not successfully got round it, because when Special Commissioners are asked to judge upon a company and upon an individual's service to that company, they are being asked to undertake something which is very difficult. Those are the reasons wihich actuated the Government in forming the view that the advice that they ought to give the House is not to accept this Amendment.

    These three Amendments hang together, and I earnestly urge upon the House the view that the fatal difficulty about the proposal is that it would be a burden upon the Special Commissioners which it is not fair to call upon them to try to discharge. For these reasons I hope the House will agree with me that this attempt, which is accepted at once as a very genuine attempt to get over a difficulty, is not one which in practice. if it were tried out, would work.

    I followed the Solicitor-General when he pointed out that the test of motive is not the only test and that there is another and perhaps truer test, the true nature of the payments. The Solicitor-General will agree with me that when a man sells his assets the proceeds are not subject to tax, and one of the most important assets with which a man starts his business life is almost complete freedom of contract. When he sells some part of that freedom, he is, in fact, realising his capital assets. Once it has been established that the transaction is of that nature, then the test of motive, which is provided by my right hon. and learned Friend's Amendment, is an appropriate test on every logical principle.

    9.15 p.m.

    When the right hon. and learned Gentleman was speaking of the difficulty of evaluating the various elements in those payments, I wondered if he had read subsection (2) of this Clause. When listening to the speech of the hon. Member for Sowerby (Mr. Houghton) I felt convinced that both he and other hon. Members opposite had no idea what this Clause, unamended, strikes at. Let hon. Members get clear about this matter. The Clause strikes at every enforceable restrictive covenant. I understand that a restrictive covenant is not legally enforceable, even if It is made under seal, unless it is supported by valuable consideration. Therefore, every enforceable covenant is attacked by this Clause.

    I invited the Solicitor-General just now to examine subsection (2) of the Clause, and I invite the hon. Member for Sowerby to do the same. That subsection makes it clear that we are concerned not only with covenants where a sum of money is paid as consideration but with every covenant which is legally enforceable because it is supported by valuable consideration. The Solicitor-General knows that "valuable consideration" is a legal term of art which means any consideration at all, including a sum of money. The Commissioners have imposed upon them precisely that duty which the Solicitor-General spent half his speech saying that it was most unreason• able to expect them to discharge.

    The Solicitor-General shakes his head, but it is a fact that they have imposed upon them the duty of examining any consideration which supports a restrictive covenant and of evaluating it in money. Many restrictive covenants are supported by other considerations. For example, a man is given a seven years' contract of service in return for entering into a restrictive covenant. It becomes the duty of the Commission to value the long period of the contract and to attach a money value to it. The hon. Member for Sowerby who, I am glad to see, is busily engaged in reading subsection (2), then said that the whole idea of the Clause which the Front Bench were putting forward was to treat such payments as income and that they ought to be income. The Solicitor-General said the same thing. If they are to be treated as income, why are they not made subject to Income Tax. They are grossed up and made liable to Surtax.

    It is obvious that the Government know quite well that there are meritorious restrictive covenants, and therefore they have said that the only people who shall be attacked by the Clause are rich men. The distinction is not made between covenants which are good and covenants which are bad but, by this Clause, between covenants entered into by men who are liable for Surtax on their incomes and restrictive covenants entered into by men who have incomes of less than £2,000 a year.

    As to the effect of this, let us suppose that the consideration supporting a restrictive covenant is valued at £1,000. That is then treated as a net payment and grossed up to about £1,800, and Surtax is then paid on £1,800. That £1,800 is, of course, added to the current income of the person charged. In so far as it makes him liable to Surtax he pays. If it does not make him liable to Surtax no payment is due.

    I should like the Solicitor-General or one of his colleagues to explain why, if the desirable principle is that these payments should be treated as income, they are only made subject to Surtax and not to Income Tax. It is a very remarkable thing indeed that this distinction should be made and that the tax should be levied in this way by grossing up the sum paid as though it had been liable to Income Tax and then, having more or less doubled it, to charge Surtax. The object of the peculiar provision in line 41 on page 18 is to make sure that the person who is not liable to Surtax gets right away with any restrictive covenant while at the same time ensuring that a person who is liable to Surtax does not save any money on that account but has his own payment grossed up and more or less doubled first.

    The very fact that the Clause is drafted in that way shows conclusively that the Government know that there is a distinction between convenants which are meritorious and others which are not. There is the classic example of such covenants described as relating to the kind of employment in which there is a confidential element in the employment or in which the employee has to be initiated into trade secrets. Such restrictive covenants are clearly defensible upon every commercial principle. They have been defended in the courts, and I have never heard them impugned until this Debate.

    If the Government recognise that such meritorious covenants exist and go out of their way by using a curious form of words to save most of them by making the payment only liable to Surtax, why do they not do the job properly and so draft the Clause that all meritorious covenants are exempted and not only those meritorious covenants which are entered into by people who are not liable to Surtax?

    I hope that it will not be thought unseemly if someone who cannot call himself "right hon. and learned" takes part in this Debate. I intend to make as objective a contribution as I can without those legal advantages of which I was deprived by the First World War. We do not approach this subject at all from a partisan or party point of view and I want to leave some of the legal niceties behind me and try to make some contribution to the subject from a practical point of view.

    We may feel that the tax is too heavy and we may feel that it falls with undue harshness on certain individuals, but the characteristic of our country is that, on the whole, people pay their taxes, and any action against taxation must be political and through the Parliamentary processes and not by means of what I might call a sit-down strike of the taxpayer or by "jiggery-pokery" which, according to the hon. Member for Sowerby (Mr. Houghton) is the result of the marriage between acute legal minds and unscrupulous taxpayers.

    Our objection to the Government's original intentions about this matter fall under two headings. First of all—I believe that this is shared by hon. Members in all parts of the House—we have a profound distrust and dislike of retrospective legislation by which a man may be caught and, in effect, punished for doing something which was perfectly legal at the time at which he did it. We can perhaps think of exceptions where this principle of retrospection may become blurred but, nevertheless, I suggest that no legislative body can be otherwise than extremely apprehensive about the effects of retrospective legislation, not only upon the individual particularly hit but upon the general body of citizens who may for one thing be left in great uncertainty and doubt as to their day to day actions. Nor can it be denied that retrospective legislation, if carried too far and applied too frequently, would undermine the respect for the law. And if we have made one contribution more than any other to civilisation, it is the application of our common law.

    There is another feature of retrospective legislation which has not been referred to today but which I must touch upon, that is equally distasteful to us and to hon. Members opposite, and which deepens our feeling of distrust, namely, that warnings by Ministers should subsequently be taken as having an almost constitutional validity. I do not want to over-state the case but, for example, during the Steel Bill we objected to a general pronouncement by the Prime Minister on the subject being afterwards written into the Statute Book. The Prime Minister said:
    "… it is the intention of His Majesty's Government in the present Parliament to nationalise the relevant portions of the iron and steel industry."—[OFFICIAL REPORT, 21st October, 1947; Vol. 443, c. 33.]
    Now the date was the 21st October, and when we looked at the Bill, we found that any transactions of a certain kind which took place after that date were subject to a number of distraints laid down in the Statute.

    The objections to these warnings have, I admit, less force—I want to be strictly fair—when the warnings are particularised in the most careful way upon some small definable point of the Income Tax law, but we should never let ourselves slip into the error of thinking that because one Minister said, perhaps not even in this House, "If there are any more strikes of meat porters or meat drivers we shall have to introduce legislation, the effect of which will be to impose severer penalties upon those meat porters who have been engaged in these activities in the past," it would have constitutional validity.

    My hon. and learned Friend the Member for Hove (Mr. Marlowe), put the case in another way when he talked about salaries of Members of Parliament. We should regard it as intolerable if the Government introduced legislation to knock £100 a year retrospectively off the salaries of hon. Members. That would be intolerable to our idea of how a law should be made or applied. I hope I carry the House with me when I say that the principle of retrospective legislation is distasteful to all hon. Members and that they will apply it only with the utmost reluctance if forced to do so and then only on the narrowest front.

    I conclude this part of my argument by saying that if the Amendment we have put on the Paper were accepted, very little of this principle—or lack of principle—of retrospective legislation would remain. I think it necessary to state once more that no retrospective legislation would be necessary to catch payments which are in effect disguised remuneration. The ordinary. processes of the law would work, and these payments would attract tax in the hands of the recipient. I say again that we on this side of the House have no wish to see disguised remuneration escape the tax which it would have attracted if it had been open and obvious.

    9.30 p.m.

    Our second main objection is a general one which must always concern this House when legislating about anything, namely, that the desire to prevent abuse may at the same time lead us to catch and impede many bona fide transactions which may well be necessary for the smooth conduct of trade and industry.

    For example, it is the kind of dilemma which faced the Government when they introduced the Companies Act. Although I do not agree with every provision in the new Companies Act, I believe that we have steered a reasonable course and have done much to stop abuse and fraud in the joint stock companies system without at the same time unduly hampering the management of joint stock companies as a whole. That Act has meant that much useful information is now available to shareholders which previously depended upon the outlook, or the whim, rather than upon the legal obligation, of those who managed the companies. Here again, when we come to legislate concerning capital payments under restrictive covenants and the like, we must so far as lies in our power prevent bona fide transactions from being caught by a net which is thrown too wide.

    The Solicitor-General mentioned the subject of commuted contracts of service and said that if a man left an employment his contract of service was terminated by some reason, perhaps, outside his control, but that then it was right to say that the sum which he received was not capital but income. When I intervened, the right hon. and learned Gentleman told me that that sum would attract Income Tax and Surtax in the year in which it was received. That, again, shows how extremely thin is the whole argument. because if a man had, for instance, a contract at £500 a year with five years to run and he received a payment of £2,500, it would be quite wrong to treat that, not only as income, but also as attracting Income Tax and Surtax in the year in which it was received.

    The two illustrations which I want to give which seem to me to be bona fide transactions are, first, what I might call commutations of terms of service. My hon. Friend the Member for Bath (Mr. Pitman) produced some very wise and experienced arguments to support the general idea that at times it is right and proper that a contract of service should be terminated and that certain sums which are given to people whose contracts are terminated by mutual agreement should not attract tax but should be commuted in the terms of restrictive covenants of this kind.

    My other illustration is where in industry, for instance, a new process or product is developed by a brilliant person and this product or process obviously has wider application. The time comes when it has passed the experimental or laboratory stage and when its wholesale production becomes necessary. The inventor, in other words, requires to be put in touch with a large productive enterprise. This kind of thing happens almost daily, and hon. Members will think of new products of the plastic group, for instance, as an example of what I say.

    The inventor, the man with the technical knowledge, frequently wishes to sell his business to the producer. It seems to me only natural that when he sells the business he should also receive a capital sum, which would not attract tax, for what the Americans call "know-how"; in other words, that the producing company should say, "We will give you this sum so that your know-how and the developments which may still be germinating in your brain should not be given to competitors who may arise in this business."

    It is even simpler to see what happens over some of the distributive processes. I have an instance in my constituency where the Ministry of Food refused to allow another fish and chip shop to be put up in a certain road because, they said, there was not custom enough to carry two shops. I think they were quite wrong, but that is what happened. If that shop had been bought by some fish and chip magnate, it would be only natural for him to say that the man from whom he bought it must not set up in business just across the road and that he would make him a payment to prevent his doing so. That, I think, ought not to attract tax.

    I only mention these things because as far as I can see the most pertinent questions were addressed to the Solicitor-General by my hon. Friend the Member for Bromsgrove (Mr. Higgs) to which he received no answer, a habit which is becoming uncomfortably common with Ministers, even with those who take such great trouble as the Solicitor-General to meet our points. He did not answer the direct question of whether those particu- lar transactions would be caught by this Clause, and I think someone ought to do so.

    The only arguments the Government have produced against the Amendments is that they are too difficult to carry out and that the Special Commissioners are being asked to look into the matters which the Solicitor-General made look almost metaphysical. Yet these are all things which have to be summed up every day. When one engages a technical expert, one has to consider if he has the personality or power of leadership which will enable him to carry out the job because, if he has not, he is worth a third or a half of what he would be worth otherwise.

    The Solicitor-General raised a cloudy barrier against the operation of a very ordinary piece of human judgment exercised every day and said, also, that the Commissioners and then the Special Commissioners would find it impossible to weigh the evidence of men who only came from the company concerning which the restrictive covenant was in force. That argument has very little validity as a very large body of professional opinion, the great firms of chartered accountants, are available to give evidence before the Commissioners. They have been accustomed to do it for years and very much more complicated provisions come before the purview of the Commissioners and, as far as I know, it has never been suggested that their duties have not been satisfactorily discharged. I do not think there is very much force in the argument that this is an impossible thing to do. The only way in which we can get a satisfactory Clause is by adopting the Amendments put down by my right hon. and learned Friend.

    I would sum up by saying that no one wishes to see remuneration, or disguised remuneration, escape tax. On the other hand, we wish to draw the net only over disguised remuneration and do not want to tax, if we can avoid it, the bona fide transactions I have mentioned. The hon. Member for Sowerby (Mr. Houghton) said that if I engaged a skilled craftsman for three years, and paid him no salary on the undertaking that I should pay him at the end of three years a sum equivalent to the salary he would have received, that would be disguised remuneration. I agree with him, but that is not the kind of trans- action we have in mind. The kind of transaction I have in mind is where the man gets, in addition to what he would have received in salary, a capital payment for not terminating the contract within a particular period and not working for someone else. Those are two different things and I agree with the hon. Member's main contention that we want to catch disguised remuneration.

    If abuses are to be avoided on the one hand and hardships to be avoided on the other it is natural and proper to bring them to the Commissioners, who are quite competent, in my opinion, to distinguish what part of a particular payment should attract tax as disguised remuneration and what part may be regarded as undisguised remuneration. I would point out, once again, that by accepting these Amendments we would get away from what we all intensely dislike, the evil of retrospective legislation, because they require no back dating legislation to make liable sums which have been found by an impartial body to represent disguised remuneration.

    I have listened carefully to the Debate and—I think we may perhaps attribute

    Division No. 57.]


    [9.42 p.m

    Amery, J. (Preston, N.)Conant, Maj. R. J. E.Garner-Evans, E. H. (Denbigh)
    Amory, D. Heathcoat (Tiverton)Cooper, A. E. (Ilford, S.)Gates, Maj. E. E.
    Arbuthnot, JohnCooper-Key, E. M.Glyn, Sir R.
    Ashton, H. (Chelmsford)Craddock, G. B. (Spelthorne)Gomme-Duncan, Col. A.
    Assheton, Rt. Hon. R. (Blackburn, W)Cranborne, ViscountGridley, Sir A.
    Astor, Hon. M.Crookshank, Capt. Rt. Hon H F. CGrimston, Hon. J. (St. Albans)
    Baldock, J. M.Cross, Rt. Hon. Sir R.Grimston, R. V. (Westbury)
    Banks, Col. C.Crosthwaite-Eyre, Col. O EHarden, J. R. E.
    Beamish, Maj. T. V. HCrouch, R. F.Hare, Hon. J. H. (Woodbridge)
    Bell, R. M.Crowder, F P. (Ruislip-Northwood)Harris, F. W. (Croydon, N.)
    Bennett, Sir P. (Edgbaston)Crowder, Capt. John F. E. (Finchley)Harris, R. R. (Heston)
    Bennett, R. F. B. (Gosport)Cundiff, F. W.Harvey, Air-Codre A. V. (Macolesfield)
    Bennett, W. G. (Woodside)Cuthbert, W. N.Harvey, Ian (Harrow, E.)
    Bevins, J. R. (Liverpool, Toxteth)Darling, Sir W. Y. (Edinburgh, S.)Hay, John
    Birch, NigelDavidson, ViscountessHead, Brig. A. H
    Bishop, F. P.Davies, Nigel (Epping)Heald, L. F.
    Black, C. Chair, S.Henderson, John (Cathcart)
    Boles, Lt.-Col. D. C. (Wells)Deedes, W. F.Hicks-Beach, Maj. W. W
    Boothby, R.Digby, S. WingfieldHiggs, J M. C.
    Bossom, A. C.Dodds-Parker, A. D.Hill, Mrs. E. (Wythenshawe)
    Bower, N.Donner, P. W.Hill, Dr. C. (Luton)
    Boyd-Carpenter, J. A.Douglas-Hamilton, Lord MHinchingbrooke, Viscount
    Bracken, Rt. Hon. BrendanDrayson, G. BHirst, Geoffrey
    Braine, B.Drewe, C.Hogg, Hon. Q
    Bromley-Davenport, Lt.-Col. W.Dugdale, Maj. Sir T. (Richmond)Hollis, M. C.
    Browne, J. N. (Govan)Duncan, Capt. J. A. L.Holmes, Sir J Stanley (Harwich)
    Buchan-Hepburn, P. G. T.Dunglass. LordHope, Lord J
    Bullock, Capt. M.Duthie, W. S.Hopkinson, H. L. D'A
    Bullus, Wing-Commander E. E.Eccles, D. M.Horsbrugh, Miss F.
    Eden, Rt. Hon. A.Howard, G. R. (St. Ives)
    Burden, Squadron-Leader F. A.Elliot, Lieut.-Col. Rt. Hon. WalterHoward, Gerald (Cambridgeshire)
    Butcher, H. W.Erroll, F. J.Hudson, Sir Austin (Lewisham, N.)
    Carr, L. R. (Mitcham)Fisher, NigelHudson, Rt. Hon. R. S. (Southport)
    Carson, Hon. E.Fletcher, W. (Bury)Hulbert, Wing-Cdr. N. J.
    Channon, H.Fort, R.Hutchinson, Geoffrey (Ilford, N.)
    Clarke, Col. R. S. (East Grinstead)Fyfe, Rt. Hon. Sir D. P. M.Hutchison, Lt.-Com. Clark (E'b'rgh W.)
    Clarke, Brig. T. H. (Portsmouth, W.)Galbraith, Cmdr. T. D. (Pollok)Hyde, H. M.
    Clyde, J. L.Galbraith, T. G. D. (Hillhead)Jeffreys, General Sir G.
    Colegate, A.Gammans, L. D..Jennings, R

    this to the Solicitor-General—no speech I have heard has attempted to raise any prejudice on these matters. It is very easy as a taxpayer to feel aggrieved if someone is to get away with anything which simply means that the total burden of taxation falling on the rest of us is going to be heavier than otherwise it would have been. We have to look at these things and I think we have done so without prejudice at all. We must be sure that in the attempt to remove some abuses bona fide contracts necessary for the healthy expansion of our trade are not caught.

    It is for these reasons that I hope—and I reiterate that this is not a party matter—that the Government will accept our Amendments and incorporate them in the Bill. If they do so, I think we shall once again have done something very difficult, which is to curb illegitimate evasion, while, at the same time, preserving those transactions which may be of benefit to trade and industry in future.

    Question put, "That those words be there inserted in the Bill."

    The House divided: Ayes, 258; Noes, 284.

    Johnson, Howard S. (Kemptown)Morrison, Maj. J. G. (Salisbury)Spens, Sir P. (Kensington, S.)
    Jones, A. (Hall Green)Morrison, Rt Hon. W. S. (Cirencester)Stanley, Capt. Hon. R. (N. Fylde)
    Joynson-Hicks, Hon. L. WMott-Radclyffe, C. EStevens, G. P.
    Kaberry, D.Nabarro, G.Steward, W. A. (Woolwich, W.)
    Kerr, H. W. (Cambridge)Nicholls, H.Stewart, J Henderson (Fife, E.)
    Lambert, Hon. G.Nicholson, GStorey, S.
    Lancaster, Col. C. G.Noble, Comdr. A. H. P.Strauss, Henry (Norwich, S.)
    Langford-Holt, J.Nugent, G. R. H.Stuart, Rt. Hon. J. (Moray)
    Law, Rt. Hon. R. K.Nutting, AnthonySummers, G. S.
    Leather, E. H. C.Oakshott, H. D.Sutcliffe, H.
    Legge-Bourke, Maj. E. A. H.Odey, G. W.Taylor, C. S. (Eastbourne)
    Lennox-Boyd, A. TOrmsby-Gore, Hon. W. DTaylor, W. J. (Bradford, N.)
    Lindsay, MartinOrr, Capt. L. P. S.Teeling, William
    Linstead, H. N.Orr-Ewing, Charles Ian (Hendon, N.)Thomas, J. P. L. (Hereford)
    Liewellyn, DOrr-Ewing, Ian L. (Weston-super-Mare)Thompson, K. P. (Walton)
    Lloyd, Rt. Hon. G. (King's Norton)Osborne, C.Thompson, R. H. M. (Croydon, W.)
    Lloyd, Maj. Guy (Renfrew, E.)Perkins, W. R. DThorneyeroft, G. E. P. (Monmouth)
    Lloyd, Selwyn (Wirral)Peto, Brig. C. H. MThornton-Kemsley, C. N.
    Longden, G. J. M. (Hats, S. W.)Pickthorn, KThorp, Brigadier R. A. F
    Low, A. R. WPitman, I. J.Tilney, John
    Lucas, Major Sir J. (Portsmouth, S.)Powell, J. EnochTouche, G. C.
    Lucas, P. B. (Brentford)Price, H. A. (Lewisham, W.)Turton, R. H.
    Lucas-Tooth, Sir H.Prior-Palmer, Brig. O.Tweedsmuir, Lady
    Lyttelton, Rt. Hon. O.Profumo, J. D.Vane, W. M. F.
    McAdden, S. J.Raikes, H. V.Vaughan-Morgan, J. K.
    McCallum, Maj. D.Rayner, Brig. RVosper, D. F.
    McCorquoqale, Rt. Hon. M. S.Redmayne, M.Wakefield, E. B. (Derbyshire, W.)
    Macdonald, Sir P (I. of Wight)Remnant, Hon. P.Wakefield, Sir W. W. (St. Marylebone)
    Mackeson, Brig. H. R.Renton, D. L. M.Walker-Smith, D. C.
    McKibbin, ARoberts, P. G. (Heeley)Ward, Hon. G. R. (Worcester)
    Mckie, J. H. (Galloway)Robinson, J Roland (Blackpool, S.)Ward, Miss I. (Tynemouth)
    Maclay, Hon. J. S.Robson-Brown, W. (Esher)Waterhouse, Capt. C.
    Maclean, F. H. R.Roper, Sir H.Watkinson, H.
    Macleod, lain (Enfied, W.)Ropner, Col. L.Watt, Sir G. S. Harvie
    MacLeod, John (Ross and Cromarty)Ross, Sir R. D. (Londonderry)Webbe, Sir H. (London)
    Macmillan, Rt. Hon. Harold (Bromley)Russell, R. S.White, J. Baker (Canterbury)
    Macpherson, N. (Dumfries)Ryder, Capt. R. E. D.Williams, C. (Torquay)
    Manningham-Buller, R. ESandys, Rt. Hon D.Williams, Gerald (Tonbridge)
    Marlowe, A. A. H.Scott, DonaldWilliams, Sir H. G. (Croydon, E.)
    Marples, A. E.Shepherd, W. S (Cheadle)Wills, G.
    Marshall, D. (Bodmin)Smiles, Lt.-Col. Sir W.Wilson, Geoffrey (Truro)
    Marshall, S. H. (Sutton)Smith, E. Martin (Grantham)Winterton, Rt. Hon. Earl
    Maude, A. E. U. (Ealing, S.)Smithers, Peter H. B. (Winchester)Wood, Hon. R.
    Maude, J. C. (Exeter)Smithers, Sir W (Orpington)Young, Sir A. S. L.
    Maudling, R.Smyth, Brig. J. G. (Norwood)
    Medlicott, Brigadier F.Snadden, W. McN


    Mellor, Sir J.Soames, Capt. C.Mr. Studholme and
    Malson, A. H. E.Spearman, A. C. MMajor Wheatley.
    Moore, Lt.-Col. Sir TSpence, H. R. (Aberdeenshire, W)


    Acland, Sir RichardBrown, T. J. (Ince)Davies, S. O. (Merthyr)
    Adams, RichardBurke, W Freitas, Geoffrey
    Albu, A. HBurton, Miss E.Deer, G.
    Allen, A. C. (Bosworth)Butler, H. W. (Hackney, S.)Delargy, H. J.
    Allen, Scholefield (Crewe)Callaghan, JamesDiamond, J.
    Anderson, F. (Whitehaven)Carmichael, JamesDodds, N. N.
    Awbery, S. S.Castle, Mrs. B. A.Donnelly, D.
    Ayles, W. H.Champion, A. JDonovan, T. N.
    Bacon, Miss A.Chetwynd, G. RDriberg, T. E. N.
    Baird, JClunie, J.Dugdale, Rt. Hon. J. (W. Bromwich)
    Balfour ACocks, F. S.Dye, S.
    Barnes, Rt. Hon A. J.Coldrick, W.Ede, Rt. Hon. J. C.
    Bartley, P.Collick, P.Edelman, M.
    Benson, G.Collindridge, F.Edwards, John (Brighouse)
    Beswick, F.Cook, T. F.Edwards, Rt. Hon. N. (Caerphilly)
    Bevan, Rt. Hon A. (Ebbw Vale)Cooper, G. (Middlesbrough, W.)Edwards, W. J. (Stepney)
    Bing, G. H. C.Cooper, J. (Deptford)Evans, Albert (Islington, S.W.)
    Blackburn, A. R.Cove, W. G.Evans, E. (Lowestoft)
    Blenkinsop, A.Craddock, George (Bradford, S.)Evans, S. N. (Wednesbury)
    Blyton, W. R.Crawley, A.Ewart, R.
    Boardman, H.Cripps, Rt. Hon. Sir S.Fernyhough, E.
    Booth, A.Crosland, C. A. RField, Capt. W. J.
    Bottomley, A. G.Crossman, R. H. S.Finch, H. J.
    Bowden, H. W.Cullen, Mrs. A.Fletcher, E. G. M. (Islington, E.)
    Bowen, R.Daggar, GFollick, M.
    Bowles, F. G. (Nuneaton)Daines, P.Foot, M. M.
    Braddock, Mrs. E. M.Dalton, Rt. Hon. H.Forman, J. C.
    Brockway, A FennerDarling, G. (Hillsboro')Fraser, T. (Hamilton)
    Brook, D. (Halifax)Davies, A Edward (Stoke, N.)Freeman, J. (Watford)
    Brooks, T. J. (Normanton)Davies, Ernest (Enfield, E.)Gaitskell, Rt. Hon. H. T. N
    Broughton, Dr A. D. D.Davies, Harold (Leek)Ganley, Mrs. C. S.
    Brown, George (Belper)Davies, R J. (Westhoughton)Gibson, C. W.

    Gilzean, A.Longden, F. (Small Heath)Ross, William (Kilmarnock)
    Glanville, J. E. (Consett)McAllister, G.Royce, C.
    Greenwood, A. W. J. (Rossendale)MacColl, J. E.Shacklelon, E. A. A
    Greenwood, Rt. Hn. Arthur (Wakefield)Macdonald, A. J. F. (Roxburgh)Shurmer, P. L. E.
    Grey, C. F.McGhee, H. G.Silverman, J. (Erdington)
    Griffiths, D. (Rother Valley)McGovern, J.Silverman, S. S. (Nelson)
    Griffiths, Rt. Hon. J. (Lianelly)McInnes, J.Simmons, C J
    Griffiths, W. D. (Exchange)Mack, J. DSlater, J.
    Gunter, R. J.McKay, J. (Wallsend)Smith, Ellis (Stoke, S.)
    Hale, J. (Rochdale)Mackay, R. W. G. (Reading, N.)Snow, J. W.
    Hale, Leslie (Oldham, W.)McLeavy, F.Sorensen, R. W.
    Hall, J. (Gateshead, W.)MacMillan, M. K. (Western Isles)Soskice, Rt. Hon. Sir F
    Hamilton, W. WMcNeil, Rt. Hon. H.Steele, T.
    Hannan, W.MacPherson, Malcolm (Stirling)Stewart, Michael (Fulham. E.)
    Hardy, E. A.Mainwaring, W. H.Strachey, Rt. Hon. J
    Hargreaves, AMallalieu, E. L. (Brigg)Strauss, Rt. Hon. G R. (Vauxhall)
    Harrison, J.Mallalieu, J. P. W. (Huddersfield, E.)Stross, Dr. B.
    Hastings, Dr. SomervilleMann, Mrs. J.Summerskill, Rt. Hon. Edith
    Hayman, F. H.Manuel, A. C.Sylvester, G. O.
    Henderson, Rt. Hon. A. (Rowley Regis)Marquand, Rt. Hon. H. ATaylor, H. B. (Mansfield)
    Herbison, Miss M.Mathers, Rt. Hon. GeorgeTaylor, R. J. (Morpeth)
    Hewitson, Capt. MMellish, R. J.Thomas, D. E. (Aberdare)
    Hobson, C. R.Messer, F.Thomas, George (Cardiff)
    Holman, P.Middleton, Mrs. L.Thomas, I O. (Wrekin)
    Holmes, H. E. (Hemsworth)Mikardo, IanThomas, I. R. (Rhondda, W.)
    Houghton, DouglasMitchison, G. R.Thorneycroft, Harry (Clayton)
    Hoy, J.Moeran, E. W.Thurtle, Ernest
    Hubbard, T.Monslow, W.Timmons, J.
    Hudson, J. H. (Ealing, N.)Moody, A. S.Tomney, F.
    Hughes, Emrys (S. Ayr)Morgan, Dr. H. B.Turner-Samuels, M
    Hughes, Hector (Aberdeen. N.)Morley, R.Usborne, Henry
    Hughes, Moelwyn (Islington, N.)Morris, P. (Swansea, W.)Vernon, Maj. W. F
    Hynd, H. (Accrington)Mort, D. L.Viant, S. P.
    Hynd, J. B. (Attercliffe)Moyle, A.Wallace, H. W
    Irvine, A. J. (Edge Hill)Mulley, F. WWatkins, T. E
    Irving, W. J. (Wood Green)Nally, W.Webb, Rt. Hon M. (Bradford. C.)
    Isaacs, Rt. Hon. G. AO'Brien, T.
    Janner, B.Oliver, G. H.Weitzman, D.
    Jay, D. P. T.Orbach, M.Wells, P. L. (Faversham)
    Jeger, G. (Goole)Padley, W. E.Wells, W. T (Walsall)
    Jeger, Dr. S. W. (St. Pancras, S.)Pannell, T. C.West, D. G.
    Jenkins, R. H.Pargiter, G. A.Wheatley, Rt. Hn. John (Edinb'gh, E.)
    Johnson, James (Rugby)Parker, J.White, Mrs. E. (E. Flint)
    Johnston, Douglas (Paisley)Paton, J.White, H. (Derbyshire, N.E.)
    Jones, D. T. (Hartlepool)Peart, T. F.Whiteley, Rt. Hon. W.
    Jones, Frederick Elwyn (West Ham, S.)Poole, CecilWigg, George
    Jones, Jack (Rotherham)Popplewell, E.Wilcook, Group-Capt. C. A. B.
    Jones, William Elwyn (Conway)Porter, G.Wilkins, W. A.
    Keenan, WPrice, M Philips (Gloucestershire, W.)Willey, F. T (Sunderland)
    Kenyon, CPryde, D. J.Willey, O. G. (Cleveland)
    Key, Rt Hon. C. W.Pursey, Comdr. H.Williams, Ronald (Wigan)
    King, H. M.Rankin, J.Williams, Rt. Hon. T. (Don Valley)
    Kinghorn, Sqn.-Ldr. ERees, Mrs. D.Williams, W. T. (Hammersmith, S.)
    Kinley, J.Reeves, J.Wilson, Rt. Hon. J. H. (Huyton)
    Lang, Rev, G.Reid, T. (Swindon)Winterbottom, I. (Nottingham, C.)
    Lee, F. (Newton)Reid, W. (Camlachie)Winterbottom, R. E. (Brightside)
    Lee, Miss J. (Cannock)Rhodes, H.Wise, Major F. J
    Lever, L. M. (Ardwick)Richards, RWoodburn, Rt. Hon. A
    Lever, N H. (Cheetham)Robens, A.Woods, Rev. G. S
    Lewis, A W J. (West Ham, N.)Roberts, Emrys (Merioneth)Wyatt, W. L.
    Lewis, J. (Bolton, W.)Roberts, Goronwy (Caernarvonshire)Yates, V. F.
    Lindgren, G. S.Robertson, J. J. (Berwick)
    Lipton, Lt.-Col. M.Robinson, Kenneth (St. Pancras, N.)


    Logan, D. G.Rogers, G. H. R. (Kensington, N.)Mr. Pearson and Mr. Sparks

    I beg to move, in page 19, line 21, after "that," to insert—

    "(a) the said preceding provisions shall not apply to any sums paid or consideration given if either—
  • (i) the undertaking in question was given on or before the sixth day of April, nineteen hundred and forty-eight; or
  • (ii) the sum or consideration is or was paid or given at or after the time of the retirement of the individual in question from the service of the person under whom the office or employment in question was held and is or was so paid or given in pursuance of a provision in that behalf which expressly provides for the payment or giving thereof at or after that time and is embodied in a contract made in writing on or before the eighteenth day of April, nineteen hundred and fifty, or reduced to writing on or before that date; or
  • (iii) the sum or consideration is or was paid or given in pursuance of an express provision in that behalf embodied in a contract made in writing on or before the eighteenth day of April, nineteen hundred and fifty, or reduced to writing on or before that date, being a contract the main purpose of which was to provide for the transfer of a trade or part of a trade or for the transfer of the controlling interest in any body corporate; and
  • (b)."
    This Amendment is designed to implement the proposal I made, when we were discussing this Clause in Committee, to deal with the retrospective aspect of it. I said that, in the first place, I would carry out the purpose of an Amendment which was down in the name of the hon. and learned Member for Norwich, South (Mr. H. Strauss). That Amendment proposed that all undertakings entered into before the warning was given by my right hon. and learned Friend on 6th April, 1948, should be altogether excluded from the scope of the Clause. Sub-paragraph (i) does exclude, for all purposes, all such undertakings. That is to say, whatever the undertaking was that was entered into or whether, if I may use loose language, it was a tax evasion undertaking or a genuine commercial one, it is outside the scope of the Clause. I think that implements the first undertaking I gave.

    We come now to sub-paragraphs (ii) and (iii). When discussing the Bill during the Committee stage, I said that I would go as far as I could to try to eliminate from the Clause what I may loosely call genuinely commercial transactions, even though they were undertakings entered into after the date of the warning but before the date of the Budget statement of this year. These two sub-paragraphs are designed to do that. They set about to do it in this way. Broadly speaking I think one can say that those undertakings which are given when an employee is still intending to remain in the employment of the employer are, generally speaking a type of undertaking which have tax motive behind them.

    Therefore, what I have done is to take out from the operation of the Clause undertakings which provide for payment when an employee leaves the service. Any undertaking of that kind entered into after the warning, but before this year's Budget statement, is outside the scope of the Clause. Hon. Members will note that payments under those undertakings are taken outside the Clause whether they are made before the Act comes into force or afterwards. In other words, payments by instalments are entirely out of the Clause, whether they are made before the Act comes into operation or after.

    The second category of undertaking which, broadly speaking, one can say is likely to be actuated by a genuine commercial motive is that which is dealt with in sub-paragraph (iii), and that is the undertaking which is given by an employee or a director on the occasion of the sale of a business or the sale of a controlling interest in the business. There again, whether the payment is made before or after the Measure comes into force, it is not caught by the Clause. I submit that one can say that those two categories of undertaking comprehend most of those that are likely to be actuated by genuine commercial motives, and the effect of my Amendment would be that I would take out of the operation of the Clause all pre-Budget undertakings of that sort.

    When we were discussing this on the Committee stage, two general trends of opinion were expressed. Some hon. Members declared themselves against any kind of retrospective operation, and quite obviously this Amendment will not satisfy those hon. Members. But other hon. Members, amongst whom was the right hon. and learned Member for West Derby (Sir D. Maxwell Fyfe), accepted that retrospective legislation was permissible in some cases. I hope that he may be able to agree that this Amendment goes as far as the Government can be expected to go in order to meet the kind of point he had in mind.

    The right hon. and learned Gentleman put down an Amendment which would have the effect of applying a subjective motive test—and hon. Members will know what I mean by that, because that is what we have been discussing on a previous Amendment. I intimated that I did not think that I could see my way to accept an Amendment on those lines. Short of accepting such an Amendment, I suggest that I have gone as far as I can to try to take out innocent transactions entered into before the Measure comes into force.

    The right hon. and learned Gentleman has dealt with sums paid arising out of the retirement of a person, or sums paid on

    "the transfer of a trade or part of a trade or for the transfer of the controlling interest in any body corporate."
    Will he explain what is the difficulty in excluding that type of transaction in the future if he has been able to do it retrospectively?

    If we exclude that type of contract in the future, it will give rise to wide possibilities of evasion, particularly in the case of sales of business not at arm's length—sales of business between relatives, and so on. It would be easy to evade the operation of the Clause if we excluded that type of transaction for future purposes. It may well be that we have excluded some not innocent transactions already by this Amendment, but I could not go further and provide an opportunity of evasion on a very large scale by making the exclusion apply to the future as well as to the past.

    There is a traditional warning against looking gift horses in the mouth, and although it is difficult to refrain from doing so when the gift horse has more resemblance to a mule and has neither pride of ancestry nor hope of posterity, the overriding principle still exists and we must be thankful for such small mercies as the right hon. and learned Gentleman has given us in this Amendment. Having said that, I should like to say that the right hon. and learned Gentleman showed great consideration in displaying his intentions before we dealt with these matters by Amendments on the Order Paper, and in ascertaining our views. We are grateful to him for the consideration which he showed to us and which he always shows to the House.

    10.0 p.m.

    I should like to make two points. The first is that paragraph (i) of the Amendment meets the point raised in the Amendment put down by my hon. and learned Friend the Member for Norwich, South (Mr. H. Strauss), in ruling out all undertakings before 6th April, 1948. But I think the difficulty with regard to paragraphs (ii) and (iii) is present to all our minds. The right hon. and learned Gentleman has said that they cover, in his view, what are the best approximations he can give to commercial transactions and, having covered them up to 18th April, 1950, as soon as we get beyond that date he says it is impossible to cover them for the future. That is a non sequitur which we cannot accept.

    I do not want to reiterate the Debate we have just had on the last Amendment by going into that point again, but I must put on record our disappointment that it has not been possible to find any way, either by test such as we tried to do or by description such as the right hon. and learned Gentleman has used in paragraphs (ii) and (iii), to make this distinction for future transactions and for future years. That must be a matter of deep regret for two reasons. First of all, we think that there will be unfairness. Secondly, we think that there will be a handicap on genuine commercial transactions and we establish the point which has been made on many occasions—the retention of valuable personnel and even more valuable ideas and expertise in this country when there will be serious and heavy temptations for those responsible for them to go elsewhere.

    For those reasons I can only express combined appreciation of the fact that the right hon. and learned Gentleman has met us on paragraph (i) with disappointment that he has not been able to deal with what we believe is the really serious problem left open by the other paragraphs.

    The Amendment on the Order Paper in my name, which you ruled we might discuss at this time, Mr. Speaker, is really a separate issue, if I may say so in all humility. Both of these Amendments deal with an issue of the future. I want to get this absolutely clear with the right hon. and learned Gentleman—whether or not we are here trying to stop compensation for loss of office with no restrictive covenant attached thereto. As I see it, the whole field of tax evasion still remains open provided no restriction is included. [Interruption.] On a point of order. On a major Amendment, earlier today, Mr. Speaker, you asked me to speak on the Amendments arising out of the Amendment in the name of the Chancellor of the Exchequer.

    That is the first Amendment—in page 20, line 12, at end. insert:

    (6) It is hereby declared that this section shall not apply in relation to any such undertaking as is mentioned in paragraph (a) of subsection (1) of this section in a case where such undertaking is given in connection with the sale of a trade or business or assets thereof or of shares conferring the controlling interest in a company carrying on a trade or business.
    If the hon. Member wants to talk on other Amendments following, they will be called separately. His name is down on the next Amendment; it is not down on the one after that. If he wishes to speak on the first of those two, that will be called separately.

    The right hon. and learned Gentleman has, as I said previously tonight, got himself into difficulty by trying to legislate in a general Act of Parliament for particular cases which have offended his party politically; and it is that which has led him into the numerous difficulties in which he now finds himself. I am not in the position of my right hon. and learned Friend the Member for West Derby (Sir D. Maxwell Fyfe) in relation to a gift horse, because, as far as my own point of view in this matter is concerned, I have not received any gift at all. I do want the attention of the Solicitor-General, when he is able to give it. I hope he will, if he can find time to do so, cast his memory back to what took place when he gave the pledges which he gave at Committee stage, and consider whether he has—

    We are now dealing with Clause 23 and the Chancellor's Amendments, and the attempt made by the right hon. and learned Gentleman and the Solicitor-General to fulfil the pledges which they gave on a previous occasion. It has become abundantly clear, as we see when we look at the words of the Amendments, that they have found it impossible to fulfil the pledges which the Solicitor-General gave, when he said he would introduce words which would, in fact, exempt innocent transactions. The actual words he used were:

    "We shall try, if we can … to find words … which will except what I have broadly described as innocent transactions, that is to say transactions which were not entered into with a view to tax evasion."—[OFFICIAL REPORT, 19th June, 1950; Vol. 476, c. 881.]
    In spite, however, of the attempt to do so, the right hon. and learned Gentleman has found it impossible to carry out that pledge, and he is, in fact, now bound to include not only contracts which were tax evasions but also contracts which were not tax evasions, and the reason for that is that the right hon. and learned Gentleman, in common with his party, prejudged the whole of this issue, and were not prepared for the ordinary tax laws to operate; but they decided that two gentlemen had offended against their party views. That is, of course, borne out by the quotation, with which I need not weary the House again because I have referred to it once before tonight already.

    The right hon. and learned Gentleman said on the previous occasion when we debated this matter, "We give an undertaking that we shall introduce legislation to meet the position as far as possible, and I shall see that it does not exempt those two particular gentlemen." [Interruption.] That, of course, meets with the approval of hon. Gentlemen opposite. It certainly can be said that that part of the right hon. and learned Gentleman's undertaking has been carried out. He has done his best to prejudge this issue, and instead of letting the courts determine whether there has been a case of tax evasion or not he has deliberately brought in specialised legislation for the sole purpose of prejudging that issue, and it is an unworthy thing for this House to approve.

    I want to refer to one other aspect of the matter in which the right hon. and learned Gentleman has failed to honour an undertaking. Again I make no complaint against him, for I realise that he gave an undertaking it was impossible to keep. He said on the same occasion as that to which I have already alluded:
    "I hope we shall be able not merely to cover payments under such covenants before the Act comes into force, but after."—[OFFICIAL REPORT, 19th June, 1950; Vol. 476, c. 883.]
    Now the right hon. and learned Gentleman has had to agree that he has not been able to honour that undertaking as regards transactions that come after. I do not want to detain the House further on this matter—[Interruption.] I know hon. Gentlemen opposite do not like honour being defended, but I am perfectly ready to go on to do so. If, as far as we know, transactions have been honourably entered into they should be honourably safeguarded by this House. On that, I do not expect any assistance from hon. Members opposite. If pledges are given in this House they should be kept; and I do not expect any assistance from hon. Members opposite in regard to that either. I only say that it will be recorded that here is another broken pledge added to the long list of pledges broken by the Socialist Government.

    There is one element in this Amendment which is extremely offensive to my mind—and I believe not to my mind alone. I refer to the date of 6th April, 1948. Without entering into the whole question, which has been so much discussed, of the rights and wrongs of retrospection, I submit that it would be far better for any other date than 6th April, 1948, to have been written into this Amendment. There is only one reason why that date is there: because it is the date upon which the Chancellor of the Exchequer made a certain statement in his Budget speech, which has been described as a warning.

    The implication of that date in this Amendment is that after that date those whom it concerns should have known better. In other words, it is a statement of the principle that a person desiring to know what he may lawfully do and what his lawful position is should have regard to, amongst other things, statements made by Chancellors of the Exchequer and other Ministers. Now that principle, which is clearly present in the writing of that date into this Amendment, is a principle which overthrows the whole basis of the ascertainability of the law.

    It is a principle of our constitution that a man shall be able to ascertain what he may lawfully do and what he may lawfully not do, and how the law relates to his circumstances. Hitherto he has been able to do so by consulting statute law and case law, and if he himself or his advisers have satisfied themselves of the state of statute law and of case law—

    The hon. Gentleman now seems to be talking on the Clause and not on the Amendment.

    I was addressing myself to paragraph (i) of the Amendment, in which the date 6th April, 1948, is made the operative date, and I was arguing that that is the wrong date to choose. I was doing so by showing that on our present understanding a man's knowledge of the law is derived from statute law and case law as he is advised of it by his legal advisers. If we accept this Amendment with this date a man cannot be satisfied of his legal position merely in that way. He has also got to read HANSARD; he has got to ascertain whether perhaps some statement which bears upon his case or his circumstances has been made by a Chancellor of the Exchequer; and he has got, as best he can, to interpret that statement in HANSARD.

    In the particular case which is relevant he might have considerable difficulty in so interpreting such a statement, because the Chancellor's statement was a very qualified one. The passage has been quoted many times in the course of these Debates, but the words to which I refer are these. He said that such devices as he gave a warning against
    "are intolerable in our present state of affairs."—[OFFICIAL REPORT. 6th April, 1948 Vol. 449, c. 70.]
    Now that is a very qualified warning; it is a very subjective statement, and very much an expression of opinion. If a man, in order to ascertain what he may or may not do and how he stands in the eyes of the law, is to have regard, not to statutes, not to pronouncements of judges, but to expressions of Chancellors of the Exchequer as loosely worded as that, then he can never be sure what his position is.

    I observe that this principle goes a great deal further. It so happens that in the present case it is the same Chancellor of the Exchequer who spoke in 1948 who is now bringing forward this Finance Bill. But would not the same arguments be used had there been a change of Government and a change of Chancellor of the Exchequer? One of my right hon. Friends on the Opposition Front Bench might have given this warning in 1948 and might now, in 1950—

    10.15 p.m.

    The hon. Gentleman is going too wide. He is discussing the Clause as a whole. This is a fairly limited Amendment, and we have discussed the Clause once before.

    I am very sorry, Mr. Speaker. I was endeavouring to restrict my remarks to the question of the date of 6th April, 1948, to which my objection relates. I object to that date because it has been chosen as being the date on which the so-called warning was given by the Chancellor of the Exchequer. I argue that if we accept the principle which is involved in writing that date into the Clause, then we are imposing on everyone who desires to know his position the necessity of consulting not only the law but the statements in HANSARD of right hon. Gentlemen on both sides of the House and, for all I know, the statements of party programmes of parties who have not yet come into office.

    I would further illustrate the danger of accepting this principle by drawing attention to another element in this warning. The Chancellor of the Exchequer instanced sums paid as compensation for loss of office. I understand that in the present case he is not catching compensation for loss of office, but if we accept the principle, as we are doing, that his warning was a valid statement of what the law was going to be, then any Chancellor of the Exchequer could come to this House at any time in the future and bring in a retrospective provision from 6th April, 1948, to render taxable payment of compensation for loss of office. This is a principle which is indefinitely extendable, and which we accept by the simple act of writing in this date. Therefore, without regard to the general question of retrospection, I want to lodge my most emphatic protest against the acceptance, with all its implications, of that particular date.

    I take it that the right hon. and learned Gentleman maintains that he has fulfilled his undertaking in Committee to exclude from the purview of the Clause certain payments made before the passing of the Act in relation to agreements made before the passing of the Act and, also, he is excluding certain payments made in respect of such agreements even though the payments may be made after the passing of the Act. Those payments he has defined in two sets of circumstances—one the retirement from an employment and the other a transfer of a trade or part of a trade or of the controlling interest in a body corporate.

    I understand that his only objection to excluding such transactions in the future is the difficulty of finding a formula and he considers it would be impossible to find a formula whereby such transactions,could be excluded, because their inclusion would make tax evasion so easy. I see that the learned Solicitor-General and the Chancellor of the Exchequer both nod their heads in agreement so I take it that if it is possible for a formula to be produced then it might be possible in a future Finance Bill to exclude such transaction.

    I would urge on the right hon. and learned Gentleman that there are certain instances where substantial damage would be done by making payments under such transactions taxable. For example, on the transfer of a business or the controlling interests in a business, it may be that the purchasers do not wish to employ the manager who has been in the employment of the vendors. It is very much better that that gentleman should get a capital sum in respect of his restrictive covenant not to enter into the employment of a competing firm.

    It would be better to commute that sum and get rid of the contingent liability right away rather than to provide for annual payments. It is a thing which is very often done, and I do not think it is the desire of either of the right hon. and learned Gentlemen to catch such transactions if such a formula can be devised. Both right hon. and learned Gentlemen agreed with me on that point, and I hope through the ingenuity of people on both sides of the House that it will be possible in a future Finance Bill to put that right.

    Amendment agreed to.

    Further Amendments made: In page 19, line 25, at the end, insert:

    For the purposes of this subsection, a director of a company shall be deemed to be in the service of that company and to hold his office as such under that company.

    In line 28, after "undertaking," insert:

    "given after the sixth day of April nineteen hundred and forty-eight, and."—[The Solicitor-General.]

    The following Amendment stood on the Order Paper in the name of Mr. SELWYN LLOYD:

    In page 20, line 12, at end, insert:

    (6) It is hereby declared that this section shall not apply in relation to any such undertaking as is mentioned in paragraph (a) of subsection (1) of this section in a case where such undertaking is given in connection with the sale of a trade or business or assets thereof or of shares conferring the controlling interest in a company carrying on a trade or business.

    The purpose of this Amendment is to ensure that an agreement for the payment of compensation for loss of office shall not be caught by the terms of the Clause as it is after the Amendment introduced by the right hon. and learned Gentleman is included. If the Solicitor-General will interrupt me straight away and tell me that if in his view such agreements for payment by way of compensation for loss of office would not be caught by the Clause it would enable me to curtail the discussion on my Amendment. Before moving the Amendment I will give way to the right hon. and learned Gentleman.

    My view would be that if it is merely a contract for compensation for loss of office and does not contain a restrictive covenant, that is, a covenant restricting him in the pursuit of certain activities, then it is not within this Clause.

    In view of that quite definite undertaking from the right hon. and learned Gentleman of his interpretation of the Clause, I do not propose to move the Amendment.

    Mr. Lionel Heald