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Orders Of The Day

Volume 529: debated on Thursday 8 July 1954

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Finance Bill

As amended (in Committee and on recommittal), further considered.

Clause 16—(New Provision For "Investment Allowances")

3.58 p.m.

I beg to move, in page 11, line 19, to leave out "instead of," and to insert "in addition to."

We make no apology for returning to this important Clause on investment allowances. The Amendment I am moving was discussed in the Committee as one of a number of Amendments put down by my hon. and right hon. Friends. We have selected this particular one as, on the whole, the most attractive of the various alternatives which we put to the Government in Committee.

The purpose of the Amendment is to allow the initial allowance to continue in addition to the investment allowance in the case of industrial building. The Chancellor of the Exchequer gave us an undertaking in Committee that he would look at the whole question of allowances for industrial building between the Committee and the Report stages. He said:
"I may be of the same opinion on Report, but as this is a point on which we wish to keep the goodwill of industry and get an improvement in investment, I will give the undertaking to look at all the speeches and all the Amendments again before the Report stage."—[OFFICIAL REPORT, 16th June, 1954; Vol. 528, c. 2035.]
We had hoped that, as a result of that examination, the Chancellor of the Exchequer would have felt able to put down a Government Amendment to meet us on the point that we are making, but as he has not done so we are once again arguing that some change should be made in the Bill as regards allowances for industrial building.

I do not need to go over the argument at great length but, briefly, this is our case. We believe that it is right that industrial building should be stimulated. I should like particularly to refer to the, not one but several, speeches of my hon. Friend the Member for Ashton-under-Lyne (Mr. Rhodes), who has stressed the great importance to industry of being given some encouragement in this direction. He has gone into this matter in detail and has made a number of suggestions, including, for instance, that there should be greater standardisation of types of factories for particular purposes. I understand that his suggestions have been very well received in industry generally.

4.0 p.m.

Therefore, I say that industrial building should be encouraged. I do not think that the Government are at odds with us in that. It is true that the Chancellor of the Exchequer said in Committee that the Government gave priority, as it were, to investments in plant and machinery, but he certainly also wished to stimulate industrial building.

The question then arises as to how an increase in industrial building is possible on physical grounds. Obviously, if the Government had been able to show that in present circumstances there was really no possibility of additional building resources being made available for industrial building, that would have been a good argument against providing any further stimulus: but that is not the position according to the Chancellor of the Exchequer. This is what the right hon. Gentleman said on 16th June:
"The right hon. Gentleman asked whether industrial building was living up to its resources or whether there was any slack. Unfortunately there is more slack in the building industry than in other industrial sectors. It is possible and important that this sector of the building industry, namely, industrial building, should come to the front whether there is slack or not. It is important to encourage it for the sake of industrial output, While I am not acknowledging that there is much slack in the building industry"—
that was slightly contradictory to what the right hon. Gentleman had said before—
"I say that this is a priority and that in any case the matter is important."—[OFFICIAL REPORT, 16th June, 1954; Vol. 528, c. 2032–3.]
It is quite evident, therefore, that, so far as physical capacity is concerned, the Chancellor is satisfied that it is available.

The next question is whether the provisions of the Bill are designed or are likely to encourage industrial building. I do not think that now there can be any doubt about what the effects of the change-over from investment allowances to initial allowances amount to. We have stressed continually from this side of the House and in Committee that the change from initial allowance to investment allowance leaves the industrialist who wishes to build, as before, with the 10 per cent. allowance in the first year. In the case of the investment allowance, all that it does is to add an extra five years at 2 per cent. from the forty-fifth to the fiftieth years of the life of the building. I cannot see how anybody can argue that this small concession, to be enjoyed 45 years hence, is likely to have any significant effect on the willingness of any industrialist to go in for new building.

I am not criticising the Government wholly for the fact that there is so little stimulus. There is no doubt that the law as it stands has, in recent years certainly, given greater encouragement to the purchase of plant and equipment than to industrial building. I said in Committee that there were good reasons for that because of the tightness of the building industry and the scarcity of resources which was natural after the war. But whatever the reason may be, there is an enormous difference in the kind of encouragement which the investment allowance gives to introduce new plant and machinery, not only because it is a higher rate—20 per cent.—but also because of the way in which the depreciation is calculated, on a steadily reducing basis, and because the rate of life of the plant and machinery is so much shorter.

Therefore, there can be no doubt that there is this difference between the encouragement given by the investment allowance as it now stands to industrial building, on the one side, and to the introduction of plant and machinery, on the other side. The series of Amendments that we moved last time were designed to correct that. We were encouraged by what the Chancellor had to say on this subject during Second Reading to put down our Amendments. He made it plain that he recognised that we had a point of considerable substance, and we were very disappointed when he agreed to none of the Amendments during the Committee stage. Now, we return to this particular Amendment, which on the whole we prefer to the others.

What the Amendment does is to allow the initial allowance to continue so that, in effect, the industrialist who decides to go in for new building is now able to obtain, not only the investment allowance at 10 per cent. in the first year, but also an initial allowance of the same amount of 10 per cent. Against that, he would lose the last five years of the capital allowance, which he would receive under the Bill as it now stands. In other words, the industrialist gets the writing off in the first year—the full 10 per cent.—instead of the 2 per cent. in each of the years between the forty-fifth and the fiftieth years. I do not think there can be much doubt that that is bound to be much more attractive as a proposition to any industrialist who contemplates new building.

When we put this proposal forward among the other alternatives in Committee, we had no adequate answer whatever from the Government. All that the Chancellor said was:
"I do not like the second alternative of reintroducing the initial allowances."
The reason he did not like it was never disclosed. The Financial Secretary had given a rather more elaborate but equally unconvincing explanation why the Government would not accept it. Speaking of the method of having the initial allowance and investment allowance both applying, the Financial Secretary said:
"It would be a somewhat complicated and cumbersome method which would involve those engaged in industry in a great deal of trouble and, as my right hon. Friend explained at an earlier stage, it is one of the main purposes of this Clause to substitute the investment for the initial allowance over a very large part of the field in which the initial allowance is at present operating."—[OFFICIAL REPORT, 16th June, 1954; Vol. 528, c. 2034, 2021]
The second part of that explanation was merely to repeat that it was the purpose of the Clause to replace the one allowance for the other, but it was not an explanation why that should be done. As for the argument that this proposal is a "somewhat complicated and cumbersome method," I do not think the right hon. Gentleman can have meant that seriously. As compared with the complexities of capital allowances generally in relation to taxation, this is certainly a minor matter. The right hon. Gentleman would agree that it is not very difficult to calculate the extra 10 per cent. that would be allowed in the first year in place of the 2 per cent. between the forty-fifth and fiftieth years. We cannot accept that as a serious explanation of the Government's refusal to accept the Amendment. It is, in fact, insulting both to the Inland Revenue and to industrialists to suppose that they could not possibly work the system or that there was any particular difficulty about it.

The only other argument that has been used is that of cost. The cost, we are told, in the first year would be £4 million and in the second and some subsequent years £7 million. But since this is a case of reintroducing the initial allowance, that, at any rate, is something which in theory, at least, is ultimately repayable to the Treasury. In other words, there would be a reduction, as I have said, in the extent to which the industrialists could write off the buildings a long time ahead. It is arguable that by then some other new buildings would be being built and, therefore, that the Treasury would always be out of pocket. But the Government themselves accept this distinction between initial allowances and investment allowances—and I do not want to go into that argument any more—so they cannot argue very seriously that this is an exceptionally heavy expense.

If the Government still press that argument, I would very strongly stress two points. First, I do not think that in terms of inflationary pressure there will be any danger of the increased expenditure here giving rise to anything that we really need worry about. As I have argued previously it would be offset by an increase in undistributed profits—in corporate saving. I think that there need be no anxiety on that account.

Secondly, if we are right in this—and I think that we have good reason to believe that we are—to the extent that the initial allowance does stimulate a little more industrial building it will be abundantly worth while. It will be just as worth while as the increase in investment in plant and machinery which it is the object of the 20 per cent. allowance to bring about.

We feel that up to now we have had no satisfactory answer whatever to this particular proposal. We think that the Government have simply paid lip-service—and only lip-service—to the very legitimate complaint that, as this now stands in law and as it is in the Bill, industrial building simply will not get the encouragement that it ought to get. I hope that even at this very late stage the Government will change their minds. This is a simple Amendment. There can be no argument as to drafting; there would be no difficulty in the Government accepting it on those grounds. I very much hope they will see their way to do this.

I have never been able to understand why, if the Chancellor wants to hurry the Finance Bill through, he does not offer a substantial monetary bribe to those of us on the back benches always to persuade our right hon. Friend the Member for Leeds, South (Mr. Gaitskell) to open the debates. He does so in such an admirable manner that there is very little left to be said by those of us who previously thought of intervening. I shall therefore speak only briefly to underline one or two of his remarks.

Like him, I was both surprised an disappointed that no Amendment was put on the Order Paper by the Chancellor himself, in view not only of his encouraging hints during the Second Reading debate but of the course the debate took in Committee. I think no detached and fair-minded observer who listened to our debates on the various Amendments on industrial building which we put down in Committee could possibly have denied that the Government had very much the worse of those debates. An extremely strong case was made out from these benches.

The Financial Secretary's reply was so inadequate that the Chancellor was compelled to intervene half an hour later, and his own speech was neither thorough nor very convincing. From the extent to which our arguments prevailed, and from the Chancellor's own words, I think that everyone in the Committee was left with the impression that something would be done between that stage and the Report stage. It was therefore disappointing, to say the least, to see the Order Paper empty of any Government proposal.

So far as I know, the position is not in dispute at all. Everyone wants more industrial building than we are now getting, not only for the reason which my hon. Friend the Member for Ashton-under-Lyne (Mr. Rhodes) has always stressed, in order to modernise our industrial buildings, but also for the reason that clearly we shall not get an increase in production over the next 10 years with-our expansion of capacity. There is no dispute about that. I imagine that there is little dispute that the present trend in industrial building is not sufficiently upward for anybody to be able to say that the problem is being solved and that we need not do anything to assist.

4.15 p.m.

If there is no dispute that we need more industrial building than we are getting under our present taxation system, why do the Government so resolutely refuse to make one of the changes we are urging? It is not as though they can say that in the Finance Bill as presented to the House there is already a large incentive to industrial building. The position, as my right hon. Friend said, is that in this year's Finance Bill there is virtually no new incentive to industrial building of any kind whatever. So it seems a passive attitude for the Government to adopt.

The pressure for a concession towards industrial building does not merely come from this side of the House. It has been discussed in the financial Press over the last two months and many in the industrial world—and Mr. Chambers very obviously—have pressed for this most strongly. It is not just a party dispute; our attitude has very strong backing from leaders of industry.

I wonder whether the Economic Secretary realises that the investment allowance Clause as it stands gives to certain industries virtually no help whatsoever. I will take, if I may, an industry in which my hon. and learned Friend the Member for Kettering (Mr. Mitchison), who is not in his place at the moment, is also interested—the boot and shoe industry. The new 20 per cent. allowance on plant and machinery is of no assistance to that industry. It is not one which buys new equipment but, almost entirely rents it from the British United Shoe Machinery Company. The boot and shoe firms therefore get no assistance from the 20 per cent. allowance on plant and machinery and virtually none from the 10 per cent. investment allowance on industrial building, which takes no effect until the 46th year. That industry is wholly unaffected by this Clause. It is an industry which, like the industries to which my hon. Friend the Member for Ashton-under-Lyne has so often referred, badly needs an improvement in its present standard of industrial building.

As my right hon. Friend pointed out. our Amendment in effect brings forward the 10 per cent. investment allowance from years 46 to 50 to the first year. In other words, if one looks over the whole 50-year period during which the building is written off it does not increase the allowance but brings it forward from right at the end to right at the beginning of that period.

In Committee we had from the Treasury Bench not one argument against the proposal—none of significance, at least. From the Chancellor we only had this extraordinary phrase. "I do not like it"—a descent from a rational level of argument to a merely petulant level.

From the Financial Secretary we had the statement that what we proposed was too complicated and cumbersome to be carried through. That is hardly a point to be taken very seriously. All we ask the accountants to do is to add the 10 per cent. investment allowance to the 10 per cent. initial allowance in the case of industrial building, which is not a task of monumental arithmetical difficulty. In the case of industrial building, it surely cannot be beyond the wit of man to put those two together. That is really all we heard against what we are now suggesting in our Amendment.

The only other point was an historical one made by the Financial Secretary that, under the scheme of initial allowances introduced by the Labour Government, plant and machinery had always had more favourable treatment than had industrial building. Of course, that is the case and it has never been denied. For most of the period plant and machinery drew an initial allowance at double the rate of that for industrial building, and for a brief period it was higher still. This has never been denied.

Today the position is completely diffent from what it was five years ago. Five years ago these industries were under such strain that we had an elaborate system of building licences which had the effect of keeping building below what it would have been otherwise. The Government pride themselves that in the last few years they have been gradually relaxing the system of building licences. Presumably that means it is their positive objective to encourage a great deal more industrial building. They take the view that the resources are available and that industry should be encouraged to use them. If by relaxing the system the Government are giving industry encouragement, why should they not also give it inducement? Arguments based on the historical pattern of a few years ago are irrelevant in the completely altered conditions of today.

In Committee the Chancellor said that he agreed that industrial buildings ought to be given a high priority, yet he is not prepared now to do anything about it. When he replies, the Economic Secretary must say whether he thinks the investment allowances, considering this change from the years 1946 to 1950, do give any additional inducement over what existed before. If he admits, as I think he is bound to admit, that they do not, is there any meaning at all in all the statements made by the Chancellor that this really important matter should be attended to? I ask the Economic Secretary not to take refuge merely in very detailed calculations and arguments, but to come face to face with this essential point. Does he think investment allowances will be any substantial inducement at all? If not, why on earth does the Chancellor not do as we ask?

I think we are entitled to have from the Government some further explanation of why they resist this Amendment and why they resisted Amendments in a similar strain which were moved in Committee. Apparently there is a considerable change in the outlook of their collective mind between the Second Reading and today. In the Second Reading debate the Chancellor showed that they were very much impressed by the case put by the hon. Member for Ashton-under-Lyne (Mr. Rhodes) and seemed to suggest that he would do something in the direction of giving further inducement to industrial building.

There are usually two reasons why Governments may resist Amendments of this kind on the Finance Bill. One is because of the cost involved. It has been suggested that the cost in this case would not be more than £7 million and, in the long run, it would be nothing. I cannot help feeling that if there were lost to the Revenue £7 million in the near future which would be compensated by a lesser amount deducted from the Revenue in the far future that would be well worth while for the object we have in mind. Secondly, the Government might urge that the purpose is carried out by the Clause as it stands, but I do not think that can be said seriously. In point of fact there will be practically no inducement to undertake new industrial building if the Clause is left as it is.

In the Committee debates the Financial Secretary tried to pour a certain amount of oil on troubled waters by saying that everyone was right. In the view of some hon. Members opposite there would be a concrete advantage at once but in the view of hon. Members on this side of the House the advantage would be postponed for nearly 50 years. To paraphrase George Orwell, some were more right than others. There is no doubt that among those who were more right were the people who argued that in point of fact this would not benefit anyone until about 50 years hence. I have a very small personal experience of the effect because I happen to be connected with discussions on whether some new building should be carried out or not. The fact that 50 years hence some advantage may accrue has a very small effect on our minds today. We have to give people something more than that. An advantage to what we might call our lineal descendants is rather too remote.

It may be that big businesses have planned their capital development and some company chairmen have argued that these investment allowances, while they enable people to keep a certain amount of money, may not have a great effect on capital programmes. I think. however, they will have an effect on the smaller companies. But when we come to the question of buildings, I do not think it sufficient to apply an inducement which will not take effect for 50 years. We want to make these investment allowances effective before that. We want to spur on the Government to have the courage of their convictions. Their convictions are that industry should be encouraged to put more money into building and new machinery, and so on. Can they honestly tell us that this Clause as it stands will be enough? I believe this Amendment would go a long way to tip the balance of those companies considering whether it is worth laying out a certain amount on new buildings or not.

The point has already been made, and is a very strong one, that the time has been reached at which we should divert resources from house building to factory building. Many people still live in very bad housing conditions, but employment is also extremely important and, looking to the future of those very people, I think the time has come when we must make a change and concentrate to some extent on factory building.

For all these reasons—which have been argued at length, but not really answered by the Government—I hope the Amendment will be accepted, or that we shall be given some stronger reasons than we have had for rejecting it.

I intervene for one moment because the whole case put by the Opposition today and previously in Committee seems to rest on a premise that there is a need to encourage and stimulate new industrial building and that there is a shortage of industrial buildings. In fact, I can find no evidence at all to support that view. One has only to study the national or provincial Press, any day of the week, to find innumerable factories offered for sale. I am not suggesting that they are always necessarily in the right places or of the right construction, but there is evidently no overall evidence whatever of a pressing shortage of factory space.

The second point I want to make is in connection with many speeches on this subject by the hon. Member for Ashton-under-Lyne (Mr. Rhodes). He often tells us of the urgent need for reconstruction of 'buildings used in the textile industry. Of course, in a measure, that is true because the textile industry is a very old industry both in the branches of the industry in the hon. Member's constituency and elsewhere in Lancashire and also in the case of another branch of the textile industry, in Kidderminster, which has suffered because many of its buildings are old.

But I would remind the hon. Member and those of his hon. Friends who support his arguments that an increase in the investment allowance, or a duality of initial and investment allowances such as this Amendment proposes, would not necessarily have the stimulating effect which the hon. Member desires, because a large part of the cost of the reconstruction of old buildings in the textile industry and other industries is reckoned, in any event, as a revenue charge on company accounts. It is not by any means always considered as a capital charge.

What this Amendment is purporting to do, if anything at all—I challenge whether it would do anything at all in view of the general factory situation—is to encourage the construction of new factories. Not only do I believe the Amendment would be ineffectual because there is evidently no overall shortage of factory space in this country taking into account the normal development going on year by year, but a second consideration which is equally important is that a large part of the normal reconstruction, modernisation and rehabilitation of factories goes on year by year in order to match changes in the machinery, lay-out and improvements in machine tools installed. That type of building reconstruction is often a revenue charge, anyway, and thus would not become the subject of initial or investment allowances, such as the combination proposed in this Amendment.

Therefore, I am driven to the conclusion—and this is a view similar to that which I expressed in Committee—that no additional fiscal stimulus is needed for new industrial building, and that my right hon. Friend is right in concentrating much greater stimulus in the Bill—it is twice as great—upon plant and machinery.

4.30 p.m.

I am not surprised at the remarks made by the hon. Member for Kidderminster (Mr. Nabarro). Such remarks have been made in my part of the world for about 100 years, and that is why the Opposition feel so strongly and are determined to do something about this. Does not the hon. Member realise that we are discussing something which goes a small way—of course it does not go all the way—to stimulate investment in the private sector of industry, about which the Chancellor of the Exchequer complained bitterly when he opened his Budget? We have here a small opportunity to stimulate the Government to do a little more generously what we want done in the country generally.

If we do not have stimulation of this kind of investment in the private sector—I know there would have to be a fine balance to ascertain the cost of doing it—we shall have to have compulsion in time in the old industries, or else in the long run, if we do not have compulsion—I am warning the House about this—we shall have a stampede like we did in the case of Jarrow and many other Development Areas when we tried to do so much in such a short time. We did it very well, but it was at a terrific cost which the country would probably not be able to afford again when the time came. We have here an opportunity to press forward what we believe to be right.

Hon. Members have already been into the mechanics of the Amendment. I saw the hon. Member for Kidderminster shaking his head at references to the 46th, 47th, 48th, 49th and 50th years. The advantage, or the lack of advantage, of this proposal over the initial allowance is that it does not come into operation until the 46th year. In Committee we made a case for bringing the investment allowance into line with the allowance in respect of machinery, but it was not acceptable. Here we propose to marry the old initial allowance and the investment allowance. This keeps the Chancellor's figure where it was; all it does is to concertina the allowance in the first year to the extent of five years' capital allowance.

There are many chief inspectors of taxes who already allow just as much as is allowed in the Bill for machinery when a manufacturer who is putting in machinery builds a factory incidental to the installation of the machinery. In such a case not only does the investment allowance apply but also the amount allowed per year runs exactly in line with that allowed for machinery. We know that we are pushing at a half-open door here. I urge the Economic Secretary to act as a good host this afternoon and open the door wide to a good idea or two. He should accept our proposal as a small instalment for the future and as an inducement to private industry to invest more.

My right hon. Friend the Member for Leeds, South (Mr. Gaitskell) mentioned the remarks which I made when we debated the Budget. What I then said about the means whereby large-scale operation could be made has attracted considerable attention. In one instance it was said that those ideas would be extremely valuable for new towns. I am not concerned so much about new towns but about old towns. If the Economic Secretary or the Chancellor would accompany me home one Friday and, during the railway journey, see what is happening in Mossley, which is part of my constituency, it would not be long before he would be thoroughly convinced.

There we have new houses being erected in a district where very few houses were built before the war. The situation was that even the local authority advertised for new industries to come there on the basis that the wages which they would be required to pay would be little more than dole. The reason why there was no rush by industry to take advantage of that was that new industries could not be housed in the district. There have since been some developments and one or two good factories have been erected, but, by and large, there is a dreary succession of old buildings along the valley. As I said in Committee, one cannot go into agriculture in my part of the world; one must have a roof over one's head to do a job of work. However, we are putting up fine houses, but yet we are neglecting the very thing to which the Government ought to be paying attention.

There are countries which have tackled the problem the other way round. I remember speaking to someone who went to Stalingrad when that great city was being developed. The workers were under the corrugated iron roofs of factories which were adaptable to all manner of industries. That approach has not been our approach. There is no doubt that a tremendous amount of work and capital have been put into housing, and I plead for a little bit of a turn round. To have fine houses on the hillside and in the valley miserable buildings in which new industries cannot possibly be housed, is an anachronism.

I suppose it is true that private enterprise discards a marginal investment at any time. If it cannot make a profit from the money it borrows, it gives up, and that certainly appertained before the war. But we cannot discard human beings any more. They will not stand for it, and we cannot switch populations from one part of the country to another any more. Therefore, we must have buildings into which industries can go in order to provide a living for the people on the spot. The capital is already being put into the houses, and it is about time the capital was put into the factories as well.

There is a terrific job which must be tackled before very long in Lancashire and Yorkshire. It is time that we stopped thinking in terms of the results of the activities of the old joint stock companies. My remarks apply not only to Lancashire but over the border too. People who want to see the picture as it affects industry should consult the joint committee report on the spacing of machinery, which was brought out in 1949. That bears very much on this problem, although nothing was ever done about it, because it was not possible in those days.

I wonder if the Economic Secretary realises that in that report the whole of the textile industry was divided into three parts—the A's, the B's and the C's. The A's were new factories or altered R.O.F. factories which were turned over to the wool industry; the B's were the ones which could be converted with some expenditure; and there was the big C group which the joint committee of employers and trade unionists gave up. They could not do anything with them at all. Those were factories where oil was seeping through the floor and which were all of a jitter when the engines started up. Those are the factories where new machinery cannot he introduced because it will not fit.

This state of affairs is not confined to this country. We find the same story if we read about the shift of population and of industry in America. Last year there was published a report which had been made at the instigation of five governors in New England. If we substituted Lancashire for Fall River, and altered the names of other places in the report to suit various parts of this country, we should get the picture of the situation as it occurred here. In fact, that is what the "Manchester Guardian" said in a review of this report.

But the Americans had the big advantage that they were able to export pools of cheap labour elsewhere. They moved a lot of this labour down below the Mason-Dixon line. But it does not alter the fact that those people who lived in Fall River are still there. That is why they are doing the very thing that we are asking the Government to do today—that is to encourage new building. In settling populations, that is most essential, and it is also a human thing to do.

Although we do not claim that this Amendment will effect the necessary cure—there will have to be a major operation some time—this Amendment is an earnest of what every right-thinking person has in mind.

4.45 p.m.

As the right hon. Member for Leeds, South (Mr. Gaitskell) said in moving this Amendment, this subject was discussed fully in Committee and a number of speeches were made, particularly by the hon. Member for Ashton-under-Lyne (Mr. Rhodes). My right hon. Friend said that he would consider the subject again in the light of those speeches, but he had already said that he was chary of making a concession and he gave four reasons which weighed and still weigh in my right hon. Friend's mind in considering this matter.

He said that he was chary about making a concession, first because it would make it difficult to hold the line that he had adopted; secondly, because it would add £4 million to the cost; thirdly, because he did not want to indulge in the complicated legislation needed to do it the other way round and change buildings from the straight-line basis to the reducing-balance basis; and fourthly because he still thought that it was plant and machinery which particularly required the investment allowance and not the buildings.

In accordance with the undertaking which my right hon. Friend gave, he has studied again very carefully this whole problem in the light of what was said by hon. Members in Committee, but he has come to the conclusion on balance—it was not a very definite balance one way or the other, but, as I have said, he reached that conclusion on balance—that it would be better not to make any change in the proposals as originally introduced in the Finance Bill. It is perfectly true that the stimulus given to investment in new plant and machinery is greater than that given to investment in new buildings. No one would deny that. But I would ask hon. Members opposite not to write off entirely the benefit of this investment allowance in respect of industrial buildings.

It is true that in terms of the annual taxation bill, the difference between an investment allowance and an initial allowance does not make itself felt until the 45th year, but I should have thought—although I cannot admit to as much practical experience as many other hon. Members—that in considering an investment in a new industrial building, the question in the mind of the investor is the period over which the initial cost will be written off. The fact that the benefit does not actually accrue in terms of tax assessment for 45 years does not mean that it is not of some benefit.

Secondly, I cannot help thinking that, while there may be differences between industry and industry, and area and area, it is a little artificial to make too much of a distinction between an industrial building and plant and machinery. The purpose of the building it to hold the plant and machinery, and surely, when considering what to do to stimulate new productive investment as a whole, we want to consider what would be the effect on a potential investor of an allowance which would affect his new investment as a whole—that is, plant and machinery and buildings taken together.

That is precisely what we have been doing; we have been considering that aspect of the matter. But if, as the Economic Secretary has said, he attaches tremendous importance to the machinery, we say that the full benefit of investment in machinery cannot be obtained until the receptacle is ready for the installation. That is why we want to speed it up.

I do not think I have made my point sufficiently clear. My point is that the investor, deciding whether to invest in a new factory, will consider the tax allowance which he will get in respect of machinery and in respect of the building as a single whole. If it is said that one should be more generous than the other, I think that that is an artificial argument, because what weighs with the investor is not the allowance he gets on the plant or the allowance he gets on the building, but the total allowance he gets on the two together. Of course, I agree that that does not apply to all industries.

My right hon. Friend has considered this matter very carefully, but he has come to the conclusion that he cannot accept this Amendment. Of the four reasons which I have mentioned, the one relating to the legislation for changing buildings from the straight-line basis to the reducing-balance basis does not apply to this Amendment. The question of the relative importance of plant and machinery and buildings I have attempted to deal with. The other two reasons are the most relevant to this Amendment.

The first is because, as my right hon. Friend said, to accept an Amendment of this kind would make it more difficult to hold the line he had adopted, namely, the line drawn between industrial building and commercial building. He has been anxious not to give away the position adopted by this Government and preceding governments that the important thing to do is to stimulate industrial building.

My right hon. Friend did feel that there is an argument that there is an unfair discrimination against commercial building, and that if he were to increase still further the allowance on industrial building, the case for admitting commercial building as well would become in practice, if not in theory, more compelling. That is, briefly, what he had in mind in coming to a decision.

On the question of cost, the cost of accepting this Amendment and having an initial allowance as well as an investment allowance would be £4 million in the first year and £7 million in subsequent years. It would be difficult to say what is actually the cost to the Budget of an initial allowance. I think that the right hon. Gentleman was at slight variance with the hon. Member for Gloucester, South (Mr. Crosland) on this point. If the hon. Member for Gloucester, South is right, then, of course, what the Treasury and the revenue loses by way of initial allowance is, in practice, lost once and for all to the Exchequer.

So far as the right hon. Gentleman's argument is concerned, I cannot accept his argument about the economic effects of the initial allowance. I think that his point was that if we granted an initial allowance in addition to the investment allowance, we might have a transfer of savings from public savings to corporate savings. I cannot help feeling that if his object in granting an initial allowance is to provoke more expenditure on investment, he cannot simultaneously provoke the same amount of additional savings.

Whatever the economic effects of this proposal, the Budgetary effects would be to impose on the Budget an additional charge of £4 million for the first year and £7 million in subsequent years. I do not think that there is any argument, on either side, that the more stimulus we can give to investment in British industry the better. This is really a question of judging whether we can afford to give this stimulus in the light of the cost and the light of possible repercussions in

Division No. 194.]

AYES

[4.54 p.m.

Aitken, W. T.Crowder, Petre (Ruislip—Northwood)Hirst, Geoffrey
Allan, R. A. (Paddington, S.)Darling, Sir William (Edinburgh, S.)Holland-Martin, C. J.
Alport, C. J. M.Davidson, ViscountessHopkinson, Rt. Hon. Henry
Amery, Julian (Preston, N.)Deedes, W. F.Hornsby-Smith, Miss M. P
Amory, Rt. Hon. Heathcoat (Tiverton)Digby, S. WingfieldHorobin, I. M.
Anstruther-Gray, Major W. J.Dodds-Parker, A. D.Horsbrugh, Rt. Hon. Florence
Arbuthnot, JohnDonaldson, Cmdr. C. E. McAHoward, Gerald (Cambridgeshire)
Assheton, Rt. Hon. R. (Blackburn. W.)Donner, Sir P. WHoward, Hon. Greville (St. Ives)
Baldock, Lt.-Cmdr. J. M.Doughty, C. J. A.Hudson, Sir Austin (Lewisham, N.)
Baldwin, A. E.Douglas-Hamilton, Lord MalcolmHulbert, Wing Cdr. N. J.
Banks, Col. C.Drayson, G. B.Hurd, A. R.
Barlow, Sir JohnDugdale, Rt. Hon. Sir T. (Richmond)Hutchison, Sir Ian Clark (E'b'rgh, W.)
Baxter, Sir BeverleyDuncan, Capt. J. A. L.Hyde, Lt.-Col. H. M.
Beach, Maj. HicksDuthie, W. S.Hylton-Foster, H. B. H.
Bell, Ronald (Bucks, S.)Eccles, Rt. Hon. Sir D. M.Iremonger, T. L.
Bennett, F. M. (Reading, N.)Eden, Rt. Hon. A.Jenkins, Robert (Dulwich)
Bennett, Dr. Reginald (Gosport)Eden, J. B. (Bournemouth, West)Johnson, Eric (Blackley)
Bennett, William (Woodside)Erroll, F. J.Johnson, Howard (Kemptown)
Birch, NigelFinlay, GraemeJones, A. (Hall Green)
Bishop, F. P.Fisher, NigelJoynson-Hicks, Hon. L. W.
Boothby, Sir R. J. G.Fleetwood-Hesketh, R. F.Kaberry, D.
Bossom, Sir A. C.Fletcher-Cooke, C.Kerby, Capt. H. B
Boyd-Carpenter, Rt. Hon. J. A.Ford, Mrs. PatriciaKerr, H. W.
Boyle, Sir EdwardFort, R.Lambton, Viscount
Braine, B. R.Foster, JohnLancaster, Col. C. G
Braithwaite, Sir Albert (Harrow, W.)Fraser, Hon. Hugh (Stone)Langford-Holt, J. A.
Braithwaite, Sir GurneyFraser, Sir Ian (Morecambe & Lonsdale)Leather, E. H. C.
Brooke, Henry (Hampstead)Fyfe, Rt. Hon. Sir David MaxwellLegge-Bourke, Maj. E. A. H.
Brooman-White, R. C.Galbraith, Rt. Hon. T. D. (Pollok)Legh, Hon. Peter (Petersfield)
Browne, Jack (Govan)Gammans, L. D.Lennox-Boyd, Rt. Hon. A. T.
Buchan-Hepburn, Rt. Hon. P. G. TGeorge, Rt. Hon. Maj. G. LloydLindsay, Martin
Bullard, D. G.Glover, D.Linstead, Sir H. N.
Bullus, Wing Commander E. E.Godber, J. B.Lloyd, Rt. Hon. G. (King's Norton)
Burden, F. F. A.Gomme-Duncan, Col. A.Lloyd, Maj. Sir Guy (Renfrew, E.)
Butcher, Sir HerbertGough, C. F. H.Lockwood, Lt.-Col. J. C.
Butler, Rt. Hon. R. A. (Saffron Walden)Gower, H. R.Longden, Gilbert
Campbell, Sir DavidGrimston, Hon. John (St. Albans)Low, A. R. W.
Carr, RobertGrimston, Sir Robert (Westbury)Lucas, Sir Jocelyn (Portsmouth, S.)
Cary, Sir RobertHall, John (Wycombe)Lucas, P. B. (Brentford)
Channon, H.Hare, Hon. J. H.Lucas-Tooth, Sir Hugh
Clarke, Col. Ralph (East Grinstead)Harris, Frederic (Croydon, N.)McCorquodale, Rt. Hon. M. S.
Cole, NormanHarrison, Col. J. H. (Eye)Macdonald, Sir Peter
Colegate, W. A.Harvey, Ian (Harrow, E.)Mackeson, Brig. Sir Harry
Conant, Maj. Sir RogerHarvie-Watt, Sir GeorgeMackie, J. H. (Galloway)
Cooper, Sqn. Ldr. AlbertHay, JohnMaclay, Rt. Hon. John
Cooper-Key, E. M.Heald, Rt. Hon. Sir LionelMaclean, Fitzroy
Craddock, Beresford (Spelthorne)Heath, EdwardMacleod, Rt. Hon. Iain (Enfield, W.)
Crookshank. Capt. Rt. Hon. H. F. CHiggs, J. M. C.MacLeod, John (Ross and Cromarty)
Crosthwaite-Eyre, Col. O. E.Hill, Dr. Charles (Luton)Macmillian, Rt. Hon. Harold (Bromley)
Crouch, R. F.Hill, Mrs. E. (Wythenshawe)Macpherson, Niall (Dumfries)
Crowder, Sir John (Finchley)Hinchingbrooke, ViscountMaitland, Patrick (Lanark)

respect of other types of building, particularly commercial building.

My right hon. Friend considered this with great care, and he came to the conclusion that on balance he would not be justified at the present moment, in the present circumstances, in accepting the Amendment. He is grateful to hon. and right hon. Members opposite for the arguments and suggestions which they have advanced on this matter, and he hopes that by refusing to accept the Amendment he has not given the impression that he does not value the suggestions which have been made, but, on balance, he feels that he is not justified in accepting the Amendment at the present time.

Question put, "That 'instead of,' stand part of the Bill."

The House divided: Ayes. 263; Noes, 230.

Manningham-Buller, Rt. Hn. Sir ReginaldRamsden, J. E.Summers, G. S.
Markham, Major Sir FrankRayner, Brig. RSutcliffe, Sir Harold
Marlowe. A. A. H.Redmayne, M.Taylor, William (Bradford, N)
Marples, A. E.Rees-Davies, W. RTeeling, W.
Marshall, Douglas (Bodmin)Remnant, Hon. P.Thomas, Rt. Hon. J. P. L. (Hereford)
Maude, AngusRonton, D. L. M.Thomas, Leslie (Canterbury)
Maudling, R.Ridsdale, J. E.Thompson, Lt.-Cdr. R. (Croydon, W.)
Maydon, Lt.-Comdr. S. L. CRoberts, Peter (Heeley)Thornton-Kemsley, Col. C. N
Medlicott, Brig F.Robertson, Sir DavidTilney, John
Mellor, Sir JohnRobinson, Sir Roland (Blackpool, S.)Touche, Sir Gordon
Molson, A. H. E.Robson-Brown, W.Turner, H. F. L.
Moore, Sir ThomasRodgers, John (Sevenoaks)Turton, R. H.
Morrison, John (Salisbury)Roper, Sir HaroldTweedsmuir, Lady
Nabarro, G. D. N.Ropner, Col. Sir LeonardVane, W. M. F.
Neave, AireyRussell, R. S.Vaughan-Morgan, J. K.
Nicholls, HarmarRyder, Capt. R. E. D.Vosper, D. F.
Nicolson, Nigel (Bournemouth, E.)Savory, Prof. Sir DouglasWakefield, Edward (Derbyshire, W)
Nield, Basil (Chester)Schofield, Lt.-Col. W.Wakefield, Sir Wavell (St. Marylebone)
Noble, Comdr. A. H. PScott, R. DonaldWalker-Smith, D. C.
Nugent, G. R. H.Scott-Miller, Cmdr. R.Wall, Major Patrick
Nutting, AnthonyShepherd, WilliamWard, Hon. George (Worcester)
Oakshott, H D.Simon, J. E. S. (Middlesbrough, W.)Ward, Miss I. (Tynemouth)
Odey, G. W.Smithers, Peter (Winchester)Waterhouse, Capt. Rt. Hon. C.
O'Neill, Hon. Phelim (Co. Antrim, N.)Smithers, Sir Waldron (Orpington)Watkinson, H. A.
Orr, Capt. L. P. S.Snadden, W. McN.Webbe, Sir H. (London & Westminster)
Orr-Ewing, Charles Ian (Hendon, N.)Soames, Capt. C.Wellwood, W.
Orr-Ewing, Sir Ian (Weston-super-Mare)Spearman, A. C. MWilliams, Gerald (Tonbridge)
Page, R. G.Speir, R. M.Williams, Sir Herbert (Croydon, E.)
Peake, Rt. Hon. O.Spens, Rt. Hon. Sir P. (Kensington, S.)Williams, Paul (Sunderland, S.)
Peto, Brig. C. H. M.Stanley, Capt. Hon. RichardWilliams, R. Dudley (Exeter)
Pickthorn, K. W. M.Stevens, GeoffreyWills, G.
Pilkington, Capt. R. ASteward, W. A. (Woolwich, W.)Wilson, Geoffrey (Truro)
Pitman, I. J.Stewart, Henderson (Fife, E.)Wood, Hon. R.
Pitt, Miss E. M.Stoddart-Scott, Col. M.
Powell, J. EnochStorey, S.TELLERS FOR THE AYES:
Price, Henry (Lewisham, W.)Strauss, Henry (Norwich, S.)Sir Cedric Drewe and
Prior-Palmer, Brig. O. LStuart, Rt. Hon. James (Moray)Mr. T. G. D. Galbraith.
Raikes, Sir VictorStudholme, H. G.

NOES

Acland, Sir RichardDavies, Ernest (Enfield, E.)Henderson, Rt. Hon. A. (Rowley Regis)
Albu, A. H.Davies, Harold (Leek)Herbison, Miss M.
Allen, Arthur (Bosworth)Davies, Stephen (Merthyr)Hobson, C. R.
Allen, Scholefield (Crewe)de Freitas, GeoffreyHolman, P.
Anderson, Frank (Whitehaven)Deer, G.Holmes, Horace
Attlee, Rt. Hon. C. R.Delargy, H. J.Holt, A. F.
Awbery, S. S.Dodds, N. N.Houghton, Douglas
Bacon, Miss AliceDonnelly, D. L.Hoy, J. H.
Balfour, A.Dugdale, Rt. Hon. John (W Bromwich)Hubbard, T. F.
Beattie, J.Ede, Rt. Hon. J. CHudson, James (Ealing, N.)
Bence, C. R.Edelman, M.Hughes, Emrys (S. Ayrshire)
Benn, Hon. WedgwoodEdwards, Rt. Hon. John (Brighouse)Hughes, Hector (Aberdeen, N.)
Benson, G.Edwards, Rt. Hon. Ness (Caerphilly)Hynd, H. (Accrington)
Bing, G. H. C.Edwards, W. J. (Stepney)Hynd, J. B. (Attercliffe)
Blackburn, F.Evans, Albert (Islington, S.W.)Irving, W. J. (Wood Green)
Blenkinsop, A.Evans, Edward (Lowestoft)Isaacs, Rt. Hon. G. A.
Blyton, W. R.Fernyhough, E.Janner, B.
Boardman, H.Fienburgh, W.Jeger, George (Goole)
Bottomley, Rt. Hon. A. GFletcher, Eric (Islington, E.)Jeger, Mrs. Lena
Bowden, H. W.Follick, M.Jenkins, R. H. (Stechford)
Bowles, F. G.Forman, J. C.Johnson, James (Rugby)
Braddock, Mrs. ElizabethFraser, Thomas (Hamilton)Jones, David (Hartlepool)
Brockway, A. F.Freeman, John (Watford)Jones, Frederick Elwyn (West Ham, S.)
Brook, Dryden (Halifax)Freeman, Peter (Newport)Jones, Jack (Rotherham)
Broughton, Dr. A. D. D.Gaitskell, Rt. Hon. H. T NKeenan, W.
Brown, Rt. Hon. George (Belper)Gibson, C. W.Kenyon, C.
Brown, Thomas (Ince)Glanville, JamesKey, Rt. Hon. C. W
Burke, W. A.Gordon Walker, Rt. Hon. P. CKing, Dr. H. M
Burton, Miss F. E.Greenwood, AnthonyKinley, J.
Butler, Herbert (Hackney, S.)Grey, C. F.Lawson, G. M.
Castle, Mrs. B. A.Griffiths, Rt. Hon. James (Llanelly)Lee, Frederick (Newton)
Champion, A. J.Grimond, J.Lee, Miss Jennie (Cannock)
Clunie, J.Hale, LeslieLever, Leslie (Ardwick)
Coldrick, W.Hall, Rt. Hon. Glenvil (Colne Valley)Lindgren, G. S.
Collick, P. H.Hall, John T. (Gateshead, W.)Lipton, Lt.-Col. M
Corbet, Mrs. FredaHamilton, W. W.MacColl, J. E.
Cove, W. G.Hannan, W.McInnes, J.
Craddock, George (Bradford, S.)Hardy, E. A.McLeavy, F.
Crosland, C. A. R.Hargreaves, A.MacPherson, Malcolm (Stirling)
Crossman, R. H. S.Harrison, J. (Nottingham, E)Mallalieu, E. L. (Brigg)
Cullen, Mrs. A.Hastings, S.Mallalieu, J. P. W. (Huddersfield, E.)
Daines, P.Hayman, F. H.Mann, Mrs. Jean
Dalton, Rt. Hon. H.Healey, Denis (Leeds, S.E.)Manuel, A. C.
Darling, George (Hillsborough)Healy, Cahir (Fermanagh)Marquand, Rt. Hon H. A

Mason, RoyPryde, D. J.Thomas, George (Cardiff)
Mayhew, C. P.Pursey, Cmdr. H.Thomas, Iorwerth (Rhondda, W.)
Mellish, R. J.Reid, Thomas (Swindon)Thomas, Ivor Owen (Wrekin)
Messer, Sir F.Reid, William (Camlachie)Thomson, George (Dundee, E.)
Mikardo, IanRhodes, H.Thornton, E.
Mitchison, G. RRichards, R.Timmons, J.
Monslow, W.Robens, Rt. Hon. A.Tomney, F.
Moody, A. S.Roberts, Goronwy (Caernarvon)Ungoed-Thomas, Sir Lynn
Morley, R.Robinson, Kenneth (St. Pancras, N.)Usborne, H. C.
Morris, Percy (Swansea, W.)Rogers, George (Kensington, N.)Warbey, W. N
Morrison, Rt. Hon. H. (Lewisham, S.)Ross, WilliamWeitzman, D.
Moyle, A.Royle, C.Wells, Percy (Faversham)
Mulley, F. W.Shackleton, E. A. A.Wells, William (Walsall)
Noel-Baker, Rt. Hon. P. JShinwell, Rt. Hon. E.West, D. G.
Oldfield, W. H.Short, E. W.Wheeldon, W. E.
Oliver, G. H.Shurmer, P. L. E.White, Mrs. Eirene (E. Flint)
Orbach, M.Silverman, Sydney (Nelson)Whiteley, Rt. Hon. W.
Oswald, T.Simmons, C. J. (Brierley Hill)Wigg, George
Padley, W. E.Skeffington, A. M.Wilcock, Group Capt. C. A. B.
Paget, R. T.Slater, Mrs. H. (Stoke-on-Trent)Willey, F. T.
Paling, Rt. Hon. W. (Dearne Valley)Slater, J. (Durham, Sedgefield)Williams, Rev. Llywelyn (Abertillery)
Paling, Will T. (Dewsbury)Smith, Ellis (Stoke, S.)Williams, W. R. (Droylsden)
Palmer, A. M. F.Smith, Norman (Nottingham, S.)Willis, E. G.
Pannell, CharlesSorensen, R. W.Wilson, Rt. Hon. Harold (Huyton)
Pargiter, G. A.Soskice, Rt. Hon. Sir FrankWinterbottom, Ian (Nottingham, C.)
Parker, J.Sparks, J. A.Winterbottom, Richard (Brightside)
Parkin, B. TSteele, T.Woodburn, Rt. Hon. A.
Paton, J.Strachey, Rt. Hon. J.Wyatt, W. L.
Pearson, A.Strauss, Rt. Hon. George (Vauxhall)Yates, V. F.
Pearl, T. F.Summerskill, Rt. Hon. E.Younger, Rt. Hon. K.
Popplewell, E.Swingler, S. T.
Porter, G.Sylvester, G. O.TELLERS FOR THE NOES:
Price, J, T. (Westhoughton)Taylor, Bernard (Mansfield)Mr. Wilkins and Mr. John Taylor
Proctor, W. T.Taylor, Rt. Hon. Robert (Morpeth)

I beg to move, in page 11, line 44, after "one-fifth," to insert:

"or, in the case of the fuel-saving machinery or plant mentioned in the next following subsection, one quarter."
This Amendment is intended to give to certain types of plant and machinery designed to save fuel an investment allowance of 25 per cent, instead of one of 20 per cent. It will be remembered that we had a debate on a rather similar Opposition Amendment last year, to which the Chancellor replied by making one of his less felicitous speeches in which he descended from the very high moral tone which he usually adopts, and which, to use his own words in reference to another speech, created no intellectual stir in the Chamber, or indeed stir of any other kind, if it comes to that. I hope that he will make his speech this year on a rather higher level, and will go into the question rather more thoroughly.

This is a particularly propitious, or perhaps unpropitious moment—I am not sure which—to be discussing questions of fuel economy in the light of the National Union of Mineworkers' Conference which has been going on this week and in the light of the very sombre warnings given to that conference. The decisions on various other matters discussed at the conference give pain in some quarters and pleasure in others. But they are not our concern, at any rate not this evening.

This conference has listened to extremely grave warnings about the coal position both from its own officers, Mr. Jones and Mr. Horner, and also from Sir Hubert Houldsworth himself. There can be no question that the coal position is extremely alarming. Both sides of the House said last year that the situation was serious even then, but it is clearly a great deal more serious now.

We have had this year an increase in output of a little over 1 million tons. Exports are about the same as last year which, I think, nobody considers large enough. If our exports of coal could be considerably increased, it would be of great benefit to the country. Stocks are about the same as last year, but they ought to be larger, because industrial consumption is increasing. Therefore, last year's figures are inadequate.

What is really serious is the fact that, compared with the increase in output of only 1 million tons, consumption has gone up by over 3 million tons. Nobody doubts that the coal position during this coming winter is going to be a very unsatisfactory one. Once again we have announced that we shall import coal from abroad, and that is something which nobody likes.

Of course, it could be said by whichever Minister replies that any concessions to fuel saving equipment in July will not have much effect on the position this winter, because some forms of this equipment take, possibly, two or three years to instal and another year before any appreciable effect is felt from their use. I do not think that is a sufficient argument against accepting the concession this year, because there is every indication that the coal picture is going to be as bleak in five, 10 or 15 years' time as it is in 1954.

I think that every committee and every body which has studied the long-term position is agreed on how difficult the outlook is. The Ridley Committee said that the home demand for coal in some 10 years' time would amount to 230 million tons. The Federation of British Industries, which I should have thought had more reason on their side, put the figure of the home demand in about 10 years' time at 260 million tons. The Ridley Committee and the National Coal Board have both been talking in terms of exports in 10 years' time being about 30 million tons. That figure is a good deal lower than our export figure in the 1920s, and is one which the Economic Commission for Europe certainly thinks can be exceeded, since its own calculation was that by that time there will be a European coal gap of no less than 50 million tons.

It does not matter which calculation we take. It is perfectly clear that, looking ahead, the demand for coal, both for home industry and also for export, is going to be very much greater than the amount of coal which, even on the most favourable assumptions, we can produce in this country. If it is the case that in a few years' time the demand for coal is going to be a great deal greater than we can supply, then, obviously, it is right that we should emphasise the question of fuel economy.

This is not a party matter, and except for the hon. and gallant Member for New Forest (Colonel Crosthwaite-Eyre) who intervened rather unexpectedly in the debate last year, it is not an issue upon which there is any disagreement at all. Everybody is agreed that large savings of fuel can be made in industry. Indeed, the hon. Member for Kidderminster (Mr. Nabarro) has made this point again and again in this Chamber.

The hon. Member for Garston (Sir V. Raikes) said last year that in five years or so, industry could certainly save 9 or 10 million tons of coal by fuel economies. The Ridley Committee reported in exactly the same terms, and I do not think there is any dispute that large savings can be made. Nor is there any dispute about the fact that industry needs an incentive if it is to save coal, because, except in the case of three or four notable industries, fuel costs are an extremely small proportion of total costs.

Last year, in reply to a debate on an Amendment which we then put down to give 100 per cent. initial allowances to certain fuel equipment, the Chancellor rejected our plea while admitting that the matter was of the greatest possible importance. He rejected it not in one of his rather patriotic, idealistic and ethical sounding speeches, but in one of his rather more debating speeches, taking refuge very largely in the fact that the wording of the Amendment was bad. I have this morning re-read the speeches on that occasion, and I have come to the conclusion that he misread the Amend-milt, but that is not particularly germane at the moment.

Is the hon. Gentleman suggesting that I cannot be forensic and patriotic at the same time?

I am sure that the Chancellor is one of the very few people who can come within sight of this duality of character. But more normally he is a Jekyll and Hyde character and adopts either one or other of his rather contrasting personalities.

Assuming we have got the right hon. Gentleman in a patriotic and moralising attitude this afternoon, I hope he will not take refuge in the fact that there may be some flaws in the drafting of our Amendment. Of course, it is difficult to draft an Amendment perfectly when in Opposition, and this year we have had less time than usual between the Committee stage and the Report stage. I do not think, however, there is a great deal wrong with it, or if there is that it is very serious. But, if the Chancellor is willing to accept the principle, he can say it is badly drafted if he likes, provided he agrees with the substance of it.

Last year the right hon. Gentleman admitted the great importance of the subject and admitted that the existing loan scheme of the Ministry of Fuel and Power had largely broken down. Out of £1 million loans provided under that scheme, only some 4 per cent. had, in fact, been taken up. Therefore, the Chancellor, in collaboration with the Minister of Fuel and Power, did make a small concession in respect of the loan scheme. He extended the category of equipment to which it should be applied, and extended the period of repayment. He made it two years instead of one year interest free.

We have now observed how this scheme has worked, and the Minister of Fuel and Power has given the House, on more than one occasion, figures of how much of this money has been loaned. The last figure that he gave was on 28th June this year when, in answer to a Question, he said:
"Under the new Government loan scheme I have approved 51 schemes amounting to £339,000."—[OFFICIAL REPORT, 28th June, 1954: Vol. 529, c. 876.]
Those are better than the figures in the previous scheme, but can this really be considered a rapid rate of improvement? We on this side of the House think not.

It might be argued that the scheme was only operating for a year and, therefore, why not give it another year. That, I think, would be a powerful argument if the thing appeared to be going full steam ahead and if the loans were being made at a rapid rate. But on the basis of the figures we have been given I do not think that progress under this scheme is really such that we can be happy about our present arrangements.

There is this further point about it. If we were going to ask what kind of inducement ought to be given to industry to instal this equipment, I could understand that at a time when industry was short of cash, a loan scheme was the natural way of dealing with the matter. Two years ago it could be argued—indeed, it was argued—that industry was then short of cash. Nobody thinks that today. The Economic Secretary in a previous debate admitted that the great majority of firms are not short of cash.

I cannot think that a loan scheme of any kind is a strong inducement to firms that are not short of cash. Apart from the fact that there are two years' interest free, the offer of loans on favourable terms will not make the installation of equipment more profitable than it would otherwise be. It would only make the money available to most firms, and money available now through a loan scheme is not relevant to a position such as that in which we find ourselves today.

What we require today is not to offer loans but to make the installation of this type of equipment more profitable to industry. That is exactly what we are seeking to do in this Amendment. The fact is that an investment allowance does give an additional return on any investment, and we are seeking to increase this still further on this particular kind of investment. I hope that whoever replies to this debate will deal with this point, which is fundamental. The concept of a loan was obviously the correct approach at a time when industry was short of cash, but now that industry is not short of cash a loan is an irrelevant type of approach and what is wanted is something to increase the net return and the profitability on this sort of equipment. That is what we are pressing for.

5.15 p.m.

What objections can be used against this suggestion? First of all, we can have the old familiar objection that there are practical difficulties. The Ridley Committee wanted to advocate a concession, not of this exact kind but somewhat parallel. It was, in fact, a 100 per cent, initial allowance. They did not do so, however, because after discussion with the Inland Revenue, they were convinced that there were great practical difficulties.

The Inland Revenue, with all due respect to my hon. Friend the Member for Sowerby (Mr. Houghton), have a rather professional vested interest in creating practical difficulties when a Minister asks whether some new scheme should be adopted or not. Whatever the position two years ago, it cannot be said that there are practical difficulties about defining the sort of equipment which we have in mind, because it is already defined by the Ministry of Fuel and Power for the purposes of the loan scheme. Clearly, if this type of equipment and plant can be identified for the purpose of giving firms loans, it can be identified for the purpose of giving firms a higher investment allowance. It really would not be fair to take seriously now the argument that there were great practical difficulties in defining and identifying the type of equipment that we have in mind.

It might be objected that a comparatively small concession of this kind will not save much coal. I might say that the only reason why we suggested a small concession is that, in view of the Chancellor's mood of obstinacy during the whole of the proceedings on this year's Finance Bill, we thought it would be a waste of time to suggest a concession involving a more substantial amount. We have tried to attract his interest by making it comparatively small and not costly.

But, in any case, I would suggest to the Committee that, supposing it is stated that this kind of concession will only save 500,000 tons or a million tons of coal, it does not, therefore, mean that this is not worth doing. A small marginal saving of coal can be of the greatest possible importance because we are working on such a narrow margin the whole time. A million tons of coal may not sound very important when we think that our total consumption of coal is 220 million tons, but that one million tons might easily make the difference between having a coal crisis and not having a coal crisis.

The value to the country of one million tons of coal is its equivalent in industrial output which would be lost by its not being there. One million tons of coal could make a difference in one year of 5 per cent. in industrial output. In 1947, for a brief period there was a very small coal shortage which was reflected in a huge drop in industrial output. So I hope that hon. Members will not say that, because the saving in terms of coal is comparatively small, therefore the saving to the country is not of the greatest possible importance.

Lastly, I suppose the principal objection that will be brought forward is the objection that we cannot discriminate in favour of a single industry. Despite the fact that both this year on the investment allowance and last year on the initial allowances we asked for discrimination for a number of separate industries, I personally have a great deal of sympathy with the argument that the Treasury cannot discriminate over the whole field of taxation. I think my hon. Friend the Member for Sowerby very naturally takes a similar view.

I think, therefore, that it is very natural for the Treasury Bench to say on the various Amendments from this side of the House—I think there were from five to ten this year—asking for larger investment allowances for this and that industry, that this is a degree of discrimination which will make the whole thing really hopeless.

I hope that they will notice that this year at this stage, we were careful not to put this fuel saving Amendment on the Order Paper with other Amendments proposing discriminating treatment which we put forward on the Committee stage, but have brought it forward separately on Report. We made the differentiation in order to make the point that we regard this is a separate issue. In other words, if a concession were made on this point we would not say that the Government should make a concession on machinetools or shipbuilding and various other things. I hope that whoever answers the debate will not take refuge behind the general argument about discrimination, but will accept the fact that we put this on quite a different level from other cases which we have argued.

Even the argument against discrimination can be pressed very much too far. This Government, following the example of previous Governments, have themselves discriminated in initial allowances and investment allowances. Initial allowances were given for mining works and extractive industries at a rate double that given to other industries. This year, when the change was made to investment allowances, again the mining and extractive industries, alone of all industries, are given the choice between a 20 per cent. investment allowance and a 40 per cent. initial allowance. Therefore, there is already in Government policy a perfectly clear discrimination in favour of mining works and we might say that the principle has been accepted. It would not involve establishing some quite new and revolutionary principle now to give the discrimination that is given in the case of mining works also to fuel saving equipment.

Again, the Government discriminate in favour of the coal industry by having a loan scheme at all. They do not offer loans on these exceptionally favourable terms to the chemical, engineering or textile industries. Therefore, I do not think that the Minister can say that the Government cannot discriminate in favour of this kind of plant, machinery and equipment when the Minister of Fuel and Power, with the support of the entire House, already discriminates in its favour.

Although I have a horrible feeling that we shall hear about the discrimination argument and that that will constitute 50 per cent. of the case against us, I hope that, at any rate, the case will be put rather more subtly than it was put last year. I hope that the Economic Secretary will not content himself with saying in a rather high falutin' fashion that all discrimination of any kind is bad. I hope that he will address himself to the fact that the Minister of Fuel and Power already does this, and that even in the sphere of investment allowances and initial allowances there is already discrimination in favour of certain types of industry.

I am sorry that the Chancellor is not replying to this debate. Considering all that has been said about the coal situation in recent days, I would have hoped that he would have signalled the importance which he attaches to the subject by replying himself, as he did last year, Although last year we did not get a very sympathetic reply, at least we did have a reply from him. He said last year that he was going to give the loan scheme a trial for a year and that he would report to the House or to the Committee when the next Finance Bill was discussed whether he thought that it was functioning adequately or not. Therefore, I would have hoped that we should have an interim report from the Chancellor and a statement on whether he thinks something further should be done. Taking the long view, I think the House might reasonably conclude that the loan scheme, although useful and an improvement on its predecessor, is still not enough and that something additional should be done.

I beg to second the Amendment.

In seconding this Amendment, I hope that I shall not sound as pessimistic as my hon. Friend the Member for Gloucestershire, South (Mr. Crosland) did towards the end of his speech, because I hope that we shall have a more satisfactory reply than the one last year. I should like to say how very pleased we are to see the Parliamentary Secretary to the Ministry of Fuel and Power here. His presence shows an attitude towards these debates which is very different from that which we have come to expect from the Board of Trade. When we discuss industry in general we very rarely have a representative from the Board of Trade in the Chamber. It is an indication of the seriousness with which this matter is taken that the Parliamentary Secretary to the Ministry of Fuel and Power has left his other very serious duties to be here.

I am sure that we all admire the persistence with which my hon. Friend the Member for Gloucestershire, South has pressed this matter year after year. There is no doubt about its seriousness or that he feels very strongly about it, as we all do on both sides of the House. As he said, although such a concession, small as it is, can hardly have much effect on the position this year, nevertheless the situation is one which we have to envisage for quite a number of years ahead.

I know that there are hon. Members and people outside who think that in a few years' time we shall have atomic energy generation and that anxiety about coal will not matter. That is the most arrant nonsense, because it will be years before we can substitute power generation by atomic energy for the existing methods, and the capital required for such a programme will be far too great to envisage it in short-term. There are others who say that we should and could turn over to increasing use of oil. There is already a very substantial turnover to oil on the railways and in industry, but the House will not be unaware of the view which I hold about the future of our balance of payments problem and the continuing necessity to save imports.

When we bear in mind that our net imports last year were of the value of £240 million, we can see that any substantial substitution of petroleum for coal or an increase in home consumption of petroleum must inevitably have a serious effect on our balance of payments. I agree that the position would be very much worse if, owing to the shortage of coal, industry had to close down. I should be certainly in favour of importing oil in those circumstances; but that is not the argument. The argument is whether we can afford to import at that rate and lose the exports of coal to which my hon. Friend the Member for Gloucestershire, South referred.

There are very few hon. Members on the benches opposite at the moment. We happen to be discussing investment in industry and not Estate Duty, when no doubt the House will fill up. When we are discussing the expansion of our industries, few hon. Members of the party opposite are here. There are hon. Members opposite who speak very freely about coal production with knowledge based only on experience of the subject, when the economic situation, and particularly the manpower situation, was very different indeed. In the best circumstances, even with the most brilliant management, the most enthusiastic workers, and the highest standard of investment, can we imagine that there will be a radical increase in coal production in the next 10, 15 or 20 years?

We hope that when the present capital plans of the Coal Board come to fruition there will be a substantial increase in production, but we have to remember that even today the output per man-shift is rising and has continued to rise. As the "Manchester Guardian" points out in a very interesting leading article today,
"…the miners are regularly attending a much larger number of shifts, year in, year out, than ever in any period of years in the 1930s, and probably than ever in history."
It is true, of course, that very rarely before in the history of the coal industry has there been continuous employment in all pits. Now there is, and the truth is, as the "Manchester Guardian" points out,
"…we do not really know what is a reasonable number of shifts to ask a man to maintain…."
in the pits. Before the war, in many districts the demand was high enough for work to be continuous, and it is quite likely, as the figures seem to indicate, that absenteeism was higher than it is today.

5.30 p.m.

It is, therefore, no good reading moral lessons to the miners, attacking management and administration, and thinking that by some magic twist we can revert to a situation where the production of exports is very much lower, there is considerable unemployment and, therefore, very many more workers in the mines. We must realise that we shall never go back to freely available and cheap coal, any more than we shall to freely available and cheap food, in the sense that we had it before the war. We shall never go back to a situation where the community exploits miners and agricultural workers.

That being so, we must put a true value upon the use of coal. Some people think that coal is too cheap. My hon. Friend the Member for Gloucestershire, South has sometimes almost seemed to take that view, and I am not sure that I do not agree with him. After all, our coal is cheaper than it is anywhere else in Europe. In any case, the price of coal does not prevent many industrial firms from wasting it.

There are some industries in which coal is responsible for a very high proportion of the cost, but in the vast majority of industries that is not so, and the owners do not think it is worth while to make a special effort to save it. They are showing their ignorance, because if they cared to make the necessary estimates many of them would find that they could make considerable profits, even without any loan or investment allowance from the Government. Works and employment managers are so concerned to see that the cost of their heating and steam production is not a very high proportion of their total costs that they are unwilling to go to the trouble of installing simple equipment to save coal.

In this case we need both a stick and a carrot. We must have the stick of higher prices for the coal industry and the carrot supplied by the Amendment. Hon. Members have no doubt seen the report of the survey of the use of steam and power made by the Ministry of Fuel and Power, which shows that only about one-third of the potential electric power that could be generated by the use of back pressure engines or turbines is being generated at the present time. This is a complicated and difficult type of installation, which involves not only the cost of plant and machinery but of consultancy, skilled engineering, and technical advice. A firm must think very seriously about this type of installation before going ahead with it, because the calculations are not easy. Nevertheless, it is quite clear that in many cases it would be of very great value.

It does not appear as that the Government's loan scheme is offering a sufficient inducement—although one would have thought that no inducement were needed. Besides the highly complicated scheme which I have just mentioned there are much more simple ones which could be put into operation, but which are still ignored. One would think that it was only common sense that not only buildings but piping and even some plant and machinery and equipment should be insulated, but one can go into many factories where the pipes are not insulated or lagged, and there is nothing on the roof but the bare tiling, or whatever the covering happens to be. The loss of heat because of this is absolutely appalling.

We need to make a much stronger drive to persuade industry to save fuel. My hon. Friend the Member for Gloucestershire. South has gone through all the objections that can be raised. I do not entirely agree with him that the Government cannot be more discriminatory than they are at present. I realise the difficulties, but I believe that in some cases, especially with regard to definitions, they are not so great as they may appear. This Amendment is an example not of discrimination between industries, but in the use of quite well known types of plant and equipment, or types of building work, which are quite simply and easily described.

I can think of the kind of comparison that we had during the war. I know that in those days money was much less of an object, but a scheme existed for the relighting of factories, whereby we could get the whole cost of relighting our factories from the Ministry of Supply. The factory which I managed did so. It was a quite separate arrangement. The relevant regulation said that under certain conditions of light measurement the whole cost of improving the lighting in a factory engaged in war production would be paid for by the Treasury. That is quite a simple scheme. It does not discriminate between industries, but it is an incentive to the installation of certain equipment. That is exactly what the Amendment seeks to achieve.

It is not as if the Government have not considered the question of making rather more discriminatory allowances. My hon. Friend has referred to some examples, and the Economic Secretary, during the Committee stage, in reply to the debate upon our Amendment to make the investment allowance more discriminatory, said that very serious consideration was being given to the matter. It is not as if it was something altogether outside the minds of the Government. Nor can some of the other arguments put forward by the Economic Secretary on that occasion be used today. In this case there is no element of an export subsidy or loan.

If the Government are serious about this matter and hold the same view of the future prospects as that of my hon. Friend and myself, they ought to make this concession. It is not a very great one, but if it were made it would be an indication of the seriousness with which the Government view the matter, and the importance which they attach not only to increased coal production but to coal saving and fuel saving as a whole.

The hon. Member for Gloucestershire, South (Mr. Crosland) said that my right hon. Friend the Chancellor gave an unsympathetic reception last year to the proposal put forward by hon. Members opposite for increasing the fiscal incentives for installation of industrial fuel efficiency equipment. I should like to refute that suggestion at once. I had long and earnest conversations with m) right hon. Friend and with his Inland Revenue officials over a period of some months before the introduction of the 1953 Budget, and throughout those conversations it was evident to me that my right hon. Friend was extremely sympathetic in the matter of the need for making arrangements to provide an added incentive for greater industrial fuel efficiency. It was also evident, however, that very grave practical difficulties were involved.

Nevertheless, my right hon. Friend made one important concession last year. to which neither the hon. Member for Gloucestershire, South nor the hon. Member for Edmonton (Mr. Albu) has made adequate reference this afternoon. My right hon. Friend extended substantially the scope of the loans scheme for industrial fuel-saving equipment. Furthermore, by arrangement with the Ministry of Fuel and Power, he did something of much greater importance from the fiscal point of view, and something which has a direct relationship to the Amendment. The period for repayment of the industrial fuel efficiency loans was extended in order that it should be made the same period as that allowed by the Inland Revenue for wear and tear purposes upon the plant installed.

The practical effect of such an arrangement is not sufficiently realised in industry, and is not. I think, completely understood in the House. What it means is this: if an industrialist spends £10,000 upon a piece of fuel-economising equipment and obtains a Government loan for it, and if, as is normal in the case of such equipment, he arranges with the Inland Revenue that the period of wear and tear allowances to apply to that piece of plant and machinery shall be 20 years, then, under the loan scheme, the period of repayment of the loan will also be 20 years. It follows that each annual repayment against the loan is a sum equal to the annual amount of the wear and tear allowance granted by the Inland Revenue. One cancels the other out or it is an absolute equation.

Thus, the only cost of the new equipment to the industrialist is the net amount of the interest charged on the loan after deduction of Income Tax. That is a relatively small annual charge, and is more than adequately covered by the additional profit which is earned by the industrial undertaking as a result of the economy in coal at today's relatively—I stress "relatively"—high cost. It is therefore not correct to say that the loan scheme does not carry with it an adequate incentive for the installation of industrial fuel-saving equipment. In its purely fiscal aspects, it has a direct relationship to the proposal of the hon. Member for Gloucestershire, South.

There is a second point which is of great importance. We inaugurated the loans scheme for industrial fuel-saving equipment on the present more comprehensive basis a matter of only six or eight months ago. Since then, as a result of the proposals made by the Ridley Committee, and later by the Pilkington Committee, an autonomous fuel efficiency organisation for industry has been established, called the National Industrial Fuel Efficiency Service. It is autonomous and largely financed by the National Coal Board, the British Electricity Authority and the nationalised gas industry. That organisation covers every aspect of industrial fuel efficiency and is often responsible for examining schemes submitted for these loans, which are later approved or otherwise by the Ministry of Fuel and Power.

This fuel efficiency organisation has been in being only since 1st May, 1954. The loans scheme, on its enlarged basis, has been in being for only a little longer. In my view, it would be a grave mistake to try so soon to alter the whole basis of encouraging and stimulating industrial fuel efficiency by changing to the type of incentive which is proposed b) the hon. Member for Gloucestershire, South, supported by the hon. Member for Edmonton. I want to give this new basis, the industrial fuel organisation, and the loans scheme a fair run, at least for 18 months or two years.

Moreover, as a simple point for the hon. Member for Gloucestershire, South, the effect of the present loan scheme, the lengthened period of repayment and the relating of each annual repayment to the amount of each year's wear and tear allowance on the industrial fuel-economising equipment installed is precisely what he advocated last year. The practical effect of it is a 100 per cent. initial allowance, because it means that the industrialist has to find no money to meet the capital cost of the equipment at all, and year by year has to find no money out of net resources for the repayment of the loan.

For all those reasons, I hope that my right hon. Friend will think that this Amendment does not represent a suitable means, at this moment, of encouraging industrial fuel efficiency. I hope he will rely upon the schemes already in force. Nothing which I have said should be taken as being in any way derogatory to the cause, which I am glad to say is a non-party political cause, of stimulating greater efficiency in the burning of coal—our single raw material asset in this country and a wasting asset at that—by the very large number of industrial undertakings which have to use it for generating power, for raising steam, for heating and processing, and for a multiplicity of other purposes.

5.45 p.m.

I want to say a few words about administration. We in the House understand policy much better than we understand administration, especially when we are administering the law, in which there can be no ad hoc decisions and no gounds for dealing with taxpayers or other citizens purely on the basis of expediency. Every taxpayer whose circumstances are similar to those of another taxpayer is entitled to expect the same treatment under the Income Tax law as that accorded to the other man, and that is what makes discrimination in tax relief so difficult to administer.

We should all agree that tax reliefs as a system of economic policy must be used with great care and only when there is an overwhelming case for doing so. I believe that there are much stronger grounds for using tax reliefs as a system of social policy than for using them as a means of economic policy, especially in a society in which industry is largely in the hands of private enterprise.

There will obviously be difficulties about administration if there is too much discrimination and unless there are ways and means by which the taxpayer can prove his title to the allowance. My hon. Friend the Member for Gloucestershire, South (Mr. Crosland) said that there had been a certain amount of restraint in the course of the Committee stage of the Finance Bill this year, and we are confining ourselves to this single proposal in favour of a measure of tax relief in a direction which right hon. and hon. Members on both sides of the House will agree is important.

Perhaps the salvation of the Amendment from the administrative point of view is that the Ministry of Fuel and Power would come into it. It seems to me that there are to be some means of satisfying the Inland Revenue—which in terms of practical day-to-day work means the local inspector of taxes—that the money has been so spent and that it has been spent in the manner intended by the Act; and that there is no reason to doubt the facts of the matter. These are the grounds on which some form of discrimination becomes extremely difficult to administer unless we have a staff of technicians and specialists of one kind or another who, by physical inspection, are able to bring the necessary evidence to the Inland Revenue on which it can make its decision.

Many years ago, when I first went into the Inland Revenue, there was a tax known as Inhabited House Duty, and there was a physical inspection of shops which it was claimed were lock-up shops in order to make sure that there was no living accommodation which was accessible from the business part of the premises. That was repealed many years ago, but I give it as an illustration of the problems which exist when the Inland Revenue does not know whether the facts are as stated by the taxpayer and there are no practical means of finding out.

If the Inland Revenue says that there are difficulties about this sort of thing, who am I to say that there are not? I have never found that the Inland Revenue exaggerated the difficulties of administration. The chief complaint of the staff is that it underrates them and makes promises to the Chancellor which are extremely difficult to carry out or does not advise him properly of the difficulties of what he proposes to do.

Any reasonable person looking at this Amendment could say that there are safeguards which will make the Amendment practicable from the point of view of administration, and I trust that in giving the reply which he is already impatient to make—I hope it will be favourable—the Economic Secretary will not devote too much time to the administrative difficulties but will attend to the other and more serious points which support the Amendment moved by my hon. Friend.

I accept the advice of the hon. Member for Sowerby (Mr. Houghton) about administrative difficulties in this matter, and I prefer to base my arguments on a rather different approach.

The hon. Member for Edmonton (Mr. Albu) perhaps went a little wide of this Clause in dealing with the problems of the coal-mining industry and the reasons for them. It would be interesting to debate them, but I feel that this is not the time to do so. I shall try to deal with this Amendment, bearing in mind the warning which I receive from time to time from the hon. Member for Gloucestershire, South (Mr. Crosland) to be neither highfalutin nor sub-intellectual. I shall try to follow his own model of brevity and discretion.

The proposal here is to give to this particular form of plant and machinery, fuel-saving equipment, a higher investment allowance than to other forms. There is obviously no dispute about the fact that the whole situation gives rise for concern and that coal should be used as economically as possible. The argument is whether this is the right way to encourage more economy in the use of coal by industry.

My real objection to this proposal is that it introduces discrimination in circumstances in which it is difficult to justify it. During our discussions in Committee we spoke at length on the principle of discrimination and I advanced various reasons why the Government have decided that it is wrong to introduce that principle into the tax structure in circumstances such as these. In moving the Amendment, the hon. Member pointed out that the general question of discrimination is not at issue here, and so I shall not repeat the arguments which I used then. Leaving that on one side, his argument is that here is a very special case on its own, where special tax allowance should be given for this form of equipment because of the great shortage of coal.

I wonder whether it is as special as all that. Supposing one made this special tax and investment allowance, it would be a net gain to the taxpayer and not merely anticipation. If we gave special concessions in the case of machinery designed to save coal, what about machinery designed to save dollar-costing goods, Petroleum, for example, as was mentioned by the hon. Member for Edmonton. Although the problem of obtaining coal in this country is very great, there is also the problem of ensuring that we get the imports we require.

If we gave a concession of this sort it would save imported petroleum exactly as it would save coal.

That is exactly my point. The people saving imported petroleum by other methods would ask why they should not receive the same treatment, and I should find it very difficult to argue against that.

In this case there is special provision made by the Government to encourage firms to install fuel-saving machinery. The hon. Member for Gloucestershire, South used that as an argument that discrimination was already admitted. I cannot accept his argument. The position I have tried to maintain on previous occasions is that it is wrong to discriminate in the tax structure between one taxpayer and another. If we have different rates of investment allowances those rates should clearly apply to different things. Obviously, buildings should be treated differently from plant and machinery, because there is so much difference in the period of life of buildings and of plant and machinery. Here hon. Members are suggesting discrimination between two different kinds of machinery, and it is the opinion of the Government that it is wrong to do that by means of tax concessions.

But it may be right to assist one form of machinery by special schemes such as loans. Reference has been made this afternoon to the loan scheme, particularly by my hon. Friend the Member for Kidderminster (Mr. Nabarro) who illustrated in a most interesting manner the way in which this loan arrangement works out in the minds of industrial investors. The latest figures reveal that 55 schemes have been approved for loan, amounting to £377,000, and a further 47 schemes, involving £247,000, are under consideration. I think that it is clear, therefore, that considerable progress is being made in that direction.

What is the position of an industrialist who installs fuel-saving equipment of an efficient kind? I think that it is quite clear from the figures that machinery of this kind—one cannot particularise too much, but broadly speaking I would say fuel-saving equipment of this kind—should pay for itself in terms of fuel economy in four or five years. The industrialist investing in this type of machinery gets the regular capital allowance; a special loan, with the great advantage involved to which my hon. Friend referred; and in addition, under this year's Budget, he will get the investment allowance. So already there is an incentive to an efficient industrialist to install machinery of this kind.

My conclusion is that what is required is not further financial incentives, but far wider publicity about what is already available. I gained the impression that my hon. Friend the Member for Kidderminster would agree with that point of view, in that he stressed that the present advantages are not sufficiently known among industrialists. He referred to the National Industrial Fuel Efficiency Service, and I understand that they are now promoting a wide publicity campaign to encourage firms to take greater advantage of the Government's loan scheme. I am sure that that is the right way to go about this matter. There are great advantages for industrialists and companies from the installation of this type of machinery.

I agree that the National Industrial Fuel Efficiency Service is promoting a vast publicity campaign, but will my hon. Friend call in aid the Treasury information unit? Surely that is the appropriate body to explain the fiscal points to which I referred, by which an industrialist can recover, over a period of years, practically the whole initial cost of the plant and machinery?

I will certainly consider that suggestion, which I regard as a valuable one.

I would sum up the attitude of the Government to this Amendment in this way. Here we have fuel-saving plant, and its installation is, generally speaking, a good business proposition for the company concerned. We have a Government scheme involving special loans to encourage industrialists to install that type of machinery. In addition, we have the allowances, and I do not feel that we should be justified in going further, when obviously the advantages already in existence are not fully known.

I suggest that we concentrate on informing industry of the existing advantages to be obtained from making full use of the Government scheme and from investing in fuel-saving machinery. I am sure that this debate will prove of considerable assistance in furthering that process of education, which is the right way to encourage the use of this equipment.

During the debate on the last Amendment, my hon. Friend the Member for Gloucestershire, South (Mr. Crosland) referred in terms, which might have been complimentary or reproachful, to the way in which I moved the Amendment. He described it as "thorough." I will return him the compliment, or the reproach, by saying that he has done a good job with this Amendment.

It is not necessary for me to argue the points over again, but I wish to comment on some of the things which the Economic Secretary has said. He rejected this Amendment first, on the ground that if we gave special concessions to the installation of fuel-saving and coal-saving machinery, we ought to do the same for oil. I had some experience in this field as Minister of Fuel and Power, and the fact is that the waste of solid fuel is always far more serious than the waste of oil fuel. I think that is recognised by everyone.

6.0 p.m.

We are really concerned here with the out-of-date installations for burning solid fuel. I do not think that the Minister can ride off on the ground that really we ought to do it for oil as well. There has not been a problem with oil but there has been one with solid fuel. There has been not only the problem of the shortage of coal, but the knowledge that coal was being very wastefully used.

The hon. Gentleman also put forward the usual argument that we could not have discrimination on fiscal matters of this kind. He did not deal adequately with the examples given by my hon. Friends where there is already such discrimination. There is discrimination in the case of ships. The owners are allowed the 40 per cent. initial allowance or the investment allowance, as they think fit. There is no special circumstance there. One cannot call a ship an installation, but it is certainly a form of capital expenditure. Here we have another form.

I do not accept the argument that we must beware of discrimination. I do not think that it is any more than an anxiety, which I understand, on the part of the Treasury and the officials of the Inland Revenue, that by reason of discrimination in favour of one type of installation they may be driven to having to make similar concessions to others and that the whole matter will get so hopelessly complicated that it will be difficult to administer.

But as my hon. Friends have pointed out, in this instance we have a very simple criterion to apply. The matter is covered by the second of the two Amendments, namely, the fact that the Ministry of Fuel and Power have all the machinery for deciding whether a piece of fuel-burning equipment does or does not fall within the class which should be encouraged. I do not accept the hon. Gentleman's argument in that respect.

The third argument was that, while the Government did not see their way to produce discrimination in this field, nevertheless they believed in fuel economy and they were helping out in other ways. The hon. Member for Kidderminster (Mr. Nabarro) made great play with what has been done through the loan scheme. The loan scheme is predominantly for those who are short of capital. That would be a reasonably good argument, in the light of what the hon. Member said, in comparison with initial allowances, but the whole purpose of the investment allowance was to deal with the lack of incentive and not the shortage of capital.

Though I do not wish in any way to decry the loan scheme, I would say that the difficulty is that it does not provide the incentive. It is all very well to say that industrialists are stupid and that they do not understand that there would be great advantages. That may be true, but the fact remains that industry generally has not gone as far as we would like it to go in this direction. I am not making reproaches now. As a matter of fact, successive Governments over the years have done a very good job on fuel efficiency. The work began during the war and it was carried on later.

Would the right hon. Gentleman also admit that successive Governments have pleaded that they cannot give any greater incentives, because that would lead to discrimination? It was the right hon. Gentleman himself who turned down my plea during the consideration of the Finance Bill in 1951 on the very ground of discrimination.

Division No. 195.]

AYES

[6.7 p.m.

Acland, Sir RichardBenn, Hon. WedgwoodBrockway, A. F.
Albu, A. H.Benson, G.Brook, Dryden (Halifax)
Allen, Arthur (Besworth)Bing, G. H. C.Broughton, Dr. A. D. D.
Allen, Scholefield (Crewe)Blackburn, F.Brown, Rt. Hon. George (Belper)
Anderson, Frank (Whitehaven)Blenkinsop, A.Brown, Thomas (Ince)
Attlee, Rt. Hon. C. R.Blyton, W. R.Burke, W. A.
Awbery, S. S.Boardman, H.Burton, Miss F. E.
Bacon, Miss AliceBottomley, Rt. Hon. A. GButler, Herbert (Hackney, S.)
Balfour, A.Bowden, H. W.Castle, Mrs. B. A.
Beattie, J.Bowles, F. G.Champion, A. J.
Bence, C. RBraddock, Mrs. ElizabethClunie, J.

to the 1951 Budget. I can only repeat that the circumstances in which that Budget was brought in were quite exceptional and refer to the enormous increase in expenditure which we had to face in that year as well as the heavy pressure involved in the early stages of the defence programme on the whole of the engineering industries. That constituted a special situation.

Now we have a coal situation which is recognised to be causing anxiety in the Government and in the country generally. We know that it is caused by a very sharp increase in coal consumption. There has been an increase in the first half of this year of over 3 million tons. An annual rate of increase of 6 million tons a year is a formidable one to meet, especially if at the same time the National Coal Board has to devote, as it must, a good deal of its resources to long-term development such as the sinking of new pits, reconstruction, and so on.

It is overwhelmingly clear that a very special effort should be made in fuel economy. Here is an opportunity which I thought the Government would take. They might reasonably have said that this would not be enough that this could not do the trick. Then I should have said that they should try it anyhow, because it is desperately important that we should save fuel. I should have thought that the Government would have jumped at the opportunity to give the additional incentive. There is no need to decry anything else that has been done, but why not do this as well?

In view of the answer which the Economic Secretary gave, which seemed to us unconvincing in the light of the situation, I suggest to my hon. Friends that we should divide the House.

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

The House divided: Ayes, 224; Noes, 262.

Coldrick, W.Irving, W. J. (Wood Green)Rhodes, H.
Collick, P. H.Isaacs, Rt. Hon. G. A.Richards, R.
Corbet, Mrs. FredaJanner, B.Roberts, Goronwy (Caernarvon)
Cove, W. G.Jeger, George (Goole)Robinson, Kenneth (St. Pancras, N.)
Craddock, George (Bradford, S.)Jeger, Mrs. LenaRogers, George (Kensington, N.)
Crosland, C. A. R.Jenkins, R. H. (Stechford)Ross, William
Crossman, R. H. S.Johnson, James (Rugby)Royle, C.
Daines, P.Jones, David (Hartlepool)Shackleton, E. A. A.
Dalton, Rt. Hon. H.Jones, Frederick Elwyn (West Ham, S.)Shinwell, Rt. Hon. E.
Darling, George (Hillsborough)Jones, Jack (Rotherham)Short, E. W.
Davies, Ernest (Enfield, E.)Keenan, W.Shurmer, P. L. E.
Davies, Harold (Leek)Kenyon, C.Silverman, Julius (Erdington)
Davies, Stephen (Merthyr)Key, Rt. Hon. C. W.Silverman, Sydney (Nelson)
de Freitas, GeoffreyKing, Dr. H. M.Simmons, C. J. (Brierley Hill)
Deer, G.Kinley, J.Skeffington, A. M.
Delargy, H. J.Lawson, G. M.Slater, Mrs. H. (Stoke-on-Trent)
Dodds, N. N.Lee, Frederick (Newton)Slater, J. (Durham, Sedgefield)
Donnelly, D. L.Lee, Miss Jennie (Cannock)Smith, Ellis (Stoke, S.)
Dugdale, Rt. Hon. John (W. Bromwich)Lever, Leslie (Ardwick)Smith, Norman (Nottingham, S.)
Ede, Rt. Hon. J. C.Lindgren, G. S.Sorensen, R. W.
Edwards, Rt. Hon. John (Brighouse)Lipton, Lt.-Col. M.Soskice, Rt. Hon. Sir Frank
Edwards, W. J. (Stepney)McInnes, J.Sparks, J. A
Evans, Albert (Islington, S.W.)McLeavy, F.Steele, T.
Evans, Edward (Lowestoft)MacPherson, Malcolm (Stirling)Stokes, Rt. Hon. R. R.
Evans, Stanley (Wednesbury)Mallalieu, E. L. (Brigg)Strachey, Rt. Hon. J.
Fernyhough, E.Mallalieu, J. P. W. (Huddersfield, E.)Strauss, Rt. Hon. George (Vauxhall)
Fienburgh, W.Mann, Mrs. JeanSummerskill, Rt. Hon. E.
Fletcher, Eric (Islington, E.)Manuel, A. C.Swingler, S. T.
Fellick, M.Marquand, Rt. Hon. H. ASylvester, G. O.
Forman, J. C.Mason, RoyTaylor, Bernard (Mansfield)
Fraser, Thomas (Hamilton)Mayhew, C. P.Taylor, John (West Lothian)
Freeman, John (Watford)Mellish, R. J.Taylor, Rt. Hon. Robert (Morpeth)
Freeman, Peter (Newport)Messer, Sir F.Thomas, George (Cardiff)
Gaitskell, Rt. Hon. H. T. N.Mikardo, IanThomas, Iorwerth (Rhondda, W.)
Gibson, C. W.Mitchison, G. R.Thomas, Ivor Owen (Wrekin)
Glanville, JamesMonslow, W.Thomson, George (Dundee, E.)
Gordon Walker, Rt. Hon. P. C.Moody, A. S.Thornton, E.
Greenwood, AnthonyMorgan, Dr. H. B. W.Timmons, J.
Grey, C. F.Morley, R.Tomney, F.
Griffiths, Rt. Hon. James (Llanelly)Morris, Percy (Swansea, W.)Ungoed-Thomas, Sir Lynn
Hale, LeslieMorrison, Rt. Hon. H. (Lewisham, S.)Usborne, H. C.
Hall, Rt. Hon. Glenvil (Colne Valley)Moyle, A.Warbey, W. N.
Hall, John T. (Gateshead, W.)Mulley, F. W.Weitzman, D.
Hamilton, W. W.Oldfield, W. H.Wells, Percy (Faversham)
Hannan, W.Oliver, G. H.Wells, William (Walsall)
Hargreaves, A.Orbach, M.West, D. G.
Harrison, J. (Nottingham, E.)Oswald, T.
Hastings, S.Padley, W. E.Wheeldon, W E.
Hayman, F. H.Paget, R. T.Whiteley, Rt. Hon W
Healey, Denis (Leeds, S.E.)Palmer, A. M. F.Wigg, George
Healy, Cahir (Fermanagh)Pannell, CharlesWilley, F. T.
Henderson, Rt. Hon. A. (Rowley Regis)Pargiter, G. A.Williams, Rev. Llywelyn (Abertillery)
Herbison, Miss M.Parker, J.Williams, Rt. Hon. Thomas (Don V'll'y)
Hewitson, Capt. M.Parkin, B. T.Williams, W. R. (Droylsden)
Hobson, C. R.Paton, J.Willis, E. G.
Holman, P.Peart, T. F.Wilson, Rt. Hon. Harold (Heyton)
Holmes, HoracePlummer, Sir LeslieWinterbottom, Ian (Nottingham, C.)
Houghton, DouglasPopplewell, E.Winterbottom, Richard (Brightside)
Hoy, J. H.Porter, G.Woodburn, R. Hon. A.
Hubbard, T. F.Price, J. T. (Westhoughton)Wyatt, W. L
Hudson, James (Ealing, N.)Proctor, W. T.Yates, V. F.
Hughes, Emrys (S. Ayrshire)Pryde, D. J.Younger, Rt Hon. K.
Hughes, Hector (Aberdeen, N.)Pursey, Cmdr. H.
Hynd, H. (Accrington)Reid, Thomas (Swindon)TELLERS FOR THE AYES:
Hynd, J. B. (Attercliffe)Reid, William (Camlachie)Mr. Wallace and Mr. Wilkins.

NOES

Aitken, W. T.Bishop, F. P.Butcher, Sir Herbert
Alian, R. A. (Paddington, S.)Black, C. W.Butler, Rt. Hon. R. A. (Saffron Walden)
Alport, C. J. M.Boothby, Sir R. J. G.Campbell, Sir David
Amery, Julian (Preston, N.)Bossom, Sir A. C.Carr, Robert
Amory, Rt. Hon. Heathcoat (Tiverton)Boyd-Carpenter, Rt. Hon. J. A.Cary, Sir Robert
Anstruther-Gray, Major W. J.Boyle, Sir EdwardChannon, H.
Arbuthnot, JohnBraine, B. R.Clarke, Col. Ralph (East Grinstead)
Assheton, Rt. Hon. R. (Blackburn, W.)Braithwaite, Sir Albert (Harrow, W)Clarke, Brig. Terence (Portsmouth, W.)
Baldwin, A. E.Braithwaite, Sir GurneyCole, Norman
Banks, Col. C.Brooke, Henry (Hampstead)Colegate, W. A.
Barlow, Sir JohnBrooman-White, R. C.Conant, Maj. Sir Roger
Baxter, Sir BeverleyBrowne, Jack (Govan)Cooper, Sqn. Ldr. Albert
Beach, Maj HicksBuchan-Hepburn, Rt. Hon. P. G. TCooper-Key, E. M.
Bell, Ronald (Bucks, S.)Bullard, D. G.Craddock, Beresford (Spelthorne)
Bennett, F. M. (Reading, N.)Bullus, Wing Commander E. ECrookshank, Capt. Rt. Hon. H. F. C
Birch, NigelBurden, F. F. ACrosthwaite-Eyre, Col. O. E

Crouch, R. F.Iremonger, T. L.Raikes, Sir Victor
Crowder, Sir John (Finchley)Jenkins, Robert (Dulwich)Ramsden, J. E.
Crowder, Petre (Ruislip—Northwood)Johnson, Eric (Blackley)Rayner, Brig. R.
Darling, Sir William (Edinburgh, S.)Johnson, Howard (Kemptown)Redmayne, M.
Davidson, ViscountessJones, A. (Hall Green)Rees-Davies, W. R.
Davies, Rt. Hn. Clement (Montgomery)Joynson-Hicks, Hon. L. W.Remnant, Hon. P.
Deedes, W. F.Kaberry, D.Renton, D. L. M.
Digby, S. WingfieldKerby, Capt. H. BRidsdale, J. E.
Dodds-Parker, A. D.Kerr, H. W.Roberts, Peter (Heeley)
Donaldson, Cmdr. C. E. McALambton, ViscountRobertson, Sir David
Donner, Sir P. W.Lancaster, Col. C. GRobinson, Sir Roland (Blackpool, S)
Doughty, C. J. A.Langford-Holt, J. A.Rodgers, John (Sevenoaks)
Douglas-Hamilton, Lord MalcolmLeather, E. H. C.Roper, Sir Harold
Drayson, G. B.Legge-Bourke, Maj. E. A. H.Russell, R. S.
Drewe, Sir C.Legh, Hon. Peter (Petersfield)Ryder, Capt. R. E. D.
Dugdale, Rt. Hon. Sir T. (Richmond)Lennox-Boyd, Rt. Hon. A. T.Savory, Prof. Sir Douglas
Duncan, Capt. J. A. L.Lindsay, MartinSchofield, Lt.-Col. W.
Duthie, W. S.Linstead, Sir H. N.Scott, R. Donald
Eccles, Rt. Hon. Sir D. MLloyd, Maj. Sir Guy (Refrew, E.)Scott-Miller, Cmdr. R.
Eden, Rt. Hon. A.Lockwood, Lt.-Col. J. C.Shepherd, William
Eden, J. B. (Bournemouth, West)Longden, GilbertSimon, J. E. S. (Middlesbrough, W.)
Erroll, F. J.Lucas, Sir Joseph (Portsmouth, S.)Smithers, Peter (Winchester)
Finlay, GraemeLucas, P. B. (Brentford)Smithers, Sir Waldron (Orpington)
Fisher, NigelLucas-Tooth, Sir HughSnadden, W. McN.
Fleetwood-Hesketh, R. FMcCorquodale, Rt. Hon. M SSpearman, A. C. M.
Fletcher-Cooke, C.Macdonald, Sir PeterSpeir, R. M.
Ford, Mrs. PatriciaMackeson, Brig. Sir HarrySpens, Rt. Hon. Sir P. (Kensington, S.)
Fort, R.Mackie, J. H. (Galloway)Stanley, Capt. Hon. Richard
Foster, JohnMaclay, Rt. Hon. JohnStevens, Geoffrey
Fraser, Hon. Hugh (Stone)Maclean, FitzroySteward, W. A. (Woolwich, W.)
Fraser, Sir Ian (Morecambe & Lonsdale)Macleod, Rt. Hon. Iain (Enfield, W.)Stewart, Henderson (Fife, E.)
Galbraith, Rt. Hon. T. D. (Pollok)MacLeod, John (Ross and Cromarty)Stoddart-Scott, Col. M.
Galbraith, T. G. D. (Hillhead)Macmillan, Rt. Hon. Harold (Bromley)Storey, S.
Gammans, L. D.Macpherson, Niall (Dumfries)Strauss, Henry (Norwich, S.)
George, Rt. Hon. Maj. G. LloydMaitland, Patrick (Lanark)Stuart, Rt. Hon. James (Moray)
Glover, D.Manningham-Buller, Rt. Hn. Sir ReginaldSummers, G. S.
Godber, J. B.Markham, Major Sir FrankSutcliffe, Sir Harold
Gomme-Duncan, Col. AMarlowe, A. A. H.Taylor, William (Bradford, N.)
Gough, C. F. H.Marples, A. E.Teeling, W.
Gower, H. R.Marshall, Douglas (Bodmin)Thomas, Rt. Hon. J. P. L. (Hereford)
Graham, Sir FergusMaude, AngusThomas, Leslie (Canterbury)
Grimond, J.Maudling, R.Thornton-Kemsley, Col. C. N.
Grimston, Hon. John (St. Albans)Maydon, Lt.-Comdr. S. L. C.Tilney, John
Grimston, Sir Robert (Westbury)Medlicott, Brig. F.Touche, Sir Gordon
Hall, John (Wycombe)Mellor, Sir JohnTurner, H. F. L.
Hare, Hon. J. H.Molson, A. H. E.Turton, R. H.
Harris, Frederic (Croydon. N)Moore, Sir ThomasTweedsmuir, Lady
Harrison, Col. J. H. (Eye)Morrison, John (Salisbury)Vane, W. M. F.
Harvey, Ian (Harrow, E.)Nabarro, G. D. N.Vaughan-Morgan, J. K.
Harvie-Watt, Sir GeorgeNeave, AireyVosper, D. F.
Hay, JohnNicholls, HarmarWade, D. W.
Head, Rt. Hon. A. H.Nicolson, Nigel (Bournemouth, E.)Wakefield, Edward (Derbyshire, W.)
Heald, Rt. Hon. Sir LionelNield, Basil (Chester)Wakefield, Sir Wavell (St. Marylebone)
Heath, EdwardNoble, Comdr. A. H. P.Walker-Smith, D. C.
Higgs, J. M. C.Nugent, G. R. H.Wall, Major Patrick
Hill, Dr. Charles (Luton)Nutting, AnthonyWard, Hon. George (Worcester)
Hill, Mrs. E. (Wythenshawe)Oakshott, H. D.Ward, Miss I. (Tynemouth)
Hinchingbrooke, ViscountOdey, G. W.Waterhouse, Capt. Rt. Hon. C.
Hirst, GeoffreyO'Neill, Hon. Phelim (Co. Antrim, N.)Watkinson, H. A.
Holland-Martin, C. JOrr, Capt. L. P. S.Webbe, Sir H. (London & Westminster)
Holt, A. F.Orr-Ewing, Charles Ian (Hendon, N.)Wellwood, W.
Hopkinson, Rt. Hon. HenryOrr-Ewing, Sir Ian (Weston-super-Mare)Williams, Gerald (Tonbridge)
Hornsby-Smith, Miss M. P.Page, R. G.Williams, Sir Herbert (Croydon, E.)
Horobin, I. M.Peake, Rt. Hon. O.Williams, Paul (Sunderland, S.)
Horsbrugh, Rt. Hon. FlerencePeto, Brig. C. H. M.Williams, R. Dudley (Exeter)
Howard, Gerald (Cambridgeshire)Peyton, J. W. W.Wills, G.
Howard, Hon. Greville (St. Ives)Pickthorn, K. W. M.Wilson, Geoffrey (Truro)
Hudson, Sir Austin (Lewisham, N.)Pilkington, Capt. R. A.Wood, Hon. R.
Hulbert, Wing Cdr. N. J.Pitman, I. J.
Hurd, A. R.Pitt, Miss E. M.TELLERS FOR THE NOES:
Hutchison, Sir Ian Clark (E'b'rgh, W.)Powell, J. EnochMr. Studholme and
Hyde, Lt.-Col. H. M.Price, Henry (Lewisham, W.)Mr. Richard Thompson.
Hylton-Foster, H. B. H.Prior-Palmer, Brig. O. L.

Clause 27—(Reduced Rate Of Duty On Certain Business Assets)

6.15 p.m.

I beg to move, in page 29, line 25, at the end, to insert:

Where an interest in a partnership passes on death the deceased shall be deemed to have an interest in the hereditaments and machinery or plant referred to corresponding to his interest in the partnership assets.
The Amendment is intended to deal with partnerships so far as they are affected by the Clause and is designed to remedy a legal gap in the relief proposals. As I understand the position—in this complicated field I am open to correction by the Financial Secretary—in the case of a partnership at will—that is to say, one without a partnership agreement—a share in the real property of the partnership does not pass on the death of a partner.

These situations are governed by Section 33 (1) of the Partnership Act, 1890, which holds that on a partner's death the partnership is dissolved. What then happens is that the deceased partner's interest in the firm has to be ascertained according to rules set out in Section 44 of the Act, and the interest becomes a sum of money constituting a debt due from the surviving partners to the estate of the deceased.

I imagine that in these circumstances—here I shall welcome the elucidation of the Financial Secretary—it will be held that what passes is not an interest in an industrial business, whether hereditament, plant or machinery, but a mere money claim, which would not qualify for the relief which the Clause proposes to provide.

Nevertheless, this seems to me to be a case where relief should be given, and I will show how I imagine it should operate. It might, in the first place, be argued that the efficiency of the partnership would not be affected by the death of one of the partners, particularly as under the Partnership Act the interest in the partnership is dissolved on the death of a partner. However, in this sort of business there is usually a very strong family connection, and although the interest in the partnership might be held to be dissolved, the probability is that a relation of the deceased partner would wish to enter the business as a partner, or, if he was already in the business as a junior, would wish to become a partner.

The surviving individual would in all probability be one of the principal beneficiaries under the will of the deceased partner, because he would be a close relation, and as a beneficiary, and no doubt the principal beneficiary, he would only be receiving money with which to buy himself back into the partnership and it would be after that money had borne Estate Duty at the appropriate rate. He would then, in fact, be less well equipped than he should be to restore to the partnership the working capital which it required in order to maintain itself. He would be worse off to the extent that, as matters stand at present, he would not be able to get the relief which the Clause ought to be designed to give him.

The efficiency of such partnerships will be affected if the relief is not given, and the reasons are the same as those in the case of other family businesses. I hope very much that the Government will accept this small Amendment which closes a legal gap in their relief proposals.

I beg to second the Amendment.

My hon. Friend the Member for Altrincham and Sale (Mr. Erroll) has moved the Amendment so thoroughly and with such clarity that very little remains to be said. The Amendment follows on naturally from the provisions which the Government have introduced in Clause 27 of this Bill, in which relief is given to industrial hereditaments. Its purpose is to ensure that partnerships, and particularly partnerships in which there is no partnership agreement, are included in the benefits given by Clause 27.

My hon. Friends have made it clear that they, are concerned with the application of the benefits given by this Clause to the cases of partnerships. I have studied their Amendment carefully, and, as it is phrased, I must say that it would not have the effect of extending the provisions of the Bill in this respect at all.

Where, under the Clause as it stands, an interest in a partnership, which is the expression used in the Amendment, passes, it does receive, proportionately, the benefits of the Clause, and therefore in that case there is no legal gap, to adopt the phrase used by my hon. Friend the Member for Altrincham and Sale (Mr. Erroll). But, as I understand his speech, my hon. Friends are not so much concerned with that, but with the wider question, much more frequently arising, of whether, on the death of a partner, what passes is not part of the interest in the partnership, but, in the much more usual case, a sum of money, and in that case, as I think my hon. Friends have indicated, the provisions of this Clause do not apply. Therefore, though the Clause as it stands deals only with the passing of an interest in a partnership, I think that, in view of the interest of my hon. Friends in the other and much more frequent case, when what passes is a sum of money, I, should say a word or two about the general merits of the matter.

I agree that the passing of a sum of money is the more frequent where there is a partnership deed. Whether what passes is an interest in a partnership or a sum of money depends on the terms of the deed, and therefore, in the drawing up of a partnership deed, it is very much a matter for the partners concerned whether they desire to frame their partnership deed in a way which will attract the benefits of this Clause or not. On the other hand, in the case of a partnership at will, the Partnership Act, 1890, in Section 33, provides that what passes shall be a sum of money, and these are really the cases with which my hon. Friends are concerned, because, in respect of a partnership deed, it depends on the way it is framed, and we can assume that in framing it the partners will do it in such a way as to suit their particular circumstances.

My hon. Friends say that, in the case of a partnership at will, the benefit of this Clause should be given. It is true that, in the sort of case to which my hon. Friends have referred—the case where the money passes to a near relative, who desires to continue the partnership business—there is an argument in favour of extending the benefits of this Clause to that sort of case, but that is not the only case by any means, and we must deal with this matter on the broad general merits, which are these.

Where, on a death, a partner has to pay a sum of money to the executors of the deceased, it is of no significance at all to the partnership whether that sum of money is paid net or gross of Estate Duty. It is of great interest to the dependants of the deceased partner, but, as far as the partnership is concerned, and as far as its continued operation as a business is concerned, if it has to pay, say, £50,000, it makes no difference at all to the working of the partnership whether or not that £50,000 is paid over entire to the executors and they have to find the appropriate sum in Estate Duty; the working of the partnership is not affected one way or another.

On that basis, it really seems to me that the proposal of my hon. Friends, though it appeals naturally to one's sympathies, in respect of the beneficiaries of the deceased person's estate is not really within the intention of this Clause as it was outlined by my right hon. Friend. My right hon. Friend made it clear that one of the major purposes of this Clause was to assist the operation of the family business, of which a partnership is a particular example, and the proposal in the Amendment to extend the benefits of this Clause would extend it into a sphere where the health of the family business does not really arise. Looking at the matter from a purely sympathetic and compassionate point of view, we should be driven by this Amendment to extend the ambit of the Clause very widely.

For these reasons, and quite apart from the fact that the actual drafting of the Amendment does not achieve what my hon. Friends want it to do, on the merits of the matter it would not be possible to accept this proposal, involving some departure, though not a very great one, from the main purpose of the Clause. I appreciate, however, the intention with which the Amendment was put forward, and, indeed, would not wish in any way to diminish the very valuable share which partnership activities take in the economic and industrial life of the country.

Amendment, by leave, withdrawn.

I beg to move, in page 31, line 34, after "into," to insert:

"before or is entered into within three years after the death."
This Clause deals with the partial relief from Estate Duty given to family businesses, and subsection (9), to which our Amendment relates, deals with those businesses and companies to which relief will not be granted The Amendment is designed to close a gap of a very different kind from that which has been referred to by the hon. Member who moved the last Amendment. This matter was fairly fully' debated in Committee, when my hon. Friend the Member for Islington. East (Mr. E. Fletcher), with his usual lucidity and brevity, moved this particular Amendment with such clarity that even the right hon. and learned Gentleman the Solicitor-General had to agree that there was a great deal of substance and force in what he had said.

In fact, when the Solicitor-General began his speech, we had great hopes that he was going to accept the Amendment, but, having said that there was everything in the point put forward, he went on to erect what we thought were Aunt Sallies in order to knock them down again, and to show that, although there might be something in it, and although, in fact, there was everything in what my hon. Friend had said, nevertheless there were certain difficulties. The Government, however, would watch the matter very carefully during the coming year.

6.30 p.m.

The Solicitor-General gave what we thought were very insubstantial reasons for turning down the Amendment. I listened to what he said with great care, and I re-read it. His chief reason for turning down the Amendment, in spite of the fact that he thought it reasonable, was that there might be a sale
"because there is no suitable member of the family left to run the business."
A more fantastic reason for turning down the Amendment was
"because the surviving member of the family does not consider it suitable for him to run."—[OFFICIAL REPORT, 24th June, 1954; Vol. 529, c. 726.]
That surely cuts the whole ground from under the concession of 45 per cent., which is a considerable one. It is to be given only because there is a certain amount of feeling that family businesses, after paying Estate Duty, would find themselves deprived of assets necessary for the continuance of the business on the family basis, and would have to be broken up and sold. It was demonstrated beyond all doubt by the Inland Revenue, after going into this matter at some length, that there was very little in the suggestion that family businesses had had to be liquidated wholesale from one end of the country to another. Nevertheless, the Government moved the Clause, and we were willing to accept it because we wanted to be reasonable.

Here undoubtedly is a loophole which should be closed. We are suggesting in our Amendment that if a sale takes place within a period of three years after the death, the full weight of Estate Duty should apply to the estate. We think that is reasonable, and it is obvious that the Government think it is reasonable, but they will not accept our suggestion. They did not put it into the Bill them- selves, and they dislike accepting it from this side of the House. They also think that the Estate Duty department might have a little extra work to do in watching these estates over the proposed longer period.

The arguments from our side of the Committee were so strong that the Chancellor of the Exchequer had to intervene, following the Solicitor-General, and he, like the Solicitor-General, agreed that there was a great deal in our contention. He said that he would watch the situation, but added that nothing could be done this time. It is absurd to leave this matter over for a further period of years. If we leave the stable door open all that time, a good many horses will have disappeared. There is no reason why, if the Government make this concession, it should not be as watertight as possible.

The arguments used by the Chancellor of the Exchequer and the Solicitor-General were not very convincing. If the surviving member of the family does not want to carry on the business, obviously it will cease to be a family business. If the family takes steps within a reasonable period—we say three years—to sell the business, the obvious intention is not to continue it on the family basis, and we do not see why relief should be granted in those circumstances.

I have every confidence that the Solicitor-General, having slept on this matter, having considered what was said then and what was said then having sunk in, is now about to rise in this place and say that, on behalf of the Government, he accepts the Amendment which I now move.

I would say one word on this Amendment. Its purpose was clearly stated in the Committee, and has been reiterated by the right hon. Member for Colne Valley (Mr. Glenvil Hall). It is designed to prevent a man from buying up a family business simply for the purpose of getting a lower rate of death duty. His heirs, having no interest in the business, will probably sell it or its assets, thereby defeating the very purpose which the Chancellor of the Exchequer had in mind in giving this concession. This is not an unlikely event. I have already seen advertisements in newspapers offering for sale family businesses, and pointing out that they will be liable only to a lower rate of death duty.

The right hon. Member for Colne Valley criticised some parts of the Solicitor-General's speech in Committee. Some of his arguments did not seem very conclusive against the Amendment then moved. I would draw attention to another part of the speech of the Solicitor-General. It was apparent that he agreed that there was a loophole and that it was undesirable that the concession should be used by people who simply wanted to get a lower rate of death duty. He went on to say:
"One does not wish to take those steps in advance. In my view, it is better to keep a close watch on the position to see whether exploitation does take place, and, if so, to note what devices are used and to stop the use of them."—[OFFICIAL REPORT, 24th June. 1954; Vol. 529, c. 728–9.]
If there are obvious loopholes in the Clause, we ought to stop them up now. Otherwise, the quickest and cleverest men will get through them and then steps will be taken to stop the loopholes retrospectively, which will be highly objectionable. If it is not done retrospectively some people will have got away with it; I do not say immorally and certainly not illegally, but in a way which the House and the Government think undesirable. In due course, other people who are in exactly the same position will be unable to do the same thing.

This method of dealing with fiscal legislation, in which draft Bills are put forward with obvious doubts and loopholes is objectionable. It may in some cases prove necessary to amend fiscal provisions against unforeseen results, but to leave obvious loopholes in its provisions should not be a method which the Government advocate while the Bill is still under debate. They should not be stopped up retrospectively. I think what the Solicitor-General had in mind, when he spoke about people who take advantage of the Clause, was that they might be brought in by some form of retrospective legislation. That surely would be highly undesirable.

In moving the Amendment, the right hon. Member for Colne Valley (Mr. Glenvil Hall) raised a subject which we discussed, and I would say very fully discussed, in the Committee. He hardly did justice to the arguments advanced from this side of the Committee, and he has quite clearly quoted two passages from my speech right out of context. He has confused illustration with argument. I will make no point about that. This is a narrower Amendment than the one we discussed on that occasion.

I hope the right hon. Gentleman will let me reply. We want to get on to the next debate, on much bigger issues.

The right hon. and learned Gentleman made an assertion which makes it appear that I have been unfair to him and to the arguments that he advanced in Committee. I quoted what he actually said. The rest of his argument advocated an Amendment which was taken at the same time, and which was moved by the hon. Member for Orkney and Shetland (Mr. Grimond).

I think that the right hon. Gentleman was unfair to my argument, because he took sentences completely out of their context. Anyone can form his own opinion about that by looking at the OFFICIAL REPORT.

I would remind the House that the Amendment now moved is narrower than the one then under discussion, and is consequently more objectionable than the previous one which sought to deal not only with the case of a private business for sale, but also with the case of a company which was wound up within the period. I then indicated that one of the difficulties in dealing with companies was where the company was not wound up but there was a sale of shares. It is, in fact, very difficult to overcome that possible way of operating.

This Amendment is the more objectionable because, were it accepted, it would apply only to private businesses and not to companies which would be affected by subsection (2, b). That is a very strong objection to the Amendment. I say now, as I said on the last occasion, that there is some substance in the point put forward, and the right hon. Gentleman is quite wrong in thinking that we are not prepared to recognise the force of any arguments advanced from the benches opposite.

It really would be wrong to accept this Amendment not only for the reasons which I advanced on the last occasion but because it would not cover the held to anything like the same extent as the previous Amendment, unsatisfactorily as it was covered by that Amendment. I dealt, I hope, satisfactorily with the Amendment discussed at the same time in the name of the hon. Member for Orkney and Shetland (Mr. Grimond). I then indicated the hardship that the time-limit which he proposed to impose might create.

To give another example, If a time limit were imposed, for even three years, only in relation to businesses, it would be very hard and unfair where a death occurs and where someone of the family carries on a business coming within the intentions of this Clause and then, within the three-year period, the person carrying on the family business dies and there is no one left to continue it. In such a case, the benefit of this Clause would be taken away. That, I think, would be very hard.

The difficulty here is to distinguish between operations designed to abuse the provisions of the Clause, and what I might call the unfortunate events which occur, where there is no intent to engage in tax avoidance or to secure an improper tax benefit. That difficulty of distinguishing between the two makes it impossible at the present moment to accept any Amendment on the lines suggested.

If such an Amendment were accepted, it would mean that one would have to hit a number of such unfortunate cases as well as hitting some of those one would want to hit. I reiterate once again that, although in this instance there is great force in the argument, we hope that there will not, in fact, be abuse of the Clause. If there is, it may possibly take one of two or three different forms. But directly we see which form, if any, emerges, I can assure the House that we shall give immediate consideration to preventing the use of that form, without injuring the genuine family business of the sort I have instanced.

6.45 p.m.

My right hon. Friend the Chancellor, when he took part in the debate, said that he thought it more likely that we should adhere to our decision to allow the Clause to operate, and that then, if any abuse should arise in future years, we should deal with it in the light of experience. We have given most careful consideration to the point, because, as I have indicated all along, we feel that there is some substance in the view advanced as to the possibility of the improper use of the Clause.

Having given further consideration to the matter, we adhere to our view, having regard to all the circumstances, that it is better to retain the Clause as it now stands. I hope that I have not dealt with the point too shortly, and, equally, that I have not dealt with it at too great a length. I have confined my remarks to perhaps a shorter compass than I might otherwise have done because we discussed the matter very fully in Committee, and because I know that the House wants to get on to the next Clause, which raises some very big issues.

It is perfectly true that the House wants to get on to the next Clause, which raises some very big issues, but I do not think that the House would be content to do that until it had dealt satisfactorily with this Clause. I do not believe that anyone listening to the right hon. and learned Gentleman would really regard the explanation which he has given this evening as being in any way satisfactory.

What did the Solicitor-General say? He started by complaining that my right hon. Friend had today moved an Amendment in a more limited form than the one which was considered in Committee. He then went on to say that one of his reasons for rejecting the Amendment was that it was not precisely the same as the earlier Amendment, to which he adduced arguments in opposition in Committee.

We are not concerned with the other Amendment; we are concerned today with dealing with a matter which both the Solicitor-General and the Chancellor recognises as being a serious and genuine complaint. Indeed, in urging us to come to a decision on the last occasion, the Chancellor said that he recognised the spirit of perfect sincerity in which the Amendment was put forward.

I think that we are perfectly entitled to complain that on this Clause we have been treated with very scant civility by the Solicitor-General. He really has not done justice to the arguments put forward by my right hon. Friend. Here is a case in which, admittedly, there is the possibility of considerable abuse of these concessions. In fact, the hon. Member for Orkney and Shetland (Mr. Grimond) pointed out that it is apparent, from advertisements already appearing in the Press, that some subtle persons have already discovered that quite advantageous benefits can be obtained by purchasing, shortly after the death of an individual, businesses which have benefited from this concession in respect of Estate Duty.

What were the arguments put forward by the Solicitor-General for opposing this Amendment? In Committee, his chief argument was that if Estate Duty was allowed to remain in suspense for more than three years, it would involve the Estate Duty Office in a duty to supervise all estates during that period. In other words, he put forward an administrative difficulty. All hon. Members who have any experience of these matters know perfectly well that it is part of the job of the Estate Duty Office to keep watch on estates over a long period of years. Claims frequently arise for the revision of Estate Duty and Succession Duty and no real administrative difficulty arises in this connection.

Even if it did, the Solicitor-General contradicted himself both in Committee and today by saying that, instead of accepting this Amendment, he preferred to keep a close watch on the matter. How can he keep a close watch on the matter unless he imposes on the Estate Duty Office precisely the same responsibility of supervising these matters which he gave as one of the administrative difficulties for not accepting the Amendment? That argument strikes me as being so hollow and insincere that I do

Division No. 196.]

AYES

[6.53 p.m.

Acland, Sir RichardBraddock, Mrs. ElizabethCrossman, R. H. S.
Allen, Arthur (Bosworth)Brockway, A. F.Daines, P.
Allen, Scholefield (Crewe)Brock, Dryden (Halifax)Dalton, Rt. Hon. H.
Anderson, Frank (Whitehaven)Broughton, Dr. A. D. D.Darling, George (Hillsborough)
Attlee Rt. Hon. C. R.Brown, Rt. Hon. George (Belper)Davies, Ernest (Enfield, E.)
Awbery, S. S.Brown, Thomas (Ince)Davies, Harold (Leek)
Bacon, Miss AliceBurke, W. A.Davies Stephen (Merthyr)
Beattle, J.Burton, Miss F. E.de Freitas, Geoffrey
Bence, C. R.Butler, Herbert (Hackney, S.)Deer, G.
Benn, Hon. WedgwoodCastle, Mrs. B. A.Delargy, H. J.
Benson, G.Champion, A. J.Dodds, N. N.
Bing, G. H. C.Clunie, J.Donnelly, D. L.
Blackburn, F.Coldrick, W.Dugdale, Rt. Hon. John (W. Bromwich)
Blenkinsop, A.Collick, P. H.Ede, Rt. Hon. J. C.
Blyton, W. R.Corbet, Mrs. FredaEdwards, Rt. Hon. John (Brighouse)
Boardman, H.Cove, W. G.Edwards, W. J. (Stepney)
Bottomley, Rt. Hon. A. G.Craddock, George (Bradford, S.)Evans, Albert (Islington, S.W.)
Bowles, F. G.Crosland, C. A. R.Evans, Edward (Lowestoft)

not think the right hon. and learned Gentleman could have intended to put it forward seriously.

Here is a situation in which, as both the Chancellor and the Solicitor-General have recognised, there is the possibility that this provision will be exploited for ulterior purposes, and the possibility certainly that, if it is exploited for those ulterior purposes, it will defeat the whole object of these Estate Duty concessions, which are reserved for the continuity of family businesses. In the light of evidence which has already accumulated, surely it is monstrous for the Solicitor-General to refuse this Amendment on the grounds which he has given.

He said that the Amendment does not go far enough and that, if he accepted it, there should be another Amendment to deal with cases of companies being wound up. We are concerned not with the technicalities of draftsmanship but with the acceptance of the principle. I think it perfectly disgraceful that the Solicitor-General—particularly in view of what he and the Chancellor said in Committee—should have adopted this completely unrelenting attitude this evening. During the Committee stage of the Finance Bill we did not have a single concession, despite the numerous Amendments which were put forward. I can only regard the Government's attitude in these matters as being completely obscurantist and indefensible. For those reasons, I hope that my hon. and right hon. Friends will carry their views into the Division Lobby.

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

The Committee divided: Ayes, 217; Noes, 249.

Evans, Stanley (Wednesbury)Kinley, J.Rogers, George (Kensington, N.)
Fernyhough, E.Lawson, G. M.Ross, William
Fienburgh, W.Lee, Frederick (Newton)Royle, C.
Fletcher, Eric (Islington, E.)Lee, Miss Jennie (Cannock)Shackleton, E. A. A.
Follick, M.Lever, Leslie (Ardwick)Shinwell, Rt. Hon. E.
Forman, J. C.Lindgren, G. S.Short, E. W.
Fraser, Thomas (Hamilton)Lipton, Lt.-Col. M.Shurmer, P. L. E.
Freeman, John (Watford)McInnes, J.Silverman, Julius (Erdington)
Gaitskell, Rt. Hon. H. T. N.McLeavy, F.Silverman, Sydney (Nelson)
Gibson, C. W.Mallalieu, E. L. (Brigg)Simmons, C. J. (Brierley Hill)
Glanville, JamesMallalieu, J. P. W. (Huddersfield, E.)Skeffington, A. M.
Gordon Walker, Rt. Hon. P. C.Mann, Mrs. JeanSlater, Mrs. H. (Stoke-on-Trent)
Greenwood, AnthonyManuel, A. C.Slater, J. (Durham, Sedgefield)
Grey, C. F.Marquand, Rt. Hon. H. ASmith, Ellis (Stoke, S.)
Griffiths, Rt. Hon. James (Llanelly)Mason, RoySmith, Norman (Nottingham, S.)
Grimond, J.Mayhew, C. P.Sorensen, R. W.
Hale, LeslieMellish, R. J.Soskice, Rt. Hon. Sir Frank
Hall, Rt. Hon. Glenvil (Colne Valley)Messer, Sir F.Sparks, J. A.
Hall, John T. (Gateshead, W.)Mikardo, IanSteele, T.
Hannan, W.Mitchison, G. R.Stokes, Rt. Hon. R. R.
Hargreaves, A.Monslow, W.Strachey, Rt. Hon. J.
Hastings, S.Moody, A. S.Strauss, Rt. Hon. George (Vauxhall)
Hayman, F. H.Morgan, Dr. H. B. W.Summerskill, Rt. Hon. E.
Healey, Denis (Leeds, S.E.)Morley, R.Sylvester, G. O.
Healy, Cahir (Fermanagh)Morris, Percy (Swansea, W.)Taylor, Bernard (Mansfield)
Henderson, Rt. Hon. A. (Rowley Regis)Morrison, Rt. Hon. H. (Lewisham, S.)Taylor, John (West Lothian)
Herbison, Miss M.Moyle, A.Taylor, Rt. Hon. Robert (Morpeth)
Hewitson, Capt. M.Mulley, F. W.Thomas, George (Cardiff)
Hobson, C. R.Noel-Baker, Rt. Hon. P. J.Thomas, Ivor Owen (Wrekin)
Holman, P.Oldfield, W. H.Thomson, George (Dundee, E.)
Holmes, HoraceOliver, G. H.Thornton, E.
Holt, A. F.Orbach, M.Timmons, J.
Houghton, DouglasOswald, T.Tomney, F.
Hoy, J. H.Padley, W. E.Ungoed-Thomas, Sir Lynn
Hubbard, T. F.Paget, R. T.Wade, D. W.
Hudson, James (Ealing, N.)Palmer, A. M. F.Warbey, W. N.
Hughes, Emrys (S. Ayrshire)Pannell, CharlesWeitzman, D.
Hughes, Hector (Aberdeen, N.)Pargiter, G. A.Wells, Percy (Faversham)
Hynd, H. (Accrington)Parker, J.Wheeldon, W. E.
Hynd, J. B. (Attercliffe)Parkin, B. T.Whiteley, Rt. Hon. W.
Irvine, A. J. (Edge Hill)Paton, J.Wigg, George
Irving, W. J. (Wood Green)Peart, T. F.Wilkins, W. A.
Isaacs, Rt. Hon. G. A.Plummer, Sir LeslieWilley, F. T.
Janner, B.Popplewell, E.Williams, Rt, Hon. Thomas (Don V'll'y)
Jeger, George (Goole)Porter, G.Williams, W. R. (Droylsden)
Jeger, Mrs. LenaPrice, J. T. (Westhoughton)Willis, E. G.
Jenkins, R. H. (Stechford)Proctor, W. T.Wilson, Rt. Hon. Harold (Huyton)
Johnson, James (Rugby)Pryde, D. J.Winterbottom, Ian (Nottingham, C.)
Jones, David (Hartlepool)Pursey, Cmdr. H.Winterbottom, Richard (Brightside)
Jones, Frederick Elwyn (West Ham, S.)Reid, Thomas (Swindon)Woodburn, Rt. Hon. A.
Jones, Jack (Rotherham)Reid, William (Camlachie)Wyatt, W. L.
Keenan, W.Rhodes, H.Yates, V. F.
Kenyon, C.Richards, R.Younger, Rt. Hon. K.
Key, Rt. Hon. C. WRoberts, Goronwy (Caernarvon)
King, Dr. H. M.Robinson, Kenneth (St. Pancras, N.)TELLERS FOR THE AYES:
Mr. Bowden and Mr. Wallace

NOES

Aitken, W. T.Billiard, D. G.Doughty, C. J. A.
Alport, C. J. M.Bullus, Wing Commander E. EDouglas-Hamilton, Lord Malcolm
Amery, Julian (Preston, N.)Burden, F. F. A.Drayson, G. B.
Amory, Rt. Hon. Heathcoat (Tiverton)Butcher, Sir HerbertDrewe, Sir C.
Anstruther-Gray, Major W. J.Butler, Rt. Hon. R. A. (Saffron Walden)Dugdale, Rt. Hon. Sir T. (Richmond)
Arbuthnot, JohnCampbell, Sir DavidDuncan, Capt. J. A. L.
Assheton, Rt. Hon. R. (Blackburn, W.)Carr, RobertDuthie, W. S.
Baldwin, A. E.Cary, Sir RobertEden, Rt. Hon. A.
Banks, Col. C.Channon, H.Eden, J. B. (Bournemouth, West)
Barlow, Sir JohnClarke, Col. Ralph (East Grinstead)Erroll, F. J.
Baxter, Sir BeverleyClarke, Brig. Terence (Portsmouth, W.)Finlay, Graeme
Beach, Maj. HicksCole, NormanFisher, Nigel
Bell, Ronald (Bucks, S.)Colegate, W. A.Fleetwood-Hesketh, R. F.
Birch, NigelConant, Maj. Sir RogerFletcher-Cooke, C.
Bishop, F. P.Cooper, Sqn. Ldr. AlbertFord, Mrs. Patricia
Black, C W.Craddook, Beresford (Spelthorne)Fort, R.
Boothby, Sir R. J. G.Crookshank, Capt. Rt. Hon. H. F. C.Foster, John
Boyd-Carpenter, Rt. Hon. J. A.Crosthwaite-Eyre, Col. O. E.Fraser, Hon. Hugh (Stone)
Boyle, Sir EdwardCrowder, Sir John (Finchley)Fraser, Sir Ian (Morecambe & Lonsdale)
Braine, B. R.Crowder, Petre (Ruislip—Northwood)Galbraith, Rt, Hon. T. D. (Pollok)
Braithwaite, Sir Albert (Harrow, W)Darling, Sir William (Edinburgh, S.)Galbraith, T. G. D. (Hillhead)
Braithwaite, Sir GurneyDeedes, W. F.George, Rt. Hon. Maj. G. Lloyd
Brooke, Henry (Hampstead)Digby, S. WingfieldGlover, D.
Brooman-White, R. C.Dodds-Parker, A. D.Godber, J. B.
Browne, Jack (Govan)Donaldson, Cmdr. C E McAGomme-Duncan, Col. A
Buchan-Hepburn, Rt. Hon. P. G. TDonner, Sir P. W.Gough, C. F. H

Gower, H. R.Mackeson, Brig. Sir HarryRoper, Sir Harold
Graham, Sir FergusMackie, J. H. (Galloway)Russell, R. S.
Grimston, Hon. John (St. Albans)Maclay, Rt. Hon. JohnRyder, Capt. R. E. D.
Grimston, Sir Robert (Westbury)Maclean, FitzroySavory, Prof. Sir Douglas
Hall, John (Wycombe)Macleod, Rt. Hon. Iain (Enfield, W.)Schofield, Lt.-Col. W.
Hare, Hon. J. H.MacLeod, John (Ross and Cromarty)Scott, R. Donald
Harris, Frederic (Croydon, N.)Macmillan, Rt. Hon. Harold (Bromley)Scott-Miller, Cmdr. R.
Harrison, Col. J. H. (Eye)Macpherson, Niall (Dumfries)Shepherd, William
Harvey, Ian (Harrow, E.)Maitland, Patrick (Lanark)Simon, J. E. S. (Middlesbrough, W.)
Harvie-Watt, Sir GeorgeManningham-Buller, Rt. Hn. Sir ReginaldSmithers, Peter (Winchester)
Hay, JohnMarkham, Major Sir FrankSmithers, Sir Waldron (Orpington)
Head, Rt. Hon. A. H.Marlowe, A. A. H.Snadden, W. McN.
Heald, Rt. Hon. Sir LionelMarples, A. E.Spearman, A. C. M.
Heath, EdwardMarshall, Douglas (Bodmin)Speir, R. M.
Higgs, J. M. C.Maude, AngusSpens, Rt. Hon. Sir P. (Kensington, S.)
Hill, Dr. Charles (Luton)Maudling, R.Stanley, Capt. Hon. Richard
Hill, Mrs. E. (Wythenshawe)Maydon, Lt.-Comdr. S. L. C.Stevens, Geoffrey
Hinchingbrooke, ViscountMedlicott, Brig. F.Steward, W. A. (Woolwich, W.)
Hirst, GeoffreyMellor, Sir JohnStewart, Henderson (Fife, E.)
Holland-Martin, C. J.Molson, A. H. E.Stoddart-Scott, Col. M.
Hopkinson, Rt. Hon. HenryMoore, Sir ThomasStorey, S.
Hornsby-Smith, Miss M. P.Morrison, John (Salisbury)Strauss, Henry (Norwich, S.)
Horobin, I. M.Nabarro, G. D. N.Stuart, Rt. Hon. James (Moray)
Horsbrugh, Rt. Hon. FlorenceNeave, AireyStudholme, H. G.
Howard, Gerald (Cambridgeshire)Nicholls, HarmarSummers, G. S.
Howard, Hon. Greville (St. Ives)Nicolson, Nigel (Bournemouth, E.)Sutcliffe, Sir Harold
Hudson, Sir Austin (Lewisham, N.)Nield, Basil (Chester)Taylor, William (Bradford, N.)
Hulbert, Wing Cdr. W. J.Noble, Comdr. A. H. P.Thomas, Rt. Hon. J. P. L. (Hereford)
Hurd, A. R.Nugent, G. R. H.Thomas, Leslie (Canterbury)
Hutchison, Sir Ian Clark (E'b'rgh, W.)Oakshott, H. D.Thornton-Kemsley, Col. C. N.
Hyde, Lt.-Col. H. M.Odey, G. W.Tilney, John
Hylton-Foster, H. B. H.O'Niell, Hon. Phelim (Co. Antrim, N.)Touche, Sir Gordon
Iremonger, T. L.Orr, Capt. L. P. S.Turner, H. F. L.
Jenkins, Robert (Dulwich)Orr-Ewing, Charles Ian (Hendon, N.)Turton, R. H.
Johnson, Eric (Blackley)Orr-Ewing, Sir Ian (Weston-super-Mare)Tweedsmuir, Lady
Johnson, Howard (Kemptown)Page, R. G.Vane, W. M. F.
Jones, A. (Hall Green)Peake, Rt. Hon. O.Vaughan-Morgan, J. K.
Joynson-Hicks, Hon. L. WPeto, Brig. C. H. M.Vosper, D. F.
Kaberry, D.Peyton, J. W. W.Wakefield, Edward (Derbyshire, W.)
Kerby, Capt. H. B.Pickthorn, K. W. M.Wakefield, Sir Wavell (St. Marylebone)
Kerr, H. W.Pilkington, Capt. R. AWalker-Smith, D. C.
Lambton, ViscountPitman, I. J.Wall, Major Patrick
Lancaster, Col. C. G.Pitt, Miss E. M.Ward, Hon. George (Worcester)
Langford-Holt, J. A.Powell, J. EnochWard, Miss I. (Tynemouth)
Leather, E. H. C.Price, Henry (Lewisham, W.)Waterhouse, Capt. Rt. Hon. C
Legge-Bourke, Maj. E. A. H.Prior-Palmer, Brig. O. LWatkinson, H. A.
Legh, Hon. Peter (Petersfield)Raikes, Sir VictorWebbe, Sir H. (London & Westminster)
Lennox-Boyd, Rt. Hon. A. T.Ramsden, J. E.Wellwood, W.
Linstead, Sir H. N.Rayner, Brig. RWilliams, Gerald (Tonbridge)
Lloyd, Maj. Sir Guy (Renfrew, E.)Redmayne, M.Williams, Sir Herbert (Croydon. E.)
Lockwood, Lt.-Col. J. C.Rees-Davies, W. RWilliams, Paul (Sunderland, S.)
Longden, GilbertRemnant, Hon. PWilliams, R. Dudley (Exeter)
Law, A. R. W.Renton, D. L. M.Wills, G.
Lucas, Sir Jocelyn (Portsmouth, S.)Ridsdale, J. E.Wilson, Geoffrey (Truro)
Lucas, P. B. (Brentford)Roberts, Peter (Heeley)Wood, Hon. R.
Lucas-Tooth, Sir HughRobertson, Sir David
McCorquodale, Rt. Hon. M. S.Robinson, Sir Roland (Blackpool, S.)TELLERS FOR THE NOES:
Macdonald, Sir PeterRodgers, John (Sevenoaks)Mr, Richard Thompson and
Mr. Robert Allan.

Clause 31—(Aggregation)

I beg to move, in page 38, line 25, to leave out "on his behalf or."

I desire to press this Amendment once again in the hope that the Financial Secretary, who promised to consider the matter before the Report stage, will agree that these words would be better out than in. I have looked at the Sections to which he referred in his speech in Committee, namely, Section 24 of the 1936 Finance Act and Section 28 of the 1949 Finance Act. Where those words are used in those Acts, they deal with the charge of or exemption from Estate Duty upon property situated outside Great Britain. I am quite unable to understand what they mean in their context in those Acts, but that does not matter. The point is that they have been repeated in this Clause, which deals with quite a different subject matter.

In my view, the whole scheme of the Clause, as indicated by the Financial Secretary during the Committee stage, might be seriously infringed if these words are allowed to remain in. The Financial Secretary referred to certain logical divisions. He said that there ought to be aggregated the free estate of the deceased plus property settled by him, or settlements made out of property belonging to him, on the one side, and all other settled property on the other. That is the logical division at which the Clause is aiming, but if these words are left in it seems to me that settlements of property other than that belonging to the deceased could be brought in, and it would therefore be possible to tax a large block of property, aggregated with the free estate, which ought not to be so aggregated if the logical division is as I have stated.

Two examples have been suggested to me by learned friends of mine. If the deceased is a member of a class on behalf of which class some settlement is made, such as a settlement for blind persons, it cannot be intended that any benefit to the deceased under such a settlement should be aggregated with the man's free estate. The other example is one to which the Financial Secretary himself referred during the Committee stage. He suggested that property belonging to a company of which the deceased was a governing director might be settled by his direction. All I can say is that if it is property of the company it is not property of the deceased, and if the settlement is made by the company on behalf of the deceased—which I should think would be a most improper settlement, and probably completely invalid—I should not have thought that it would, in any event, be aggregated with the deceased's free estate. In those circumstances, I hope that the Financial Secretary will decide that these words are better out than in.

As my right hon. and learned Friend said, we had a short discussion upon this point in Committee. I am inclined to think that my right hon. and learned Friend exaggerates the importance and the effect of the words which he seeks to delete. I told him that the words were included because they had been used in—as it seemed to me—the somewhat similar circumstances of the two Sections to which he has referred. Upon looking at the words and trying to see what effect they would have, however, I am bound to admit that I cannot conceive of any circumstances in which they would in any way affect the matter. In those circumstances, if my right hon. and learned Friend desires to press the Amendment, I should not desire to thwart him.

Amendment agreed to.

I beg to move, in page 38, line 36, to leave out from "then," to the end of line 42, and to insert:

"the rate of estate duty to be paid on any such policy, money or interest so included (hereinafter referred to as 'a life insurance') shall be determined as follows:—
  • (a) in respect of the value of any life insurance or interest in a life insurance to which immediately after the death any one person is absolutely and indefeasibly entitled for his own benefit Otherwise than by virtue of a purchase for consideration in money or money's worth (whether of that life insurance or interest or of the policy or otherwise), the rate shall be that appropriate to the value or aggregate value of that life insurance or interest and of any other life insurance or interest in a life insurance to which he is so entitled;
  • (b) subject to the foregoing paragraph, the rate shall be that appropriate to the aggregate value of all the life insurances or, if there is only one, to the value of that life insurance:
  • Provided that for the purposes of this sub-section—
  • (i) there shall be left out of account any life insurance in respect of which estate duty neither is payable on the death nor would be if the duty were payable on estates of however small a principal value; and
  • (ii) where any life insurance or interest in a life insurance is immediately after the death subject to a mortgage or charge, the mortgage or charge shall be disregarded and the life insurance or interest shall be valued accordingly; and
  • (iii) in relation to life insurances and interests therein which then form part of the unadministered estate of a deceased person this subsection shall have effect as if that person had been then living and entitled to those life insurances and interests.
  • (3) For the purposes of paragraph (a) of the last foregoing subsection the value of any interest in a policy of assurance or moneys received under such a policy shall be arrived at by apportioning the total value of the policy or moneys according to the respective values of the interest in question and of the interest a person would have if, except for the interest in question, he were absolutely and indefeasibly entitled to the policy or moneys."
    This Amendment embodies the proposal in respect of which my right hon. Friend the Chancellor of the Exchequer authorised me to give an undertaking in Committee in connection with an Amendment moved by my hon. Friend the Member for Morecambe and Lonsdale (Sir I. Fraser). The House will recall that the Clause, as introduced, reversed the position which had existed for many years by providing for the aggregation of proceeds of policies of assurance with each other for the purpose of determining the rates of Estate Duty which would be applicable. As I explained during the Second reading debate, that proposal was brought forward to counter the abuse which had developed of persons taking out a number of small policies below the Estate Duty exemption limit in favour of the same person, and so completely evading Estate Duty on what might be a large sum of money.

    In the debate in Committee, after a full discussion, I undertook on my right hon. Friend's behalf to bring forward a proposal under which this new provision in the Bill would operate to aggregate separately only those moneys arising from policies of assurance in respect of identifiable beneficiaries, and I indicated that, so far as unidentifiable beneficiaries were concerned, I thought that the Clause would have to continue to stand as it then stood. The Amendment, in my submission, carries out that undertaking.

    The House will remember that I warned the Committee that there would be a considerable number of complications to be dealt with. Perhaps it would be of assistance to the House if I touched on the details of the Amendment which, I suggest, deals reasonably and sensibly with the points of difficulty, some of which I referred to during the debate in Committee. The broad effect of the proposal is, if I may use once again the metaphor I used in Committee of the ring fence, to treat as being within individual ring fences the proceeds of all the policies of insurance in favour of each named individual. We aggregate, that is to say, all the policy moneys that go to each particular identified individual and then retain the original provision of the Clause under which policy moneys were aggregated within one ring fence so far as unidentified beneficiaries are concerned. That is, broadly, the purpose and, I suggest, the effect of the Amendment.

    It is, of course, necessary to deal with the case of the identified beneficiaries—to give an obvious example, such of my children as attain the age of 21. It seems to us that the most satisfactory way of dealing with them, in view, apart from anything else, of the difficulties of dealing with them satisfactorily on any other basis, is to put them in one ring fence of their own, and I think it is proper to put them in a separate ring fence from the unidentifiable beneficiaries since it might otherwise be possible in certain cases to get round the effect of the Clause by leaving certain policies to named beneficiaries and to others who would be those beneficiaries, but, in a form of words, not expressly identifiable. I think we get round that by putting unidentifiable beneficiaries in a ring fence of their own.

    Paragraph (a) carries out this main intention. Hon. Members will observe the words
    "… otherwise than by virtue of a purchase for consideration in money or money's worth …"
    That provision is designed to deal with the difficulty, to which I referred in Committee, of the possibility of abuse arising in this way. The assured person might bequeath a large number of policies to one named beneficiary and during his life that named beneficiary might sell the policies to investment houses. At the moment, therefore, of the assured person's death the holders of the policies would be a number of investment houses. Therefore, if we did not insert this provision, none of those policies would be aggregated with another. That would be a method of abuse, and by excluding from the benefits of the Clause cases where policies have been sold I think we effectively prevent that possibility. That is the explanation of that exclusion.

    Paragraph (b) reproduces the substance of the original subsection as it stood in the Bill as introduced, and applies, as I have already indicated, where the beneficiaries are unidentifiable.

    The proviso deals with a number of smallish points of difficulty. Sub-paragraph (i) deals with a point I referred to in moving an Amendment in Committee. It is to make sure and quite clear that policies of less than £2,000—or, in future, less than £3,000—shall be aggregated with other policies. There was some doubt whether the Bill as it stood had that effect. Sub-paragraph (ii) of the proviso makes aggregable the amount that the insurance company pays out to the beneficiary on death without reduction the third sub-paragraph deals with the rather awkward problem of the case where the beneficiary dies before the insured person and the estate is not wound up but is still under administration at the time of the death of the assured person. To deal with that we have provided that the beneficiary shall be treated for this purpose as if he is still alive, and that artificial resuscitation of him for this purpose gets us out of the particular difficulty of the benefit of the policies going in the direction in which the beneficiary's estate might fall to be distributed.

    7.15 p.m.

    The last part of the Amendment secures for the purposes of valuation under the Clause that the life and reversionary interest in the policy shall together amount to its total value.

    The Clause is, I am afraid, a little complicated, but it is less complicated than I feared it would be when we discussed it in Committee, and will deal with the abuse mentioned on Second Reading. It will secure that, in the case I have described of an individual who takes out a large number of small policies in respect of the same beneficiary, aggregation of those policies with each other will continue to be applied. It therefore goes far enough to check the abuse, though it does not, as I have indicated, go as far as the original provision. The original provision, in our view, went too far, inasmuch as it aggregated policies the benefit of which was going to different named individuals.

    This is, of course, a difficult subject, on which opinions can, and no doubt do, legimately differ. Whichever alternative we adopt, the original alternative of aggregating all the insurance policies with each other but separate from the main estate, or the present proposal of aggregating policies in so far as they go to identifiable individuals or generally to unidentifiable, either course is, no doubt, subject to a certain degree of attack on the ground of logic. I think one could attack either. Whether, if one were constructing a system de novo, one could construct a system on these lines is, perhaps, an open question.

    However, we are dealing with a situation that in fact exists as a result of a state of affairs that has lasted now for 60 years, a state of affairs in which those policies of insurance were treated as a separate estate, and as we are dealing with this problem against that background it does seem sensible to modify it so far as is necessary to check the abuse—that we are doing—but not to carry it farther than necessary to check the abuse. In our judgment, the original proposal went farther than was necessary to check the abuse that had developed.

    Would the right hon. Gentleman elucidate one point for me? He referred to, the first sub-paragraph of the proviso in terms which I certainly did not understand. He said it was to deal with the case of small policies, and that where they were aggregated no duty would be payable, but what it appears to do is to leave out of account any policies of any size in respect of which Estate Duty is not payable on death, apart from any question of value.

    I think that the hon. and learned Gentleman's difficulty is that he probably was not in the Committee when we discussed an Amendment to which I have just referred. The Clause, as originally drafted, was intended to provide for the exclusion of policies in which the deceased had not had an interest. I am speaking from memory, but I think I gave an example of a case of a policy taken out on a deceased's life by his wife on premiums solely furnished by her. But we thought it would also exclude from aggregation estates which did not fall to pay Estate Duty because they were below the exemption limit, While maintaining the exclusion in respect of those cases, in my view this Amendment makes it clear that where Estate Duty is not payable merely by reason of the size of the estate being below the exemption limit, none the less those estates shall be aggregated for this purpose.

    I think it is clear, but if the hon. and learned Gentleman had not followed the previous debate I can understand that what I said might possibly have misled him. That is the provision which we make, and in our view it meets the difficulty which had arisen and with which, as I indicated, we regarded it as our duty to deal—namely, the abuse in respect of a large number of small policies. It does not carry the matter further than is necessary to deal with that abuse, and, in so doing, pays attention to what has been the practice for 60 years in this country under a variety of Governments.

    Will the right hon. Gentleman observe that I did follow the previous debate, but I am not at all sure that I have followed his proviso?

    It has been suggested to me that our proceedings might be expedited if a single discussion were to take place on this matter and upon the Amendments to this proposed Amendment. If the House were to agree that the words proposed to be left out should not stand part of the Bill, I would then put the Question "That those words be there inserted in the Bill"; and if on that a general discussion took place, and, if desired, it were carried to a Division, that would provide one way of dealing with the matter. But I should like to make it clear so that there is no misunderstanding that if the Question "That those words be there inserted in the Bill" is carried in the affirmative, it will inhibit me from calling any of the Amendments to the proposed Amendment. I say this in order that there shall be no misunderstanding whatsoever.

    I think I have got the matter clear, Mr. Speaker, and that what you have said is agreeable to my hon. Friends on this side of the House. We appreciate that this matter has been discussed before. We do not want to carry the proceedings too far or into too much detail, so long as we can state our points of view which are embodied in the Amendments to the Chancellor's proposed Amendment.

    We agree, Mr. Speaker In fact, the crystal clarity of your observations compares very well with the Amendment which we have moved.

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

    Motion made, and Question proposed, "That those words be there inserted in the Bill."

    We are dealing with an extremely complicated matter and a very compli- cated Amendment, but I think that, with the possible exception of the point which was raised by my hon. and learned Friend the Member for Kettering (Mr. Mitchison), the Financial Secretary, as he usually does, explained the Amendment with great lucidity. It certainly appeared to me that it gives effect to what he said he would attempt to give effect to when he announced the concession in Committee.

    In spite of that, we do not like the Amendment. My right hon. and learned Friend the Member for Neepsend (Sir F. Soskice) made it clear in Committee that we did not like it, and we have not liked it any more as a result of thinking about it during the interval. We have put down the Amendments to which you have referred, Mr. Speaker, and which we are not at the moment moving, but which we are able to discuss at this stage, which seek to limit the extent of the concession.

    To use the right hon. Gentleman's metaphor of the ring fence, our proposals seek to do this. Instead of putting the estate into an indefinite number of parts, as the present Government Amendment proposes to do, and instead of leaving the estate in two parts as the Clause as originally drafted seeks to do, our Amendment seeks to put it into three parts, each of them with a ring fence around them. The first part would be the main part of the estate. The second part would be any money accruing, as a result of insurance policies, to the widow or, for the sake of sex equality, to the widower; and the third part would be any insurance policies accruing to any other people. That would limit substantially the extent of the concession which the Government have proposed.

    I must say that we would prefer not to have the concession at all, and that we have not heard either in Committee or in the lucid speech of the Financial Secretary any reasons to indicate why, if the Government thought it really necessary to bring forward this Clause at all and correct the admitted abuse, the effect of the Clause should be lessened as it is by this Amendment. It seems to me that the proposal which is put forward in this Amendment is open to fairly obvious and substantial abuse—indeed, a new form of abuse.

    Under the arrangements which are proposed, by which an individual may not get round the Estate Duty provisions by taking out an indefinite number of small policies in favour of one beneficiary, but may achieve the same result by taking out a number of policies in favour of a different beneficiary, it is difficult to see why it should not be possible for a number of people to arrange mutually compensating bargains by which they each make over sums in favour of each other's children, so that very much the same effect is obtained as would be obtained if we did not have this attempt to block up the loophole altogether. I would have thought that, from that point of view, this matter ought to be considered again.

    Despite what the right hon. Gentleman has said about the position during the last 60 years and the position which has existed in respect of the Married Women's Property Act, I do not think we are really convinced that there is a case for treating insurance policies in an entirely different way from the rest of the estate. I am not at all sure, from what he said in his extremely interesting speech in Committee, that we do not carry the hon. Member for Hall Green (Mr. Aubrey Jones) with us on this point. I know that he wants an entirely different approach to the whole question of Estate Duty. He wants the duty levied on the individual who receives it according to how much money has come in, and not on the individual who is leaving the money according to how much his estate is. That seems to me to be an arguable point of view, but I think he agrees that, until we can do that, there is no logical basis for saying that we should treat the estate of a man who carries a great deal of life insurance in an entirely different way from the way in which we treat an individual who, for various reasons, does not happen to do anything of the sort.

    It is not directly bearing on the point to say that this has been the position, as the Financial Secretary said, for 60 years. In fact, I think he slightly underestimates the period, because I believe the date of the Married Women's Property Act was 1880, so that it would be a period of 74 years.

    The right hon. Gentleman's intervention makes in advance the point that I was about to make, and that is that the Married Women's Property Act, from which stems this separation of these insurance policies from the rest of the estate, was introduced before Estate Duty was ever thought of. We have all heard a lot about Sir William Harcourt in these debates.

    7.30 p.m.

    My right hon. Friend the Member for Bishop Auckland (Mr. Dalton), in his speech yesterday, invited the Chancellor to join him and Sir William in a glorious trio of those who reduced the Estate Duties at the lower end. Sir William is reputed to have said. "We are all Socialists now." I think that remark was not true. There is one other remark by Sir William which seems to me more apposite to what we are discussing now and of which I would remind the Chancellor, because I think that it may have some application to occasions when he has to deal with the more recalcitrant and property-conscious among his own back benchers.

    One of Sir William Harcourt's friends complained that Sir William had no landed ideas, to which Sir William replied, "You have the land; leave the ideas to me." I think that the only difference about that is that I am not at all sure that the right hon. Gentleman has not the land as well as the ideas. However, it is quite clear what is the position here under the Married Women's Property Act, and I think that the Financial Secretary is straining a point when he attempts to say that we must, therefore, respect the position which has grown up over the last 60 years.

    He said that if he had been dealing with the matter de novo he might have arrived at a different solution. But surely we are to a large extent dealing with the matter de novo in this Bill. The only thing which, I understand, is not de novo is the Married Women's Property Act which was brought into being to deal with an entirely different set of circumstances when there was no Estate Duty 60 years ago.

    This is the first time that we have faced up to what we want to do about insurance policies in which the person taking out a policy has no interest. The Government have brought forward two solutions. While I think that the Government have a better solution in mind— the Financial Secretary hinted at it—we have to put up with the solution which he says is not a good one because the position which has existed over the last 60 years is not clear. It is a very unsatisfactory position in which we are left.

    During these rather long drawn-out and not altogether uninteresting debates on the Finance Bill, no issue has brought out greater disagreement between both sides of the House than on this question of Estate Duty. I think that one of the most significant remarks which the Chancellor has made in the course of his intervention in our debate was the one which he made yesterday when replying to a debate in which the right hon. Member for Blackburn, West (Mr. Assheton) came out with a very strong proposal for Estate Duties in almost any form. He indicated his position clearly by saying that the members of the Chamberlain family came of a very radical family so far as he was concerned.

    The Chancellor gave a very broad hint that if things were a little easier he would like to do away with the very heavy burden of Estate Duty on large estates.

    I think that the Chancellor is quite right. I did not imagine or think that he intended it to be imagined that estates were to be entirely free of Estate Duties. He did announce that he would go for a rate of Estate Duties which would be much less an equalising weapon than it is at present. Nothing has brought out the difference between the two sides of the House more than this question affecting property passing from a deceased person to an heir of one sort or another. That applies to this Amendment which we regard as quite unnecessary and with which we are thoroughly unsatisfied.

    I start by thanking my right hon. Friend for introducing this Amendment. I think that it is a very great improvement indeed on the Clause as it originally stood. It would be interesting to go into an historical discourse about the origin of the Married Women's Property Act and death duties generally, but I want only to look at the position as I understood it to be when the Finance Bill was introduced.

    The Married Women's Property Act has been made more and more use of during the recent years. It has been made use of by two quite different sets of people. It has been made use of by thousands of people of limited means who make provision for their widows and for their children, and in nearly all those cases they take out one policy for their widow and one policy for each child. There have been a small number of people who have found that by taking out a large number of policies in favour of their widow or their children they can get benefits for each particular party.

    The proposal which the Government originally brought in was, of course, a complete attack upon all the benefits of the Married Women's Property Act, and the people who would have been most hit by it were the people of more limited means. I have been perfectly amazed to listen to the speeches from the other side and the whole-hearted attack made on the Married Women's Property Act and the provisions which people of limited means, during the last 20 or 35 years, have been making for those among the very class which, I would have thought, hon. and right hon. Gentlemen opposite desire to represent in this House.

    What evidence has the right hon. and learned Gentleman of that? I was in the insurance industry for 20 years, and I never came across a single case of that in the whole of my experience.

    I do not know what estates the hon. Gentleman operated, but I can tell him that, so far as I know, there are many hundreds of policies under the Married Women's Property Act taken out every year by people of very limited means who, so far as I possibly can, I desire to protect.

    If we can clear up this point, the right hon. and learned Gentleman's speech will be more intelligible to all of us. Some of us are not quite sure what he means by a person of limited means. Does he mean people with £500, £750, £1,000, or more? I would remind him that it will now be possible for a person to take up single policies on anything up to £3,000.

    I was referring to people of small incomes rising up to junior executives in business of £500 to £1,500 a year. These are the people who very largely take out these policies. The proposal here, so far as the Government are concerned, is that a ringed fence goes round each lot. That seems to me right. Let me deal with the ringed fence round the widow or widower.

    It seems here extremely hard that a policy taken out in favour of children should be aggregated with other policies which there happen to be on a man's life. That seems to me to be pretty unkind when one thinks about it, and I should have thought the ringed fence ought to be round the widow and widower and the children.

    The reason why I think the Government plan is right is this. After all, policies are taken out, not only under the Married Women's Property Act, but also as ordinary life insurance policies for the benefit of dependants and employees and people of that sort. They are comparatively small policies—£500, £1,000. £1,500 or something of that sort. There may be, in addition, policies running into thousands taken out by the deceased on his life. If we aggregate them together, these small policies for individuals have to bear the full weight of Estate Duty on the aggregation of all the policies. That seems to me to be wrong. That is got rid of by the Government's plan of the aggregation—the ringed fence—being round each beneficiary who takes a policy upon death.

    This is a good Clause, and I have only one comment to make. Under the Married Women's Property Act a very common form of policy is a policy for the widow, if she survives, for life and afterwards to the children. Unfortunately, I gather that that type of policy would not come within paragraph (a) but would have to be under paragraph (b), because on the death there would be no person
    "absolutely and indefeasibly entitled for his own benefit.…"
    That may be unavoidable, but it is the one point in paragraph (a) which will hit a great number of these policies. I think that they are the best type of policy and should be encouraged in every possible way. Subject to this one comment, I congratulate my right hon. Friend and express my thanks and, I am sure, those of many of my hon. Friends for the Amendment.

    The right hon. and learned Member for Kensington, South (Sir P. Spens) has just found that some of the provisions about Estate Duty are unkind. Taxation is usually unkind in one sense of the word. Life is sometimes unkind, and death is almost invariably unkind.

    It seems to me that, on the Government side, there is only one really logical person, and that is the hon. Member for Hall Green (Mr. Aubrey Jones). He thought that the whole basis of Estate Duty was wrong, and that it ought to depend on the means of the person receiving and not on the size of the estate of the deceased. That is perfectly logical. But with this Clause we are getting into a quite hopeless state of confusion about the existing situation as a result of some sentimental reasons advanced in favour of a very limited class of person by hon. Members opposite. I say "very limited class of person" because there are very many people who have never been in a position to take out policies of this kind and who are never likely to be able to do so.

    My first comment on the Clause and the whole matter is that much the easiest way to deal with this question would have been to put the whole of the moneys coming from life insurance policies of this nature into the estate, to aggregate them and then, if it was desired to make special provision for the widow and children, to do it in the straightforward way by giving them a special concession in the rate of Estate Duty, such as they used to have under the legacy and succession duty. I doubt whether that is the right thing to do, but that, at any rate, is a simple and clear way of doing it.

    The present position is that not all widows benefit under this practice, but simply the widows and children of people who have taken out a particular form of provision for them—that is to say, a particular form of life insurance. Other provisions have not attracted the advantage that this provision has attracted by reason of a section in the Married Women's Property Act which was in all probability introduced for a quite different purpose.

    It is a very poor defence of an abuse, because it has, admittedly, been an abuse, to say that it is an old one and, therefore, when it is being altered we will make only a small alteration. Surely, once it is recognised that there has been abuse, the right thing to do is to reconsider the whole position and see what ought to be done and not hesitate to take fairly sweeping steps in order to do so. The essential things to aim at in a matter of this sort are, first, that the provisions that are put into the Bill should be as simple as possible and, secondly, that it should conform with ordinary ideas of fairness.

    7.45 p.m.

    I do not regard the Amendment or the Clause as in any way clear. The Clause is an excellent monument of obscurity and I shall not take up time by going through all the details of it. In the Amendment we begin by having a "policy, money or interest" referred to as "a life insurance," and a little further on we find an "interest in a life insurance." That, therefore, means an interest in an interest. I leave it to the Chancellor or whoever replies to tell us what that means and why it is there. We could go through the Clause and find point after point which the ordinary person and, indeed, the skilled person would find just as much difficulty in interpreting as I found myself in doing so. The more obscure we make fiscal legislation, in the long run the more likely we are to afford opportunities for evasion.

    Next, on the fundamental facts, let us see what is proposed. First, there is the ordinary estate. Next, there is to be, say, the provision far the widow. Next, if there are four children, there is to be a separate ringed fence round each of them. What is the common fairness in this? Why should this form of provision for children, if that is the way we regard it, be entitled to this special treatment. Suppose that the deceased had had, say, four houses, bits of property let out to people. The party opposite are rather in favour of a property-owning democracy, are they not? Surely the property is not merely to be confined to life insurances, however great some people's interest in them may be. It would include perhaps a house or two. Why not?

    Assume that there are five houses of the deceased person, and one goes to the widow and the other four to the children. I need not say to the House that that all forms part of the estate and gets no benefit. All the sob stuff that we have been hearing about providing for the widow and the children for some obscure reason is perfectly sound, so we are told, when it is applied to this particular form of life insurance; but when it is applied to any other provision—for instance, the houses in which many humble savings are invested—it is no longer a sound principle. It is nonsense to approach the matter in that way.

    I should have thought that the simplest thing with an estate is to confine ourselves to two obvious classes, one of which is the widow. It must be remembered that widows have had special treatment as, for example, in the case of intestacy. If we are to make a special benefit at all and to do it in this rather illogical and inconvenient way, there is a special case for giving it to the widower or to the widow. But once that is done, I see no reason whatever for drawing a separate ringed fence around all the other interests concerned. I am talking, of course, about the "absolutely and indefeasibly entitled" beneficiaries to whom the Financial Secretary was referring.

    Suppose, for instance, that a man has, say, five Children and makes provision for them by taking out a separate policy for each of them. What is the moral difference between his doing that and taking out one policy for the five children or the survivors of them? Where is the moral element? Why should those five people, because they have five separate policies, be entitled to a special advantage that would not accrue to a family as a whole, if the policy was taken out in general terms so that until the event happened one could not know to which person it would apply? What is the moral difference between that kind of case and the case of five children, each of them having a clean-cut special policy and who therefore are entitled to a specially reduced rate of duty?

    I cannot see it at all, and I suggest that here, by way of complication, we are getting into real injustice, and opening a door to evasion. I hope that the House will reject the whole Amendment. If we are to have it, I would prefer the limitation I have just been outlining, but I believe that the original clause did not go far enough. I believe that what is now proposed is far too complicated, has no real foundation in fairness and even within the narrow limits which the right hon. Gentleman has set himself, is quite the wrong way of doing it.

    It is only as a very last hope, as it were, that I should recommend the Amendments which we put down. They are one degree better than the Chancellor's Amendment, but by far the best thing is to reject the whole.

    The debate so far has been one between precedent and logic. My right hon. Friend the Financial Secretary has stood for precedent and hon. Members opposite stand for logic. As a good Conservative, I cannot be other than reverent towards precedent. Equally as a Welshman, I cannot close my ears to the claims of logic. It is true that the arrangement represented by this Amendment has existed for over 70 years and I am entirely in agreement with my right hon. Friend that we ought not to get away too quickly or too precipitately from something which has been sanctified by this long history.

    What worries me is whether the concession represented by this Amendment can, on the basis of precedent, be a permanent concession. I welcome the concession, but I think that I may claim for myself a greater degree of farsightedness than my hon. Friends. I wish to make the concession permanent, and it would seem to me that the only way to do so is to follow out the logic of the Amendment. Hon. Members opposite and I are, I think, at one in wishing to be logical. The difficulty is that our logic differs. Hon. Members opposite, or at any rate the hon. and learned Member for Kettering (Mr. Mitchison), wished to carry to its full conclusion the present logic of Estate Duty and to assimilate the Amendment to the present corpus of law. I wish to do the opposite. I wish to assimilate the present corpus of law to the Amendment. I wish to see the Amendment carried further. They must vote against it, and I must vote for it.

    One may well ask, if this illogic, this absence of logic, has existed for 70 years, why cannot it go on existing? The truth of the matter is, it seems to me, that the illogic has become apparent only within the last few years. It became apparent only when the exemption limit was raised from a nominal figure to £2,000. It then became profitable for a person to distribute his property in parcels of life assurance policies of under £2,000, and so avoid duty.

    That loophole is closed by the Clause, but a lesser loophole would remain under the Amendment. My hope is that people would not resort to this lesser loophole, but it would be very serious and disastrous if they did. If they were to do so—which is the last thing that the Financial Secretary would desire—the concession could not possibly last. At some time or other a Chancellor would come to this Chamber and say, "Advantage has been taken of this provision to secure mitigation of Estate Duty, and I cannot countenance it."

    Were that so, the argument of precedent would no longer avail. For that reason—and despite the obvious reluctance of the Financial Secretary—I wish once again to press upon him the claims of logic. I shall not enter again into the long and abstruse argument which I inflicted upon hon. Members during the Committee stage. I was interested in the disquisition which we heard yesterday from the right hon. Member for Bishop Auckland (Mr. Dalton). We were told that Estate Duty has retained its shape for 60 years. The right hon. Gentleman described it as the hest of taxes. Whatever may have been said of it in the past, I contend that current rates of taxation have altered the position completely.

    With current rates of taxation as they are, a living person can no longer provide for the duties which becomes payable on his death. They are in fact payable by his heirs, and those heirs pay duty relating not to what they receive or to their own circumstances, but to the circumstances of someone else altogether. 'That appears to me to be fundamentally unjust. For that reason I pleaded with the Committee for the inclusion in the corpus of death duties of an acquisition duty. It is the acquisition principle which is represented by the Amendment, but in a confused and inchoate way.

    I believe that the concession given by my right hon. Friend and represented by the Amendment may be made permanent if we reintroduce an acquisition duty settled on a proper basis of principle and applied to all forms of property, not only to property represented by life assurance policies. I do not ask for it straight away. I plead here, as I pleaded in Committee, for an inquiry into the matter; and while I understand the reluctance of my right hon. Friend to look into all these matters afresh, I urge on him that he, probably more than anyone else, has an interest in so doing.

    It seems to me that death duties, far more than duties on income or duties on profits, touch people in some of their very deepest instincts and affections. That being so, if the principle of the death duty seems unjust, then the statute in the long run will suffer. Indeed, I would contend from what we have heard in our debates on the subject that the statute on this matter is subject to considerable strain. My right hon. Friend has an interest in safeguarding the reputability of the statute, and in my judgment that can only be done in the long run by initiating an inquiry on the lines I suggested in Committee, and for which I would plead again today.

    8.0 p.m.

    I am sure that we are all agreed that the speeches we have heard have shown how much there is still to be learned about the philosophy and logic of Estate Duty. The more I heard the hon. Member for Hall Green (Mr. Aubrey Jones) speak, the more I believed that he is too pure in heart to belong to the Conservative Party. I am sure he will forgive me if I turn from his musings on Estate Duty to the more practical question raised by the right hon. and learned Member for Kensington, South (Sir P. Spens), who I am glad to see has remained in the Chamber.

    He reproached us on these benches for not taking care of people of limited means. He said that he was astonished to hear speeches from these benches which seemed to be so indifferent to the welfare of those of limited means and the provision which they were trying to make for their wives and families. When my right hon. Friend the Member for Colne Valley (Mr. Glenvil Hall) asked the right hon. and learned Gentleman to define a person of limited means, he replied—and I took his words down—"Those who have risen to the position of executives on, say, £500 to £1,500 a year." That was his definition of persons of limited means. Presumably the right hon. and learned Gentleman supports the Chancellor and opposes my hon. Friends on the ground that the Chancellor is taking care of those of limited means whereas we are not.

    I want to ask the right hon. and learned Gentleman how much insurance of this kind he thinks people of limited means can afford. It would be possible for a person of limited means to take out a policy for £3,000 in the interests of his widow and three separate policies of £1,000 for each of his three children—a total of £6,000; and under the Amendment which we are discussing in relation to the Chancellor's Amendment, no Estate Duty would be payable on that £6,000. But the total cost of the insurance would be well over £300 a year in premiums. What person on £500 a year can afford to pay £300 a year in insurance premiums for this modest provision?

    The hon. Member has completely misunderstood me. Of course a man on £500 does not pay £300 a year in premiums. He pays a much smaller sum and does not insure for as much as £3,000. As he earns a higher income, so he takes out another policy.

    The right hon. and learned Gentleman has merely proved my point, which is that persons of limited means can afford only limited amounts of insurance—and those limited amounts of insurance would be exempt from Estate Duty anyway, and they would be still more exempt—

    No. What we are dealing with here is insurance taken out in the interest of the wife and family. These insurances will be separately calculated for Estate Duty and will be treated entirely distinctly from the free estate of the testator. It does not matter what he leaves in other forms of property. We are concerned only with the amount of insurance which he has left to his wife and family, which would be exempt from Estate Duty, for he would take advantage of the loopholes, some of which the Chancellor proposes to retain. I think the House will agree that a person of limited means between £500 and £1,500 a year is not at all concerned either with what the Chancellor proposes or with what we propose.

    Who is concerned with it? This surely must be realised: this is the field of operation of those with large incomes. It is not a scrap of good talking about persons of limited means. What does insurance cost per £1,000 for a man of 40 years of age? Surely it is at least £50 in premiums each year per £1,000 for a policy of this kind. One can work it out that if this sort of provision for the wife and children is to be undertaken, as it is undertaken, with a view to avoidance of Estate Duty, it will be done on a big scale, otherwise it is not worth doing at all.

    It is possible to take out two policies for £1,000 and obtain the benefit of each.

    At the present time it is possible for a person to take out 10 policies, one each year—not more than that because of the voluntary restrictions imposed by the life insurance offices—in the name of the same beneficiary, and each of those will be treated as a separate estate. The Chancellor proposes to stop that avoidance, even under the amended Clause—let us be quite fair to him.

    What we are suggesting is that he is retreating from the right and proper position which he adopted of aggregating all these policies for all beneficiaries and treating them as an estate separate from the free estate of the testator. Already a great concession is being made in treating these policies as separate estates, even if aggregated—a very big concession indeed. To lump the two things together would in many cases mean that they would attract a much heavier rate of Estate Duty.

    Let us acknowledge that, as the Chancellor proposes to meet the situation, he is stopping up one loophole, but he is allowing very large concessions to continue. I wonder whether he, or whoever is to reply, will tell us how much revenue he is giving away, making the comparison between his original Clause and his new proposal. It looks to me as if there is a considerable difference in the Estate Duty received, between the original proposal and the modified proposal which the Chancellor is now making, because of the treatment of each policy, or each set of policies for each beneficiary, as a separate estate.

    I do not see why the right hon. Gentleman is doing this. Consider the person who takes out policies of £4,000 for his wife and £4,000 for each of his two children—£12,000 in all. Why, under the modified proposal, does the Chancellor intend to make a gift of about £600 in relief from Estate Duty? What justification is there for doing that? As the figures go higher, of course, the concession becomes greater.

    Much has been said about the Married Women's Property Act. Under our proposal the sanctity of that Act is preserved. We would make special provision for the widow, but we do not propose that that advantage should be given to each of the other beneficiaries—and I am sure that that would strike any reasonable person as being quite fair.

    Undoubtedly this has been a large source of avoidance of Estate Duty and we on these benches regret that the Chancellor did not stick to his guns. Had he done so, we would have supported him. He has given inadequate reasons for the variation made by the proposal which he now puts forward. If it is suggested that it has been put forward in the interests of people with limited means, let us disabuse our minds of that before we proceed to the final stage of the Bill.

    I had hoped that the Chancellor would intervene at this point, but if he prefers to follow me I will, of course, speak now.

    The reason I did not rise was not through any desire not to speak, but because, as the Financial Secretary had opened the debate, I thought the right hon. Gentleman would like to speak at this stage.

    Certainly.

    My hon. Friend the Member for Sowerby (Mr. Houghton) has really made my speech for me. He dealt with the only significant contribution which has been made to the debate from the other side of the House. It came from the right hon. and learned Member for Kensington, South (Sir P. Spens). I must say—and I think he is aware of this from what has been said by my hon. Friends —that his speech startled us, for it seemed to us, on all the facts, to be at variance with the position as we see it.

    I listened carefully to the Financial Secretary. I agree with one of my hon. Friends who remarked that the Financial Secretary, as usual, had explained the matter in a lucid and clear way. This is a most complicated Amendment. Part of our case is that we see no reason for the Amendment, complicated or otherwise. Undoubtedly, as was pointed out by my hon. and learned Friend the Member for Kettering (Mr. Mitchison), this will cause a good deal of doubt in the minds of those who may be affected by it, and perhaps some work for the profession which my hon. and learned Friend adorns. However, if all that happens as a result is that we help, on the one side, very rich people, and on the other, well-to-do barristers, that is no reason why we should approve the Government's proposal.

    Even at this late hour, we should like to hear that the Chancellor has had second thoughts and that he has decided to accept the arguments deployed from this side of the House. I can only assume that, if the original Clause had not been good, it would not have been put into the Bill. If that is correct—the Clause was good and the Chancellor thought that it was wise and right, why is it now necessary for the Government to propose an Amendment to it? If after careful thought—and I know that careful thought is always given to the contents of the Finance Bill—the Clause was introduced, why is it that now in such a short space of time the Chancellor, and those associated with him should have had second thoughts?

    The Financial Secretary told us that the original Clause went too far. When was it discovered that it went too far? As far as we can see, it was only when pressure was brought to bear from the Government back benches. Perhaps we shall be told by the Chancellor that the matter has been debated by the 1922 Committee. It may be that that Committee informed the Chancellor that in this matter he had gone too far.

    This is one of the few radical proposals in the Bill yet, although in our view it does not go far enough, within a remarkably short space of time the Treasury Bench comes to the conclusion that the provision was too revolutionary. The fact is that the Clause as it now stands does not go far enough. We should have liked to see it tightened up, not loosened.

    I wish to make some brief observations on the speech of the right hon. and learned Member for Kensington, South (Sir P. Spens). As I have said, my hon. Friend the Member for Sowerby covered most of the points which he made, but I must say that, for my own part, it seems incredible that anyone in any part of the House should imagine that the proposed' Amendment will, in fact, help the small man—the man of whom the right hon. and learned Gentleman spoke as the person of moderate means. I intervened to ask him what he meant by this description and when he replied he laid down fairly wide limits. He said that moderate means meant from £500 to £1,500 a year.

    I understood further from what he said that such a man would be one who had reached the executive class. I understood the right hon. and learned Gentleman to mean by that somebody who was not starting at the beginning, but, in a sense, had reached the kind of position from which he would rise no higher. He had ceased to be in the lower grades of his profession or occupation.

    I meant a man who rises in the course of the years from £500 to £1,500 a year and takes out insurance as he gets better off.

    8.15 p.m.

    It is obvious that on an income of £500 a year most people would find that difficult. Their families would be young and most of their income would be earmarked for other purposes than this type of insurance. I therefore assume that the man concerned would have to be receiving at least £1,000 a year, and perhaps more, before he could begin to take out policies of this kind. Even then, it is obvious that by that stage he would no longer be young. In all probability he would be in his fifties.

    Everybody knows that when a man reaches that age the premiums he has to pay are pretty high. Such a person would have to pay a premium of some hundreds a year to take out a policy which would do him any good under the Clause. He would, I think, hesitate very long before, for this purpose and this purpose only, he would sink premiums to the extent of many hundreds of pounds in this way.

    The plain fact should be obvious in every part of the House, that whilst this provision will help people of substantial means, the small men and women—even those with an income of £1,500 a year—will not be helped very much, if at all. The right hon. and learned Gentleman seemed to forget, though I am sure that the Chancellor does not, the Amendment accepted yesterday. Although the actual Amendment accepted was moved from the opposite side of the House, all the running and the pressure came from this side of the House and was really moved in essence by my right hon. Friend the Member for Bishop Auckland (Mr. Dalton).

    The Chancellor will recollect, if the right hon. and learned Member for Kensington, South does not, that now estates exceeding £3,000 and not exceeding £4,000 will only pay Duty of 1 per cent. That is a small sum. This provision must surely mean therefore that only people who have very high incomes or assets and substantial amounts at their command and who are willing to sink them in insurance policies of this kind will be those who will benefit.

    For that reason, we reject the proposals of the Chancellor. We think that they give to very rich people much more than they are entitled to in this direction. Instead of closing a gap and reducing what has become an abuse, the Government Amendment only helps that abuse to continue. Therefore, if the Chancellor cannot see his way to meet us in any way, I must advise my hon. and right hon. Friends to carry their opposition into the Division Lobby.

    I hope that my speech may conclude the debate on this important matter on which we have had a variety of useful speeches. The Amendments suggested by the Opposition are absolutely intelligible and quite clear. That is a very good way in which to end our debates. I should like to pay a tribute to the hon. and learned Member for Kettering (Mr. Mitchison) who serves in such a useful capacity to the Opposition in helping them with this difficult legal drafting We can understand the Amend- ments clearly, and the more we understand them the less we like them. I am afraid that my answer to the right hon. Member for Colne Valley (Mr. Glenvil Hall) is that we are unable to accept them. What they do is restore the position to the original Clause, with a slight expansion, as has been explained by Opposition speakers.

    The right hon. Gentleman said that I changed to the new Amendment on the Report stage under pressure from the 1922 Committee. During much of the course of the Finance Bill the theme song of the Opposition has been that the Government are so rigid that they are unable to move. Yet when the Government do move they are regarded as being under pressure from some revolutionary junta in the 1922 Committee. The Opposition cannot have it both ways. I am not conscious of ever having discussed the matter with the 1922 Committee, and if I did discuss it with them, I am doubtful if they would understand it any better than the hon. and learned Member for Kettering at present understands the drafting of the Amendment which we put on the Order Paper.

    It is true that some of my very learned and able right hon. and hon. Friends who have sat with assiduity through our Finance Bill debates have shown a particular interest in this matter. So have I and my right hon. Friend the Financial Secretary, who moved the Amendment with such clarity. The reason for the change is quite simple; we were impressed by the arguments put forward just as, strange to relate, I was impressed by the arguments which the right hon. Member for Bishop Auckland (Mr. Dalton) used yesterday.

    It shows that as we now draw rapidly to the conclusion of our debates on the Finance Bill we are being accommodating to both sides of the House, which is the right way in which to conclude our discussions. We have learned from these discussions to be even more accommodating than we were last year, and we have ended up with a concession to the Right today and a concession to the Left yesterday. I hope that our aim will prove that our attitude will in future be killing when we have a target in front of us.

    The right hon. Member for Colne Valley claimed that this was not a very desirable course of action. If it is not a very desirable course of action, why did not his Government tackle this abuse during their period of office? We dealt with this abuse when it was brought to our attention. We might have thought of it earlier, but the fact is that we dealt with the abuse in the original Bill as printed at the Committee stage.

    There are two simple answers to the right hon. Gentleman. The first is that the Labour Government could not do everything in one period of office. We did a great deal. I thought that right hon. and hon. Gentlemen opposite felt that we did too much. The second answer is that this abuse really became an abuse which ought to be attended to as a result of the action of my right hon. Friend the Member for Bishop Auckland (Mr. Dalton) in 1946 in relieving estates up to £2,000. It was only then that it really became a substantial scandal, and it took some years to grow.

    Then the actions of the right hon. Member for Bishop Auckland were so nefarious that they created opportunities for evading a law which it then took the right hon. Gentleman and his colleagues five years to perceive. I do not think that the right hon. Gentleman added to the validity or strength of his argument by his intervention.

    The fact is that this position has existed, not to the extent of the abuse announced by the Financial Secretary in the earlier stages of our debates, but with the possibility of abuse, since 1894. When we came to consider the attitude adopted by some of my right hon. and hon. Friends, we thought it perfectly reasonable that, in the words of the Financial Secretary, a ring fence should be put round a policy of assurance taken out for a child. We think that that is a reasonable proposal for each individul child, and, according to the terms of the Clause, those whose titles can be absolutely claimed according to the terms of the Amendment which we put on the Order Paper. That is a perfectly reasonable restoration of the original position.

    Our main desire originally was to stop the abuse of an indefinite number of small policies being taken out in the interests of the same person. However, on reconsidering the matter with the care that we always devote to reconsideration, we thought it not unreasonable that the Amendment should be made. Indeed, I see great value in the Amendment, because I do not think it is illegitimate that in the case of a child, particularly in a case related to the Married Women's Property Act, a ring fence should be put round it. I can see nothing immoral in it, and I can see considerable advantages in it.

    One or two points have been raised by right hon. and hon. Gentlemen in their speeches. The hon. and learned Member for Kettering raised some very technical points. They are so detailed that I will have a little interview with him after the conclusion of the Finance Bill.

    The hon. Member for Sowerby (Mr. Houghton) asked how much we should lose on this Amendment compared with the original proposition. It is a case not of how much we shall lose but of how much less we shall claw back, because the object of the original draft was to stop an abuse, and, as I think we shall stop an abuse, it cannot be said that there is a necessity to claw back the amount which would have been saved by the original drafting but which will now be conceded in the case of a ring fence being put round a child's assurance policy. I have made inquiries and attempted to define the amount, but I cannot give an accurate assessment. I am, however, assured that the figures are not alarming. Certainly, I did not have to consider this as being an action in which I was making any great hole in the budgetary position as I envisaged it.

    I do not think I need take up the points made by my right hon. and learned Friend the Member for Kensington, South (Sir P. Spens). It was from his speech that the argument started as to whether we were trying to help the rich or the poor. The right hon. Gentleman opposite said that the Clause was intended to help very rich people and well-to-do barristers. That is gross exaggeration. I hope that the people of this country, if they are following our discussions at the present moment—about which I am in some doubt—will, next time they consult their lawyers, ask them whether those who take out insurance policies under the Married Women's Property Act can all be classified as belonging to the two classes of very rich people or well-to-do barristers like the hon. and learned Member for Kettering. I do not believe that those are the only people who will profit by the Clause. If I thought that the hon. and learned Member for Kettering would make a packet out of it, it would give me all the more encouragement to proceed with the Amendment; but I do not believe that is the case.

    I believe that there are many people of reasonable and modest means, such as those referred to by the hon. Member for Sowerby in his illustration of the amount of the premium, for whom it will not be impossible to take out an insurance policy. I believe that many of those people will take advantage of this opportunity. However, I do not believe that those who went into this affair as a racket and took out 50 policies for the same person and thereby attempted to avoid Estate Duty, will find that the law as we leave it today makes it worth their while to perpetuate the racket. Therefore, in view of that, I ask the House to pass this Amendment, to reject the Amendments moved from the other side, and proceed to the conclusion of the discussions on the Finance Bill this year.

    8.30 p.m.

    While we appreciate the caustic reference to the 1922 Committee, which might even be described, to use a favourite phrase of the Chancellor himself, as wounding, and while we also appreciate his very friendly and appreciative remarks about my hon. and learned Friend the Member for Kettering (Mr. Mitchison), I must say that, as far as its substance is concerned, we thought his speech was utterly deplorable.

    I do not propose to rehearse the arguments again, except to say that I really

    Division No. 197.]

    AYES

    [8.31 p.m.

    Aitken, W. T.Braine, B. R.Craddock, Beresford (Spelthorne)
    Allan, R. A. (Paddington, S.)Braithwaite, Sir Albert (Harrow, W.)Crookshank, Capt. Rt. Hon. H. F. C.
    Alport, C. J. M.Braithwaite, Sir GurneyCrosthwaite-Eyre, Col. O. E.
    Amery, Julian (Preston, N.)Brooke, Henry (Hampstead)Crowder, Sir John (Finchley)
    Amory, Rt. Hon. Heathcoat (Tiverton)Brooman-White, R. C.Crowder, Petre (Ruislip—Northwood)
    Anstruther-Gray, Major W. J.Buchan-Hepburn, Rt. Hon. P. G. T.Darling, Sir William (Edinburgh, S.)
    Arbuthnot, JohnBullard, D. G.Davidson, Viscountess
    Baldwin, A. E.Bullus, Wing Commander E. E.Deedes, W. F.
    Banks, Col. C.Burden, F. F. A.Digby, S. Wingfield
    Barber, AnthonyButcher, Sir HerbertDodds-parker, A. D.
    Barlow, Sir JohnButler, Rt. Hon. R. A. (Saffron Walden)Donaldson, Cmdr. C. E. McA
    Baxter, Sir BeverleyCampbell, Sir DavidDonner, Sir P. W.
    Beach, Maj. HicksCarr, RobertDoughty, C. J. A.
    Bell, Philip (Bolton, E.)Cary, Sir RobertDouglas-Hamilton, Lord Malcolm
    Bell, Ronald (Bucks, S.)Channon, H.Drayson, G. B.
    Bennett, Dr. Reginald (Gosport)Clarke, Col. Ralph (East Grinstead)Drewe, Sir C.
    Birch, NigelClarke, Brig. Terence (Portsmouth, W.)Dugdale, Rt. Hon. Sir T. (Richmond)
    Bishop, F. P.Cole, NormanDuncan, Capt. J. A. L.
    Black, C. W.Colegate, W. A.Duthie, W. S.
    Boyd-Carpenter, Rt. Hon. J. A.Conant, Maj. Sir RogerEden, Rt. Hon. A.
    Boyle, Sir EdwardCooper-Key, E. M.Eden, J. B. (Bournemouth. West)

    think he ought not to expect us to swallow the talk about people of limited means. I suppose it could be a question of what the Chancellor and the right hon. and learned Member for Kensington, South (Sir P. Spens) understand by that phrase, but the plain fact is that, with the scale of Estate Duty as it is now, nobody will make very much out of dividing up insurance policies among their children if the total estate is under £10,000. That is the plain fact of the matter. The duty on £10,000 is only 4 per cent., so that comes to £400.

    I agree that one can save part of it, but the really big savings are going to come out of the big estates, such as those of £100,000, in which case the Estate Duty is 45 per cent. You can reduce that to whatever figure you like, according to the number of beneficiaries, and, as I showed during the Committee stage, it could be reduced to nothing in the final stage. But these are the people who are to gain, and, whatever the Chancellor and the right hon. and learned Gentleman may say, these are the plain facts of the matter. Whether or not the right hon. Gentleman regards them as very rich or not, I do not know, but they certainly are rich.

    However, we have had a long debate, we have expressed our point of view with great clarity and vigour, and it only remains for us to express our views in the usual way, which we shall do with particularly strong feeling, when we go into the Division Lobby.

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

    The House divided: Ayes. 251; Noes, 214.

    Finlay, GraemeLloyd, Maj. Sir Guy (Renfrew, E.)Robertson Sir David
    Fisher, NigelLockwood, Lt.-Col. J. C.Robinson, Sir Roland (Blackpool, S.)
    Fleetwood-Hesketh, R. FLongden, GilbertRodgers, John (Sevenoaks)
    Fletcher-Cooke, C.Low, A. R. W.Roper, Sir Harold
    Ford, Mrs. PatriciaLucas, Sir Jocelyn (Portsmouth, S.)Ropner, Col. Sir Leonard
    Fort, R.Lucas, P. B. (Brentford)Russell, R. S.
    Foster, JohnLucas-Tooth, Sir HughRyder, Capt. R. E. D.
    Fraser, Hon. Hugh (Stone)McCorquodale, Rt. Hon. M. SSavory, Prof. Sir Douglas
    Fraser, Sir Ian (Morecambe & Lonsdale)Macdonald, Sir PeterSchofield, Lt.-Col. W.
    Galbraith, Rt. Hon. T. D. (Pollok)Mackeson, Brig. Sir HarryScott, R. Donald
    Galbraith, T. G. D. (Hillhead)Mackie, J. H. (Galloway)Scott-Miller, Cmdr. R.
    George, Rt. Hon. Maj. G. LloydMaclay, Rt. Hon. JohnShepherd, William
    Glover, D.Maclean, FitzroySimon, J. E. S. (Middlesbrough, W.)
    Godber, J. B.Macleod, Rt. Hon. Iain (Enfield, W.)Smithers, Peter (Winchester)
    Gomme-Duncan, Col. AMacmillan, Rt. Hon. Harold (Bromley)Smithers, Sir Waldron (Orpington)
    Gough, C. F. H.MacPherson, Malcolm (Stirling)Snadden, W. McN.
    Gower, H. R.Macpherson, Niall (Dumfries)Spearman, A. C. M
    Grimston, Hon. John (St. Albans)Maitland, Patrick (Lanark)Speir, R. M.
    Grimston, Sir Robert (Westbury)Manningham-Buller, Rt. Hn. Sir ReginaldSpens, Rt. Hon. Sir P. (Kensington, S.)
    Hall, John (Wycombe)Markham, Major Sir FrankStanley, Capt. Hon Richard
    Hare, Hon. J. H.Marlowe, A. A. H.Stevens, Geoffrey
    Harris, Frederic (Croydon. N.)Marples, A. E.Steward, W. A. (Woolwich, W.)
    Harrison, Col. J. H. (Eye)Marshall, Douglas (Bodmin)Stewart, Henderson (Fife, E.)
    Harvey, Ian (Harrow, E.)Maude, AngusStoddart-Scott, Col. M
    Harvie-Watt, Sir GeorgeMaudling, R.Storey, S.
    Hay, JohnMaydon, Lt.-Comdr. S L CStrauss, Henry (Norwich, S.)
    Head, Rt. Hon. A. H.Medlicott, Brig. F.Stuart, Rt. Hon. James (Moray)
    Heald, Rt. Hon. Sir LionelMellor, Sir JohnSummers, G. S.
    Heath, EdwardMolson, A. H. E.Sutcliffe, Sir Harold
    Higgs, J. M. C.Moore, Sir ThomasTaylor, William (Bradford, N.)
    Hill, Dr. Charles (Luton)Morrison, John (Salisbury)Teeling, W.
    Hill, Mrs. E. (Wythenshawe)Nabarro, G. D. N.Thomas, Rt. Hon. J. P. L. (Hereford)
    Hinchingbrooke, ViscountNeave, AireyThomas, Leslie (Canterbury)
    Hirst, GeoffreyNicholls, HarmarThompson, Lt-Cdr. R. (Croydon, W.)
    Holland-Martin, C. J.Nicolson, Nigel (Bournemouth, E.)Thornton-Kemsley, Col. C. N.
    Hopkinson, Rt. Hon. HenryNield, Basil (Chester)Tilney, John
    Hornsby-Smith, Miss M. PNoble, Comdr. A. H. P.Touche, Sir Gordon
    Horobin, I. M.Nugent, G. R. H.Turner, H. F. L.
    Horsbrugh, Rt. Hon. FlorenceOakshott, H. D.Turton, R. H.
    Howard, Gerald (Cambridgeshire)Odey, G. W.Tweedsmuir, Lady
    Howard, Hon. Greville (St. Ives)O'Neill, Hon Phelim (Co. Antrim, N.)Vane, W. M. F.
    Hudson, Sir Austin (Lewisham N)Orr, Capt. L. P. S.Vaughan-Morgan, J. K.
    Hulbert, Wing Cdr. N. J.Orr-Ewing, Charles Ian (Hendon, N.)Vosper, D. F.
    Hurd, A. R.Orr-Ewing, Sir Ian (Weston-super-Mare)Wakefield, Edward (Derbyshire, W.)
    Hutchison, Sir Ian Clark (E'b'rgh. W.)Page, R. G.Wakefield, Sir Wavell (St. Marylebone)
    Hyde, Lt.-Col. H. M.Peake, Rt Hon. O.Walker-Smith, D. C.
    Hylton-Foster. H. B. HPeto, Brig. C. H. MWall, Major Patrick
    Iremongor, T. L.Peyton, J. W. W.Ward, Hon. George (Worcester)
    Jenkins, Robert (Dulwich)Pickthorn, K. W. M.Ward, Miss I. (Tynemouth)
    Johnson, Eric (Blackley)Pilkington, Capt. R. AWaterhouse, Capt. Rt. Hon. C.
    Johnson, Howard (Kemptown)Pitman, I. J.Watkinson, H. A.
    Jones, A. (Hall Green)Pitt, Miss E. M.Webbe, Sir H. (London & Westminster)
    Joynson-Hicks. Hon. L. WPowell, J. EnochWellwood, W.
    Kaberry, D.Price, Henry (Lewisham, W.)Williams, Gerald (Tonbridge)
    Kerby, Capt. H. B.Prior-Palmer, Brig. O. LWilliams, Sir Herbert (Croydon, E.)
    Kerr, H. W.Raikes, Sir VictorWilliams, Paul (Sunderland, S.)
    Lampton, ViscountRamsden, J. E.Williams, R. Dudley (Exeter)
    Lancaster, Col. C. GRayner, Brig. R.Wills, G.
    Langford-Holl, J. ARedmayne, M.Wilson, Geoffrey (Truro)
    Leather, E. H. C.Rees-Davies, W. RWood, Hon. R.
    Legge-Bourke Maj. E. A. H.Remnant, Hon. p.
    Lennox-Boyd, Rt Hon. A. T.Ronton, D. L. M.TELLERS FOR THE AYES:
    Lindsay, MartinRidsdale J. E.Mr. Studholme and Mr. Legh.
    Linstead, Sir H. N.Roberts Peter (Heeley)

    NOES

    Acland, Sir RichardBoardman, H.Cove, W. G.
    Adams, RichardBottomley, Rt. Hon. A. G.Craddock, George (Bradford, S.)
    Allen, Arthur (Bosworth)Bowden, H. W.Crosland, C. A. R.
    Allen, Scholefield (Crewe)Bowles, F. G.Crossman, R. H. S.
    Anderson, Frank (Whitehaven)Braddock, Mrs. ElizabethDaines, P.
    Attlee, Rt. Hon. C. R.Brockway, A. F.Dalton, Rt. Hon. H.
    Awbery, S. S.Brook, Dryden (Halifax)Darling, George (Hillsborough)
    Bacon, Miss AliceBroughton, Dr. A. D. D.Davies, Rt. Hn. Clement (Montgomery)
    Beattie, J.Brown, Rt. Hon. George (Belper)Davies, Ernest (Enfield, E.)
    Bellenger, Rt. Hon. F. JBrown, Thomas (Ince)Davies, Harold (Leek)
    Bence, C. R.Burke, W. A.Davies, Stephen (Merthyr)
    Benn, Hon. WedgwoodBurton, Miss F. E.de Freitas, Geoffrey
    Benson, G.Butler, Herbert (Hackney, S.)Deer, G.
    Bing, G. H. C.Castle, Mrs. B. A.Delargy, H. J.
    Blackburn, F.Champion, A. J.Dodds, N. N.
    Blenkinsop, A.Clunie, J.Dugdale, Rt. Hon John (W Bromwich)
    Blyton, W. R.Collick, P. HEde, Rt. Hon. J. C.

    Edwards, Rt. Hon. John (Brighouse)King, Dr. H. MRoberts Goronwy (Caernarvon)
    Edwards, W. J. (Stepney)Kinley, J.Robinson Kenneth (St. Pancras, N.)
    Evans, Albert (Islington, S.W.)Lawson, G. M.Rogers, George (Kensington, N.)
    Evans, Edward (Lowestoft)Lee, Frederick (Newton)Ross, William
    Evans, Stanley (Wednesbury)Lee, Miss Jennie (Cannock)Royle, C.
    Fienburgh, W.Lever, Harold (Cheetham)Shackleton, E. A. A.
    Fletcher, Eric (Islington, E.)Lever, Leslie (Ardwick)Short, E. W.
    Follick, M.Lindgren, G. S.Shurmer, P. L. E.
    Forman, J. C.Lipton, Lt.-Col. M.Silverman, Julius (Erdington)
    Fraser, Thomas (Hamilton)MacColl, J. E.Simmons, C. J. (Brierley Hill)
    Freeman, John (Watford)McInnes, J.Skeffington, A. M.
    Gaitskell, Rt. Hon. H. T. N.McLeavy, F.Slater, Mrs. H. (Stoke-on-Trent)
    Gibson, C. W.Mallalieu, E. L. (Brigg)Slater, J. (Durham, Sedgefield)
    Glanville, JamesMallalieu, J. P. W. (Huddersfield, E.)Smith, Ellis (Stoke, S.)
    Gordon Walker, Rt. Hon. P. C.Mann, Mrs. JeanSmith, Norman (Nottingham, S.)
    Greenwood, AnthonyManuel, A. C.Sorensen, R. W.
    Grey, C. F.Marquand, Rt. Hon. H. A.Soskice, Rt. Hon. Sir Frank
    Griffiths, Rt. Hon. James (Llanelly)Mason, RoySparks, J. A.
    Grimond, J.Mayhew, C. P.Steele, T.
    Hale, LeslieMellish, R. J.Stokes, Rt. Hon. R. R.
    Hall, Rt. Hon. Glenvil (Colne Valley)Messer, Sir F.Strauss, Rt. Hon. George (Vauxhall)
    Hall, John T. (Gateshead, W.)Mitchison, G. RSylvester, G. O.
    Hamilton, W. W.Monslow, W.Taylor, Bernard (Mansfield)
    Hannan, W.Moody, A. S.Taylor, John (West Lothian)
    Hargreaves, A.Morgan, Dr. H. B. W.Taylor, Rt. Hon. Robert (Morpeth)
    Hayman, F. H.Morley, R.Thomas, George (Cardiff)
    Healey, Denis (Leeds, S.E.)Morris, Percy (Swansea, W.)Thomas, Ivor Owen (Wrekin)
    Henderson, Rt. Hon. A. (Rowley Regis)Morrison, Rt. Hon. H. (Lewisham, S.)Thomson, George (Dundee, E.)
    Herbison, Miss M.Moyle, A.Thornton, E.
    Hewitson, Capt. M.Mulley, F. W.Tomney, F.
    Hobson, C. R.Noel-Baker, Rt. Hon. P. JUngoed-Thomas, Sir Lynn
    Holman, P.Oldfield, W. H.Wade, D. W.
    Holt, A. F.Oliver, G. H.Wallace, H. W.
    Houghton, DouglasOrbach, M.Warbey, W. N.
    Hoy, J. H.Oswald, T.Weitzman, D.
    Hubbard, T F.Padley, W. E.Wells, Percy (Faversham)
    Hudson, James (Ealing, N.)Paget, R. T.Wells, William (Walsall)
    Hughes, Emrys (S. Ayrshire)Palmer, A. M. F.Wheeldon, W. E.
    Hughes, Hector (Aberdeen, N.)Pannell, CharlesWhite, Mrs. Eirene (E. Flint)
    Hynd, H. (Accrington)Pargiter, G. A.Whiteley, Rt. Hon. W.
    Hynd, J. B. (Attercliffe)Parker, J.Wigg, George
    Irvine, A. J. (Edge Hill)Parkin, B. TWilkins, W. A.
    Irving, W.J. (Wood Green)Paten, J.Willey, F. T.
    Isaacs, Rt. Hon. G. A.Peart, T. F.Williams, Rt. Hon. Thomas (Don V'll'y)
    Janner, B.Plummer, Sir LeslieWilliams, W. R. (Droylsden)
    Jeger, George (Goole)Popplewell, E.Willis, E. G.
    Jeger, Mrs. LenaPorter, G.Wilson, Rt. Hon. Harold (Huyton)
    Jenkins, R. H. (Stechford)Price, Philips (Gloucestershire, W.)Winterbottom, Ian (Nottingham, C.)
    Johnson, James (Rugby)Proctor, W. T.Winterbottom, Richard (Brightside)
    Jones, David (Hartlepool)Pryde, D. J.Woodburn, Rt. Hon. A.
    Jones, Frederick Elwyn (West Ham, S.)Pursey, Cmdr. H.Wyatt, W. L.
    Jones, Jack (Rotherham)Reid, Thomas (Swindon)Yates, V. F.
    Keenan, W.Reid, William (Camlachie)Younger, Rt. Hon. K.
    Kenyon, C.Rhodes, H.
    Key, Rt. Hon. C W.Richards, R.TELLERS FOR THE NOES:
    Mr. Holmes and Mr. J. T. Price.

    Fifth Schedule—(Amendment Consequential On Abolition Of Permanent Annual Charge For National Debt)

    I beg to move, in page 50, line 25, after "Debt," to insert:

    "(including any such enactment contained in an Act of the same Session as this Act, passed at the same time as or after this Act)."
    Clause 32, to which this Schedule is attached, abolishes the permanent annual charge for the National Debt, and the Schedule makes certain consequential alterations in other Statutes. The purpose of this Amendment is to secure that these consequential changes are also effected in Bills at present before Parliament.

    The Government will no doubt be glad to hear that, in view of the lucid and comprehensive explanation given by the Financial Secretary, we on this side of the House do not propose to oppose the Amendment.

    Amendment agreed to.

    Bill to be read the Third time Tomorrow, and to be printed [Bill No. 141].