Before I call an hon. Member to speak, I wish to make an appeal to the Committee. In addition to the major business we are about to discuss, there are several other major issues to which the Committee will have to give its attention in the course of the evening and the night. I hope, therefore, that, although a considerable number of hon. Members left the Chamber last night with a heavy burden of an undelivered speech, they will try, in the interests of the Committee and our business, to make their contributions as brief as possible.

I am grateful for the opportunity to re-open the debate, for although I am not sure that the capital transfer tax is the most important tax measure since the war—to use the Chancellor's terms—it is certainly likely to have a greater long-term impact upon society and the shape of industry and the countryside than any financial measure that I can remember since I joined the House in 1966.

Although the Opposition's contribution to the debate last night was admirably opened by my right hon. Friend the Member for Finchley (Mrs. Thatcher), I thought that by the end of the evening we had been somewhat diverted from the main point at issue, as was particularly evident in the Chancellor of the Exchequer's winding-up speech. It is, of course, necessary to re-examine the effect of the proposed tax on forests, charities and historic homes. But what is at stake in the debate and vote on the clause is what I think the Chancellor himself described, in the final remarks of his opening speech, as the social and economic structure of the nation—indeed its very future.

If the right hon. Gentleman meant what he said, and if, with respect to him, he is his own man rather than the mere creature of one of the militant factions who sit behind him, I think he will ponder further on his statement yesterday that he does not seek to destroy the essential base of saving, investment and employment upon which this country is founded. It is so much easier to destroy that continuity which is England than to preserve it, and England is nothing—

Britain.

I can include Scotland, Ireland, Wales and Cornwall. I represent the Celtic fringe myself.

England is nothing without its traditions and history and its family firms and farms. The Tory Party used to represent what the small family firm and the small farm are all about. I hope that we still do. If we do not, I see it as my main task in politics to ensure that we do so once again. There may be Whigs in both parties who feel that they can represent all interests but, in fact, never succeed in representing any of them. But I believe that the Tory Party exists as much as anything to represent the continuity of family life and the family business and family farm.

It was a gross over-simplification for the Chancellor to state yesterday that more than 95 per cent. of the population, or whatever proportion he took, are below the threshold of the tax. That is beside the point, because the truth is that well over half the working people of this country, almost the whole of our countryside, a major proportion of our exports and all our investment are directly affected by the proposed tax—in my view, adversely.

It is too much that this short debate should hang under the threat of a closure at any time, when informed opinion in the Committee and outside is only just beginning to grasp the massive implications of what we are about. That goes for both sides of the Chamber. I know that very well from what several Labour hon. Members have told me.

My time is limited. I shall comment first on the structure and rate of the tax. In doing so, I ask the Committee to believe me when I say that I am not against the taxation of capital or inherited wealth, or against stopping up the loopholes in what is now the estate duty. Indeed, when my right hon. Friend the Member for Wanstead and Woodford (Mr. Jenkin) and I were in the Treasury together we genuinely wanted to make a start on the reform of capital taxation. If we had done so we would have taken into full account that we already have the most extensive taxes on capital in the world. Any measure that we would have considered would have embraced the reform of estate duty, the reform of capital gains tax—I believe probably its abolition—and perhaps the replacement of those measures with an overall tax upon wealth. However, it would not have been a tax of the kind that is increasingly being forced upon us—namely, taxes upon the creation of wealth. That is the distinction that we must make. The capital transfer tax, alas, misses that distinction altogether.

I now turn to the structure of the capital transfer tax. I believe that it is unacceptable to any reasonably minded man. With the respect that I have for the Inland Revenue and its top people, I do not understand how it could ever have produced such figures or how Ministers could ever have accepted them. The result of the grossing-up effects of this tax and the interaction of capital gains tax is that rates well in excess of 100 per cent. can be levied on even a modest family business. That is the position without the effect of the wealth tax. I am meant to be sitting shortly on the Select Committee on the wealth tax.

Time permits me to give only one example—namely, a 300-acre farm worth £500 an acre. My example could equally well be the small engineering business in the Midlands employing 50 men and worth about £150,000. We can assume that for the 300-acre farm capital gains tax since 1965 would amount to £22,500. Capital transfer tax at 20 times the annual rent of £15 an acre—I am talking about the relevant rate, which is 45 per cent. CTT—would mean a CCT liability of £48,333. The total tax payable by the donor—that is, the capital gains tax and the proposed CTT rate—would be £70,833 or half the market value of the farm. That is against a present tax liability under estate duty with the 45 per cent. rebate of £36,987.

That is the result of capital transfer tax on a relatively modest family business which would not produce for its owner any great income. The tax liability will be approximately double the present liability. If rents move up in agriculture—I believe that they must do so—and the market value is to be taken into account rather than the annual rent, total taxes on the 300-acre farm would be over 100 per cent. Therefore, the whole of the value of the farm would go in tax and more besides.

Mr. John Chown, the taxation correspondent of the Financial Times, gave a more extreme example in another vein. He made a number of assumptions, but none of them was absurd. He took the example of a parent with a handicapped child who not unreasonably wanted to provide £2,000 a year in real terms for the child for 60 years. The child would need under the new proposals £828,000. The cost to the donor of leaving that amount, after capital transfer tax, rises to £2.4 million. I do not understand how the Government could have come forward with even draft legislation of that sort.

The legislation that has been presented to the House will, of course, go through Committee. But it should never have been presented in its present form. It seemed that the Chancellor yesterday evening showed a glimmer of understanding of the enormity of what he had in draft terms. I should like to feel that in winding up today he will indicate that he has grasped what he is doing.

I may be a minority of one on the Conservative benches when I say that I believe the Chancellor's macro-economic policies are broadly right. I just happen to agree with his broad macro-economic policies. However, the right hon. Gentleman has been too busy with the general economy and with gallivanting around on international jamborees to follow what his Department has been doing with the tax system in his absence. It is no use getting us through the next two years without a bloody revolution—after all, that is the Chancellor's task—if, in doing so, there are tax measures passing through the House which will undermine the basic long-term structure of our society.

I shall now quote Lady Burton of Coventry, who is, I believe, a Socialist in another place. In a letter to The Times last week she said:

"I am writing"—

she was on the theme of the middle classes—

"not because of the anger of the middle class but because of the despair and fear, of those people in all classes of modest means and now retired, who have no hope to sustain them in their remaining years. … I am speaking not of the rich but of the millions of decent, hard-working people who saved a modest amount of money over their working years, and who put this into a building society or bought life assurance for their old age."

That letter was written by a Socialist in another place. She was referring to the efforts last week of the Treasury Bench on investment income. The Government's measures in that clause are just a mean little act resulting from foolish commitments made whilst in opposition. Clause 17 is far more far-reaching. We are dealing with the destruction of the family business, much of our landscape and the basis on which the private sector of the economy is now founded.

I am in a critical mood and I fear that I am not critical only of the Government. It was my party—I was a member of the previous Conservative Government and I take full responsibility—which for all sorts of well-meaning reasons agreed that dividends should rise under the prices and incomes policy at only 5 per cent. a year. That started the undermining of the savings principle. It was a foolish act for a Tory Government to take. It was my party—this was much more suspect, and the motives were not so good as they were based on electoral expediency—which failed to vote against the Second Reading of the Rent Act 1974.

I quote those two examples in suggesting that the traditional concept of property—I refer to property in the widest sense of the word and in the sense in which it has always been referred to in British history—has been diminished, if not forgotten. Property in the widest sense means life assurance, family businesses, savings and building society deposits. Property in that sense cannot be distinguished from the continuity of family life. That is why I feel so strongly about capital transfer tax, which goes to the very heart of the issue.

I do not like the term "the middle classes". I think it is a silly term. Perhaps it is that sector of society that can be referred to a the bourgeoisie. When we use the term "the middle classes" I think we mean the saving classes rather than the spending classes. The real income of that class has been falling very fast. The demoralisation of the bourgeoisie is no minor matter. It is the single most important factor, in my view, in present politics.

Does the hon. Gentleman acknowledge that much the greatest part of savings in this country is made in pension contributions by working people?

Yes, but who owns the pension entitlements? They are owned by the very people to whom I am referring, those who subscribe to pension schemes and who as a result of the premiums that they pay are entitled to their share of the assets of the fund. That goes to the heart of the matter.

We all know that power now resides outside the House of Commons. In my view, our institutions no longer reflect the broad base of interests in the country. Whitehall, Westminster and private industry merely react to the pressures of organised labour.

Every tax depends ultimately, the The Times said this morning—God forbid, I never thought that I would find myself in agreement with a leading article in The Times but I did this morning—the whole basis of the tax structure depends upon consent, upon the consent of the governed and the taxed. The Government, in this and other tax measures, are engaged in pulling down almost the last edifice which supports the remaining powers of government in this country—that is, respect for the tax system.

4.0 p.m.

We hear a great deal about the powers of the miners and of the electricity workers. But a power resides in the hands of the taxpayer which far exceeds the power which lies in the hands of the miner. Once this basis of consent is undermined—the Inland Revenue knows this only too well—and once people start withholding their taxes because they have become penal and objectionable, the whole structure of government in this country will collapse. That could happen very easily indeed.

I conclude with only one positive suggestion, which I hope the Chancellor will take in the spirit in which it is intended. We have had Green Paper discussions and Select Committees on many taxes in the past few years. I do not need to list those that we have had. We now have a Select Committee on the Wealth Tax. But that Committee is proceeding in parallel with Lord Diamond's committee—the Royal Commission on the Distribution of Income and Wealth. Frankly, we are both considering, in parts of our work, very similar things. Yet the Select Committee is not privy to Lord Diamond's figures, so both of us are working side by side on essentially the same problem.

In the capital transfer tax we have a tax which, quite clearly, interacts with the wealth tax and the work of Lord Diamond's committee. How is the House of Commons to perform its functions seriously if we isolate the wealth tax from the capital transfer tax? They should not be isolated. They are all now part of the same overall problem.

Therefore, if this is the most important tax since the war, I suggest to the Chancellor that it deserves some rather more lengthy, non-partisan consideration which embraces the whole concept of the wealth tax and taxes on capital, and a limit on the overall amount of tax. It should embrace all these things. I ask for consideration—not today but over the next week or two—of whether we might not take this matter out of the Bill for now and refer it to the Select Committee on the Wealth Tax, broadening the base of that Committee's working to include capital transfer tax. I am not the chairman of the Select Committee, so I must defer to him, but I am sure that we could finish our considerations by the summer and take account of these matters which, with great respect to the Treasury Bench, Treasury Ministers must know by now that they have not considered properly at all.

I want to talk about the position of Northern Ireland in relation to the new tax. First, I want to speak about the forestry industry in Northern Ireland.

Northern Ireland's forestry is principally coniferous and planted by the public. This position has been built up over many years. The reason why public planting has consisted primarily of softwoods is simply that the land on which trees have been planted, by public money, is not suitable for the growing of hardwoods. Therefore, practically all hardwood planting is carried out by private land owners. In Northern Ireland that means that hardwoods are planted on very small patches of land which are unsuitable for agriculture—because the land slopes steeply, because perhaps a corner is cut off or the land is too wet, or because there is something else wrong with it from an agricultural point of view. Some of these trees are planted as shelter belts for stock and, therefore, come under the heading of being ancillary to agriculture. But some are planted with a view to investing for the future in timber.

All Governments recognise that we have need of trees. Northern Ireland is one of the most tree-less landscapes in Europe. We have encouraged planting, but if we are to have continued planting there must be a profit which must be of benefit to the land owners. This profit can be realised only when the trees are cut down. If trees have to be cut down to pay taxes, they will not necessarily be cut down at maturity. They will be felled whenever the tax money is needed. The effect of the tax will simply be that as people exhaust their cash in the bank to pay the tax when it falls due, the trees will be cut down regardless of their state of growth. They will be turned into cash, and the land will not be replanted. This will lead to a complete destruction of the few private pieces of forestry that we have, and to more and more land becoming derelict in Northern Ireland.

I have no doubt that the Committee will be interested to learn that Northern Ireland has at present almost half a million acres of land which is unsuitable for agriculture and is not used in any way. On this land we should encourage the planting of trees. This can be done only by the private sector because in general the land exists in parcels which are much too small individually to be taken over and planted by public authorities.

I come now to the farm structure in Northern Ireland. This is totally different from that pertaining on this side of the Irish Sea. Practically all the land there is owner-occupied and farmed by the owners. The holdings are much smaller, on average, than they are in Britain, but they have been growing in size due to the economic factors operating in farming over the past 30 years or so. Size and viability have much in common. Size means the number of acres, or the size of the business actually carried on on small acreages.

When one considers the cost of increasing one's acreage of land in Northern Ireland, one has to take into account some social factors, one of which is the competition for the land available on the market, and the position of the land that is being sold. The price paid for that land when it is sold in the open market does not necessarily reflect the economic value of the land which is bought to increase the size of the holding. This brings into question the whole capability of the farming community in Northern Ireland to raise the money out of the income from the land to pay the tax on that land.

This is because the return on agricultural land, taking the market value as the base, is very much lower than that in most other industries. Family farmers do not buy land as a hedge against tax. They buy land in the way a labourer would buy a spade. It is a tool with which to earn a living—neither more nor less. It is a necessity for their way of life. A farmer without enough land cannot grow food and he cannot fulfil his object in life.

The Chancellor has implied that the loss of outside money would bring about a drop in land prices. However, that is not necessarily so. Even if it diminishes the value of the land, what happens to the farmer? What will he use as security whenever he goes to the bank for money? Farmers use the value of their land in order to get liquid capital with which to invest. At a time of inflation, when prices are rising so rapidly, it is vitally necessary that farmers have the ability to invest in the plant and machinery they need to carry on.

The Bill will lower the farmer's purchasing power, right across the farming industry. When one considers the amount of farm machinery that is sold and the effect that such a loss of purchasing power will have on the economy of this country, one appreciates that this is a matter which the Chancellor would be well advised to look at again very carefully.

The Chancellor has also said that forests have been raised in price by the tax relief under estate duty. But it is not the sale value of the forest that counts. It is the value of the spendable income from the land on which the forest grows over the life of the forest. If the profit to the land owner from a forest is less than that which he can get from grazing sheep on the land, he will stop growing trees and will graze sheep. The spendable income from the forest must be taken as an annual income over the entire life of the forest. Looked at in this light, the spendable income per annum from a forest after paying tax will be so low that it is simply not worth planting the trees.

In Northern Ireland, and I think throughout Britain, the family business is a powerful force in society. Despite what some hon. Members opposite may think, people do not work for the tax man. They work for themselves and for their children. People work for their children so that their children may have a better standard of living and a better life than that which they themselves enjoyed. Therefore, they want to give their children a better start in life.

When the Chancellor of the Exchequer says that one person in 10,000 will pay more tax he misses the point. The point is that all businesses of over £15,000 in value will eventually be caught. Not in one year but in a generation every land owner and business owner will be caught by the tax and the result will be the destruction of society as we know it.

One serious result of that in farming will be a reduction in production. Family farms depend upon the families who farm them. Father and son, wife and daughter do the work. Anyone who denies that has never lived on a family farm. If a farmer or business man believes that there is no future for his children in the farm or business he will put them into a profession or trade and, therefore, the farms and businesses will eventually collapse. They will grow into large corporate units or fragment. Either result will be disastrous to our way of life.

When people find that they have to pay not only the capital transfer tax but capital gains tax the spirits of even the stoutest will quail. The Chancellor of the Exchequer spoke of a lifetime accumulation of £15,000. That has been treated as a vast sum by hon. Members opposite. The present cost of building a very moderate council house in Northern Ireland is at least £10·50 per square foot, or over £11,000 per house. There is hardly a person in a reasonable job, even among the poorest workers, who does not wish to own his house and who is not prepared to make sacrifices for it. But when those sacrifices are taxed people simply will not make the effort. Why should they?

The Chancellor of the Exchequer spoke about 1,000 acres of land or a quarter of a million pounds. I draw attention to the amendment in the name of the hon. Member for Caernarvon (Mr. Wigley), which attempts to get round the problem in a rather subtle way by referring to the quality of land. Other methods could be used in farming. There is a system known as man days to prove the viability or otherwise of a farming business. One could consider the income from the farm over a period of years. But possibly the simplest way of dealing with the matter is to take the market value. If one does that, why worry about the size of the farm?

We are told that one of the aims of the Bill is to make the tax compulsory and not voluntary. Any tax depends upon the willingness of the governed to pay it. In my experience, people will pay bills, whether they be tax bills or any others, as long as they think that they are reasonable, just and justified. But when people as a group or as a national body are convinced that the tax is not reasonable they will make every effort to avoid paying it. That leads swiftly and inevitably to crookedness and corruption in the nation's life.

4.15 p.m.

I draw attention to the statement of the Chancellor of the Exchequer about relief for the Army and the police. I am unable to understand what he meant. My reading of Schedule 7 indicates that the relief is to be extended to members of the armed forces up to at least 1984. On 9th December I asked the following Question of the right hon. Gentleman's Department:

"… whether, when members of the UDR, the RUC and the RUCR are killed, as a result of terrorist activity in Northern Ireland, their estates are free from estate duty in the same way as the estates of members of the armed forces".—[Official Report, 9th December 1974; Vol. 883, c. 43.]

The reply was "Yes".

How does that fit in with what the Chancellor of the Exchequer said last night when he denied that the relief was extended to members of a police force? I realise that it is not in the present legislation, but I think that it should be incorporated in the legislation. If we ask men and women to defend this country either against terrorism within its borders or against armed attack from without, it is only reasonable that the nation should protect the defenders of the nation. It is atrocious to deny this relief to people who defend our way of life and our soil.

I have been trying to discover the position regarding civilians who die as a result of terrorist activity. I find they are excluded from relief. But they were not excluded in the 1939–45 war. I asked the Library about this matter, and a few days ago it supplied the answer. It said that total exemption from death duties was granted in respect of the first £5,000 worth of property passing to the widow, widower or any other relation or to the brothers and sisters and their descendants of any person who died as a result of enemy action.

Is there any good reason why that should not be incorporated in the Bill and the relief extended to civilians and their dependants who die as a result of enemy action within or without our borders? Furthermore, today £26,329 would be needed to give the same level of relief as £5,000 in 1941. In these circumstances, there is an excellent case for increasing the base starting point for the tax to almost double the £15,000 proposed.

The Chancellor said that he would be prepared to listen to reasonable arguments. I think that the points that I have made are more than reasonable. Therefore, I trust that the right hon. Gentleman will accept them and act upon them at once.

I should like to say how much I agreed with the speech of the hon. Member for Londonderry (Mr. Ross). I wish I could say the same about the speech of the Chancellor of the Exchequer last night. However, it would be ungracious not to say that we were grateful to the right hon. Gentleman for saying that he would consider some of the points made in the debate. I should like to take up one or two matters with him. It is difficult to know where to begin, although the best course is always to begin at the beginning. However, this is not a question of historical reminiscences or of airing my knowledge.

The Chancellor said that estate duty was introduced before the twentieth century began, to prevent vast aggregations of inherited wealth being passed on from generation to generation. If the Chancellor will read his history he will find out that the tax was introduced because the Liberal Government of the day were short of money and had to build many warships. Estate duty was introduced as a money-raising Bill, in which the existing probate duties and death duties were scrapped, with an estate duty brought in at a slightly higher rate in spite of the opposition of the then Prime Minister and Liberal leader, Mr. Gladstone.

In 1910 the concept, which the Chancellor of the Exchequer attributed to the nineteenth century, began to take shape in the famous Budget of Mr. Lloyd George. He introduced much higher rates of tax, partly with a view to financing the great social services then being launched and partly having in mind the present Chancellor's ideas about inherited wealth. At the same time he introduced Section 61(5) of the Finance Act. It was an amendment. It was introduced by Mr. Lloyd George expressly to exempt forestry from the effect of estate duty at the greatly increased rates imposed in 1910. The amendment was proposed not by any Tory land owner but by the Chancellor of the Exchequer, and it has remained on the statute book for the past 65 years.

The relevance of this is that it was done on commonsense principles. It was not desired to apply this penal form of taxation to a totally unsuitable industry such as forestry.

Speaking about forestry, the Chancellor of the Exchequer said that in recent years half the planting had been done by the Government, and that, of the other half, four-fifths had been done by investment companies as a hedge against inflation. Later he mentioned investment trusts.

The Committee should have a picture of what has been happening in forestry, which is now divided into three sections. Half of the planting is done by the Forestry Commission, and the other half, which is carried out neither by investment trusts nor investment companies, is carried out by private owners—half of them doing it on their own. Here I must declare an interest, as I am involved, together with my agents and employees. The rest of the planting is done by forestry companies, which are working companies responsible for management and planting and are owned by woodland owners, the employees and the timber industries. However they neither own nor deal in land. They provide jobs in rural areas and implement Government policy as directed by the Forestry Commission. There is no secret about their names. There are four principal companies. They are responsible for managing about half the private sector. Their incomes derive from the services which they provide. The land they manage is dedicated not by the forestry company but by the owner concerned.

I believe that the provisions—or nonprovisions—concerning forestry in the Bill have been actuated by suspicions of forestry being used as a method of tax avoidance. I should like to impress on the Chancellor that it not possible to avoid tax by planting trees. But it is possible to avoid tax to some extent by buying forestry land and selling it at the right time. The forestry companies follow a consistent policy of discouraging that sort of thing, which is of no help to them, although some short-term operators have tried, by means of advertisements, to interest people in these schemes. On a number of occasions the forestry companies have suggested to the Inland Revenue a simple means by which legislation could be brought in to prevent that type of tax evasion without damaging the industry in the way that now seems inevitable.

To sum up, forestry in the private sector receives aid from the taxpayer partly in the form of the income tax code introduced by the Attlee Government in 1947 and partly in the estate duty concession introduced in 1910, while in contrast the whole of the burden of the Forestry Commission planting is borne by the taxpayer.

I do not know whether it is worth while to refer to the point which seemed to weigh so heavily with the Chancellor of the Exchequer last night when he seemed to imply that there was something guilty or immoral about the fact that the planting done by "investment trusts" was done overwhelmingly in softwoods, alleging that the planting of hardwoods was done overwhelmingly by the Forestry Commission.

These are the facts of life about forestry. For defence and economic reasons, it is essential that the bulk of our forestry planting should be in softwoods, which is what we shall need if we experience a siege economy. We need softwoods to help our balance of trade. On two aspects of forestry policy—namely, rural employment and what is called amenity—we need hardwoods, which to a minor extent are also valuable in the economic and defence spheres.

The argument is hardly worth pursuing. I am not surprised that nobody wished to argue it with the Chancellor, because it is irrelevant to our discussion on the Bill.

I declare my belief that the need in this country is for a continually expanding forestry industry both in the public and the private sectors. I very much regretted the decision taken in 1958 by the Conservative Government to scale down Forestry Commission plantings. I should like the Government to register the fact that this deficiency has been to a large extent made up by the useful activities of the forestry companies I have described.

Having declared my interest as a private forester, I wish to speak briefly about ordinary private forestry. Those engaged in it plant a greater proportion of hardwoods than either the Forestry Commission or the forestry companies. We are very much concerned with small woodlands. It is difficult to see who else could be properly concerned with them.

An important aspect is terminology. We have to invent suitable names for small woods. I started that process when I was a keen and promising Member of Parliament, and I resorted to the use of the names of Leaders of the Conservative Party. There is a Macmillan Wood on our property and the Home Covert. We are now focusing on an area called the Heath Plantation. We have only one thatched cottage on the estate, and, unfortunately, the wood next door already has a name. If the necessity arises, I am not sure whether we shall be able to call it Thatcher Wood.

This is an important aspect of private forestry, which contributes to the beauty of the countryside we want to preserve and to rural employment.

It would be an ironical result of this Bill if those who like myself during a lifetime have obtained no benefit from planting, which is all a matter of spending money, were to be penalised in times of posterity by a Bill allowing nothing to be inherited by anybody.

Referring to what my hon. Friend the Member for Ludlow (Mr. More) said about the naming of woods, the only place where the Chancellor of the Exchequer would find refuge on my hon. Friend's estate would be in the Dog Kennel Plantation.

I have listened to the many speeches made in this debate but I have not heard one speech in favour of the tax. Even the hon. Member for South Ayrshire (Mr. Sillars) could find nothing very much in favour of it. Even he had to ask the right hon. Gentleman for some concessions in so far as the tax affects charities. Only the Labour Party could produce a tax which operates so unfairly on families. If a man has one child he can give it one gift of £15,000 and £1,000 a year. But anyone with four children finds that each of them can have only a quarter of that and an annual gift of £250.

4.30 p.m.

Much of last night's debate missed the Press, but no one can say that the first leader in The Times today on taxation and consent, which has been referred to already by my hon. Friend the Member for St. Ives (Mr. Nott), was written as a result of the debate in the early hours of this morning. That leading article emphasised first the punitive rates of the tax, and it went on to widen the argument to include the effect of the capital transfer tax on discretionary trusts and on family settlements.

Trusts as a whole have a long and respectable history of protecting wealth. They protect it from the profligate spender who may for a short time be the beneficiary of the wealth. But far worse damage will be done by this Government, who will just dissipate the wealth through this tax. We shall not solve inflation by taking away people's savings and using them up in current Government expenditure.

Throughout our debates on this Bill, the Chancellor of the Exchequer has shown a growing awareness of the full implications of what he is proposing. He made some comforting noises to the foresters. He made some sympathetic comments about charities and about small farmers. When he intervenes again today, I hope he will show that at least he is prepared to give further consideration to the effect of the capital transfer tax on money put into trusts and on money paid out by trusts and to the iniquitous harm which will be done by the 10-year levy on the undistributed assets of discretionary trusts.

I hope, too, that the right hon. Gentleman will make favourable noises about the retrospective element in this legislation. We have a classic example on the statute book already of a Government changing their mind about retrospective legislation and its effect on the old death duties. When foreign real property was brought into the net of the old death duties by a Conservative Government, the point about retrospection was accepted. Where someone received foreign real property thinking it free of death duties and had resettled it, it was accepted as not being liable to death duty. The same applies to settlements and discretionary trusts, and I hope that the right hon. Gentleman will look favourably at the retrospective element of what he proposes, especially where existing trusts were made in good faith by a settlor domiciled abroad who then returns to this country and is caught by the capital transfer tax when the trust is held by non-resident trustees. This is the worst kind of retrospective legislation.

We had a little bit of sanctimonious unction from the right hon. Gentleman when he tried to disguise his real intent. We heard a great deal about small farmers and owner-occupier farmers. Does the right hon. Gentleman accept that 46 per cent. of all the land farmed in this country is farmed on a landlordand-tenant relationship? He tried to get a few cheap cheers from his supporters by talking about the increase in the value of land brought about by the present death duty repayment of 45 per cent. However, I do not accept that. I believe that the landlord-and-tenant system has brought two kinds of capital into British agriculture—the working capital of the tenants and the capital of the landlords. It is capital which is badly needed by the industry.

Has the right hon. Gentleman worked out what will be the effect on food production in 10 years of no maintenance and no modernisation on half our farming land? That will be the effect of the capital transfer tax.

I expect that the right hon. Gentleman will say that he did not realise the effect of the tax. Probably he will say that he did not realise the effect of interest not being allowed to be charged against income tax and surtax where owners of land make use of the eight-year provision for paying their death duties. Here, the right hon. Gentleman is frustrating a concession which has been used by people for many years by the way in which he is treating the interest. If that is deliberate, it is fair enough and we understand. If it is another of the right hon. Gentleman's mistakes because he does not really understand what he is doing, I hope he will look again at the provision.

The tax which the right hon. Gentleman proposes is a prevention-of-gifts tax. It will ensure that one third of all businesses—agricultural and other small businesses—will be owned by senile people. No one will transfer businesses or wealth. What is worse, at some stage one third of the people of this country may end up being employed by senile female ownership under the provisions of this Bill.

It is a geriatrics' charter.

I agree with my hon. Friend. It is a geriatrics' charter.

For the first time since becoming a Member of this House, this weekend I received a joint deputation in Lincolnshire from the chamber of trade, the chamber of commerce, the CLA and the NFU. It is the first time that I have known all these groups feel so strongly about any one issue.

I want finally to say a few words about forestry. The skyline of North Lincolnshire is dominated by Pelham's Pillar. It was erected by the Pelham family to commemorate the planting of their one-millionth tree. More than 3,500 acres of private woodland are owned by one family in my constituency. They employ 22 men and produce 50 tons of sawable and marketable timber each week. This enterprise is threatened by the right hon. Gentleman's provisions.

My right hon. Friend the Member for Finchley (Mrs. Thatcher) spoke about the one-generation society which this tax will bring about. Even if we repeal this tax at some time in the near future, the next generation which inherits will have to pay some duty on the assets which they receive and hold for their lifetime. But, with any luck, they will hold those assets long enough to build them up and repair the damage which any form of inheritance tax may inflict. I dare say that some form of tax of this kind can be fairly devised. The trouble about the present proposal is that the damage that it is likely to do will be irreparable.

I begin by declaring my own interest as a member of a family company. I understand only too well that the Government's proposal means the death of successful family companies in the second generation.

The creation of many enterprises cannot be properly measured in the term of one human life, whether they be family businesses, woodlands or certain forms of agriculture. Such activities have to be built up over generations. If it is to be impossible to do this for reasons of tax convenience, the country stands to lose a great deal. That is the implication of this tax, and it demands a longer debate. I do not believe that it is right that in a few hours the work of families over many generations should be set at naught.

Before any debate takes place on whether the family company is an advantage to our community, I urge the owners of such businesses to invite Government supporters to look round their factories and businesses and to say to them "We have been here for generations. We have provided employment. We have provided what our customers want. We have been sensitive to the needs of the neighbourhood. You are putting us in a position where we have to slow down investment or sell up in order to pay this tax. Are we to sell to the Arabs, to the Germans or to the Americans? If we do that, will they be sensitive to our neighbourhood? Will they support the repair or the rebuilding of the cathedral? Will they support the local football team? Will they support the local college of further education? Will they become part of our society? You are passing ownership to an alien group." That deserves serious attention by Government supporters.

The Chancellor of the Exchequer should recognise that fundamentally we are a trading nation. In origin, our great exporting companies are either family businesses or amalgamations of them. Distillers, Beechams, Unilever and ICI are all amalgamations of family businesses, and their component parts could not have emerged if they had faced the battery of taxes which the present Government are developing against them.

Other companies like Guinness, Cadbury and Marks and Spencer have been able to carry on through the generations only because of discretionary trusts. Would it have been in the national interest if they had been broken up? Would it not have been the case that, if death duties were not to some extent voluntary, they would have been broken up? Is it conceivable that, if they had been broken up, the penal levels now ruling would still continue? Would there not have been an outcry against the unemployment which would have developed and about the degree to which our assets had passed into foreign hands? I believe there would.

All of us in business are worried about the extent to which this sort of legislation is drafted by people who have never created wealth of any sort and who have no understanding of the needs of the consumer and of how difficult it is to meet those needs. Of new products that are started perhaps one in 10 is still going after 10 years. For new companies the figures are about the same order. It is extraordinarily difficult to create a successful enterprise. It is only too easy to destroy it.

I ask the Chancellor to look at our overseas competitors. Are those who are successful the ones who penalise initiative? Do we find in Germany or the United States that capital taxes are higher than they are here, that income tax is higher than it is here? Of course not. These countries recognise that starting a family business involves great sacrifice, often great risk, and that the families concerned are prepared to put present advantage behind the realisation that they are creating something that is of worth and will be of benefit to their families and, hopefully, to the community.

We understand that these proposals are put forward in some measure as part of the social contract and that equality of sacrifice is demanded. Some people would have difficulty in finding equality of sacrifice when contrasting a 30 per cent. wage increase with the destruction of the work of a family over generations. Nor do I see in this the basis on which an appeal can be made for unity. Nor do I believe that it really serves the interests of those who are party to the social contract.

Does not the standard of living of us all depend upon investment, and does not this measure threaten investment at its very core? I do not think that the Chancellor should underestimate the psychological impact of his measure. When we consider a rate of inflation of 20 per cent. and we ask what return is necessary on an investment to produce any increase in real net worth to a company we find that the answer is in the region of 40 per cent. Where can we find any activity today giving that sort of return? Because of inflation, most companies are cutting back. This move can only reduce their confidence further.

The Chancellor would appear to be offering the entrepreneur three temptations. The first is to go abroad. Is that what the regeneration of British industry is about? The second is to spend, spend, spend on imports and foreign travel. Does that help the balance of payments? The third is to run down the assets of a business to keep them in the family. Think what that means. Factories and farms are run down and woodlands are ravaged. Many people will not yield to these temptations. They will say to the Chancellor "Get you behind me, Satan." They will to some extent be encouraged by the vision of the "Blessed Margaret", pledged to restore hope to the enterprising and reward to the thrifty and to light up the dark motives of the Left.

Let us not mistake the strategy of the Left. It is to provoke owners to act irresponsibly and thereby to justify expropriation. What is happening to family businesses today is following on the Chilean model, if not yet the Chilean scale. If owners are forced to sell, I hope that they will talk to those who are members of their companies and will say that they are being put into a position when they cannot carry on because of the Government's measures and inflation. I hope they will say that it is in the interests of their shareholders that they should sell to the highest bidder. Who is the highest bidder? Naturally it is the company with which the synergy is highest. In that case obviously, because the price is high, there will be far more unemployment than would otherwise be the case.

Is this what the trade unions want? Of course not. We must recognise that to a large extent the shareholders of the companies which deserve to have the highest price are the pension funds of the trade unions. They must see where their real interests lie. If, as could be the case, such action leads to sit-ins, ultimately the Government should remember that the rest of the world cannot be compelled to buy what we produce. The Chancellor may compel nationalised industries to buy from co-operatives or from companies that are non-viable for a period. Finally, however, our success as a nation depends upon successful companies. They are always family companies in their origin.

I appeal to the social democrats in the Labour Party to do their homework and to discuss with management and trade unions in companies in their constituencies whether they really believe that the family company has been found wanting in providing employment, fostering innovation, providing an environment where people can talk to each other and see where each fits into the pattern as a whole or in being sensitive to local needs and resisting monopoly. Every inquiry which has been undertaken suggests that the great majority of people would rather work in small companies than in large ones, in the private sector rather than in the nationalised industries. At the end of the day we all like the management of our companies to have a human face. I urge the Chancellor to accept the sensible suggestion of my hon. Friend the Member for St. Ives (Mr. Nott) and defer this proposal.

Last night the Chancellor sat and listened to speech after speech in which he was castigated for the consequences of this clause. Not a friendly voice did he hear, with the possible exception of his hon. Friend the Member for South Ayrshire (Mr. Sillars), and the right hon. Gentleman did not look particularly grateful for that. The Chancellor professed to be surprised, even shocked, by the consequences that were pointed out to him and the vehemence of protests made from the Conservative benches and from his own about the consequences of this clause. He said he would see whether anything could be done about it.

I do not believe that the Chancellor had failed to perceive what would be the consequences of this clause to forestry, farming, small businesses and charities. To no one with the intellect or the access to advice enjoyed by the Chancellor could these consequences possibly have come as a surprise. Just in case they did I want to do my best to encourage the Chancellor to take a harder look at what he is proposing.

For that purpose I want to tell him about 100 acres of woodland at Horsmonden in the Weald of Kent. Until not very many years ago those 100 acres supported only useless scrub. They did not look anything, and in productive terms they were quite valueless. But a man improved that land, and spent money draining it and planting it. He is a constituent of mine. He does not look for an immediate return, or even a medium-term return, from his investment. He is looking to the long term. Little of his planting will mature before the end of the century and, because some of his planting is oak—which does better in the Weald of Kent than anywhere else—another 100 years or so will have to pass before maturity. But, with the provisions of the clause, it is probable that none of it will mature, for the owner cannot afford to let that happen. It would add to the burden of taxation on his back which the low yield from his farming activities would not allow him to carry. His is not one of those broad backs to which the Chancellor, in his serialised Budget Statements and speeches this year, has so often and with such relish referred.

I hope that the Chancellor will give his mind to the threads that go to make up the story and look at what this land owner has done. He has taken something which was at the outset useless. To that he has applied capital and enterprise. He has, by the application of capital and enterprise, transformed this originally useless land to something which is now a burgeoning asset. It is an asset not just to him but to the countryside and the country as a whole, because he is growing something which is in short supply, for which the world demand, with an increasing population, is growing, and which is something which we already have to import in large quantities.

To do that he has devoted his money not to consumption, not to short-term expenditure, but to investment on the longest term. That is an example which the Government, on reflection, might perhaps wish to encourage. If it were followed throughout the private sector of industry many of our economic problems would be at an end.

What must the Government do to encourage the example of my constituent? It is pathetically simple. They have to do no more than allow him to pass the land on to his son, not without any tax, but upon fair and reasonable tax terms, so that his investment may mature in the hands of a member of his family. Is that wrong, selfish, acquisitive or unreasonable?

Why do not the Government do that? The ostensible reason is to be found in one of the earliest sentences of the Chancellor's first intervention last night, when he said that this tax was needed to ensure the equality of sacrifice without which we cannot meet the problems that confront us.

I wish to express my fervent agreement with what was said by my hon. Friend the Member for Kidderminster (Mr. Bulmer) about the inequality of sacrifice that the clause will impose. I ask the Chancellor what section of the community is being asked to make a sacrifice of anything in equal proportion to that which is being imposed upon land owners by the clause. But if there is to be no equality of sacrifice among producers, there is certainly to be equality of sacrifice among those who are recipients of gifts, or who are beneficiaries under trusts.

For example, a disabled person or a mongol child, fortunate among that unfortunate class in having been able to live at home because his parents have been able through their lifetime to support him, need not look for relief from the Government for a trust, or for a gift of capital, to enable him to continue to live at home and to be looked after, for there is no such relief to be found from this Government, the Government of such vaunted compassion.

I trust that the Chancellor, if he was taken by surprise at the vehemence of the protests uttered last night against this monstrous clause, will go away and think about it again.

The provisions of the clause remind me of a piece of indiscriminate bombing. Somehow, some time, somewhere, no doubt one of the bombs will hit the target intended. In the meantime a great deal of unnecessary and undesirable damage will have been done.

With the target which the Chancellor laid down last night I entirely agree. For greater accuracy I will quote from The Times report as the Official Report is not yet available. The Chancellor is reported as saying that:

"the first and overriding purpose of the tax was to make estate duty an effective tax.

No MP could object to making effective a tax which was universally agreed to be fair, which had been in existence for 80 years, but which had been avoided on a colossal and increasing scale."

The Chancellor had a defined target. What the legislation needed was discrimination in the way that that target was aimed at, and the bomb aimer should have been more accurate.

I do not agree with hon. Members who suggest that it is a good thing for the country that estate duty was a voluntary tax. How can that be justified? Because many of the people who should have paid the tax have not done so the rate of the tax has had to be higher. The tax threshold has been lower because many people who should have paid the tax dodged it, and those who dodged it were generally the wealthiest people who should, of all concerned, have paid.

For many years Government of all complexions have accepted that estate duty was a fair and just tax. Had it been levied properly we should not be in this situation now.

The hon. and learned Gentleman, drawing on his great legal experience, will, I am sure, concede that estate duty was not conceived as a gifts tax. That being so he cannot properly talk about avoidance, let alone evasion, if people chose to give away their property and not pay the tax. Will the hon. and learned Gentleman be more discriminating in his use of language?

It was stated, correctly, from the Front Bench that since 1910 a levelling-out of wealth has been intended. Because people have been allowed to get away with avoidance for so long the so-called middle classes have suffered. Wealthy people in the cities have put their speculative gains short-term into land to avoid taxes, and that is why our genuine farmers are now threatened.

The hon. Member for Ludlow (Mr. More) is a famed estate owner and a great authority on forestry. He looks after his woods with loving care. He is one of many people who are threatened because for years Governments have allowed people who have never seen a tree save from a car or a railway carriage window to put their money into investment companies to buy land as a means of avoiding this tax.

When a tax is imposed Parliament and successive Governments have a duty not to discriminate between taxpayers and to make sure that the tax is applied fairly. The Chancellor is now taking an excessively blunt weapon to try to deal with this matter and will crush many worthwhile people in the process.

Surely the hon. and learned Gentleman's analysis cannot be correct. Death duties have been in existence for 60 or more years.

For 80 years.

Well, for 80 years, and yet the high price of land about which he complains is quite recent. It did not happen between the wars and has nothing to do with the so-called avoidance of estate duty. It is quite different.

The hon. Gentleman's intervention reminds me of Mark Twain's advice to a young man: "Buy land, young man, they don't make it any more." There is a great deal of truth in that. It partly accounts for what happens in an inflationary society to the value of land, especially when tax concessions are given. One only has to own land by purchase for 10 minutes before one dies to get 45 per cent. death duty relief. Who can possibly justify that? That provision, with no limits to it, partly contributed to the high price of land.

I believe that the Chancellor of the Exchequer would be well advised to withdraw the clause and reconsider the matter. The whole subject of capital gains in a highly inflationary situation, together with the whole question of land, should be considered as an entity and not in separate sections, as we are considering it in this Bill and in other Bills. I believe that the Chancellor's main objectives are right, but what he is doing is quite different from what Lloyd George sought to do in 1910. He tried to curtail the excess amassing of wealth and to tax great property holdings because they brought with them sustained power and influence which was entirely due to ownership of property and not to the ability to create wealth. I can understand the attack that was made on the system at that time, and this country would not tolerate the vast unjustified inequalities of wealth which we had in the past, and to a considerable extent still have today. Nevertheless, I believe that there should be certain specific reliefs. It has already been pointed out that the tax will have a devastating effect on forestry. Lloyd-George in 1910 exempted forestry because he had a far greater knowledge of the rural scene than has the present Chancellor of the Exchequer, who no doubt has a far greater knowledge of the industrial scene than had his illustrious predecessor.

This tax could have a devastating effect on farming and farm units, and a much more careful look is needed at the proposed farming exemptions. I agree with the views expressed by the hon. Member for Caernarvon (Mr. Wigley) on the farming problem, and I would also grant concessions to genuine agricultural estates where there are genuine tenancies, but there would have to be an upper limit.

There should, clearly, be considerable changes in respect of charities and concessions to enable the national heritage to be safeguarded.

I am certain that the weapon adopted by the Chancellor in this clause is not worthy of him. What was necessary—and this should have been done years ago, and proposals on this score were not accepted by Conservative or Labour Governments—was that the loopholes in the tax system should be closed to make sure that the many systems of discretionary trusts, and so on, were brought under control. It should have provided that people who were intended to pay estate duty should have paid it and there should have been many and precise exemptions in the national interest. But the Chancellor with this proposed tax is bound to cause all kinds of troubles which no doubt he does not envisage or intend. It will cause hardships which, in the national interest, we should avoid.

I wish to support all that has been said by other speakers about the importance of our national heritage, and I wish to emphasise one or two points.

It is important that amenity land surrounding historic houses should be included in any scheme, and I also believe that the chattels within those houses should be covered in Clause 29 and, if necessary should be accepted by the Treasury in lieu of tax if kept in the house.

It is also important that the Historic Buildings Council should vet claims on tax exemptions. That council already has much experience in dealing with claims for assistance in the restoration of houses and would be the right body to deal with the matter. Furthermore, we should take the opportunity to put right the way in which value added tax discriminates against the repair and maintenance of historic houses. It is quite ridiculous that when a house is pulled down and a replica put in its place VAT need not be paid, but if the house is repaired VAT is imposed. That is one anomaly that should be cleared up, because the view now in all parts of the House is that we should as far as possible maintain the use of existing buildings rather than pull them down and rebuild.

I turn to the subject of forestry. I was a little disappointed to hear my right hon. Friend the Chancellor on one aspect of this problem. I agree that we should kill any attempt to dodge tax in this respect and, as has been said earlier, there has been speculation in land, but I should like to remind my right hon. Friend that it has been Labour Party policy for many years to encourage forestry. That involves the planting of further areas as well as keeping existing forests in being. We need a scheme in which the Government assist in planting without its being used as a way of speculating in land. More planting certainly needs to be undertaken.

My right hon. Friend's predecessor, Hugh Dalton, had a great love of trees and believed in the expansion of forestry, and in his Budgets allocated more money to the forestry authorities. However, we must recognise that we cannot meet the programme drawn up after the war to run to the end of the century, without a firm planting policy. The plan was that there should be a planting policy up to the year 2000, to reach 5 million acres inclusive of existing forests and their renovation. We are still a million acres short of that programme. We should be going ahead now to complete that programme by the year 2000.

Much should be done and can be done by the Forestry Commission, and if my right hon. Friend can put more money at its disposal, so much the better. But we should also welcome assistance from private capital and investment in forestry to help in the completion of that programme. If we can give assistance, as we rightly do, to hill sheep farming, we should give similar assistance to forestry farming. I am sure that a scheme could be drawn up to give comparable assistance to forestry using private capital, without at the same time allowing the abuses which have happened in the past in tax fiddling and land speculation. Therefore, I ask my right hon. Friend to look sympathetically at new planting of forests, because we need that extra million acres by the end of this century. We should take as much help as we can get in doing so from private capital.

Is the hon. Gentleman aware, as I am sure he is, that the future livelihood of 10,000 forestry workers not employed by the Forestry Commission is at stake on this clause?

I was coming to that point. I took the chair this week at a meeting at which we heard the views of representatives of many of these people. I agree with my hon. Friend the Member for South Ayrshire (Mr. Sillars), who said last night that whatever changes we make in the law now, we must think of the people working in private forestry, and avoid putting them out of work.

I remember, as a very young man, the disastrous May Committee set up by the Labour Government of 1929–31, which reported in favour of an enormous number of economies in those pre-Keynsian days. It was battles over that report which brought down the Labour Government. The succeeding National Government largely carried out those economies, one of which involved the destruction of vast numbers of young trees in nurseries ready to be planted. Planting programmes everywhere had to be drastically cut, by both the Forestry Commission and others. Bonfires were made of vast numbers of young trees.

We do not want another such bonfire, but planting programmes are being cut. Whether such trees are planted by the Forestry Commission or private interests, that is a national disaster. We need a positive approach. A great deal of our land is better used for forestry than for any other purpose. Much of the upland rushland, which can never make good sheep herbage, would be better devoted to this purpose. We should not attach too much importance to representatives of town organisations, like the Ramblers' Association, which do not like trees and are frequently anti-conifer fanatics. I am all in favour of mixed forest from the point of view of amenity, but from a national point of view much of our land is suitable only for conifers. By the end of the century 5 million acres of land actively producing timber will provide an important contribution to our balance of payments, which we shall always be able to use.

Without agreeing with the various tax fiddles which have taken place, I believe that constructive help to private forestry is needed. All over western Europe, private forestry has to have some government assistance of the sort that we give to hill sheep farming. I do not depreciate the great work of the Forestry Commission, which I hope will be expanded, but that does not preclude a positive approach to all sides of forestry.

If I had been able to catch your eye last night, Mr. Thomas, I would have made many of the points that the hon. Member for Dagenham (Mr. Parker) has made about woodland and agriculture, but many other hon. Members have already done so, so I do not propose to follow him in that. It is obvious from the speeches which we have heard in this debate, especially the magnificent speech, yesterday, of my right hon. Friend the Member for Finchley (Mrs. Thatcher), that the Chancellor does not have the political support to carry this tax unamended as regards woodland. I think that he realises that changes will have to be made.

I want to talk about something which has not been raised today—the effect of the tax on the building industry. Under our new rules, I should declare a prospective interest, having been asked to join the board of a building company. I have provisionally accepted, but it has not yet been finalised.

Those hon. Members who know the industry will know that building firms are normally small and local, doing a number of different things—usually family businesses. Very few industries—agriculture, of course, is another example—are so family based. A number of hon. Members have used the phrase, "when we go into Committee" but since we actually are in Committee, it will not be unreasonable, I think, to mention a couple of factual points to assist the argument.

5.15 p.m.

There are basically six components in what is loosely known as the construction industry. The first comprises very large general contractors dealing with all sorts of building and civil engineering work. In April 1970, only 78 firms out of 73,400 in the whole country employed more than 1,200 men. The second component consists of substantial firms employing between 600 and 1,200 men, of which, in April 1970, there were only 132. Third, there are medium-sized firms employing between 115 and 600 men, of which, in April 1970, there were 1,053. Fourth, there are small firms of general builders employing between 14 and 114 men. There were 10,738 such firms at that time. The fifth component consists of the very small firms employing between two and 14 men, of which there were 21,000. Finally, there are the self-employed people working on their own—not "Jumpers" but such people as village carpenters—of whom there were 20,355.

Those figures clearly show that the building industry is made up overwhelmingly of small firms employing very few men—basically family businesses. This tax will have an absolutely ruinous effect on the industry's structure unless it is changed. The Chancellor may disapprove of the structure of the industry, but he should not try to change it, by fiscal means, without a proper explanation to the country. That is what will happen. I want to give three examples of the effect of the tax.

The first example is that of a medium-sized building firm operating near London, worth just over £1½ million, which has been earning annual net profits in the two most recent years of £104,000. It employs more than 400 people. If the chief proprietor were found to own two-thirds of the business and to have outside possessions—residence, furniture, private investments, and so on—of no more than £40,000, the capital transfer tax scale in the Bill would entail a tax, on his death, of £630,000, the proportion attributable to his share in the business being £606,000.

To meet a liability of £606,000, quite apart from any charge for interest incurred by his executors, would thus almost fully absorb his entire share of the profits—nearly £70,000, assuming them to continue at the current level—for between eight and nine years. I need hardly stress the practical impossibility of withdrawing funds on anything like that scale when the need will be to plough back large sums for investment and to finance stock appreciation. In fact, more than 90 per cent. of the book profits of that firm have been ploughed back over the last few years.

My second example is that of a rather smaller firm, employing 230 people, which is worth £530,000 or so and has average annual profits of £31,000. The tax payable on a two-thirds share of the firm as part of the estate of a proprietor with £40,000 of outside possessions, which would come to £180,000, would once again amount to between eight or nine times the entire yearly net profits earned by that proprietor's stake in the business.

My third example is that of an even smaller local building firm, with 75 employees, worth about £90,000, which has been yielding profits between £4,000 and £5,000. Even in the lower reaches of the CTT table of rates, a two-thirds proprietor's share in the business would give rise to a tax bill of almost £17,000, which would absorb nearly six times his yearly share of the net profits. Those are all absolutely ruinous figures. It would mean the destruction of those businesses and lead to a basic change in the structure of the building trade. This tax has not been thought through, or discussed, or examined and it cannot be made to work.

Small building firms are the firms which repair people's houses, which build houses in small numbers, and which do the small jobbing work on local houses which is so essential. If, by compulsion, because of this tax, small building firms are merged with bigger firms, that sort of work will not be undertaken, because it does not appeal to the larger building firms. That is why the tax must be changed. It is a bad tax. I shall have the greatest possible pleasure in opposing the clause.

You asked me to be brief, Mr. Thomas. In response to your request, I shall be as brief as I can. I shall achieve that by trying to avoid going into some of the very important points of detail here, partly because we shall be going back to them in Standing Committee.

We need a great deal more clarification from the Chancellor on some major points of principle concerning the clause and the capital transfer tax in general. Even before this Government came into office, as the Green Paper introduced by the Conservative Government made clear, we had the highest burden of capital taxation of any developed country and no doubt of any country in the world. Whether it is measured as share of gross national product, share of total taxation, or taxation per head, we had the highest burden. Therefore, why has the Chancellor thought it right, or proper, or necessary, either economically or socially, to increase this burden still further, not merely by the capital transfer tax but also by the proposed wealth tax?

Why this particular capital transfer tax? We know that there were defects in the old estate duty. That is why the Green Paper was produced. Some of those defects or loopholes were not of great consequence. Others were serious imperfections in estate duty, which could be rectified, and the Green Paper pointed out ways of doing this.

We now have something which goes far beyond that. When the Government's programme goes through completely this will be the second fresh instalment in a multiplicity of taxes on capital. To these should be added the surcharge on investment income. In the last century there was a great argument on the question whether the tree, the capital, or the fruit, being the investment income, should be taxed. Here, both the tree and the fruit are taxed heavily.

On the subject of trees, because of the time factor I shall not follow the points which have been made about the damage to forestry. It will be very serious. This is symbolic. It is very often said of private companies with great truth—

"Tall oaks from little acorns grow."

Here, the Chancellor is not merely clobbering the private companies. To show what he is doing he is clobbering the symbol as well and trying to cut down the oaks and, indeed, destroying the acorns and the saplings in between.

We need to know why this tax has been introduced. We have had no sort of explanation. The right hon. Gentleman has given us a number of reasons which justify the idea of a capital transfer tax, perhaps, but quite why we need a wealth tax and a capital transfer tax we have yet to be told.

Many of my right hon. and hon. Friends will not agree with me on this, but I think that there is a reasonably strong case for a wealth tax at a modest rate on all wealth, subject to certain exceptions, in replacement of all other taxes on capital, including the capital gains tax and the surcharge on investment income.

The question arises—why the capital transfer tax, and why the capital transfer tax at this swingeing rate? We must ask whether the Chancellor really knew what he was doing—whether he changed his mind after the Budget Statement, or what happened. In the Budget Statement he referred to the capital transfer tax, naturally enough, and said:

"I therefore propose to introduce this year in my second Finance Bill a tax on lifetime gifts … but the rates will not necessarily be as high as in estate duty."—[Official Report, 26th March 1974 Vol. 870, c. 313.]

Anybody hearing that was entitled to assume that the right hon. Gentleman was talking about the rates on gifts. It now turns out that he was talking about nothing of the sort. It appears that he was talking about the rates on the diminution in the value of the donor's estate, that diminution taking into account the tax payable. This is not a tax on the gift at that rate. This is a tax on the gifts plus the tax. In other words, the rates of tax on the gift itself are far higher than the estate duty rates.

The estate duty rates were as high as they were because it was understood that they applied to only a proportion of a deceased's estate, because he would give a certain amount during his lifetime and the tax would be on the remainder. This is a totally different concept and it is therefore wholly inapplicable to say that if those rates were appropriate to a certain proportion of the estate, they, let alone much higher rates, as these are, are applicable to the lot.

As the hon. Member for Welwyn and Hatfield (Mrs. Hayman) rightly pointed out, the Chancellor said in his White Paper that the treatment of charities under this tax would be no less generous than the treatment accorded them under the existing estate duty legislation. This is manifestly not so. It has been demonstrated that the treatment of charities in this legislation is far harsher than under the previous estate duty legislation. The Chancellor, who, I see, has the White Paper, will find that that statement is in it, categorically and unequivocally.

How was it possible for that statement to be made and for a Bill then to be introduced on totally different lines? Was the Chancellor unaware of the change, or did he change his mind? The Committee is owed an explanation. The fact that the right hon. Gentleman last night announced that he intends to make some concessions to charities—which I welcome—proves my point.

I move on to the question, what lies behind the tax itself? This is an attack on private property of all kinds. It is a total attack on private property, which will wholly alter the type of society in which we live. It is also an attack on the family. It is specifically an attack on the family business—the combination par excellence of the family and private property as represented by the family business. It has been pointed out that this tax will make it impossible for a family business to go beyond one generation. If a business cannot go beyond one generation, most people will not think it worth while to build up a family business.

I fully realise that many Labour Members will welcome this and would like to see the end of the private company, the end of the family business, and, indeed, the end of all private property of any significance. I do not believe that the Chancellor and some of his colleagues share those views. My reason for not believing that the Chancellor shares those views is that he has made speeches about the need for a vigorous and thriving private sector.

5.30 p.m.

I cannot believe that the Chancellor shares those views, but he must answer this question: is it his intention to create a Marxist economy and a Marxist society in place of the mixed economy and the society which we now have? If that is his intention, we can readily see what is behind the Bill. If it is not, he must reconsider this clause, because that will be the effect of it, whatever his intention, fairly soon. It is possible that there will not in fact be too serious an effect, since I do not expect the present Government to last beyond this Parliament, after which a Conservative Government pledged to repeal the tax, will come in and certainly do so. But if the tax were to continue for longer than the lifetime of this Parliament it would undoubtedly have the effect which we have described. Is that what the Chancellor wants?

The Chancellor said that he wanted to avoid distortions, but he has introduced a new distortion here, because it is only the transfer of material capital which gives rise to the tax. That gives an incentive for distortion, for wealthy people, if any such still exist, to buy for their children the most expensive form of private education they can find—perhaps the Chancellor wants that—so that their earning power may be increased. That form of investment in their children will not attract this punitive tax, whereas any other form of investment will. Does the Chancellor welcome distortion of that kind? That inevitable consequence was pointed out by Professor Harry Johnson, of whom, no doubt, the right hon. Gentleman has heard.

The Bolton Report confirmed—if confirmation were needed—the importance of small companies and private companies in our economy. We all know how much better industrial relations are in small companies and private companies. Does the right hon. Gentleman deny that? Does he want to do away with it? Does he want to destroy this form of company?

As for the family, I put one point to the Chancellor, and I am sure that the hon. Member for Bolsover (Mr. Skinner) will be with me here. The Chancellor talked last night of his great attachment to widows, telling us how he was trying desperately, through this tax, to help widows, of whom he was fond and for whom he had such genuine concern. How many hon. Members are aware that, under this proposed tax, if one of them were to invite his widowed mother to make her home with him, saying, "Do not be alone in your old age; we shall have you with us and look after you", he would be liable to be taxed on the rent he would have charged his widowed mother, had he charged her a market rent? There could be no more direct attack than that on the very concept of the family.

I come now to the question of avoidance and evasion. I shall not go into matters of avoidance. The Chief Secretary is a well known expert there, and he will no doubt be able to tell us whether or not the tax avoidance advisers will get the better of the Bill. I do not know. What I do know is that this tax will lead to evasion on a massive scale. It is a form of tax which is easy to evade. The Government know that. That is why they have introduced a sort of snooper's charter into the Bill. They want taxpayers' professional advisers to snoop and help the Government.

It is an easy tax to evade, and it will be evaded. It will lead to a deterioration in tax morality. What is more, those who evade the tax will have support not from me but from the Government. I remind the Committee of what the Secretary of State for the Environment said on 6th November last, when he defended what the Clay Cross councilors had done, saying that the Housing Finance Act

"infringed the tacit agreement as to what is permissible and what is not … it offended a basic sense of natural justice"—

adding that he had

"never known an Act of Parliament which so outraged the feelings of large numbers of moderate councillors up and down the country."—[Official Report. 6th November 1974; Vol. 880, c. 1077–81.]

There will be a feeling of outrage about this tax among a great number of people—many more than there are councillors in this country. There will be a feeling of offence against natural justice, of offence against the basic instinct of human kind—the desire to own property, the desire to have independence, and the desire to help fellow members of the family. This tax will be felt to be contrary to natural justice and contrary to humanity. That is why it will be evaded. I ask the Chancellor to think again and to withdraw this clause and the tax, pending further consideration.

rose—

rose—

Mr. Hugh Fraser.

Hear, hear.

Thank you for catching my eye, Mr. Thomas.

The third man.

Like the Chancellor of the Exchequer, I have been here day and night on this Bill, and, in a way, I regret that the member of the new triumvirate who has just joined us, the hon. Member for Luton, West (Mr. Sedgemore), is at this stage not allowed to participate in the debate. I hope that he will be able to catch the eye of the Chair at some stage.

Without doubt, Clause 17 is to be regarded not just as a provision in the Bill but as a parting of the ways for this country. Having heard what hon. Members on both sides have made clear to the Chancellor, I am convinced that it will be the great divide, as was said late last night, between a mixed economy and an economy falling more and more under the control of one small and diminishing group.

I am interested in forestry, but I am far more interested in the social effect which the tax will have on the country as a whole. Already in the newspapers it has been called penal or Draconian. To call it a Draconian tax is an insult to the memory of the tyrant Draco. Draco at least made himself famous by introducing the death penalty for idleness. This tax will introduce a major penalty for the industrious. The idle shall glory, and the industrious shall suffer. That is what this is all about.

The proposals made by my right hon. Friend the Member for Finchley (Mrs. Thatcher) and my hon. Friend the Member for St. Ives (Mr. Nott) should have the most serious consideration—either drop the tax or put it back to be properly looked over and worked out, with proper consultation.

Yesterday, one excuse given by the Chancellor for not following the excellent proposal made by the Liberal Party—that the recipient of the gift rather than the donor should be the taxworthy party—was administrative inconvenience. He chucked that proposal out, on the ground of the Treasury's fear of administrative inconvenience.

Let the knights of the Treasury—this applies to the Treasury under both parties—consider who it is who suffers. It is not they who suffer from administrative inconvenience. The ordinary industrialist in this country has been suffering that inconvenience over the past 25 years.

Under the Conservatives, too.

Yes, under both Governments—and under a Liberal Government even more, if there ever was one. During the past 25 years there have been no fewer than 420 major changes in company taxation in this country. In Germany during that period there have been 20 such changes. In America there have been about 40. I sometimes think that the Treasury is inhabited by gremlins or harpies, with the privilege, throughout the ages, of power without public responsibility. To say that the Government cannot move because of administrative inconvenience is the last resort of a political knave.

I turn to the question of what faces the country today. I believe that this tax, masked though it is by the case of the rich widow, or by this or that concession, will eventually move inevitably to the creation of a great division between those who wish to acquire wealth and those who wish to spend it as fast as they get it. I believe that in order to make democracy function properly, all political parties must aim not to achieve the nationally divisive. It may be blamed on my party that there has been a confrontation with the trade unions, but if we are now going to have a confrontation from the other side with those who wish to put by for their families, the whole system of democracy in this country may well be undermined. I take no less serious a view of the situation than that.

Today, we see an economic situation which, however optimistic one may be, seems somewhat out of control—a situation in which the people are inebriated with inflation, and companies are horrified for the future, where the talk is of eat, drink and be merry. We have a sort of economic Balthazar's feast, and now we have the writing on the wall, if this Bill goes through. "MENE, MENE, TEKEL, UPHARSIN". I believe that this is one of the great issues in the history of our country, as the Chancellor said last night. I believe that the aim of a political party, the aim of society, the aim of the House of Commons, is not to proletise the people or to embourgeois them, but to try to ennoble those things which are in the human spirit, and that consists of the reward of energy, initiative and drive. It is for this issue that the Tory Party will fight and fight and fight again.

I would not aspire to reach the heights of oratory which were attained by my right hon. Friend the Member for Stafford and Stone (Mr. Fraser), and for that reason I shall, like other speakers, make my remarks brief. I am concerned with the effect of the tax on Scotland. The tax, or its effects, may amuse the hon. Members for Bolsover (Mr. Skinner), Keighley (Mr. Cryer) and Luton, West (Mr. Sedgemore), who have just arrived, but I can assure them that it is no laughing matter in Scotland. I wish to deal briefly with the subject of forestry. Scotland possesses about half the United Kingdom's total of forestry, and half of that is in private hands. It gives direct work to about 20,000 people in Britain and can give indirect work to about 200,000. We know that, taking the top possible limit, the life of softwood is 75 years and of hardwood up to 150 years. That is three and six generations respectively, and three and six times that such owners will pay tax.

Only recently the House was talking about the problem of beef producers who could not change in three years from beef to cereals, as is possible in such industries as textiles, of which I have a passing knowledge. In forestry, the change would take a generation, and that is totally and utterly impossible. This country pays a £2,000 million import bill for forestry products, and it is disgraceful that, of all European countries, Britain has the third lowest percentage of acreage under trees, when Scotland should have the highest percentage.

5.45 p.m.

I need not go into the question of amenity and conservation, which has been dealt with by other speakers. However, the very thought of this Bill has hit at morale and the thoughts for the future of those in the industry. Already, in my constituency an order for 50,000 young trees has been cancelled, and forestry workers are worried about their prospects.

There is one dangerous point about this legislation. Even if it is not implemented—even if it only goes as far as the draft Bill—that has been enough to make people think about their future. If the proposal has reached the stage of a draft Bill now and goes no further, within two decades from now it could still reappear and become law, and where would that leave the forestry industry?

Does the hon. Member agree that a Scottish Government would not do to forestry what the United Kingdom Government are seeking to do now?

That would depend entirely on the calibre of the Scottish Government and on which party formed that Government. If it were the party which the hon. Member represents I could not hazard a guess what would happen, because he and his hon. Friends have different policies depending on which of the two main parties they belonged to initially.

I wonder about the drafting of the clause. What will it do for small companies, charities, agriculture and forestry? Are these points left up to the draftsmen, or do the politicians provide the leadership? In other words was the Bill drafted by fools or knaves? Was it drafted by morons or Marxists?

In the past we have all agreed that agriculture—it is even more the case with forestry—must not become a political football. In its present form the clause is too bad to amend. The Chancellor must take it back and rethink the whole issue.

I do not know whether I qualify under the strictures delivered on my party by the hon. Member for Aberdeenshire West (Mr. Fairgrieve), but I can put my hand on my heart and say that I came from neither of the parties that he mentioned. I joined the SNP directly, and it is the only party I have ever belonged to.

I should like to clarify a matter which was not directly touched upon by my hon. Friend the Member for Moray and Nairn (Mrs. Ewing) last night. The Scottish National Party wants to see the gap between excessive riches and extreme poverty narrowed. If it could be abolished I am sure that that would suit the majority of the Scottish people. In the sort of world we live in, however, I do not expect that to happen until the Day of Judgment, when we expect that the rich will be sent empty away. In any case, you cannot take it with you.

It is interesting that all the bodies which have approached me on the subject of the tax have agreed that there should be some form of tax on inheritance, so that it would appear that everybody is in favour of some sort of tax. I do not share the sentiments expressed by some Conservative Members because I am not on the side of the great land owners. There are plenty of hon. Members in the House who will speak for them. I came here to speak for the ordinary folk of Galloway. I have not looked up the history of my constituency, but I should not be surprised if I were the first person out of the common folk of Galloway ever to have represented that constituency in the House. In other words, I speak for the people who could not give their daughters a marriage gift of £5,000. Indeed, I speak for many people who could not give them 5,000p.

I have another advantage in speaking in the debate, which is that I have been a forest worker. For seven years I was a servant of the Forestry Commission, for two years as a labourer, when I earned about £6 a week. That was in about 1953–54. When I left the commission's service in 1960, having worked as a humble forest surveyor with a compass and chain, I was earning, as a ganger, the princely sum of £13 a week. It is for the forest workers that I want to speak. I compliment the hon. Member for South Ayrshire (Mr. Sillars) on his spirited defence of them last night.

It has be said that loopholes needed to be plugged, and that there has been speculation through forestry. Unfortunately, if I had to choose between some speculation and jobs for my friends in Galloway, and no speculation and no jobs, I should have to tolerate a little speculation—but I hope that the Chancellor will find a way to stop the speculation and continue the jobs.

If it is a case of the great estates gradually falling to pieces, I hope that the Government will see to it that when farms go on to the market there is a way to provide capital for young men who want to farm them themselves, and that there will not be an excuse for investors who do not know one end of a cow from another to buy the farms.

I hope that I may congratulate the Chancellor on his assurances of last night about forestry. Being a forest worker is a contemplative occupation, because one person plants and somebody else reaps. It is only right that the crop should be taxed once in the rotation.

I also hope that the Chancellor's rather short night's sleep will have allowed him to sleep on his assurances, and that he will be able to tell us more about them today. It is his final attitude to farming, forestry and small businesses that will determine my attitude to the Bill tonight and in its final stages.

There have been excellent speeches in the debate, both last night and today. Mine will not be of that calibre, but I know something about some of the matters which have been mentioned.

My interest, which I must declare, is that I have a small business. It was started by my grandfather, and my son is now a partner in it. I have, I hope, a fifth generation coming along. The business is representative of many small firms throughout the country giving employment to 40 to 100 people. The death knell for these small businesses would mean the destruction of employment in the countryside and of the whole of our way of life there.

I also have a forestry interest, in that I have a part in the management of seven or eight estates in Norfolk, all of which have many small woodlands. Despite what many people have said, these wood lands are given over to hardwood production. I doubt whether they are run for profit. They are certainly not run for tax evasion. They are beautiful, and make quite a difference to the landscape, as do the beech woods in Gloucestershire. If we see the hardwoods felled all over England, the countryside, which hundreds of thousands of people from America come to see, will be totally changed.

Like the hon. Member for Galloway (Mr. Thompson), I have worked in woodlands, but I was not paid to do so. When I was a prisoner of war I went to work digging up tree stumps in the woodlands. It was probably the hardest work I am ever likely to do, but it was also the most pleasurable I have ever done, because it meant getting outside the barbed wire.

The Forestry Commission and the private woodlands in my part of the country work hand in hand. They both employ excellent workers, many of whom we saw here the other day. Those workers and the farm workers are some of the best workers in the land. I entirely agree that their pay, which is low, is by no means enough. They are fine men and skilled men. Anyone who has to fell trees, trim trees, plant trees and look after them, or to look after the machinery on small farms, including corn machinery and harvesting machinery, which now costs many thousands of pounds, must be highly skilled.

The lack of confidence engendered by the new tax is extraordinary. Representatives of the National Farmers' Union's Norfolk branch today told the Norfolk Members that that lack of confidence is leading to a drastic cut in investment in farming. That will mean a cutback in food production, when we want every ounce of food that we can grow in this country to improve the balance of payments by saving on expensive imports. In my part of the world we need investment in new or improved sugar beet factories, and we need to grow more sugar beet.

If many small farmers have to sell up, and cannot pass on their farms to their children, confidence in the industry will be reduced, and in due course that lack of confidence will spread throughout the countryside.

The keen interest that the Chancellor has taken almost throughout the debate has convinced me that he did not realise the full damage that the tax would do. In fact, he admitted that it would do far more damage to forestry than he had thought. Therefore, I ask him to reconsider the clause and, if necessary, present it again, but after full consultation with those who know what they are talking about in the various branches of this great countryside industry.

I shall not weary the Committee with a long speech after the many long hours of debate. After listening to many of the speeches I feel that I have heard a similar theatrical performance elsewhere. I have in mind the spine-chilling third act when the felling of the orchard takes place in Chekhov's play "The Cherry Orchard". We all know the symbolic importance of that act as the precursor to the Russian Revolution.

I am delighted that my right hon. Friend the Member for Finchley (Mrs. Thatcher) has made the commitment to repeal this vicious confiscatory tax. At least we have a spark of hope from that promise. I shall not attempt to summarise the excellent speech of my right hon. Friend the Member for Farnham (Mr. Macmillan). However, I shall try to summarise the underlying attitudes of the angry middle-class workers who have recently, in myself, acquired—I hope—a modest person to articulate at least some of their views, despite the highly significant jeers from the Labour Members accompanied by the sneers of the Chancellor of the Exchequer. Those sneers will not go unnoticed in the country outside.

To which country is the hon. Gentleman referring?

The hon. Member for Luton, West (Mr. Sedgemore) asks, "which country?" The question that we shall be dividing on is simply whether we believe in a collectivised society—a society in which the individual counts for nothing and the State for everything—or in a free society, in which invention, thrift and ingenuity can germinate at the grass roots of industry and society and grow from one generation to another, from self- employed units to much larger units embracing organised unions.

This is a pernicious, damaging and malicious clause, which will do a whole range of things to change the face of our society. It will destroy the mobility of ownership, it will encourage the squandering of growing resources before they have ever grown beyond the seedling stage, and it will result in the pre-emptive nationalisation of emergent new small businesses belonging to self-reliant and self-employed people before they have even had a chance to come to fruition. It will drive into exile skilled and trained talent from our society. That talent will seek its livelihood in other parts of the world. It will strangle charity, assassinate thrift and smother all undeveloped initiative and invention.

Who wants to invent things to be put on the market in a country which will grab them whenever there is a transfer of ownership? I can think of few occasions when I shall go into the "No" Lobby with more determination. I shall be determined to reject an abhorrent and obscene offspring of humbug and malice which has been conceived in almost total ignorance, and certainly by the ignorance of back-bench Labour Members.

My hon. Friend the Member for Hendon, North (Mr. Gorst) spoke with eloquence and anger. I have heard every speech in this debate and I now feel more angry than when I entered the Chamber last night I have no interest to declare in a business that I own or might inherit or any acres that I might inherit. I have none of those things. Labour Members should get rid of the folk myth that Conservative Members come only from rolling acres. We do not. Many of us have backgrounds no more affluent than those of many Labour Members.

I wish to dedicate my political life to advancing various propositions. One of them is that there can be no freedom without economic freedom. That means the freedom to earn and to own, to give and to save and to prosper.

I have always been unhappy about the principle of estate duty. I must make that plain. What has been taxed during life is plundered at death. CTT does away with one of the more gruesome acts of plunder. We welcome that for widows, for example, but up to now people have been deluded. Some have given this tax a welcome that it does not deserve. I hope that the forceful and eloquent debate that has taken place over the past many hours will dispel any illusions that people may have. This is the most penal fiscal measure ever to be laid before the House. It is the most dramatic illustration of the Government's revolutionary concept of taxation. Its purpose is not to raise revenue but to change the whole structure of society. This is government by confiscation on a scale that is unknown this side of the Iron Curtain.

Last week in Committee on the Finance Bill I referred to the Government as the scourge of the saving classes. Today we see Clause 17 cast success as a deadly sin and make a virtue of envy. The Government's motto is to punish the thrifty, smother the inventive and outlaw the man of enterprise. Can those be the aims of men of sensitivity? I accept that there are men of sensitivity on the Government benches.

Who are they?

There are not many here. When we consider the present company it would be extremely difficult to name them.

Name them.

There are in the Chamber people who revel in the destruction of what has taken lifetimes to build. I have a fundamental belief in British democracy, and I cannot imagine that there is a true majority on the Government benches who would see that best of ambitions, the striving for one's family, made an unfair practice.

It is one thing to tax a man's earnings and to tax all his transactions, but it is quite another to say that he shall be discouraged from using the fruits of his success to build a stake in society, to maintain his business and to give security to his family. It is a curious logic to proclaim, as the Chancellor has done, a belief in a mixed economy and to bemoan the level of investment in industry, and then to urge the use of what I would describe as a fiscal blunderbuss to those who take heed of what has been said.

It is strange too for those Labour Members who often and rightly decry the more materialistic aspects of modern society to erect a tax system which will effectively destroy the desire to save and invest in objects of lasting worth. The worker who receives £3,500 a year—there are many of them these days—and who fills his house with trashy perishables, spending his substance on passing fancies, is to be prized above the man of care, taste and discrimination who saves for his family and who might, through taste and discernment, acquire possessions which appreciate in value. The spendthrift might find comfort in the bosom of a Socialist Brittania, but the Government are impaling the saver on the trident.

I cannot believe that the clause could be the calculated design of any true British Government. Are they totally in the grip of those who would wreck the social order so that from the ashes of a mixed economy a Marxist Valhalla may be built? If it is fairer opportunities and greater equality that Labour Members want, the opportunity to aspire to nobler things as my right hon. Friend the Member for Stafford and Stone (Mr. Fraser) so eloquently said, we should offer greater equality to enjoy the best in life.

In the estimation of certain Labour Members, that might involve the taxing of gifts. I see the Patronage Secretary—it is rather unusual to see him here at this stage of the day—nodding his head. It might be necessary to involve the taxing of gifts in the estimation of Labour Members; it might be necessary to tax wealth. If that is necessary, however, they should look for examples of how to do it to the west of the Iron Curtain and not to the east of it. There may be philosophical objections, and very strong objections, which I share, to the very principles of this tax, but at least if we are to have it I hope that the Chancellor will heed the many pleas which have been made from the Opposition on behalf of forestry in particular, an industry which is of paramount importance to this country and which will be killed within a generation unless there are true concessions.

I hope, too—the Chancellor gave some indication last night—that our national heritage will be safeguarded. My hon. Friend the Member for Bristol, West (Mr. Cooke) spoke eloquently about that in our debate last night. By safeguarding that heritage, another of our prime industries—tourism—would be safeguarded. But although there are millions of people who can visit our stately homes and admire our woods and beautiful countryside—and long may they be able to do so—there are millions who wish to save and prosper on their own account, to found their own businesses and to carry on the traditions that have been left to them. If this tax is passed, in its present penal and confiscatory form, they will have no tomorrow to which to look forward and we shall have a peculiar mixture of the peasant economy and the corporate State erected on the ruins of the present Government's financial policies. This country will become what Turkey was in the nineteenth century—the sick man of Europe.

This is probably the most important debate on any Finance Bill that has been before the House of Commons since I came to this place nearly 15 years ago. One proof of that is surely that the standard of the speeches from both sides of the Committee has been almost uniformly high. With that remark I should like instantly to couple the contribution of my hon. Friend the Member for Staffordshire, South-West (Mr. Cormack).

At least the importance of this proposal has been echoed by the Chancellor, because last night—the debate occurred too late for it to appear in Hansard this tins morning—he referred to it as the most far-reaching tax proposals since the war, although whether he realised its implications when he launched into it so precipitously is much more doubtful. But all of us, and particularly those who are alert to the implications of this legislation, must not be lulled by the Chancellor's indulgence and fair words—though they were appreciated last night—about charities, forestry, small farms and historic houses. All he has done is to hint at the possibility of partial reprieve from certain ruin for some very worthwhile institutions. This remains an iniquitous proposal which is designed to change the whole nature of our society—in my view, immeasurably for the worse.

Some hon. Members have referred to an article which appeared this morning in The Times. I make no apology for repeating its concluding words:

"These sections of the Finance Bill … in several respects go beyond what is acceptable in a free society, or at least go beyond what will in practice be accepted by free men."

I certainly could not put it better. I do not think that any serious or responsible critic could have put it more strongly than that.

Apart from the implications of the legislation, the second reason why this debate is of the deepest importance to us was also expressed in the same article when it said:

"The level of public understanding of what is being proposed could hardly be lower. The great majority of Members of Parliament themselves, probably, have little idea of the revolutionary consequences that would flow if these sections of the Bill were enacted in their present form."

I believe that to be true. People have no idea about it and I make no apology for reading quotations from that article.

I do not mean the simple-minded, bottom-form Marxists such as are sitting on the Government side of the Committee, some of whom were there yesterday too, giggling and gloating as if they were the knitting women before the guillotine in the Place de la Concorde. There are people who still believe that Marx-Leninism has something to do with equality. [Interruption.] There are some, and there is the proof of it.

I refer to the main misconcepts on which the proposal has been launched. The first is that it constitutes in some form a redistribution of wealth. It will prevent that. That has been explained again and again. The second is that the damage is to be confined to a tiny minority. It is not. Millions will be affected.

6.15 p.m.

Let us turn for a moment, however, to what the Chancellor yesterday repeatedly referred to as a small or tiny minority, who doubtless, in his view, deserve all that he intends they should get. Let me say a word about them.

I take it that the Chancellor means large estates and landlords in the country as much as he means anyone. Very few hon. Members—a few from this side, notably my hon. Friend the Member for Dorset, South (Mr. King)—mentioned landlords yesterday, and only a few have mentioned them today. There is a virtual taboo about the subject. I agree that if minorities are held to be unimportant, they are unimportant. Yet the Chancellor responded over historic houses, once or twice I think. A way must be found, he said, to preserve their contents as the nation's heritage. I say to him that the presumption is breath-taking. He sets out deliberately to ruin anything like a large estate and then graciously agrees to prevent the victims from selling anything to keep things going. Of course they should be preserved, but by allowing the estates to remain viable.

We are so bemused in this place with egalitarianism in its various guises that our sense of truth and realism deserts us. This is not a Soviet society. These places are not the heritage of the Chancellor or of myself or anyone else's heritage, except in a very indirect way like the Albert Hall or Lords cricket ground. They are the heritage of those who, some for generation after generation, some through recent investment, have preserved them, looked after them and loved them, and preserved them against assault upon assault from many quarters, particularly from Governments, one upon another, and before that from kings of England, too.

Has the Chancellor any idea of the complexity and devotion which goes into the administration of country estates; of the number of people employed and the part those estates play in a hundred different ways in the rhythm of village and country life? Does he really think that those who work upon them or who are tenant farmers will bless the day they have to depend on the local authority or the Ministry of Agriculture for their jobs, security or welfare? If he does, he needs to see a psychiatrist.

I have dwelt on this matter for a while not because it is the most important issue in my mind but because yesterday it went almost by default. The Chancellor should weigh the consequences very carefully. He should pay due attention to the CLA, the NFU, the Amenities Council and others involved, who will doubtless be making or have made representations to him. If he persists in his attempts to ruin large and well-administered estates, he will end by bringing great unhappiness to very many ordinary people besides those families who have preserved them—to those who work on them, to tenant farmers and to myriads of people from town and village who benefit in one way or another. And who will benefit if the Chancellor has his way and ruins them.

I concede there may well be a case for replacing estate duty, and I accept much of what the Chancellor said about estate duty at present being a voluntary tax, though I suggest that avoidance would never have grown to the extent that it has if the rate had not been so penal. I accept that there may be a case for a gifts tax. However, it is not the principle but the proposed practice to which I object. It is the venomous way in which it is to be implemented.

There have been so many contributions to the debate by now that I shall not go over this ground again. I mention merely a few aspects: the high rates as compared with anything in Europe or the United States; the lack of any concession to families; the unfairness of the grossing-up system; the retrospective effect; and this nasty little proposal in Schedules 4 and 5 by which any professional adviser is compelled to report any settlement to the Revenue within three months, and not only the details of the settlement but anything which the Revenue thinks may be "relevant". [An HON. MEMBER: "Big Brother."] Yes, if it is not "Big Brother" or a charter for spying and snooping, I do not know what is.

Another aspect on which I want to dwell for a moment is the destruction of trust law. I am no tax expert, but it seems to me that the essence of the Government's proposal is that they seek to divide trusts into two classes, approved and disapproved. Thirty per cent. of the CTT rate is to be levied on disapproved trusts every 10 years, and if the unfortunate trustees seek to change a disapproved trust to an approved trust the whole trust fund will be taxed at the full rate. The Government must wish to destroy the whole gamut of trust law.

I searched for a simile. Imagine the Grand Inquisitor in the Spanish Inquisition. He lays down arbitrary rules for identifying heretics from their past actions and then decrees that one arm or one leg should be removed every 10 days. If anyone is unwise enough to embrace the true faith, he has both arms and one leg removed immediately. That is a precise analogy to what the Chancellor of the Exchequer intends to do to trusts, and it cannot be said to constitute any proper standard of fiscal morality. In fact, it is plain dishonest.

But my main objections are twofold and they far outweigh any other consideration. Not in principle but in form and content, this is a political tax. It is the dreadful price which the nation is being forced to bear for a worthless deal between the two wings of the Labour movement. Here is the Danegeld. Private enterprise as we know it will perish in a generation. The pattern of life in our countryside which it has taken centuries of careful husbandry to make unique and from which we all profit, wherever we live, is to be destroyed—for what? For a pretence; for a sham agreement which already lies in ruins because of the arrogant power of the Left-wing union bosses.

Sic transit gloria. But there lies no glory in it for this poor thing of a Government. Therefore, let them even at this hour show some courage. I am sure that the Chancellor of the Exchequer in his heart follows me. I understand very well how hard his road is. I suspect that he is bedevilled by as many enemies among his supporters as he has elsewhere. But let him and his true friends at last assert themselves and rethink this iniquitous proposal.

I leave the Chancellor with this last reflection. We suffer in this country from no fewer than nine taxes: income tax, surtax, capital gains tax, stamp duty, estate duty—or capital transfer tax—development gains tax, value added tax and rates; and on top of all those is to come the wealth tax. Yet to date it is fair to say that the administration of these taxes has been good by any standards anywhere in the world. Perhaps one could even say that it has been the best. This is due, first, to the fact that the majority of taxpayers are honest and co-operative, and secondly to the high standard and fair treatment of the majority of Revenue officials. Both sides accept that, broadly speaking, the rules are fair. There are already signs that this happy state of affairs is ending because the pressures are too great.

But when the consequences of the capital transfer tax are known it will be the last straw. There will no longer be any acceptable basis of fairness. It is possible that strikes by taxpayers will follow, and strikes by tax collectors are just as likely. What is absolutely inevitable is a vast increase in inaccurate returns. When that state of affairs comes about, and unless the Bill is changed, it can be said that the Marxists will have won their class struggle. They will have destroyed a class of citizens who are both honest and thrifty and will replace it with a class which is neither. This tax is an attack on the very concept of private property. In these diabolical proposals the free society is placed formally at risk.

I ask the Chancellor of the Exchequer to reflect on one undoubted historical fact. Above all, it was grinding taxation—the fiscus—which destroyed the integrity of Rome. The analogy is frightening. Unless these proposals are drastically altered or repealed they will do the same to us.

However dulcet the tones of the Chancellor of the Exchequer had become by the early hours of this morning, his speech in opening the defence of his misshapen child was uninformed, insensitive and insolent. I use the word "insolent" only because the Chair yesterday ruled it to be a parliamentary expression. That was a pity, because it is time that we had a serious debate about the place of private property in our society.

The introduction of this tax at this time is a massive irrelevance—as though we had been asked to debate Harcourt's Estate Duty Bill in 1914. The pretext that this tax is an element of the social contract could have come only from the Chancellor of the Exchequer, with his capacity for ponderous irony. The issue on which he has to convince the Committee and the country is this: do savings and property bear their fair share of tax? The mere parrot-like repetition that the tax which the right hon. Gentleman has devised, if indeed he has, is fair will not make it so.

The Chancellor has not reminded us, although other hon. Members have, that we have income tax on so-called unearned income, investment income, up to the rate of 98 per cent. We have a capital gains tax, with no allowance for inflation, at 30 per cent. We have a stamp duty of 2 per cent.—and I remind the right hon. Gentleman, if he has forgotten, that stamp duty was devised as a form of capital transfer tax. We have estate duty at rates up to 75 per cent.

I concede that estate duty is not an entirely satisfactory tax, but it is not a voluntary tax. It may be a capricious tax, but death is not predictable. The estate duty rates are far too nigh and should have been reduced. Tax at those levels would be intolerable if the tax were made comprehensive. It is quite wrong to pretend, as the Chancellor claims, that his tax is merely a logical development of estate duty. Not content with the capital transfer tax and all the other taxes I have outlined which, for weight and range, are unparalleled in Western Europe, the Chancellor has devised a wealth tax.

Against that background, we are entitled to ask what possible justification there is for a capital transfer tax. It can only be that, incapable of creating wealth, the right hon. Gentleman has a rage to destroy it. Some Labour Members affect to believe that the tax will touch only a privileged few—the bastions of privilege. The range of speeches from hon. Members on both sides of the Committee will have demonstrated to the Chancellor that it will touch practically every aspect of our national life. Even if the number of people who pay the tax is numerically small, the number of people indirectly affected by it will be considerable.

The Chancellor would have us believe that he is concerned for the small farmer. Why not the large farmer too? He makes his contribution. The economic trend all the time is towards large farms. Does the right hon. Gentleman want farms to be fragmented? Does he wish the landlord and tenant system to be destroyed, with the replacement of the private landlord by the State or by the institutions? I shall not touch on the question of forestry, although I declare a small private interest in it, but I ask the right hon. Gentleman to tell us before Report what advice he has received from the Forestry Commission. The inevitable consequence of his measures will be that eventually all planting will have to be done by the Forestry Commission. Is it happy about this prospect? What have Lord Taylor and the members of the commission said to the right hon. Gentleman on this subject?

It may surprise Labour Members to know that the trade unions will be affected. If it turns out that the penalties inflicted on the AEUW in the summer were paid by an individual, he will pay a capital transfer tax on the grossed-up equivalent of £50,000. His generosity will be rewarded by a bill of perhaps £100,000 or £150,000. It will be interesting to know whether the AEUW will pass round the hat for him.

This will be a tax on charities, and in view of the time left to us I shall not enlarge on that matter. But I ask the Government to consider whether we should have had Wolfson and St. Antony's Colleges if this tax had been enacted when those colleges were founded with such princely generosity.

6.30 p.m.

The rôle played by trusts in our society has been much misunderstood although possibly not by the hon. Member for Luton, West (Mr. Sedgemore), who studies these matters through Private Eye. Some of his colleagues are perhaps less well informed. I remind them that there are trusts for employees, who will be affected. Is that what the Government intend? The Government have told us that they have designed, through this tax, an irreversible shift of wealth and power. However, that will not be a shift from individual to individual. It will be a shift from the individual to the State. One of the myths by which we order our affairs in the House of Commons is that we have control over the State. In our hearts we know that to be a myth.

There will be other consequences, namely, a drift of capital and enterprise from this country. More subtly and more corrosively than that, there will be another consequence. The line between taxation and confiscation is a fine one, but it is recognised by taxpayers. The Chancellor of the Exchequer said in a television interview that his fiscal and perhaps his social attitudes were formed by his experiences as a young officer in Italy after the war. That demonstrates how little he knows about his own country. The relevance of his experience to what happens in this country is tenuous in the extreme. He may, however, have noticed the Italian attitude towards tax-paying. That will be reproduced in this country. There is a social contract between taxpayers and the Government, and it has grown increasingly fragile. I believe that it will be broken by this tax if it is passed in its present form.

In the short time in which he has presided over our economic destinies, the Chancellor of the Exchequer has shown himself to be impotent and incredible. He has shown himself to be impotent because while capable of analysing our problems he has proved incapable of solving them and incapable of introducing the measures which he knows in his heart of hearts the situation requires. He has shown himself to be incredible because to the end of his political life his claim that inflation was running at the rate of 8¼ per cent. will be remembered and quoted against him.

Perhaps to atone for his ineffectiveness the Chancellor of the Exchequer now wishes to inflict something else on the country. The traces of his own past still hang around him. I know not and care not whether he still carries a Communist Party card in his pocket. But I know that his thinking still bears the stamp of Karl Marx. He wants to put the Marxist stamp on this country as his own contribution to our public life. Whatever the majority of people in this country voted for an 10th October, I know they did not vote for that.

From time to time since 1945 Labour Governments have conceived of a variety of measures to achieve what is euphemistically called the redistribution of wealth, and CTT is but the latest of these supposedly philanthropic measures. If any of the ancestors of this tax either had that intent or effect, that is neither the intent nor the effect of this tax. Let us be quite clear that the purpose of this tax is to break for ever the independent, of whatever means or station in society, and to break the spirit of independence which has been the inspiration of this country and which is so resented by the recidivists in the Government.

If we are looking, as the Government are, for an irreversible shift of wealth to the working classes—and I object when the hon. Member for South Ayrshire (Mr. Sillars) regards only wage earners who are trade unionists as those who work—we shall not see an irreversible shift of wealth to anybody. We shall see an irreversible shift of wealth from those who have not been spendthrifts to a spendthrift State, presently personified by the Chancellor of the Exchequer whose benign smile throughout the debate seems to me to be the smile of the tiger in anticipation of the prospect of eating the carnal beast of private capital. When last night he benignly, blandly and innocently told us that he was worried about the effect on forestry, agriculture, charities, our heritage and small businesses, which he had not appreciated until the matter had been brought to his notice, my immediate throught was "Timeo Danaos et dona ferentes". However, on reflection I thought that in this case it should be "Timeo Danaum et dona confiscantem".

When the right hon. Gentleman said that he had not appreciated the effect of his tax, I felt that either he was guilty of a naïivety and incompetence such as would compel his immediate resignation—I shall say nothing to prevent that—or that he was guilty of deliberate deceit, because despite all the advice from the agricultural and forestry industries he introduced the Bill in that form and thus postponed a whole year's planting, certainly in my constituency.

Quiet, docile and simple, these 20 words are in fact a vicious and lethal measure which I believe is intended to be vicious and lethal. If the Government do not wish us to be indistinguishable from the drab orthodoxies of the Eastern dictatorships, they should understand just how lethal and vicious it is.

This measure flies in the teeth of the professed policy of the Government, expressed only six months ago, to help agriculture. It flies in the teeth of the policy expressed six months ago to help forestry. It flies in the teeth of the professed interest in the balance of payments with respect to timber imports. It flies in the teeth of the professed interest in our heritage.

Although not all the country houses with great collections are open to the public, there are many great houses as we saw in a recent exhibition, which will be compelled to be destroyed and their fine contents distributed because of this tax. The skills, traditions, industry, diligence and pride which one generation has passed to another will come to an end.

The Chancellor of the Exchequer says that planting has taken place to avoid the payment of tax. In that case hurrah! The money was not spent. It was used to plant trees which would not otherwise have been planted.

Estate duty is said to be a voluntary tax. All taxes are voluntary. I do not believe that the Chancellor of the Exchequer can say "I will voluntarily pay more than I can get away with." I do not believe that a trade union will do that. Indeed, we have the remarkable situation that the Government legislate to force the individual to pay tax which we willingly avoid, and the same Government legislate to force us to repay from our taxation the taxes paid intentionally by a trade union.

In my constituency, in the heartland of Scotland, the livelihood of every member of the community will, in a generation, become untenable. There are few wealthy land owners. On the whole they have carried on the trust for generations. They have produced the work which all those who live in that community perform, and who works harder, for less, or longer, than the agricultural worker? All the independent people will suffer from this tax.

Are we to conclude that all these fatal results are the unintended result of a naive tax which was conceived by an incompetent Chancellor in his sleep—in which case let us scrap it and drop him—or are we to conclude that it was the intended result of the capital transfer tax and that the purpose of this provision is once and for all to take the rural community and all who are independent to the guillotine?

The lesson we must learn is that whatever Socialist pretensions there may be about caring for employment, and about interest in the humble, in the worker, in the rural community, in food production, in forestry and in our heritage—and I have no doubt that the Government are taking part in European Heritage Year—and, above all, whatever their pretensions may be about treating all men as equal providing they are not men of whom they disapprove, it is just so much callous humbug which can be temporarily swallowed to achieve the destruction of all those in our society who have the effrontery to show the spirit of independence and industry.

That is the sin for which the Labour Party has prescribed the supreme penalty of the capital transfer tax. The purpose of it is to destroy those who have built up and bequeathed to us over generations any woodland, farm, house, garden or painting. In destroying them, the Government will destroy the independent people of this country. They may think that that is what they wish to achieve. But they will also pull down others who depend for their livelihood on the independent members of our society.

It is a traditional function of the Treasury to raise revenue. However, I am sure that all right hon. and hon. Members will agree that that is not the function of this tax. Some people will describe the tax as a piece of social engineering. Others will describe it as a piece of social vengeance. Those are the two opposing views.

My remarks will be confined within the ambit of a single industry, that of agriculture. I want first to revert to the speech of the hon. and learned Member for Montgomery (Mr. Hooson), who said that no one would defend the 45 per cent. reduction in death duty for those who owned land. That was a piece of agricultural ignorance.

I invite hon. Members to consider agriculture for a moment. Throughout two centuries, and probably longer, capital made in the City of London has been translated into the farm to the enormous advantage of English agriculture and to our standard of living. But there were exceptions, and one of them occurred between the wars. Agriculture fell into a desperate state. Farms were overrun, weeds took over and farmers were ruined. Then came the war. Food was needed. The desperate efforts of agricultural executive committees, of farmers and of farm workers all over England saved the country with the food that they produced.

After the war there came a Government which I have special reason to remember. It was the universal view held by Mr. Attlee, Mr. Dalton, Mr. Churchill and Mr. Clement Davies, who then led the Liberal Party—there was no dissenting voice—that agriculture must never fall into those straits again. In that context it was agreed that capital must be attracted to it and that capital invested in land could yield no reasonable return unless there were special incentives.

That was the basis of the 45 per cent. reduction in death duty, if it be a reduction. After all, if anyone invests his money in agricultural land he will be lucky to get 2 per cent. or 3 per cent. a year. If he invests money in the City, he may well at various times get 15 per cent. or 20 per cent. a year. The 45 per cent. reduction in death duty was simply a quid pro quo. Anyone who was prepared to take the 2 per cent. would gain something from the 45 per cent. after perhaps 20 or 30 years.

That is the history of the 45 per cent. reduction, and that is why, in the context of agricultural land, I appeal to the Chancellor to consider the industry and what he is doing to it.

I represent part of the county of Dorset, in which there are a large number of fair-sized estates. I do not seek to defend the big land owner. Nor do I seek to attack him. I seek to describe him.

I could take hon. Members to estates where two, three or four tenanted farms comprising thousands of acres are owned by individuals. Some of these estates are the most efficient in England, if not in the world, and every competent agricultural person knows that.

6.45 p.m.

I regret that we do not have the Minister of Agriculture with us today. I am sure that this proposal is not really a financial one. It is one which affects farming more than any other proposal that we have made in Parliament in the past 30 years. It is an agricultural problem. That being so, I earnestly hope that the Chancellor of the Exchequer is receiving expert advice from the Ministry of Agriculture. I should be extremely surprised if any official in that Ministry could say with his hand on his heart that this proposal will do anything other than ruin farms and increase the price of food.

I do not want to be unsympathetic to the Chancellor of the Exchequer—

Why not?

Because I understand his difficulty. But if the right hon. Gentleman wants to make social change, there are many areas in which he can make it genuinely, and he can do it without creating harm.

It is not in the context of the desirability or otherwise of social change that I want the right hon. Gentleman to consider this matter. I want him to consider it in the context of national prosperity. Surely every Government supporter—Left, Right or any other wing—must listen to an appeal of this kind. I thought that it was universally acceptable in this Committee that agriculture had always had one difficulty—that of allowing the person with outstanding ability but without capital to climb the ladder to owning a farm. Some have done it, but they have done it by being tenants on a small scale first. Having been successful there, many have ended up owning thousand-acre farms. But they started at the bottom.

Everything depends on starting as a tenant. But how can anyone be a tenant if there is no landlord? I remind hon. Members that 41 per cent. of our farms are still tenanted. I thought that we heard too much from both sides of the Committee last night about the family farm. The impression was that family farms were all owned. They are not. Nearly half of them are tenanted. If our estates are smashed up, the first sufferers are those at the bottom of the ladder. I cannot think that that is what Government supporters really want.

I come now to some remarks which may seem to be a little out of character. I say to Government supporters that if they really want to smash up the landlord and tenant system, with all its complications, with all its methods for introducing capital and with all the delicate balances which sustain big estates, I can see the argument for doing so. I can see that, from the Socialist point of view, that may be a necessary objective. If the Chancellor of the Exchequer says that, I accept his sincerity. But even he will accept in turn that, if one system is smashed, another must be substituted for it. That is what the Government are not doing.

If the Government like to take the example of a 20,000-acre estate and say that the State can run it better than the individual—though I doubt it—I can understand the argument. But the Chancellor of the Exchequer is not even saying that. He is saying that no one will run it. By means of this tax the right hon. Gentleman is smashing up the whole constitutional basis on which agriculture and food production are based. For that, on any count, there can be no defence. Forget for a moment the natural ambitions of a young agricultural worker. What will happen if this is followed through, if a 10,000 or 5,000-acre estate is made available? Who will buy this?

The sheikhs.

That is what I was about to say. It may be the Arabs who will buy up the land which produces cheap food. Nothing will go in its place. I have tried to describe the genuine dilemma which is certain to face every Dorset land owner and every land owner throughout the country. I do not believe that the right hon. Gentleman really intends the effects which his tax will produce. I beg him to consult with those with expertise who know beyond doubt what the results will be.

No doubt, many hon. Members read, as I did, at the weekend an outstandingly good article in the Sunday Telegraph, warning about the consequences of the capital transfer tax. I wondered whether it was true, as was said, there that there is no realisation among the general public of the significance of this tax. That may be right. I am, however, satisfied that there is a realisation of the significance of this tax among farmers because many of them have come to see me and have written to me about it.

One farmer who wrote to me yesterday pointed out that farming was a high-risk, low-return industry. He also said—and I wonder whether the Chancellor knows this: he should—that the industry simply cannot generate sufficient capital to meet the tax levels contemplated by the Government. It has not only to meet capital transfer tax but has to meet double taxation which follows capital gains tax, and we know that waiting in the wings, to come on to the stage and dominate it, is the spectre of the wealth tax which is The cumulative effect of this taxation will be an economic holocaust for agriculture. It will be a blight of despair for the industry. If the Government had set out deliberately to do this they could not have found a more effective way of poisoning the land, destroying the crops, killing the cattle, and robbing agriculture of its present and future prosperity. I am appalled by this tax. Whatever the effect of the land hunger of a new town such as the Central Lancashire New Town upon the countryside, by robbing it of good agricultural land, it will be as nothing compared with the devastating effects of this tax.

This is a creature of Socialism. It was sired by spite out of envy. If it is let loose upon this country the loss of production and employment will be such as to live with us for generations. It will be something for which this country will never forgive the Government.

I want first to support a point made very well in the excellent speech of my hon. Friend the Member for Eastleigh (Mr. Price) last night. He rightly said that a tax of such importance as this should be debated in full on the Floor of the House. I entirely agree. If my memory serves me correctly the Committee's consideration of the Finance Bill was moved into Standing Committee largely due to pressure of business on the Floor of the House. It would be no bad thing if that pressure were reduced and we were to have less legislation to deal with here. It cannot have gone unnoticed throughout the country that the health of the nation seems to have deteriorated in inverse proportion to the increasing amount of legislation, under all Governments.

I thought that the opening speech of the Chancellor last night was one of the most depressing I have ever heard from the Government Front Bench, not just because of its content, but because of the way it demonstrated the right hon. Gentleman's lack of knowledge about the effects of his proposals. When he came to speak a second time he had become a little more conciliatory. It seemed that there was some glimmer of hope. It is all very ends, but the consequences of his pro-well for him to pursue his egalitarian posals must be considered, too.

I hope that the right hon. Gentleman has now heard enough to realise that capital transfer tax is one of the most ill-thought out pieces of legislation ever to come before us. I hope that he has learned something of the interdependence of the country's assets. I hope he has learned that if we clobber the small business man we destroy a major section of British industry. If we clobber forestry we remove the employment of thousands of forestry workers. If we clobber the land owners we shall incidentally be clobbering and destroying tenant farmers. If we clobber the farmers we shall be reducing home food production. If we clobber the country house owner we shall be destroying the English heritage. That seems to be an ironic way for the Government to be celebrating European Architectural Heritage Year.

My hon. and learned Friend the Member for South Fylde (Mr. Gardner) referred to the effects of this tax on agriculture as a blight of despair. It is worthy of notice that there is one category of farmer which avoids this tax completely, namely, the public corporation—lifeless or deathless—the companies such as ICI, and even the Co-operative Society. They will, therefore, benefit from the fact that they do not have to pay it.

About half our farmers are owner-occupiers. In the old days they often paid little or no capital taxation. They were able to make use of the seven-year rule to avoid estate duty by making a lifetime gift. Alternatively, if there was a transfer at death then the 45 per cent. rebate operated. Under the capital transfer tax proposal they have a horrible choice. Either they undertake a lifetime transfer, in which case they are liable to iniquitous double taxation under capital gains tax and capital transfer tax, or they can transfer at death with a relief from capital transfer tax described in the Farmers Weekly as "an empty gesture." If there is transfer at death it is likely, under this tax, that it will be by an old man to a middle-aged man.

7.0 p.m.

What opportunity will there be for the young farmer? I am talking not only about large farmers but about the mass of owner-occupiers who farm farms varying in size from 20 acres to several thousand acres. There must be better relief for the smaller farmers if the Chancellor's generosity cannot be extended to cope with the problems of the larger farmers. If not, the effect on the farm structure of the United Kingdom will be appalling and our production will suffer. Only too often we hear complaints about the poor European farm structure. Under this tax the same will occur in the United Kingdom.

What magic is there in the figure of 1,000 acres up to which the remission will be given? In my constituency and throughout much of East Anglia and the whole of the chalkland areas of the South there are many highly productive, highly capitalised farms of more than that acreage. It is in the national interest that they should continue to be highly capitalised and highly productive, but once they are affected by the tax they are likely to be broken up or undercapitalised.

The position of the tenant farmer is endangered in two ways. First, the landlords will be literally erased. Only a few tenants will be able to buy the land they farm, and, if they do so, many will be farming with inadequate capital, to the disadvantage of the productive potential of their farms. The second danger affects the larger tenant farmer who loses the 45 per cent. abatement of estate duty. Such are the proposed levels of capital transfer tax and the extent of the investment of tenant farmers that a tenant who is farming more than about 600 acres will be much worse off under this tax than he is under estate duty.

The tax proposal is causing grave concern throughout the countryside among farmers, land owners and those who undertake forestry operations. Yesterday I received a letter from my county naturalist trust expressing concern about the effect of the tax on the county's environment. I hope that the Chancellor, after taking careful note of all that has been said, will take away this tax and come back with a more sensible proposal.

I should like to go back to the speech made last night by the Chancellor, when he referred to the economic and social consequences of the tax. It was his singular lack of awareness of the social and economic consequences of the tax that largely inspired this debate. If the debate has achieved nothing else. I hope that it has opened the Chancellor's eyes to some of the economic and social consequences.

On Monday many hon. Members were lobbied by forestry workers. Is the Chancellor fully apprised of the fact that there are more than 10,000 people employed in forestry outside the Forestry Commission? Surely he must have some regard to the future livelihood of these people which is now in jeopardy?

I am concerned with the effect of the tax on the rural areas of the United Kingdom and of Wales in particular. The rural areas have already suffered greatly under the Labour Government as a result of increased petrol and transportation costs, increased rates, and the most erratic agricultural policy that we have seen in years. The capital transfer tax will contribute further to the impoverishment of the countryside in years to come. We have spoken of many spectres, but the one I see is the spectre of deserted villages in Wales, the country so dear to my heart. Not only is the tax a death blow to private forestry and the thousands employed in it, it also poses serious threats to agriculture and food production in several ways. The debate has not been sufficiently concentrated on the threats to agriculture.

To obtain the working farmer concession, land owners will themselves increasingly take their land in hand, and that is bound to result in a shortage of farms to rent. There is already a shortage of farms to rent for our young people in Wales and the tax will add to that problem. In Wales there are about 9,000 tenanted farms and 2,500 holdings comprising more than 50 per cent. rented land. What is to happen to this sizeable tenant farmer population when land owners take over their farms? In time there is bound to be a gradual exodus from the countryside. There has already been a sharp reduction in the farming population in Wales for other reasons, and the tax will further exacerbate that situation.

It may be argued that as land owners are forced to sell to meet their tax liabilities there will be more opportunities to buy, but buying involves more capital than does renting, and our farmers are finding it difficult enough to get working capital or rented farms, let alone capital for land purchase as well.

For the future, I cannot see land owners continuing to help their tenants—as many do—with land improvement schemes by providing fixed equipment and buildings for livestock. They will be discouraged from investing and encouraged to run down land values so that they pay as little of the tax as possible. To pay the tax, owners will have to split up viable farming units created over the years by amalgamation. The result will be the negation of the sensible policy of past Governments who have encouraged the growth of bigger and more viable farming units.

The tax will starve the land of capital—capital needed to build up its food-producing potential. There is a saying in Wales "If you starve the land, the land will starve you", and that is what the Government are proposing to do, with all the disastrous consequences involved.

One consequence which should have a particular meaning for the Labour Government is unemployment. The removal of capital and confidence from the land is bound to result in lower employment in the rural areas. It will give a further fillip to depopulation, from which Wales has suffered endlessly and which successive Governments have sought to combat.

It is for these social and economic reasons that I am critical of the tax. I hold no brief for the land owners—I do not own three acres, let alone a cow—but I am deeply conscious of the disruptive effects of the tax on the rural economy, particularly on the rural economy of Wales. I urge the Government to proceed with the utmost caution, and I echo the call of my hon. Friends for the clause to be withdrawn and reexamined.

There has been some disagreement here on the Opposition benches about whether capital transfer tax was conceived by the Chancellor of the Exchequer as a result of his innocence or his guile. My hon. Friend the Member for Blaby (Mr. Lawson) attributed the introduction of the tax to a mixture of innocence and ignorance. My hon. and learned Friend the Member for Kinross and West Perthshire (Mr. Fairbairn) attributed the introduction of the tax to the guile of the Chancellor. In so far as we have any indication which of these two are the causes of the tax, we may look for it in the words of the Chancellor himself. He said, when introducing his Budget on 12th November:

"I should have expected the moderation of my proposals … to have brought me gratitude rather than abuse.…"—[Official Report, 12th November 1974 Vol. 881, c. 277.]

There is no gratitude in politics.

I hope that the Chancellor has learned one thing as a result of this debate—namely, that there is precious little gratitude in politics and certainly none on this side of the Committee for the right hon. Gentleman.

The proposed introduction of capital transfer tax cannot be looked at in isolation. It must be looked at in the light of the present and prospective taxes on capital gains and on wealth. I believe it is wrong to proceed with the capital transfer tax, important and crucial though it may be for the future of the country, without the Chancellor having come to any decision at all about the form of the prospective wealth tax, and bearing in mind the fact that he has set up a Select Committee to advise the Government on the form of wealth tax. Therefore, I emphasise that the first reason why Clause 17 should not remain in the Bill is that it is wrong to consider such a provision when the Chancellor has not made up his mind on the form of the wealth tax.

We hear a great deal from Labour Ministers about the need for fairness. All on the Conservative benches would subscribe to the proposition that the levying of taxation is not just for the raising of revenue but also for the achievement of a just society, but justice and fairness are indivisible and must apply to all sections of the community. I criticise the proposed capital transfer tax because I believe that it is manifestly unfair and unjust. It falls on the holders of capital the income from which is already taxed more heavily than that in any other country in the world. If a man or woman wishes to pass on capital there will be penal rates of taxation on top of the existing stamp duty, existing capital gains tax and the prospective wealth tax, with no prospect at all of indexation.

The consequence of the tax will not be the wider distribution of wealth. It will be the concentration of wealth and of power in a small group of increasingly fallible men sitting on the Government Front Bench. The Chancellor has not thought through the consequences of the tax in terms of the farming community or the business community.

I am not opposed to taxes on capital. I am in favour of taxes on realised capital gains, with proper indexation. I am also a supporter of an inheritance tax falling upon the donee. I disagreed with the Conservative Government when, much too tardily, they introduced capital taxes on gains arising out of the speculation in land. I am, however, strongly opposed to this type of capital transfer tax. Therefore, I hope that the Chancellor, having listened to the debate, at least will make some concession to the Opposition.

I shall be brief. I have listened to almost every speech in this debate. I must say that most of the speeches seem to have come from the Conservative benches.

Last night the right hon. Gentleman the Chancellor of the Exchequer gave certain concessions in respect of timber, the effect on small businesses and charities—

The Chancellor did not give any concessions. We must not rejoice in a victory yet. We hope that he will give concessions.

I should be very surprised if any Chancellor, having listened to the arguments presented to him, would not give some concessions. The arguments have been so convincing and powerful that it would be difficult even for this Chancellor to resist. I do not know how far he will go. I am certain that the smile on his face at present shows that he has some intention of meeting the Committee in some respects.

The point is that this debate is not concerned merely with taking away the wealth of small sections of the community. The country outside the House must realise the consequences of the imposition of capital transfer tax and its effects on the nation. First, the tax is a challenge to the free enterprise society in which we live. It goes further since it challenges the right of individuals to continue to own and pass on property to their descendants.

The second matter to be considered is the effect of the tax on small businesses. We have to consider not only the effect on the owner of a business, trustee and so on, but the effect on those who work in the businesses, and that is most important. That is the point which people outside the House have not necessarily grasped.

Thirdly, I should like to mention the situation of agriculture. Who will buy the land once the large estates are broken down, as inevitably they will be? Will it be the tenant farmers? Of course not. They will not be able to afford to borrow money at 15 per cent. or 18 per cent. I hazard a guess that the people who will buy the land will be either the Government who will set out on a further spree of inflation, or people from the Middle East, namely, the oil sheikhs who will invest in our land as a long-term financial exercise.

If the clause goes through as it is it will alter the whole pattern of our society. It will curb the savings of our citizens. It will ruin small businesses. It will have a long-term adverse effect on agriculture, and many people who do not now realise its consequences will soon appreciate its effect when they see greater unemployment, and businesses going to the wall. They will realise that the tax affects the whole of our society, that it will be the end of a free enterprise society, the end of much of our savings and the end of an era. The Chancellor has put up no alternative to what he is seeking to destroy.

All of us who have sat through this seven-hour debate will agree that it has been exhaustive and, for some of us, perhaps, exhausting, too. In my 22 years' experience of the House few debates in Finance Bill Committees have aroused quite such passion or attracted so large and continuous an attendance, at least on the Opposition benches. I do not think we have had many debates in which the speeches have been so deeply felt. I pay my respects to the sincerity of all those who have criticised me in this debate and I shall comment on some of their contributions as I proceed.

Today, we have concentrated a good deal more on the central theme of the new capital transfer tax than we did last night. That, after all, is the central issue in a debate on whether the clause should stand part of the Bill.

The purpose of the capital transfer tax, as I said yesterday, is to make effective a law which has been on the statute book for 80 years and whose purpose, at least for the last 60 years, has been to prevent vast aggregations of inherited wealth from being passed on undiminished from generation to generation. Yet, as we all know, and as has been admitted on both sides of the Committee, estate duty has been increasingly avoided because rich men put their wealth into trusts or give it away to their children before they die.

The House and the country should be aware that estate duty affects only a small minority of the population. Roughly speaking, one person out of 1,000 is currently affected in a single year, and over a lifetime of, say, 70 years, it affects roughly one person in 12 of the population. So only a small minority are affected.

Of that small minority, the great majority have paid this tax without complaint and without trying to avoid it. All of them—the majority of this minority—will be better off under the capital transfer tax. The rates are lower and, with respect to the hon. Member for Blaby (Mr. Lawson), the principle of levying the tax on the gross value is applied just as much under estate duty as it will be under the new tax. There is no difference between the two from that point of view.

More important—this was welcomed on both sides—there is an exemption for the spouse, which means that thousands of widows who, as I said yesterday, on average outlive their husbands by 18 years, will enjoy substantial advantages over that period which they do not enjoy under the existing estate duty.

I must correct one statement by the Chancellor. On gifts inter vivos at the moment, the donee is accountable and pays tax on the amount given and not on the grossed-up amount. Will the right hon. Gentleman, for the record, correct his entirely misleading statement of the existing law?

With great respect to the hon. and learned Gentleman, I do not think that he was listening to what I said. I said that legacies under estate duty are paid gross with tax in exactly the same way as transfers under the capital transfer tax—[Interruption.] I am not talking about gifts now. The purpose of the capital transfer tax is to plug many loopholes in the estate duty.

The wealthiest part of the minority of whom I was talking have regularly avoided the tax and it has been almost without effect on the vast aggregations of wealth. It is at those vast aggregations that it has always been essentially aimed. It has become clear in the debate that many Conservative Members—perhaps the majority—do not wish to change that situation. Indeed, the right hon. Member for Farnham (Mr. Macmillan) was quite frank yesterday when he said that it was essential that estate duty should remain a voluntary and avoidable tax, because if it did not, many consequences that he would not wish to see might follow.

His own belief was clearly implicit in the contributions of many of his hon. Friends. They, too, wish estate duty to remain an avoidable tax. On the other hand, the Labour Party, the Liberal Party and, I think, a large number of Conservative Members who have spoken, have made it clear that they do want to change the situation. However much they may disagree in detail with the capital transfer tax, they regard the avoidance of estate duty as a scandal which should be halted. That is the purpose of this tax.

I hope that the right hon. Gentleman is not intentionally misleading the House. I took considerable trouble to point out that I thought that any form of tax on capital which was penal would be fatal and that this reform, which the right hon. Gentleman claims is a reform of the estate duty, should not be carried out except in the context of a much wider reform of the taxation of capital. I was at some pains to go into the detail of the way in which I thought that that might be done.

I listened to the right hon. Gentleman's speech, as I have listened to every other speech in this debate, with great care. Unfortunately, the Hansard report of his speech is not available to us today because it was made, like many speeches, late at night—

Is it in the Library?

However, I hope that the right hon. Gentleman will agree that he actually used words which expressed the opinion that if estate duty were not an avoidable tax, the type of family business to which he referred could not survive. I do not think that he will deny that. If I am wrong, I shall apologise, but I think that he will find that that is what he said. This was also implicit in the speeches of a number of other Conservative Members.

Those of us on both sides who wish estate duty to become an effective tax recognise the natural desire of parents to pass on the fruits of their labour to their children. The great majority of our people have this right, absolutely unconfined by the law, and will continue to have it when the capital transfer tax is in operation. That tax will affect only that small minority of the population to whom I have referred, who would be liable to estate duty if they did not avoid it through gifts, transfers or other devices.

We on the Government side believe that, if there is no limit on the ability of the wealthy minority to pass on the fruits of their labour to their children, we introduce into the class structure of this country a degree of rigidity, indeed, immobility, which is deeply damaging to both its economic efficiency and its social unity—[Interruption.] There is overwhelming agreement on this point in the country. It was strongly endorsed by The Times in a leader in August, which gave an unconditional welcome to the tax in the form in which it was then described and in which it has now been presented to the Committee—[An HON. MEMBER: "What about its leader this morning?"] I read that leader. One of the interesting things about it was the fascinating contrast that it presented with a leader in the same newspaper only a few months ago.

Does the right hon. Gentleman wish to achieve the objectives that he has outlined even if the method that he has chosen causes the destruction of existing private businesses—whether firms, manufacturing businesses, or whatever—and prevents the growth of new ones?

I am coming to that point in a moment, if the right hon. Gentleman will allow me. This is one of a number of specific issues—not a very large number, to be fair—on which many hon. Members have concentrated. In my later remarks in the early hours of this morning, I talked about the conclusions that I had reached, after listening to the debate, on charities, historic houses, woodlands and small firms. As for small businesses, I listened carefully to what was said last night and today by the hon. Members for Gainsborough (Mr. Kimball) and Blaby, and I shall certainly reflect on what they said. If I feel it desirable to introduce changes in the tax to meet those points, I shall do so, but I shall come back to that matter in a moment.

The hon. Member for Blaby, in his engaging way, however, also suggested that terrible consequences would follow if any of us invited his widowed mother to stay with him. I assure him that, on this as on many matters, the hon. Gentleman is totally mistaken. A man who invites his mother to stay with him is not liable to pay tax on the rent he might otherwise have charged, unless he has found it necessary to enter into a formal arrangement giving her a right of occupation. Even then, he would not be liable unless the rent he charged was considered by the Revenue to be greater than he could pay out of his income. I hope that we shall not have any more of that ridiculous fantasy from the hon. Member or anybody else.

7.30 p.m.

I hope that I made it clear, and I hope that I persuaded right hon. and hon. Members, that if reasonable arguments are put—as many were put in the course of this debate—in the later stages of consideration by the House of Commons, in Committee or elsewhere, I shall listen and seek to meet them, but there is here a fundamental issue, on which a real division emerged in the course of the last seven hours' discussions—a division which emerged most clearly in the speech of the right hon. Member for Finchley (Mrs. Thatcher) in opening for the opposition on the clause yesterday.

We on the Government side listened as intently as did her right hon. and hon. Friends to her speech to discover what slogan might be emblazoned on her campaign banner, because we know that she seeks—this is an honourable ambition—the right to lead her party and the country towards the 21st century. The fact is that she went backwards and not forwards, to one of the oldest slogans in political history.

On a point of order, Mr. Fitch. Surely we are dealing here with a most important part of the Finance Bill. Cannot we be spared these totally irrelevant considerations?

I have not heard anything out of order.

The relevance is this—

The question of leadership has no relevance at all.

Many of us would say "Amen" to that.

The right hon. Lady's whole speech was a defiant reassertion of birth and privilege—of the right of inheritance against the whole current of democratic politics in the 20th century. She started unblushingly yesterday by explaining how, under the present tax régime, the wealthy not only can but do order their affairs so as to avoid estate duty, providing that they can afford to hire an experienced tax counsel. She made it clear that success in her Utopia should depend not on one's own ability but on the wealth of one's parents. She asserted that the future of a major part of British industry should lie with men who owe their position to the accident of birth and not to what the right hon. Member for Stafford and Stone (Mr. Fraser), whom we wish well, described as energy, initiative and drive.

On a point of order, Mr. Fitch. I seek your guidance. Is the term "liar" a parliamentary term?

I did not hear the term used.

On a point of order, Mr. Fitch. The Chancellor of the Exchequer has now traduced two of my right hon. Friends and put words into their mouths which I did not hear them use when they were making their speeches. Will you ask the Chancellor to return to a discussion of the clause and not to traduce my right hon. Friends, who have made very valuable contributions to the debate?

That is not a matter of order. It is a matter of debate.

The hon. Gentleman was not in a position to hear those words spoken because he was not here at the time.

The hon. Member for Gainsborough, I think it was, described the right hon. Lady as "the blessed St. Margaret". The fact is that she emerged in this debate as La Pasionaria of privilege. She showed that she has decided, as the Daily Express said this morning, to see her party tagged as the party of the rich few. I believe that she and her party will regret it.

Mrs. Thatcher.

rose—

On a point of order, Mr. Fitch. Is it permissible for the Chancellor to treat the Committee with such gross contempt as to suggest that that is a summing up of the most important financial debate the House of Commons has had since the war?—[Interruption.]

Order. That is not a point of order.

On a point of order, Mr. Fitch. Are you satisfied that the Chancellor has in fact resumed his seat? He has not answered the debate, which has taken place over a period of seven hours.

I am perfectly satisfied that the Chancellor has resumed his seat. I have already called Mrs. Thatcher.

On a point of order, Mr. Fitch. Are you aware that during the debate the hon. and learned Member for Dover and Deal (Mr. Rees) indulged himself in what I can only describe as gutter McCarthyism, and my right hon. Friend's speech made the position clear?

I think we should get on with the debate.

I wish I could say that the Chancellor of the Exchequer had done himself less than justice. Unfortunately, I can only say that I believe he has done himself justice. Some Chancellors are macroeconomic. Other Chancellors are fiscal. This one is just plain cheap. When he rose to speak yesterday we on this side were all amazed how one could possibly get to be Chancellor of the Exchequer and speak for his Government knowing so little about existing taxes and so little about the proposals which were coming before Parliament. If this Chancellor can be Chancellor, anyone in the House of Commons could be Chancellor.

I had hoped that the right hon. Gentleman had learnt a lot from this debate. Clearly he has learnt nothing. Whatever the theory of this tax, which will have a very far-reaching effect upon the country, he might at least address himself to the practical effects, because it will affect not only the one in a thousand to whom he referred but everyone, including people born like I was with no privilege at all. It will affect us as well as the Socialist millionaires.

Whatever the theory, this tax is fundamentally damaging in two ways. First it damages the economic structure of our society by its effect on private businesses, on farming, on woodlands and on shipping. Secondly it damages the very nature of our society by concentrating power and property in the hands of the State and of those politicians whose only ambition is the pursuit of power for its own sake.

We believe that the future of freedom is inseparable from a wide distribution of private property among the people, not concentrating it into the hands of politicians.

We can say little for this tax. We cannot commend it. It is difficult to amend it. It should be withdrawn.

I beg to move Amendment No. 44, in page 25, line 36, after 'transferor', insert 'to the same transferee'.

With this it will be convenient to discuss also the following amendments:

No. 61, in page 25, line 36, after 'transferor', insert 'to any one transferee.'

No. 45, in page 25, line 39, after 'transferor', insert 'to that transferee'.

No. 46, in page 25, line 42, after 'transferor', insert 'to that transferee'.

No. 47, in page 26, line 2, after 'transferor', insert 'to that transferee'.

The amendment is designed to help the Chancellor, and I hope he will accept it. The Bill wastes the opportunity of replacing estate duty with a modern gifts and inheritance tax.

The amendment, by taxing according to the amount given to each recipient, would encourage the spreading of wealth. The Labour Party used to stand for uplifting the poor and the redistribution of wealth. Many old-time Labour Members of Parliament saw themselves as modern Robin Hoods, robbing the rich to give to the poor. This tax has the reverse effect. It robs the rich and the not-so-rich to give to the barons of bureaucracy. There is no redistributive effect, no giving to the poor, but simply a grabbing and taking to the State.

The amendment goes to the central division between the two sides of the Committee. We believe in the philosophical and economic argument which is an essential part of the case for the amendment. By concentrating wealth into the hands of the State, as it does, the Bill creates the situation that with the concentration of wealth there is a concentration of power, and with the concentration of wealth comes the concentration of decision-making. The fact that power, wealth and decision-making are totally in the hands of the State takes us well on the road to a totalitarian State and economy—the dead, outdated dogma of yesterday. The Chancellor is supposed to have renounced his early conversion to the Marxist faith, but it seems to have lived on in the tax he has produced.

Do we accept the concentration of wealth and decision-making in the hands of the Government, or do we want wealth spread throughout the community as widely as possible? The amendment seeks to achieve the latter, and I believe that this could be described as the philosophical argument.

I now turn to the economic argument, to which the Chancellor should give urgent consideration. One of the country's problems at the moment is that there is far too little investment in productive industry. In his spring Budget the Chancellor increased corporation tax and then found that he had stripped industry of its necessary working capital. He had to give it back in the autumn Budget. I shall return to this point in a moment.

The tax will encourage spending, not saving. It impels the movement of capital away from those who can best utilise it, and it is desperately unfair as between one individual and another. The nation needs more investment, and this demands saving and capital. Yesterday I noticed that on occasions Labour Members were laughing when medium-sized sums of money were being discussed. They seemed to think that it was a matter of no consequence that wealthy people would have their businesses plundered of the necessary working capital.

I have a crucial question. Why are wages in Britain lower than on the Continent? Why do we have to hold wages down? It is not because the British working man is lazy but is because there is less capital behind each worker than there is on the Continent. Too little capital per man means too low earnings per man and too low wages. As the clause stands, it represents the road to economic ruin. It will allow the Government to strip the capital out of the private sector, and that capital is necessary if the country is to grow and prosper. Even primitive man learned not to eat the seed corn but to save it, and the Government are seeking to take from the private sector the essential working capital which it should have.

The tax will encourage spending. If a man cannot pass his money on to the next generation, he will see no point in keeping it. He will ask why he should save even a brass farthing when he cannot pass his business on to the next generation. Why not eat, drink and be merry?

Let us take a practical example. If a business is worth £200,000 and the proprietor wants to give it to four people in shares of £50,000, under the Government's proposals he must find £211,870 from outside the business from his own personal wealth, over and above the value of the business, in order to do so and thus enable the four people to continue the business and the employment it provides. Under the amendment, that £200,000 would be divided into four lots of £50,000. The wealth would be spread among four people and the tax liability, though serious, would fall to £84,750. The Bill is an encouragement to expenditure that the country cannot afford. It encourages a man to have a yacht in the South of France and three mistresses. It encourages people to spend now and to say "There is nothing to be gained by saving it, because I cannot pass it on."

8.0 p.m.

Thirdly, the Bill impels the money and the capital of this country into the least dynamic and productive hands. Everyone with a business will seek to preserve it for as long as he can and will leave it to his wife. As women live longer than men, the businesses will be increasingly concentrated into the hands of grandma—the matriarchal society. What an epitaph for the Chancellor? How shall we have dynamic management of the economy when the private sector is in the hands of elderly ladies who hold the balance sheet upside down and do not know what it is all about? My right hon. Friend the Member for Finchley (Mrs. Thatcher) looks at me with an air of admonishment, but I said "elderly ladies". The Bill will create an ossified economy since the oldest people in the country will be controlling our businesses.

Incidentally, it is an interesting Government who prefer bitches to daughters. The Government will allow £50,000 to be given free of tax to the Battersea Dogs Home, but if one gives it to his own daughter he has to pay tax on it. If one's daughter is an invalid or a mongol, it does not matter. If a man is prepared to work his guts out to give the next generation security and protection, it does not matter. The tax will still have to be paid to the point at which, as the Chancellor put it, the pips squeak and the whole purpose for which a man has been building up an estate or business is destroyed.

Fourthly, the Bill is unfair as between one person and another. If a man left £100,000 in trust for his four children when they reached the age of 26, the first would receive £25,000, less the tax at £1,250; the second would receive it less £6,500; the third would receive it less £9,500; and the fourth would receive it less £11,000. That is totally unfair as between one recipient and another, each of whom is left the same amount. It cannot be justified, and it must be amended in the schedules and clauses considered in Committee upstairs.

I have looked briefly at the philosophical and economic arguments. There is also the problem of the Common Market. The Government, or part of them, are pledged to seek to negotiate to stay in the Common Market. One aspect of the Common Market is that we must move towards a harmonisation of our taxation systems. Throughout the Common Market there are systems very much like that proposed in the amendment. Luxembourg has tax exemption for direct heirs, but in all other countries except Belgium the tax is payable upon the rate received by the recipient and not as defined in the Bill.

Let us compare the case of a husband with assets of £100,000 and a wife with assets of £50,000. The father gives his son £20,000 and leaves half his estate to his wife, a quarter to his son and a quarter to his daughter. When the wife dies she leaves half to each of her children. In Holland the tax would be £4,539, in Luxembourg £4,999, in Italy £9,750, in Germany £4,033—a dynamic economy, and there is a relationship between the two; in France £17,785, in Denmark £28,434, in Belgium £13,850, and in the United Kingdom, top of the league, £35,700.

There is too little capital behind each worker in Britain. As a result of the Bill, our manufacturers, business men, family businesses and small businesses will all suffer a major drain of their essential working capital, which their competitors in Europe will not suffer. As the years go by, if the Bill remains on the statute book our workers will not be able to earn the high wages earned on the Continent, simply because their employers will not be able to put the necessary capital behind them.

It is for that reason, and the philosophical reason that we on the Conservative benches believe in spreading wealth throughout the community and not concentrating it in the hands of the State, that I move the amendment.

The hon. Member for Basingstoke (Mr. Mitchell), who moved his amendment so eloquently, will not expect me to follow his philosophical arguments. There is a fundamental philosophical difference between the two sides of the Committee on this question, and it cannot be bridged this evening.

The amendment is designed to change the basis of accumulation under the capital transfer tax, so that it applies not to the totality of an individual taxpayer's gifts over his lifetime but only to those with respect to one transferee. The fundamental objection is the enormous range of avoidance possibilities that that would create. I concede that such a system would not be as complicated to administer as a full donee-type system, but it would be possible, for example, for a group of totally unconnected taxpayers, who were fortunate enough to enjoy the possession of substantial amounts of wealth, to get together and so arrange their affairs as to distribute their transfers among the members of their separate families. The result would be a considerable diminution in the total amount of tax that would be attracted.

As most of the Common Market countries managed to resolve that problem, is it beyond the wit and ability of the British Treasury to do so?

I shall be coming to the question of international comparisons. I ask the hon. Gentleman to believe that it would be very difficult to counteract avoidance schemes of that sort, which would be perfectly legal under the amendment. The possibility of similar avoidance schemes was envisaged in the Green Paper published by the previous Government, Cmnd. 4390. I shall not weary the Committee by reading the relevant passage, which is paragraph 61.

The hon. Gentleman made international comparisons about the structure of a gifts tax or transfer tax in the various Common Market countries. I am sure that the hon. Gentleman will be the first to accept that international comparisons are dangerous, particularly those that isolate one aspect of a tax and subject it to scrutiny without consideration being given to the totality of the tax structure. It is not, of course, beyond the wit of the British Treasury to construct a tax along the lines that the hon. Gentleman suggests. It was a conscious choice that the tax was constructed in its present form.

It is true that in the cases that the hon. Gentleman outlined the tax systems allow discrimination. On the other hand, there are other régimes of gift tax—for example, in Australia, New Zealand and America—where there is no distinction. In other words, the gifts are accumulated through the lifetime of the donor without any abatement by the class of the recipient. It is a technical matter as between tax systems. I do not believe that there is any fundamental philosophical difference on that point.

I have to tell the hon. Gentleman that because of the avoidance possibilities that the amendment would permit I must advised my hon. Friends to reject the amendment.

The amendment draws attention to the farcical position that the tax is chargeable on the smallest gift if the total given by a donor reaches a certain figure. If the rate depends on the total amount given by the donor rather than the amount received by the donee there is bound to be a certain amount of unfairness and anomaly.

Perhaps I may explain the position by looking into the crystal ball and seeing what might be a reported case in a year's time. I am indebted to a chartered accountant by the name of Robert Maas, who takes a great interest in these matters. He has put forward an imaginary case.

Let us suppose that a case is heard in 1976 between the Commissioners of the Inland Revenue, and, for example, little Annie Young. The case turns on the fact that on the evening of 24th-25th December 1974 a certain Mr. St. Claus distributed some £20 million-worth of gifts to the children in this country. Let us suppose that Mr. St. Claus was not domiciled in this country but that he entered the country in December 1974 for the first time since 1st March 1974. The gifts which he distributed were distributed in this country and "transfers for value" under Clause 18(5). That would mean that although he was not domiciled in this country the property was in the United Kingdom and would be covered by Clause 22(2).

Mr. St. Claus gave little Annie a doll valued at £4. Because he had distributed about £20 million-worth of his assets to other children, little Annie was called upon to pay tax at 75 per cent. of the value of the doll. Little Annie's counsel pleaded that the gift was part of Mr. St. Claus's normal expenditure and that under Schedule 6(4) she should escape the tax. It must be shown, if that exemption is to be made, that the gift is made out of Mr. St. Claus's income; that is under Schedule 6(4)(i)(b). However, there was no evidence that Mr. St. Claus had any income, so, unfortunately, little Annie failed. It was not possible for her to say that she was the first recipient. The burden of proof is upon her to show that—and she could not do so. Little Annie was unable to show in that way that the tax should be distributed amongst all the millions of recipients. The result was that the Inland Revenue succeeded—in the first court.

But I am glad to inform the Committee that my imaginary case has a happy ending. On appeal, based on Schedule 6(8), which says that a

transfer of value made in the carrying on of a trade, profession or vocation is an exempt trasfer,

the Court of Appeal decided that Christmas had become so commercialised that Mr. St. Claus was carrying on a trade or vocation. The result was that is found in Annie's favour.

Is my right hon. Friend sure that the figures he has given are accurate? If the doll was worth £4 and there was a distribution of substantial sums, the £4 should be grossed up. As it would represent but 40 per cent. of a 60 per cent. rate the tax which the young lady would be liable to pay would be not £4 but £6.

My hon. Friend is introducing what is a doubtful point in the Bill. I am not sure—I do not think any commentators on the Bill are sure—whether the amount would be grossed up. There would be that risk. No doubt we shall consider this problem at a later stage. It is possible that little Annie would have to pay in tax far more than the value of the doll.

I am sure that the Committee is grateful to the right hon. Member for Crosby (Mr. Page) for entertainment and for being able to contemplate the intricacies of this legislation in a lighter mood.

I venture to suggest that the fallacy of the reasoning behind the amendment is emphasised by one aspect which, rather surprisingly, the right hon. Gentleman overlooked. The gentleman in question—the donor—is a character of undoubted generosity as well as of boundless means. It is therefore improbable that in the exercise of his professional business, as it may be, or his traditional function, he would fail to ensure that little Annie received the goods undiminished. The aggregated tax liability would therefore fall upon the donor.

It seems profoundly fallacious to treat the liability as falling upon the donee. That renders all aggregation grotesque. The fallacy seems to lie in the assumption and not in the form of the tax.

I refer the right hon. Member for Down, South (Mr. Powell) to Clause 23(2)(a) which says that the transferor and the transferee are made specifically liable for the tax. No doubt Mr. St. Claus would make provision for that but it is possible that the Government would sue the donee if Mr. St. Claus was domiciled outside the country and outside the jurisdiction of our courts.

I am well aware of the provision to which the right hon. Gentleman refers. The fact remains that the donor having an intention of transferring a net sum to a particular person would ensure, on his part, that any tax arising on the transfer was satisfied. I suggest that though the narrative was entertaining the analogy was grossly imperfect.

I shall speak briefly in support of the amendment. First, I must correct a point made by the Financial Secretary. In contrasting the custom in Australia with that in the Common Market countries which my hon. Friend the Member for Basingstoke (Mr. Mitchell) quoted, the hon. Gentleman said that in Australia the tax accumulated on the donor throughout his lifetime. He was quoting that as an example, if I understood him aright, in contrast to the EEC countries.

That is quite incorrect. The custom in Australia is that the aggregate of gifts made by a donor is accumulated for a period of time only. I believe that the period is only three years. After that three-year period the slate is wiped clean, and the donor starts again. There is a purpose behind that. It is to encourage people to make gifts to their children or to pass on shares in their companies throughout their lifetime rather than to do so only in the few years before they die. Indeed, in terms of the gift tax it is a different method of wiping the slate clean that the Financial Secretary could well look at.

I wanted to speak in the debate on this amendment not only because I support the principle but because last night, when I asked the Chancellor why he could not accept the tax falling on the donee when this was the custom in all EEC countries, he said that the reason was that the tax in the EEC countries was essentially on an inheritance basis. Since he made that remarks I have looked back at the corpus of taxation in Western Europe. I must say that I find nothing which supports the Chancellor's remark. Indeed, if one looks through it one finds that in countries such as Austria, Germany and France in many cases there is a gifts tax and an estate tax, and that the burden falls on the donee and it is all quite clear cut. The rate is usually the same between estate tax and gifts tax. It is preferential for direct descendants. That is the long and the short of it.

It has been argued, as the Chancellor argued last night and as the Financial Secretary was trying to do in reply to my hon. Friend the Member for Basingstoke, that the corpus of European taxation was in some way different from what is now proposed here, and that the background was different, and that that justified their taxing the donee while we continued to tax the donor. That is an argument for which I can find no substantiation. I can only conclude that the reason why the Treasury—the Financial Secretary and his right hon. Friend—wish the tax to fall on the donor is that receipts from the tax will thus be very much greater.

We shall come to the question of rates later this evening. I do not want to deal with them now. But if the tax falls on the donor the net result must be that during his lifetime he will not give away money or shares, and thus the purpose of this tax, as a lifetime tax on all gifts, will be negated. The would-be donor is bound to hoard in order to ensure that at his death the whole estate can be treated as one, at one and the same time, and all his descendants will be treated equally. That is the way he is bound to tackle this tax if the liability for paying it remains with the donor.

One further point I want to make to the Financial Secretary is that there is great confusion in the Bill on the point about tax on the donor, as on many other points. In Clause 25(5) the Bill appears to contemplate that the donor may decline to pay the whole or part of the tax. In that case—if the Financial Secretary can bear to listen to this point—the Revenue may resort to the donee, in which case the tax claimed will be less than if the donor had paid it all, as there would be no grossing up. In Clause 25(5) there is a genuine possibility of the tax falling on the donee in such circumstances, and it has been suggested that in this way the donor could opt out of paying the tax and leave it to the donee to do so, in which case the burden of the tax would be lighter.

That is one of the many misunderstandings and misapprehensions which need to be cleared up. But I am certain that the principle advanced by my hon. Friend the Member for Basingstoke is the right one—that the burden of the tax should fall on the donee.

It is a change to get back, even after listening to the few words from the Financial Secretary, from a Chancellor who clearly has very little idea at all of the implications and consequences of the legislation to a Minister who has at least followed the Bill through so far and who addressed himself to some of the issues raised by my hon. Friend the Member for Basingstoke (Mr. Mitchell). That is an improvement, even if not a very magnificent one. I suppose that we should be grateful for half a loaf rather than no loaf at all.

Many of the arguments covering the amendment were touched upon last night. That has been pointed out by my hon. Friend the Member for Mid-Sussex (Mr. Renton). I do not know whether the Financial Secretary chose Australia in the hope that it was a nice far-away country and that no one would be too certain about the arrangements prevailing there for capital transfers and a gifts tax. If he did he must now be regretting it, because my hon. Friend the Member for Mid-Sussex has shown that, in one way or another the Committee tends to have an acquaintance with and knowledge of distant countries and far-away systems. In this case my hon. Friend has shown the Financial Secretary's brief to be nonsense.

The arguments behind the amendments are straightforward enough. There is, first, the central point, made time and again by my right hon. and hon. Friends, that in this tax as it is proposed there is no redistribution. That is a fallacy. It is a misuse of words to talk as though the CTT as proposed involves redistribution. It does not do so. These amendments would change that situation radically and would provide a considerable incentive for distribution of wealth from one generation to another.

Then there is the argument touched on by my hon. Friend the Member for Mid-Sussex and put forward from the Treasury Bench that, because estate duty is established on the principle of the donor paying, it is apparently impossible to graft on to that any system which would involve the donee element, as indicated in our amendment or as implied in a full-blooded inheritance tax. When one considers just what the CCT will be doing and how far it will go in smashing up established procedures, established business methods and established ways in which people can reckon their tax liability, I should have thought that that was the last argument which would be brought forward from the Treasury Bench.

Then again, there is the argument on fairness. The kind of arrangement suggested in the amendments would be infinitely fairer. We have had the delightful fable from my right hon. Friend the Member for Crosby (Mr. Page) about the marginal umpteenth recipient of a gift from Santa Clause. This brings home what is perfectly obvious to anyone who studies the tax for rather longer than perhaps the Chancellor has bothered to do—that the accumulation principle is riddled with nonsense. It is bound to create severe unfairness as soon as one moves into the taxable range above the £15,000 minimum. It makes nonsense, as we heard last night, of any attempts to give to charities. As long as the accumulator, the aggregation principle, is there, so long are we declaring war on fairness and decreeing that there should be unfair treatment and unfair situations arising in profusion.

I am not sold on international comparisons. There is something of a neurosis in this country for comparing ourselves, often on the basis of spurious statistics, with every other country and deducing that we are a failure. I do not know whether that is a manifestation of a lack of self-confidence in the country. However, the Financial Secretary must not complain if these points are thrown back at him because he and his colleagues have, from the moment the CTT was thought of, constantly indicated, inside and outside this Chamber, that one of its virtues is that every other country has such a tax. The implication has been made—I do not know whether by the Financal Secretary but certainly by others—that the rates in other countries are heavier or certainly as heavy as anything proposed here.

We shall be able to show later that in this area as in other areas the Government's propositon about the level of the rates and their comparability with the rates of estate duty and with prevailing rates in almost any other country in the free world is wrong. However, the Financial Secretary cannot simply dismiss international comparisons as a technical matter. They are not a technical matter but a political matter because the Government have made them so by continually referring to other countries, as though the virtue of the tax is drawn from the fact that it emulates what are supposed to be systems in other countries of a similar kind.

My hon. Friend the Member for Mid-Sussex fired an initial warning shot—the first of many which will come from this side of the Committee—indicating that we do not accept the vague generalities about systems which are supposed to prevail in other countries and to inspire the system proposed by the Government. He fired a warning shot to show that the Financial Secretary, in grasping hopefully for Australia, was grasping for a broken straw because his argument did not stand up.

8.30 p.m.

The amendments would make a substantial contribution to giving realty to the call for redistribution of wealth in the genuine, creative sense so that wealth would spread and increase. That is why I shall advise my right hon. and hon. Friends to press the amendments. Even if they do not go as far as we would wish to prevent this tax from reaching the statute book and to replace it with something better, at least they would take it a stage further away from the insanity, unfairness and total lack of redistribution and the concentration in State hands which we find so deeply and utterly objectionable.

I do not wish to delay the Committee in resolving its differences in a Division, but I owe it to hon. Members who have raised certain points to try to provide them with factual answers which will satisfy their thirst for knowledge if not their sense of the fitness of things.

Let me deal with the delightful anecdote related by the right hon. Member for Crosby (Mr. Page). The generous donor in his example, having £20 million to give away, would presumably have seen fit to provide himself with an efficient tax adviser before starting on his programme of beneficence. However, as I am advised, even if so beneficent a donor were not domiciled in this country, both the exemption out of income and the £1,000 a year exemption would run and the young lady in question could expect to benefit from them.

The hon. Member for Mid-Sussex (Mr. Renton) asked whether the young lady would pay tax on the value received by her if the total estate had been given away and this was, as I understood it, the last item to go. The answer is that she would. The hon. Member will find the justification for that not so much in Clause 25 but in paragraph 1(2) of Schedule 9. No doubt we shall discuss that in Committee upstairs.

In answer to the hon. Member for Guildford (Mr. Howell) I do not think that I said that it was impossible to graft a donee element on to this tax. It has not been part of my case that it was impossible. In the fullness of time it might even be possible to add a donee element to a tax of this sort.

That was not what I said.

That may not be what the hon. Gentleman said, but I do not seek to make a play on words.

Does the Financial Secretary envisage the tax falling on the donee and the donor?

I was not envisaging anything. The hon. Member for Guildford asked me whether I thought it impossible to graft on a donee element. I was merely repudiating that I had denied the possibility of such a contingency.

The hon. Gentleman is just playing with the Committee, and having fun. He knows perfectly well that what we have suggested, both last night and today, is that a donee element should be introduced in succession to the estate duty arrangements. Last night the Chancellor of the Exchequer claimed that it was impossible to do that because the estate duty arrangements and the traditions surrounding them had been built up around the donor principle. I asked whether it was possible to move to a donee system, not add it to something which exists, which would be absurd, as the Financial Secretary knows perfectly well.

I assure the hon. Gentleman that I was not seeking to play with the Committee. That is not my wont. As I heard his words, he said that I had said that it was impossible to graft on a donee element. Perhaps my note is inaccurate. I said that as far as I could see it was not impossible to do that.