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Conditional Exemption For Certain Buildings Etc On Death

Volume 887: debated on Wednesday 5 March 1975

The text on this page has been created from Hansard archive content, it may contain typographical errors.

'(1) Where any of the following property was included in the estate of a person immediately before his death, that is to say—
(a) land which in the opinion of the Treasury is of outstanding scenic or historic or scientific interest;


(b) a building for the preservation of which special steps should in the opinion of the Treasury be taken by reason of its outstanding historic or architectural interest;

10(c) land which adjoins such a building as is mentioned in paragraph (b) above and which in the opinion of the Treasury is essential for the protection of the character and amenities of the building, or
(d) an object which in the opinion of the Treasury is historically associated with such a building as is mentioned in paragraph (b) above;
the Treasury may, on a claim made for the purpose, designate the property as property to which this section applies.
15(2) Where, with respect to any property to which this section applies, an undertaking is given, by such person as the Treasury think appropriate in the circumstances of the case, that, until the person entitled to the property dies or the property is disposed of, whether by sale or gift or otherwise, reasonable steps will be taken—
20(a) in the case of land falling within subsection (1)(a) above, for the maintenance of the land and the preservation of its character; and
(b) in the case of any other property, for the maintenance, repair and preservation of the property and, if it is an object falling within subsection (1)(d) above, for keeping it associated with the building concerned;
25and for securing reasonable access to the public, the value of the property shall be left out of account in determining for the purposes of this Part of this Act the value transferred by the transfer of value made on the death of the person mentioned in subsection (1) above (in this section referred to as the value transferred on his death).
30(3) Where, under subsection (2) above, the value of any property has been left out of account and the Treasury are satisfied that at any time the undertaken given under that subsection in respect of that property has not been observed in a material respect, then, subject to subsection (5) below, tax shall be chargeable in accordance with subsection (7) or (8) below with respect to the property and any property associated with it, and the person liable for the tax shall be the person who, if the property were sold at the time the tax becomes chargeable, would be entitled to receive (whether for his benefit or not) the proceeds of sale or any income arising from them.
35(4) Where, under subsection (2) above, the value of any property has been left out of account in determining the value transferred on the death of any person and—
(a) subsection (3) above does not apply; but
(b) the property is disposed of, whether on sale or otherwise.
40then, subject to subsections (5) and (6) below, tax shall be chargeable in accordance with subsection (7) or (8) below with respect to the property and any property associated with it, and the person liable for the tax shall be the person for whose benefit the property is disposed of; but where the value of the property has been left out of account on the death of more than one person the tax chargeable under this subsection shall be chargeable only by reference to the last death.
45(5) The Treasury may direct that the tax chargeable under this section on a failure to observe an undertaking with respect to any property or on the disposal of any property shall be chargeable with respect only to that property, if it appears to them that the entity consisting of the building, land and objects concerned has not been materially affected.
50(6) Tax shall not be chargeable under subsection (4) above with respect to any property—
55(a) on its being sold by private treaty to a body mentioned in paragraph 10 of Schedule 6 to this Act or on its being disposed of to such a body otherwise than by sale; or,
(b) if it is disposed of otherwise than by sale and the undertaking previously given with respect to it is replaced by a further undertaking under subsection (2) above; and for the purposes of subsection (4) above the acceptance of any property under paragraph 16 of Schedule 4 to this Act shall not be treated as a disposal of the property.
60(7) Where, under this section, tax becomes chargeable with respect to any property within three years of the death on which its value has been left out of account—
(a) the value of the property (at the time of the death) shall no longer be left out of account and tax shall be chargeable on the value transferred on the death as if this section had never applied to the property; and
65(b) the tax chargeable under this section with respect to the property shall be so much of the tax chargeable on the value transferred on the death as is attributable to the value restored under this subsection.
70(8) Where, under this section, tax with respect to any property becomes chargeable more than three years after the death, the tax shall be so much of the tax that would have been chargeable on the value transferred on the death as would have been attributable to the value of the property if—
(a) this section had not applied to the property; and
(b) the value of the property at the time of the death had been equal to its value at the time the tax becomes chargeable and, if it becomes chargeable on a sale, that value had been equal to the proceeds of sale.
75(9) For the purposes of this section two or more properties are associated with each other if one of them is a building falling within subsection (1)(b) above and the other or others such land or objects as, in relation to that building, fall within subsection (1)(c) or (d) above.'—[Mr. Joel Barnett.]

Brought up, and read the First time.

5.30 p.m.

The clause stems from an undertaking which I gave in Committee. Paragraph 11 of Schedule 6 exempts gifts of national heritage property which are made to non-profit-making bodies. The clause offers similar relief for national heritage property in private hands. The intention is to avoid liability of national heritage properties until a decision is taken in the light of the report of the Select Committee on the Wealth Tax. We intend to have a fresh look at the whole question of lifetime transfers, but there should not be cause for concern because there is no need to make transfers for lifetime in the interim period, and in the event of tragic accident or death there would be no liability to capital transfer tax.

The right hon. Gentleman will, I know, wish to deal with one important matter which came up in Committee; that is to say, chattels of historic value held not by individuals but by discretionary trusts. I understand from what the right hon. Gentleman said that those objects will be caught by the tax if they are held in discretionary trusts for the 10-year period or if they are passed on in any way. I hope that the Chief Secretary will deal with this matter, as he gave in Committee what I took to be an undertaking.

I am obliged to the hon. Gentleman. I was saying that the intention is to avoid liability of national heritage properties until a decision is taken in the light of the report of the Select Committee. Effectively, until that report is received and we have made further decisions, there will be no need for capital transfer tax to arise on national heritage properties. As we made clear in Committee, it is our intention to try to preserve as far as possible national heritage properties.

For the benefit of the House I will give a brief summary of what we are doing in the clause and the extent to which it differs from what some hon. Gentlemen might prefer. There are three basic differences from the relief under paragraph 11 of Schedule 6, which allows the exemption for gifts to non-profit-making bodies.

The first is that in paragraph 11 the cost of preserving buildings of aesthetic interest is allowed. The second is that the land adjoining the building has been more closely defined than in paragraph 11. It must be land which is essential for the protection of the character and the amenities of the building. I do not think that the House will find that unreasonable. The third is that the chattels need not necessarily be first-class works of art but must be historically associated with the building. Again, I hope that will be acceptable to the House.

We come to how one decides whether a property should qualify. I give the House the assurance that the Treasury will consult other Departments and outside bodies to make absolutely certain that all historic houses and properties which should be included are included as recommended by the appropriate bodies. I hope that that will be acceptable to the House.

I turn to the question of upkeep and maintenance to which we referred in Committee. It is possible that there may have been a misunderstanding, and to the extent that it may have been my fault I apologise to the House and to the hon. Members for Horsham and Crawley (Mr. Hordern) and Cirencester and Tewkesbury (Mr. Ridley). In discussions upstairs my specific commitment in the early hours of one morning related to maintenance funds and arose when we were debating paragraph 11(2)(e), which refers to non-profit-making bodies. Because of the procedural arrangements, we debated Schedule 6 before debating Schedule 4 and Clause 29, on which we discussed the matter again later.

When we debated the matter at the Seventh Sitting—which was the same day as the day on which we finished the Sixth Sitting—the hon. Member for Cirencester and Tewkesbury said:
"Then there is the more remote and, I agree, more difficult question of land which might have been an endowment for the house. If extra land or even other assets are exempted, that will provide the money for the upkeep of the house. Clearly, no one can keep up a house of the character of which we are speaking on one acre.
I put those three possibilities for inclusion among the assets which could be exempted while waiting for Godot."
I replied to that by saying:
"The hon. Member for Cirencester and Tewkesbury mentioned other assets. The problem here—indeed, this is what one hopes for from a Select Committee—is defining other assets, and that might be a little difficult."
That is the problem. Later, on Clause 29, it is possible that I might have misled the Committee when I was thinking in terms of Schedule 11, on which I had given a commitment earlier that morning. I may have given the impression that I would put down an amendment relating to the more general aspect of historic houses, and I would not want the House to have that impression.

A little later on the right hon. Gentleman said:

"anything required for the upkeep of any particular national heritage would be covered and would be exempt."—[Official Report, Standing Committee A, 6th February 1975; c. 1095–7.]
Those are the words upon which our hopes depend, and I am sure that the right hon. Gentleman will not mind my reminding him of them. Perhaps he will explain what he will not carry into action, or give us some hope of action in the future.

I am disappointed in the hon. Gentleman. I know that he sat through the night to listen to what I had to say, and I am always grateful to anyone who does that, apart from members of the Committee who had to—other than those who went into another room for a sleep. [Interruption.] I agree that the Liberal Member never stayed. He told us that he turned into a pumpkin at 12 o'clock.

I fairly told the House that I may inadvertently have misled the Committee. As is clear to anyone who reads the Official Report or who listened to what I said, I was referring to the other schedule which relates to public bodies. I will come in a moment to whether we can give relief for the maintenance of transfers in private hands.

The treatment that we offer in the clause is not unreasonable. I know that the hon. Member for Bristol, West (Mr. Cooke) is not a churlish man. He has been generous in praising what we have done in the clause, and I am obliged to him. It is a change for someone to say something nice about us, and I appreciate it.

On the question whether we should go further and give additional relief for funds to maintain a historic house in the hands of a private owner, that is an important matter about which I know that some of my hon. Friends are also concerned. There is a major difference between a public body and a house of this kind in private hands. What would be the size of the fund which could be set aside? How would we define an endowment or settle an amount for these purposes?

I hope to deal with the amendments taken with this clause when I have heard what hon. Gentlemen have to say about them. At present the amendments go very wide on this point and I certainly could not agree to accept them.

As I said in Committee, I recognise the problem. Having given relief under this clause we have no wish to see historic houses destroyed. That is not our intention. The very nature of the new clause makes that clear. However, to allow an unspecified sum for the maintenance of those houses as opposed to the maintenance of any other house would be going much too far. We have been quite generous in this clause. We have no desire to harm the national heritage.

I shall be happy to look again to see whether we can do anything about maintenance. At present I hope that the House feels that we have gone a long way towards meeting the problem, perhaps further than hon. Members have asked.

I hope that the right hon. Gentleman does not find me in any way churlish if I return to the matter on which we have just exchanged views. All those who have been campaigning throughout these long tedious months are grateful to the Government for putting down new Clause 6. The right hon. Gentleman said that there is no need to bother about lifetime gifts. He might like to think about the case where an ageing owner, perhaps approaching senility, wants to hand over his property to an heir who is in the prime of life. If we enact the Bill as it stands, the ageing owner will have to keep the property until he dies because it would not be convenient to hand it over in life.

We are not ungrateful. This proposal is the result of months of work by many interests outside this House and by many hon. Members. I hope that no one is against us in what we are trying to do, although not all hon. Members are yet prepared to take all the positive action required.

There is one glaring omission in new Clause 6. I turn to the question of resources. We have dealt with historic houses, gardens, contents, and amenity lands protected from the effects of the capital transfer tax in exchange for reasonable public access. It is difficult to see how these places can be maintained for reasonable public access without maintaining resources. It is not to put any class of owner in a specially privileged position. It is so that these houses can be maintained and enhanced in the future and enjoyed by a wider public.

5.45 p.m.

We accept the right hon. Gentleman's explanation that he meant to refer to something different. When he replies to the debate I hope he will make it clear that the Government realise that these places we all seek to protect cannot be kept going without resources. Are the house and the amenity land to be protected in isolation? Can we envisage a situation in which places like Chatsworth or Blenheim Palace are protected from capital transfer tax and perhaps from the wealth tax but in which the great estates which support these houses are gradually chipped away because of CTT and the wealth tax? I do not believe that the Government want that to happen.

Perhaps they could send a message to the Select Committee examining the wealth tax asking it to bear in mind the need to protect these vitally necessary resources. I am member of that Select Committee and we meet in public. It is no secret to say that there have been massive representations on this matter as it affects the national heritage, just as there were on the capital transfer tax.

I want to leave the right hon. Gentleman in no doubt that, although there are Labour Members who support us, the Opposition are absolutely solid in believing that the Government must protect resources so that private owners can continue to operate for a public purpose. We seek to give resources to private owners so that these houses can continue to be enjoyed by a wider public and so that more property is available to be enjoyed.

If the right hon. Gentleman is in doubt about how the amount should be specified, let him take note of the case of Heveningham, now costing the taxpayer £30,000 a year, and increasing, because the resources for historic houses have been withdrawn.

I hope I have said enough to convince the right hon. Gentleman that, although he is not prepared to go all the way today, this is a matter to which we shall wish to return in the near future.

I thank the Chief Secretary, the Chancellor and all Ministers responsible for meeting the case which some of us put forward at an early stage. I have never had any doubt that they were all sympathetic to our objective and anxious to do nothing to destroy our national heritage or anything which might endanger the continued existence of historic houses. When we put forward our case none of us had any doubt but that the Government would go as far as possible to meet our request. They have gone a long way towards it. Everyone interested in the preservation of our national heritage must be grateful to the Government.

The problem of exempting properties whose revenue is essential for their upkeep was mentioned by the hon. Member for Bristol, West (Mr. Cooke) and is elaborated in an amendment which I hope to move. The Chief Secretary has said that it is exceedingly difficult to define which properties should be exempt from capital transfer tax. We could make the exemption too wide, which would make it ridiculous, or too narrow, which would be useless. For this reason those societies and those hon. Members who are interested in the preservation of our national heritage have not attempted themselves to put forward detailed proposals as to the properties which should be exempt.

I do not blame the Chief Secretary for not going into detail now or saying that he will exempt this, that or the other property. However, I ask him to appreciate that this debate throws up a real problem. It is no use preserving buildings of national interest for cultural or historic reasons unless funds are available for their upkeep. Unless some action is taken on the lines set out in the amendment, some of these buildings will not be kept up and their contents will be sold or will decay. They will certainly be lost to the public and the public will no longer be able to visit these houses and enjoy their contents.

I ask no more of the Chief Secretary than that he should look at the problem again to see whether there is any way of defining such properties as exempt, and whether they could be put into categories, making such restrictions as he feels fit. Surely there is some way of tackling this problem, and I hope that that way will be found. We suggest that three months after the passage of the Bill the Government should present a statutory order setting out proposals in detail. That may or may not be a good idea. But it is important to take some sort of action soon to preserve the fine buildings in various parts of the country which may otherwise be lost to the public.

I beg the Government not to say "No, this cannot be done. It is too difficult." I hope that they will not take the view that no practical definition is possible. I hope they will decide that something must be done.

I thank my right hon. Friend the Chief Secretary sincerely for his sympathy and interest and for tabling the new clause. It is nearly perfect—and it would be quite perfect if he were to accept the spirit of our amendments.

I join the right hon. Member for Vauxhall (Mr. Strauss) in thanking the right hon. Gentleman the Chief Secretary for making a determined effort to put articles of historic national importance outside the capital transfer tax provisions. I wish to draw the attention of the right hon. Gentleman to some remarks in Committee; I know that he is anxious to help and to achieve certain objectives.

The Chief Secretary said on 5th February:
"I shall be happy to look at that. I have no wish, and neither has the Chancellor, to leave any threat to the national heritage, in which I include historic houses."
When the endowment issue was raised, he said:
"The second point is that the amendments would widen the scheme of the exemption provided by the paragraph so as to provide exemption for property given as a source of income for the upkeep."—[Official Report, Standing Committee A, 5th February 1975; cc. 991–4.]
Again I see no objection to that relatively minor extension.

I am sure that the Chief Secretary accepts the point made by my hon. Friend the Member for Bristol, West (Mr. Cooke) that it is not possible to keep these buildings unless some form of endowment is allowed as well. I do not know what is the best way to secure this end. I only know what will be the consequences if some form of endowment is not allowed. I am sure that the Chief Secretary is conscious that, whatever the form is, we all agree that some form of allowance must be made for the owners of historic properties to enable the proper upkeep of goods and chattels of national importance.

I wish to refer to objects of national interest and chattels of national importance held in discretionary trusts. I know that the Chief Secretary has tried to deal with the point and has given an undertaking to return to this matter. He emphasised that articles now held in discretionary trusts need not be put at risk because the Government will be entering into detailed considerations. However, the matter is not quite like that. The situation in respect of objects so held in discretionary trusts, and as it affects those who are in the position of trustees, is that, while the 10-year rule is no longer a threat, what the trustees have to advise upon is a scale under which objects will be subject to a charge of 10 per cent. if action is taken in the first year. That charge will rise in future years.

This is an unsatisfactory situation because the trustees will be in no position to advise those who are beneficiaries of these trusts or who would qualify in every other way on how best to proceed. This will not happen unless a clear undertaking is given by the Government, and particularly by the Chief Secretary, that if objects of great national importance are held in discretionary trusts the Government will see to it that they are exempted from the charge. Unless they have such an assurance it will be impossible for trustees to give proper advice or take proper action.

This is no small matter. The objectives are clear. If objects and chattels are owned by private individuals they are now exempt; but many objects, such as pictures, worth hundreds of thousands of pounds in buildings open for viewing by the public are now, as the situation stands, under considerable threat. It may well be the trustees' duty to look at the position as it is and to suggest that pictures of real national need, and indeed of world-wide interest, should be disposed of rather than held in discretionary trust. This is an important matter, and I believe that the Chief Secretary should give a clear undertaking that all such objects—objects which are plainly of national importance and interest, whether held privately or in discretionary trusts—should be exempt, whatever arrangements the Government may bring forward later.

I wish to declare interests as a member of the Historic Building Council and as a member of the Executive of the National Trust. We have in the United Kingdom a national heritage equal to that anywhere in the world, and certainly in Europe. Therefore, everything should be done to preserve that heritage.

Before I turn to the subject of historic houses, which is the nub of this debate, I wish to make clear that the public do not fully understand that the Historic Buildings Council and the National Trust are not interested only in the highlights such as Chatsworth. The National Trust owns enormous properties in the Lake District and around our coasts, much of which brings in little revenue. It owns many woodlands, especially in the Lake District, of a deciduous character and maintained for amenity purposes at great expense. The work of the Historic Buildings Council is increasingly moving into the core of historic towns, such as Bath and Chester, and of conservation areas, many of which are in the old industrial towns such as Newcastle, where a great deal has been done to stir up public interest, through both individuals and local authorities in seeking to make the best of our heritage in those areas. I appreciate the fact that the Govern- ment have increased the grant to the council to enable it to extend its work especially in this sphere.

I should like to inquire of my right hon. Friend the Chief Secretary what he believes should be done to preserve our heritage. In one respect we are lucky, since, apart from German bombing during the war, the main damage inflicted on our historic heritage has been that brought about by the activities of developers in pulling down buildings, the attraction of which they do not appreciate. However, at least we have not had battles since the Civil War in our countryside which have destroyed our buildings. That is one great point of advantage we have in attracting tourists to come to the United Kingdom to see some of the best things we have to show. We should remember that fact when considering the award of grants to enable our national heritage to be cared for.

6.0 p.m.

The National Trust owns many historic houses. That causes great problems. The National Trust cannot accept a house unless there is an endowment to go with it. Some of its properties were accepted without adequate endowments and became a charge on the general funds, which again presents a problem. In the past the Government have tried to unload on the National Trust a number of properties which came their way. The Government suggested, and almost insisted, that the Historic Buildings Council should give grants to the National Trust to maintain buildings such as Hardwick. That has not always worked out well financially. The National Trust is not keen to accept further properties passed to it by the Government even if grants are awarded for their upkeep. That is not a satisfactory way of trying to deal with part of our national heritage.

In the main, the Department of the Environment looks after buildings such as castles which are ruins. It maintains buildings of national importance, such as Hampton Court. An interesting exception is provided by the house at Audley End, which I visited in 1947 when it first came into the hands of the Government to be looked after. That building was then in very bad condition. However, I must give credit where it is due since that is now a fine example of a house which has been well preserved and maintained. However, it has been very expensive for the Treasury to do that over the years.

We have a similar problem as regards Heveringham, which was taken over prior to 1970 when the Labour Government were in office, to prevent its being pulled down because it was in danger. Ever since then the Treasury has tried to get rid of it. However, it still has to maintain that house.

If houses are to be preserved and maintained by private owners and opened to the public for the benefit of the nation, we must look at the problem of finance. Do the Government wish to give large subsidies to maintain such houses? I would have thought, given the present financial circumstances, that no Government could recommend a policy of that kind. I suggest, therefore, that the most economic way of preserving our national heritage is to make suitable financial arrangements for the maintenance of such houses. I do not suggest that undue privileges should be granted to owners. I suggest that there must be an adequate endowment for the maintenance of the house, which may partly come from fees charged to visitors. We know that such fees will go only a small way towards meeting the cost of the upkeep and running of a country house, although that may be a fact to take into consideration. I suggest that there must be an adequate endowment to go with a house which is worth preserving, if it is to be preserved in the most economic way for the benefit of the nation.

There is a need to establish a body to vet applications from persons for special endowments for the preservation of their houses. What better body can there be than the Historic Buildings Council to do that job? Its present job is to vet applications made for grants for the maintenance of houses. I think that is the right body for the Treasury to use if endowments are to be made for the preservation of houses.

The present legislation governing the Historic Buildings Council is aimed at the idea of people putting up some of the money themselves, with the Historic Buildings Council, by means of Government grants, putting up the other part of the money. Frequently 50 per cent. comes from a local authority owning such a house or from a private owner. A problem arises if no one has the money to put up to preserve that house, since the house then tends to become a ruin. As a nation we must face up to that problem. It is impossible for local authorities to take over such houses. Given the present rating system, which local authority will do so?

Another problem is: what shall be done about historic houses whose owners have no money to put towards preservation? The Historic Buildings Council cannot pay 100 per cent. of the costs in a great many cases, although it may pay more than 50 per cent.

I request the Financial Secretary to say what the Government feel is the most economic way of maintaining those houses which are worth preserving. Will he consider referring the problem to the Select Committee on the wealth tax? That body could go into the matter very fully and make suggestions. The problem must be faced. We cannot just leave it on one side.

The Opposition congratulate the members of the Standing Committee and my hon. Friend the Member for Bristol, West (Mr. Cooke) and those outside the House who have been associated with the sterling efforts to persuade the Government of the real need to finish what has been started.

The speech of the hon. Member for Dagenham (Mr. Parker) showed experience and knowledge of the subject, as did that of the Father of the House, the right hon. Member for Vauxhall (Mr. Strauss).

There is undoubtedly a wealth of talent on this subject in the Treasury. It is not generally recognised that the British Museum, which is so well looked after, comes under what is sometimes regarded as an ogre but which nevertheless possesses a wealth of wisdom in regard to the fine arts.

I wish to deal with the problem of the small houses which form part of our historic heritage. The large houses and grounds are clearly provided for within the terms of the clause. My hon. Friend the Member for Horsham and Crawley (Mr. Hordern) dealt with the position of the discretionary trust. From a fairly long knowledge of the background of our smaller houses, I think that the clause will require widening and amending. Curiously enough, I think that the words appear already in another subsection.

The new clause deals not only with outstanding scenic, historic and scientific interest as regards land but also with the inclusion of land adjacent to buildings which in the opinion of the Treasury is essential for the protection of their character and amenities. However, that definition does not apply to contents. The words deal merely with an object which in the opinion of the Treasury is historically associated with the building. That is not the reality of the picture.

There are two different classes. Let us take a case such as Bleak House in Thanet. Bleak House is associated with Charles Dickens. As a house it is certainly no beauty—quite the contrary. Presumably it would come within the terms of a building of outstanding historic interest. However, the whole of its historical interest devolves around the contents. Basically they are historically associated with the house and are essential for the protection of the character and amenities of the house. Although I agree with that, I nevertheless feel that the application of some of the amendments is much too wide.

We have to ensure that the class 2 and class 3 houses of great character are maintained. There are many in my own county of Kent. They are buildings of the fifteenth, sixteenth, seventeenth and eighteenth centuries, all of which are of great interest to the public. A good example is Mereworth, which is probably one of the finest buildings of the eighteenth century. The whole essence of it is also part of its contents. Another good example is Knole, probably the greatest seventeenth-century house in England. But it would be nothing without its silver and its Venetian room. As for Bleak House, it is pointless to attempt to certify it, but it is essential that the Dickensian objects in it and the sense of Dickens are maintained. Every encouragement should be given to see that some of these houses are developed and maintained along these lines, because we want to see the public going to them.

However the problem of endowments is dealt with—and clearly everyone will listen to the National Trust and the Historic Buildings Council on the subject—there are wealthy people who may be persuaded to maintain these places so that they can be seen by the public. Provided that they do not have to pay the capital transfer tax and provided that there is some form of definition that where the objects and chattels are in the opinion of the Treasury reasonably necessary to protect the character and amenities of a house, I am sure we can secure the protection not only of the building and grounds but also of the contents. That is not to say, of course, that they will protect everything in a house. But it is necessary to ensure that we protect the reality of the heritage, which must be viewed in a broad spectrum.

As we lawyers know, the use of the words
"in the opinion of the Minister"
"in the opinion of the Treasury"
does not result in the danger of that view being overruled by the courts. The test is entirely subjective and depends entirely upon that decision. In the context of this measure, that is the right approach.

A great deal of excellent work has been done along the right lines. But I join with other hon. Members in saying that this is only part of the road. I hope that the Chief Secretary will reiterate that all the matters which have been taken into account until now and all the arguments advanced today will be borne in mind when the Government consider the future work of the Select Committee on the Wealth Tax. The two must run parallel. When the Government reconsider all these problems, it is to be hoped that any further amendments that may be necessary will be forthcoming in what appears to be an almost round-the-clock succession of Finance Bills that we are likely to have. They should be just about in time for the Standing Committee on the next Finance Bill to meet the difficulties which have been put forward today.

I rise to assure my right hon. Friend the Chief Secretary that in this matter at least he has friends on both sides of the House. That is quite a change from the atmosphere in Committee upstairs and in earlier debates on Report.

Despite the genuine disappointment that has been voiced, most of it based entirely on misunderstandings, my right hon. Friend can draw a great deal of satisfaction from the fact that there is a genuine feeling that he has attempted to put into legislation what was said by the Chancellor of the Exchequer in earlier debates and by himself and his colleague upstairs and that the Bill has been improved by the addition of this clause. There are interests outside this House who recognise that, and they have asked me and others to say so.

6.15 p.m.

That does not prevent us from expressing disappointment that the clause does not fulfil all that we had hoped. I do not believe that anyone prior to looking at the clause would have quibbled with the general expressions and declarations of intent, which have been referred to in detail already. All that I wish to do in order to underline that view is to quote from a speech I made in Committee. I said:
"To show my absolute confidence in the belief that the future will bring all that has been forecast by the Chancellor and the Chief Secretary, I beg to ask leave to withdraw the amendment."—[Official Report, Standing Committee A, 18th February 1975, c. 2119.]
There was a genuine feeling that what my hon. Friends had in mind would be put into legislative form.

Having heard the explanation from my right hon. Friend the Chief Secretary, however, it is clear that we have not been on the same wavelength when listening to earlier debates. That is acceptable to me, and I hope that the Chief Secretary means what he said. We are going through a number of stages. My right hon. Friend and his colleagues feel that they have gone as far as they need to go and are able to go in the circumstances. Many of us feel that it was possible to go further. But care has been taken to separate the issues of gifts on death and lifetime gifts. What is more, from the numerous allusions which have been made to the fact that the Select Committee on the Wealth Tax is sitting, there is clearly another stage in which aspects of our national heritage will be protected. I have in mind especially the need to recon- cile the belief that it should be protected with the hope that we shall not be silly enough to say that what we wish to do is to maintain a house and its grounds but that we shall deny the wherewithal to those who wish to do it. There is a dichotomy there, and on close examination the illogicality of making such a sweeping statement and then ignoring the inevitable consequence of having to deliver the goods will be seen in good time.

I enjoyed very much a phrase used by thet hon. Member for Bristol, West (Mr. Cooke). He said that he liked the idea of private owners operating for public purposes. In the matters that we are discussing, I can see this being possible. It is obvious that there are properties, land and assets which are best owned, managed, controlled and funded publicly. But this is an area in which there is a wide range of sizes, circumstances, abilities and interests which need considering carefully.

The Bill contains a range of provisions, specifications and designations of what can and cannot be accepted as part of our national heritage. There is a wide understanding of the people who can guide the Treasury, and the Treasury has been honest enough to say that it will not be able to manage to dot every "i" and cross every "t". My hon. Friend the Member for Dagenham (Mr. Parker) mentioned the bodies which are available to assist the Treasury. They include the Society for the Protection of Ancient Buildings, the Georgian Group, the Victorian Society, the Civic Trust, the Ancient Monuments Society, the Historic Buildings Council, and the National Trust.

I want finally to say to my right hon. Friend the Chief Secretary that many people welcome the steps he has taken and believe that he is on the right lines. All of us want him to keep up the good work. We believe that he intends to be logical in the steps he takes. For us, logicality means practicality. We hope that he will listen to our arguments and welcome genuine expressions of opinion based on experience so that that which we all want will be achieved.

I am grateful for this opportunity of speaking in the debate, and I apologise to the Chief Secretary for coming in rather late.

I should declare my interest. Like the hon. Member for Dagenham (Mr. Parker), I am a member of the Historic Buildings Council for Scotland. I should like to add one or two particular points to which reference has been made by my hon. and learned Friend the Member for Thanet, West (Mr. Rees-Davies).

We, too, in Scotland have many small houses. The Historic Buildings Council for Scotland runs, as does its English counterpart, on a shoe-string budget. I think that it does miraculously good work. In every case where a grant is given a considerable effort is made by the owner of the property, otherwise no grant is given. Therefore, the owner in every case is playing a part and often undertaking a lot of hard work in making available to an increasingly wide public that part of our national heritage which otherwise cannot be preserved. If we help owners by giving them public money, we must clearly make it possible for them to make their own contribution. Otherwise the whole scheme will not work.

In Scotland the vast proportion of houses that we help are extremely small. If one travels from the border at Berwick anywhere up the whole of the east coast of Scotland, one will see in every village and town tiny houses included in those we are discussing today. We welcome the clause because it goes some way towards recognising the need to pursue our efforts in this sphere, which is very wide indeed.

In contrast to our small houses—and some of our great houses are able to some extent to maintain themselves—we have in our national heritage immense problems in other directions. We have, for example, the whole new town of Edinburgh. It has been variously estimated—I do not wish to give the Chief Secretary a shock—that it would cost over £20 million simply to preserve the new town. That is a formidable task for owners, public bodies and the Treasury alike. Yet there can be little doubt that throughout the whole of Western Europe there can be no greater single heritage than that part of Edinburgh which is so costly to us.

Now I should like to turn to the exhibition which was recently held in the Victoria and Albert Museum depicting the destruction of country houses, which is the other side of this same coin. It was tragic to look at room after room of photographs and pictures of houses already demolished and gone. Admittedly those houses were on the whole rather large, but there were many smaller ones as well.

I should also like to refer to a letter from the Chairman of the Historic Buildings Council for Scotland which covered evidence to the Select Committee on the Wealth Tax. The letter states:
"The council consider that the present climate of public opinion is in favour of the preservation of historic houses, and we welcome the Government's proposals towards this being possible."
The letter contains a phrase which is important and should be remembered today. It states:
"It is no good keeping these houses as State-run empty monuments or even as museums. The important thing is to enable them to be kept in living occupation."
It is that aspect that attracts the wide public that they enjoy and that we have a duty to support.

I should like to add my thanks to the Chief Secretary for tabling the clause and also for making what I thought was a fulsome apology for any misleading of the House or the Committee which might have been inferred from his remarks at various hours early in the morning on the two occasions when this matter was debated. It was because I thought that the right hon. Gentleman was not on the same point as my hon. Friend the Member for Horsham and Crawley (Mr. Hordern) and myself that I pressed him so hard. However, I do not think he is guilty of having breached an undertaking, although there was perhaps something misleading in what he said. I am prepared to accept his words at the Dispatch Box this afternoon.

I should like to press the point, which has been the theme of the debate, that assets of some kind must be available to keep the roof on and to keep repairs to a building up to standard. In only a few cases will the receipts from visitors be enough to discharge that burden. Often major repairs to a large historic house can run into tens of thousands of pounds.

It is necessary to press this point, even before the Select Committee on the Wealth Tax has reported, because an owner who cannot leave land or assets to support his house will clearly prefer to leave them to his heir, who will have to pay tax, or the owner will otherwise have to pay capital transfer tax. There will be no advantage in doing anything else. Therefore, it seems desirable, even at this late stage, to make provision for assets to be left for the upkeep of buildings.

Schedule 6, paragraph 11(2)(e), of the Bill refers to
"property given as a source of income for the upkeep of property within any of the preceding paragraphs of this sub-paragraph".
That relates to gifts for public benefit. The Government have met the need there. If it is possible to do that for gifts for public benefit, I do not see why it is not possible to exempt such assets for historic buildings which remain in private ownership.

The hon. Member for Dagenham (Mr. Parker) will know that I was one of his predecessors on the executive of the National Trust. The problem was always getting enough out of owners to make a reasonable endowment, partly because they might not have it and partly because they would prefer to leave as much as possible to their heirs. If the Chief Secretary were to accept any of the amendments in this group, the problem would not be that too much money would be left for the upkeep of houses and there could be too little upon which to pay tax, but that too little would be left by the owners because they would want to ensure that there was something left to pass on to their heirs.

If a scheme can be designed whereby property left for the upkeep of a house is put into a fund or trust which can be used only for the upkeep of such a house, I think that the need would be met. I cannot believe that a major form of avoidance would develop, because nobody would want to give more to the upkeep of a house than he believed to be strictly necessary. Indeed, there would be no advantage in so doing, because the more a person gave in trust for the upkeep of his house the less he would have to pass to his heirs or inheritors for their enjoyment.

I therefore strongly urge the acceptance of Amendment (k). It would give the Government time to design a form of trusteeship or holding account for any funds to be used for repairs. This would not be rushing matters. It is difficult now to devise a new form of words. However, I hope that when the Chief Secretary replies he will look favourably upon Amendment (k) or any of the other amendments which roughly meet the same need. We can lose some of our historic houses if we do not make provision now without waiting for the report of the Select Committee.

6.30 p.m.

Like the hon. Member for Dagenham (Mr. Parker) I, too, must declare something of an interest. I have the honour to be vice-chairman of Heritage in Danger, an all-party committee which has been formed to seek to point out to the Government many of the difficulties which could arise were CTT and the wealth tax to be imposed without considerable attention being paid to this problem. I add my congratulations to those which have been offered to the Chief Secretary for the thought which has been put into the new clause and, like other hon. Members who have spoken in this brief but constructive debate, I welcome it and thank the Government for bringing it in.

However, I think that the clause will frustrate the Government's good intentions unless they listen carefully to the points that have been made during the debate, particularly about the endowment of these properties. My right hon. Friend the Member for Renfrewshire, East (Miss Harvie Anderson) referred to the remarkable exhibition at the Victoria and Albert Museum, "Destruction of Country Houses". One thing that came out clearly from the exhibition, as anybody who visited it will agree, is that inheriting a property of this sort these days is no windfall, but brings enormous problems to the owners.

I have seen an example of this in my constituency, where a marvellous house built in the eighteenth century by Soane, with a magnificent Capability Brown landscaped park, has created great problems for the owner. He is having to devote his all to keeping that house for the nation. It is not a house which is full of prime national treasures, but Staffordshire would be very much poorer without it and it is important that it should be maintained.

The owners of these houses, as was pointed out by William Morris, who should commend himself to Labour Members, are trustees for posterity rather than owners of things of incalculable worth. One remembers Ruskin, who said he would rather live in a cottage and have Warwick Castle to be amazed at than live in Warwick Castle and have nothing to be amazed at.

This has been a constant theme of those who appreciate and feel for our national heritage. I know that this feeling is shared by the Chief Secretary, the Chancellor of the Exchequer and other Ministers on the Treasury Bench. I hope they will consider most carefully that unless there are proper funds to maintain these houses there will be one of two consequences. The owners will sell up, make themselves temporarily rich and contribute to the one-generation society which has been talked about in recent weeks and then the house will either fall down or be pulled down, as so many have, as was graphically illustrated at the Victoria and Albert Museum exhibition. Or the houses will become a charge upon public funds.

I can mention another example from my constituency. Weston Park must be known to many hon. Members. It is meticulously maintained, with many fine treasures: wonderful furniture, pictures and silver. It gives enormous pleasure not to tens of thousands but to more than 100,000 people each year. If it suddenly became a totally intolerable burden for its owner no Government could stand by and see it pulled down or closed down. Any Government, of whatever complexion, would wish that house to remain open and its treasures kept intact. It is best that it should remain open and its treasures kept intact under its present trusteeship—with no charge on public funds and no drain on local authority resources or the ratepayers—lovingly maintained, and, most important of all, kept not as a museum but as a home, with an atmosphere which no museum could ever emulate.

I hope the Chief Secretary will realise that the great houses and the small which help to make up the rich and varied fabric of our English landscape, some of which are constantly open and receive tens of thousands of visitors every year, and some of which it is impracticable to have open in that way, are part of our history and our heritage, and that their owners must be put in a position of being able to play that public part to which my hon. Friend the Member for Bristol, West (Mr. Cooke) referred. Therefore, they must have the back-up resources, be it agriculture or forestry, which enable them to do that, and I hope the Chief Secretary will make sure that this matter is dealt with properly.

The Select Committee on the Wealth Tax, to which Heritage in Danger has made detailed submissions, is discussing these matters, but because—

We decided not to meet this week because this debate was so important, but we shall be back at work next week.

I am grateful to my hon. Friend. That underlines the point.

So important and fundamental is this business of the national heritage, and so fundamentally does it transcend all party differences and lines, that there is no one who would wish to see these places closed and their treasures dispersed. It might be a good thing if there were a Special Select Committee on our national heritage. That might be the best way of dealing with the problem. I throw that out as a further suggestion to the Chief Secretary, and I hope that what he says today and what follows from his words will not in any way put in jeopardy this priceless part of England's history.

I apologise to the Chief Secretary for not being present to hear him open the debate. I congratulate my hon. Friend the Member for Bristol, West (Mr. Cooke) on the way in which he moved the amendment to the new clause. Perhaps I ought to declare an interest as the owner of a house, fortunately not an enormous one, of some architectural character built in 1742.

The alarming prospect which we face is that, increasingly, there will not be a sufficient source of income to maintain either the houses or the land which the new clause affects. The nub of the clause is to be found in subsection 2(a) and (b) where provision is made for the maintenance, repair and preservation of properties. Some hon. Members may have read in the Press fairly recently how the estate at Chatsworth has had to cut down largely on its staff employed for the maintenance of its grounds. Anybody who has been concerned with the maintenance of house property must be aware of the appalling and continuing escalation of building costs.

What we ought to be aiming for is securing for these houses, if they really are of national importance, any endowments that can be obtained for them. I am not so optimistic as the hon. Member for Dagenham (Mr. Parker), who said that what we need is adequate endowment. I think that if any private owners are prepared to offer any endowment the offer should be grabbed, and if the Government can work out some means by which these endowments can be secured for the preservation of these properties that will be an alleviation in the long run of the demands on the national Exchequer and at the same time will help to preserve our important national heritage.

May I start by thanking hon. Members for their kind remarks to me personally. It is quite overwhelming.

I say to my hon. Friend the Member for Edmonton (Mr. Graham) that we welcome advice about our historic houses and so on. I assure him that we in the Treasury welcome advice from all quarters on all subjects, but I go on to say that we are never short of advice on all subjects.

I have always very much appreciated the sincerely-held views of all those who have spoken in this debate about our national heritage, and I want to reply to the detailed points that have been put to me. Before doing that, however, perhaps I may give the hon. Member for Horsham and Crawley (Mr. Hordern) the assurance he seeks. He asked about discretionary trusts. With regard to works of art held in discretionary trusts, we think it unlikely that any problem will arise in the next year. However, I promise the hon. Gentleman and the House that we intend to meet the point in a future Bill. It is unlikely, because of the concessions we have made under discretionary trusts, that there will be a charge under the periodic charge for some years, at least until 1980, and long before that we shall have taken the necessary measures. I hope that that will reassure the hon. Gentleman and trustees who may be concerned.

The hon. Member for Bristol, West (Mr. Cooke) has an interest in these matters so great that he was able to stay up through the night about them. I hope he will agree, having referred to the problem of lifetime gifts and the ageing owner who would not want to hang on to them, that this is not really a problem because the owner would need to hang on to them himself for only a very short period until we have gone over the next step of the problem and had the report of the Select Committee on the Wealth Tax. We shall be considering that report and taking further action. There would be no need for that owner to dispose of the property and make himself liable for the tax.

A number of speakers have referred to some of the amendments. Amendment (r) would add to the property ranking for conditional exemption a group consisting of land, buildings and objects. Indeed, there is another amendment on the question of objects, to which the hon. and learned Member for Thanet, West (Mr. Rees-Davies) referred. This in some way relates to the whole question of the upkeep and preservation of property, to which I shall be coming shortly. However, as I think my right hon. Friend the Member for Vauxhall (Mr. Strauss) recognised, Amendment (r) would go much too wide. Incidentally, I am delighted to see the right hon Member for Renfrewshire, East (Miss Harvie Anderson) present in our discussions. She told us about the small houses in Scotland which need preserving—we all agree—and about the cost to private owners of preserving them. However, to include all objects would be to go too far. That would mean including for owners of historic private houses any object, whether or not it was in keeping with a house. I see that the hon. and learned Gentleman recognises that that would be to go much too wide.

Two of the amendments, (b) and (1) are not really necessary.

I said that I thought they were too wide and I suggested that a reasonable criterion was that which the Treasury has already laid down—namely, that the objects should be such as are reasonably necessary, in the opinion of the Treasury, to retain the character and amenities of the building. That is, in fact, using almost the very words of the new clause. Something along those lines would be probably much narrower and much more protective of the interests that the right hon. Gentleman has in mind.

I shall be happy to look at that matter. What is in the Bill now, however, relates to public bodies and it is a different question, as I have pointed out.

Amendment (b) seeks to make sure that land of "scientific interest" includes land of "horticultural or silvicultural interest". The answer is that it does. Therefore, the Amendments (b) and (1) are unnecessary.

The main question, as every speaker in the debate has recognised, is the problem of preservation. The crux of the problem arises very much out of the point made by my hon. Friend the Member for Dagenham (Mr. Parker). The problem of preservation and upkeep of these private houses is not altogether—indeed, not very much—a question of tax. It is a matter of financial resources for the preservation of these houses.

6.45 p.m.

We have tried to help in some ways, although not as much as many would have liked or as much as I should have liked, with grants. But as the House will know, we have some problems in relation to public expenditure. Much as I should like to increase public expenditure by increasing these grants for the preservation of historic houses and other parts of the national heritage, I am bound to look closely at any proposal for even the most valuable and helpful increase in public expenditure. The amendments go into a much narrower field and seek to give relief from capital transfer tax alone for the preservation and upkeep.

My right hon. Friend the Member for Vauxhall noted the difficulties in one of his amendments and he tried to deal with them by suggesting a statutory order to give us time to consider the best way of dealing with the matter.

The hon. Member for Thanet, West, my hon. Friend the Member for Dagenham and the hon. Member for Staffordshire, South-West (Mr. Cormack) suggested that we should have yet another Select Committee to consider these matters. But a number of right hon. and hon. Members may not be too happy about that.

As has been said, we are taking these matters in steps. We have given the relief in this new clause which should ensure that until the next step, when we have the report of the Select Committee on the Wealth Tax, there should be no problem for virtually all the private historic houses because there will be no need to transfer them in lifetime and at death they would then be exempt. The next step will be when we have the report of the Select Committee on the Wealth Tax, and that will be the time when we shall consider what it has to say and what hon. Members have said in this debate.

I hope the House will feel that this is the best way to deal with the matter, because it is a serious problem. We must contrast the positions of an owner of an ordinary private house, perhaps a large one that is not an historic house, and the owner of an historic private house. Both have problems in maintaining their houses. Therefore, in anything we do we must be particularly fair.

The hon. Member for Cirencester and Tewkesbury (Mr. Ridley) pointed out quite fairly that there would be no question of avoidance here. The particular owner could not leave too much because, first, he probably would not have all that much if he had been maintaining a historic house for many years and, second, he would want to leave something to his children or his wife. That may be so, but nevertheless one has to define the amount fairly closely, otherwise large sums could be left.

The right hon. Gentleman will appreciate that until he has the report from the Select Committee on the Wealth Tax and has taken action upon whatever it may suggest, whether or not he agrees about the resources, in the meantime we could easily have a situation in which historic houses and the amenities, gardens, land and contents of the houses might be protected but the estate could be sold off and we should have another national white elephant on our hands.

I do not see why that should be so. The owner would know that at death there would be no question of any capital transfer tax arising. He would know, as I have said, that as soon as we have the report of the Select Committee on the Wealth Tax—which I hope will not be too long delayed, although even if it is a little delayed it will not be that long in coming—we shall look at the whole question of lifetime transfers. I cannot be fairer than that. This is a reasonable approach. As one hon. Member said, let us approach it in stages and in the first instance ensure that there is no danger to historic houses in the event of a sudden and tragic death. We have done that.

I hope hon. Members will think that what we have done is the best way of approaching the matter. Our whole purpose has been constantly to ensure that the national heritage is preserved as far as possible. The problem is largely one of money and not one of tax. Generally I hope that the way in which we have approached the problem will commend itself to the House.

The Chief Secretary will not be surprised if the House is a shade disappointed with his reply, for two reasons. First, we welcome the new clause, and our hopes were raised by words in the clause which to some extent improve the situation and in another respect reprieve those parts of our national heritage over which a shadow was cast, as it was cast over so many other parts of our life, by the tax.

Our second reason for being disappointed arises from what occurred in Standing Committee. We fully accept the Chief Secretary's explanation of his words in Committee, but my hon. Friends have pointed out one or two instances where as a result of the right hon. Gentlemen's words we might have been misled.

Before we conclude the debate it is right to go further and remind the Chief Secretary of some further exchanges in Committee. The hon. Member for Edmonton (Mr. Graham), who spoke with great authority and enthusiasm on these matters when we dealt with Schedule 4, said:
"We must try to design a form of protection which will provide not only for the fabric but for its maintenance."
That was very much the point that hon. Members on both sides have made this afternoon.

The Chief Secretary replied in this way:
"In looking at how to deal with it I promise the Committee that I accept what lies behind the amendment."
The right hon. Gentleman repeated himself:
"In that sense, I accept what lies behind the amendment. We shall seek to incorporate all that has been said by hon. Gentlemen when we come to our conclusion on the matter."—[Official Report, Standing Committee A, 18th February 1975; cc. 2191–95.]
Many of us had the strong impression—it was more than just a hope; it was more than just hanging on to yet another of what we call the "happy to look at" undertakings which were so numerous in Standing Committee—that the matter was to be set right by appropriate amendments on Report. We have been disappointed on looking at the new clause.

The point is an essential one. It concerns, in the graphic words of my hon. Friend the Member for Bristol, West (Mr. Cooke), the question of private resources dedicated to a public purpose. It concerns support for the mansion—the great house, or whatever it is—without which, in too many countries and in too many parts of this country and neighbouring countries, the net result is that most pathetic of all sights—the great derelict house, the rotting mansion of the past, with its estate removed from it. Without private resources there is no possibility of maintaining the heritage which both sides of the House want maintained.

The Chief Secretary referred to the practical problems. Certainly there are problems. I do not regard them as insuperable. I believe that the Historic Buildings Councils of England, Scotland and Wales and the appropriate bodies in Northern Ireland have the necessary skills to assess cases. The Chief Secretary was worried about how it would be possible to decide what income would be needed. Schedule 6, paragraph 11(3)(c) provides—this is dealing with gifts for public benefit, which is a different case—a means by which the Treasury can assess what income is needed for the upkeep of the property. Therefore, I do not think that the administrative problem is insuperable.

Although, obviously, we welcome the new clause I do not think that we have seen fulfilled this afternoon what we had a right to expect would be fulfilled. I recommend my hon. Friends that they support Amendment (k) in the names of the hon. Members for Dagenham and Edmonton and the right hon. Member for

Division No. 126.]


[6.56 p.m.

Adley, RobertEdwards, Nicholas (Pembroke)Hicks, Robert
Aitken, JonathanElliott, Sir WilliamHolland, Philip
Alison, MichaelEvans, Gwynfor (Carmarthen)Hooson, Emlyn
Atkins, Rt Hon H. (Spelthorne)Ewing, Mrs Winifred (Moray)Hordern, Peter
Awdry, DanielEyre, ReginaldHowe, Rt Hn Sir Geoffrey
Bain, Mrs MargaretFairbairn, NicholasHowell, David (Guildford)
Banks, RobertFairgrieve, RussellHowells, Geraint (Cardigan)
Beith, A. J.Farr, JohnHunt, John
Bennett, Dr. Reginald (Fareham)Fell, AnthonyHurd, Douglas
Berry, Hon AnthonyFinsberg, GeoffreyIrving, Charles (Cheltenham)
Biffen, JohnFletcher, Alex (Edinburgh N)James, David
Biggs-Davison, JohnFletcher-Cooke, CharlesJenkin, Rt Hon P. (Wanst'd & W'df'd)
Blaker, PeterFookes, Miss JanetJessel, Toby
Bowden, A. (Brighton, Kemptown)Fowler, Norman (Sutton C'f'd)Johnston, Russell (Inverness)
Boyson, Dr. Rhodes (Brent)Fox, MarcusJones, Arthur (Daventry)
Bradford, Rev RobertFraser, Rt Hon H. (Stafford & St)Jopling, Michael
Brittan, LeonFry, PeterJoseph, Rt Hon Sir Keith
Brotherton, MichaelGalbraith, Hon. T. G. D.Kaberry, Sir Donald
Brown, Sir Edward (Bath)Gardiner, George (Reigate)Kellett-Bowman, Mrs Elaine
Bryan, Sir PaulGardner, Edward (S Fylde)Kershaw, Anthony
Buchanan-Smith, AlickGilmour, Sir John (East Fife)Kilfedder, James
Buck, AntonyGlyn, Dr AlanKimball, Marcus
Budgen, NickGoodhart, PhilipKing, Evelyn (South Dorset)
Bulmer, EsmondGoodhew, VictorKing, Tom (Bridgwater)
Burden, F. A.Goodlad, AlastairKnight, Mrs Jill
Butler, Adam (Bosworth)Gorst, JohnLamont, Norman
Chalker, Mrs LyndaGower, Sir Raymond (Barry)Lane, David
Churchill, W. S.Grant, Anthony (Harrow C)Langford-Holt, Sir John
Clark, Alan (Plymouth, Sutton)Gray, HamishLatham, Michael (Melton)
Clark, William (Croydon S)Grieve, PercyLawrence, Ivan
Clegg, WalterGriffiths, EldonLawson, Nigel
Cockcroft, JohnGrimond, Rt Hon J.Le Marchant, Spencer
Cooke, Robert (Bristol W)Grist, IanLester, Jim (Beeston)
Cope, JohnGrylls, MichaelLewis, Kenneth (Rutland)
Cormack, PatrickHall, Sir JohnLloyd, Ian
Corrie, JohnHall-Davis, A. G. F.Loveridge, John
Costain, A. P.Hamilton, Michael (Salisbury)MacCormick, Iain
Craig, Rt Hon W. (Belfast E)Hampson, Dr KeithMcCrindle, Robert
Crawford, DouglasHannam, JohnMcCusker, H.
Crouch, DavidHarrison, Col Sir Harwood (Eye)Macfarlane, Neil
Crowder, F. P.Harvie Anderson, Rt Hon MissMacGregor, John
Dodsworth, GeoffreyHastings, StephenMacmillan, Rt Hon M. (Farnham)
Douglas-Hamilton, Lord JamesHavers, Sir MichaelMcNair-Wilson, M. (Newbury)
Durant, TonyHayhoe, BarneyMcNair-Wilson, P. (New Forest)
Dykes, HughHenderson, DouglasMadel, David
Eden, Rt Hon Sir JohnHeseltine, MichaelMarten, Neil

Vauxhall (Mr. Strauss) which I shall move at the appropriate stage.

Question put and agreed to.

Clause read a Second time.

Amendment proposed to the proposed new clause: (k), in line 79, at end add:

'( ) The Treasury shall, by statutory instrument laid before Parliament within three months of the passing of this Act, make provision for leaving out of account the value of a transfer of value on death consisting of property of any description to be attached to such property as may fall in subsection (1) above to be a source of income for the upkeep of that property and transferred to the owner of that property to hold for that purpose (in this section referred to as endowment property) and for the application to such a transfer of the provisions of this section with modifications and enlargements thereto as may be appropriate'.—[Mr. David Howell.]

Question put, That the amendment be made:—

The House divided: Ayes 254, Noes 268.

Mates, MichaelPink, R. BonnerSteel, David (Roxburgh)
Mather, CarolPowell, Rt Hon J. EnochSteen, Anthony (Wavertree)
Maude, AngusPym, Rt Hon FrancisStewart, Donald (Western Isles)
Maudling, Rt Hon ReginaldRaison, TimothyStewart, Ian (Hitchin)
Mawby, RayRathbone, TimStokes, John
Maxwell-Hyslop, RobinRawlinson, Rt Hon Sir PeterStradling Thomas, J.
Mayhew, PatrickRees, Peter (Dover & Deal)Tapsell, Peter
Meyer, Sir AnthonyRees-Davies, W. R.Taylor, R. (Croydon NW)
Miller, Hal (Bromsgrove)Reid, GeorgeTaylor, Teddy (Cathcart)
Mills, PeterRenton, Tim (Mid-Sussex)Tebbit, Norman
Miscampbell, NormanRhys Williams, Sir BrandonTemple-Morris, Peter
Mitchell, David (Basingstoke)Ridley, Hon NicholasThatcher, Rt Hon Margaret
Moate, RogerRidsdale, JulianThomas, Dafydd (Merioneth)
Molyneaux, JamesRifkind, MalcolmThompson, George
Monro, HectorRippon, Rt Hon GeoffreyThorpe, Rt Hon Jeremy (N Devon)
Montgomery, FergusRoberts, Michael (Cardiff NW)Townsend, Cyril D.
Moore, John (Croydon C)Roberts, Wyn (Conway)Trotter, Neville
More, Jasper (Ludlow)Ross, William (Londonderry)Tugendhat, Christopher
Morgan-Giles, Rear-AdmiralRossi, Hugh (Hornsey)van Straubenzee, W. R.
Morrison, Charles (Devizes)Rost, Peter (SE Derbyshire)Vaughan, Dr. Gerard
Morrison, Hon Peter (Chester)Royle, Sir AnthonyViggers, Peter
Mudd, DavidSainsbury, TimWainwright, Richard (Colne V)
Neave, AireySt. John-Stevas, NormanWakeham, John
Nelson, AnthonyScott, NicholasWalters, Dennis
Neubert, MichaelShaw, Giles (Pudsey)Warren, Kenneth
Newton, TonyShaw, Michael (Scarborough)Watt, Hamish
Normanton, TomShelton, William (Streatham)Weatherill, Bernard
Nott, JohnShepherd, ColinWelsh, Andrew
Onslow, CranleySilvester, FredWhitelaw, Rt Hon William
Oppenheim, Mrs SallySims, RogerWiggin, Jerry
Osborn, JohnSinclair, Sir GeorgeWigley, Dafydd
Page, John (Harrow West)Skeet, T. H. H.Wilson, Gordon (Dundee E)
Page, Rt Hon R. Graham (Crosby)Smith, Cyril (Rochdale)Winterton, Nicholas
Paisley, Rev. IanSpeed, KeithWood, Rt Hon Richard
Pardoe, JohnSpence, JohnYoung, Sir G. (Ealing, Acton)
Parkinson, CecilSpicer, Jim (W Dorset)Younger, Hon George
Pattie, GeoffreySpicer, Michael (S Worcester)
Penhaligon, DavidStainton, KeithTELLERS FOR THE AYES:
Percival, IanStanbrook, IvorMr. W. Benyon and
Peyton, Rt Hon JohnStanley, JohnMr. Richard Luce.


Abse, LeoCorbett, RobinForrester, John
Allaun, FrankCox, Thomas (Tooting)Fowler, Gerald (The Wrekin)
Archer, PeterCraigen, J. M. (Maryhill)Fraser, John (Lambeth, N'w'd)
Armstrong, ErnestCronin, JohnFreeson, Reginald
Ashley, JackCrosland, Rt Hon AnthonyGarrett, John (Norwich S)
Ashton, JoeCryer, BobGarrett, W. E. (Wallsend)
Atkins, Ronald (Preston N)Cunningham, G. (Islington S)Gilbert, Dr John
Bagier, Gordon A. T.Cunningham, Dr J. (Whiteh)Ginsburg, David
Barnett, Guy (Greenwich)Dalyell, TamGolding, John
Barnett, Rt Hon Joel (Heywood)Davidson, ArthurGould, Bryan
Bates, AlfDavies, Bryan (Enfield N)Gourlay, Harry
Bean, R. E.Davies, Denzil (Llanelli)Graham, Ted
Benn, Rt Hon Anthony WedgwoodDavies, Ifor (Gower)Grant, John (Islington C)
Bennett, Andrew (Stockport N)Davis, Clinton (Hackney C)Grocott, Bruce
Bidwell, SydneyDeakins, EricHamilton, W. W. (Central Fife)
Blenkinsop, ArthurDean, Joseph (Leeds West)Hamling, William
Boardman, H.Delargy, HughHardy, Peter
Booth, AlbertDempsey, JamesHarper, Joseph
Bottomley, Rt Hon ArthurDoig, PeterHarrison, Walter (Wakefield)
Boyden, James (Bish Auck)Dormand, J. D.Hart, Rt Hon Judith
Bradley, TomDouglas-Mann, BruceHattersley, Rt Hon Roy
Bray, Dr JeremyDuffy, A. E. P.Hatton, Frank
Brown, Hugh D. (Provan)Dunn, James A.Hayman, Mrs Helene
Brown, Robert C. (Newcastle W)Dunnett, JackHealey, Rt Hon Denis
Buchan, NormanDunwoody, Mrs GwynethHeffer, Eric S.
Butler, Mrs Joyce (Wood Green)Eadie, AlexHooley, Frank
Callaghan, Jim (Middleton & P)Edelman, MauriceHoram, John
Campbell, IanEdge, GeoffHowell, Denis (B'ham, Sm H)
Canavan, DennisEdwards, Robert (Wolv SE)Hoyle, Doug (Nelson)
Carmichael, NeilEllis, Tom (Wrexham)Huckfield, Les
Carter, RayEnglish, MichaelHughes, Rt Hon C. (Anglesey)
Carter-Jones, LewisEnnals, DavidHughes, Mark (Durham)
Castle, Rt Hon BarbaraEvans, Ioan (Aberdare)Hughes, Robert (Aberdeen N)
Clemitson, IvorEvans, John (Newton)Hughes, Roy (Newport)
Cocks, Michael (Bristol S)Ewing, Harry (Stirling)Hunter, Adam
Cohen, StanleyFernyhough, Rt Hon E.Jackson, Colin (Brighouse)
Coleman, DonaldFitt, Gerard (Belfast W)Jackson, Miss Margaret (Lincoln)
Colquhoun, Mrs MaureenFlannery, MartinJanner, Greville
Concannon, J. D.Fletcher, Ted (Darlington)Jay, Rt Hon Douglas
Conlan, BernardFoot, Rt Hon MichaelJeger, Mrs Lena
Cook, Robin F. (Edin C)Ford, BenJenkins, Hugh (Putney)

Jenkins, Rt Hon Roy (Stechford)Moonman, EricSilverman, Julius
John, BrynmorMorris, Alfred (Wythenshawe)Skinner, Dennis
Johnson, James (Hull West)Morris, Charles R. (Openshaw)Small, William
Johnson, Walter (Derby S)Murray, Rt Hon Ronald KingSmith, John (N Lanarkshire)
Jones, Alec (Rhondda)Newens, StanleySnape, Peter
Jones, Barry (East Flint)Noble, MikeSpearing, Nigel
Jones, Dan (Burnley)Oakes, GordonSpriggs, Leslie
Judd, FrankOgden, EricStallard, A. W.
Kaufman, GeraldO'Halloran, MichaelStewart, Rt Hon M. (Fulham)
Kelley, RichardOrbach, MauriceStoddart, David
Kerr, RussellOrme, Rt Hon StanleyStrang, Gavin
Kilroy-Silk, RobertOvenden, JohnStrauss, Rt Hon G. R.
Kinnock, NeilOwen, Dr DavidSummerskill, Hon Dr Shirley
Lambie, DavidPadley, WalterSwain, Thomas
Lamborn, HarryPalmer, ArthurTaylor, Mrs Ann (Bolton W)
Lamond, JamesPark, GeorgeThomas, Jeffrey (Abertiliery)
Latham, Arthur (Paddington)Parry, RobertThomas, Mike (Newcastle E)
Leadbitter, TedPavitt, LaurieThomas, Ron (Bristol NW)
Lee, JohnPeart, Rt Hon FredThorne, Stan (Preston South)
Lever, Rt Hon HaroldPendry, TomTierney, Sydney
Lewis, Ron (Carlisle)Perry, ErnestTinn, James
Lipton, MarcusPhipps, Dr ColinTomlinson, John
Litterick, TomPrentice, Rt Hon RegTorney, Tom
Lomas, KennethPrescott, JohnUrwin, T. W.
Lyon, Alexander (York)Price, C. (Lewisham W)Varley, Rt Hon Eric G.
Lyons, Edward (Bradford W)Price, William (Rugby)Wainwright, Edwin (Dearne V)
McCartney, HughRadice, GilesWalker, Harold (Doncaster)
McElhone, FrankRees, Rt Hon Merlyn (Leeds S)Walker, Terry (Kingswood)
MacFarquhar, RoderickRichardson, Miss JoWard, Michael
Mackenzie, GregorRoberts, Albert (Normanton)Watkins, David
Mackintosh, John P.Roberts, Gwilym (Cannock)Watkinson, John
Maclennan, RobertRobertson, John (Paisley)Weitzman, David
McMillan, Tom (Glasgow C)Roderick, CaerwynWellbeloved, James
McNamara, KevinRodgers, George (Chorley)White, Frank R. (Bury)
Madden, MaxRodgers, William (Stockton)White, James (Pollok)
Magee, BryanRooker, J. W.Whitehead, Phillip
Mahon, SimonRoper, JohnWhitlock, William
Marks, KennethRose, Paul B.Willey, Rt Hon Frederick
Marquand, DavidRoss, Rt Hon W. (Kilmarnock)Williams, W. T. (Warrington)
Marshall, Dr Edmund (Goole)Rowlands, TedWilson, Alexander (Hamilton)
Marshall, Jim (Leicester S)Ryman, JohnWilson, Rt Hon H. (Huyton)
Mason, Rt Hon RoySandelson, NevilleWilson, William (Coventry SE)
Meacher, MichaelSedgemore, BrianWise, Mrs Audrey
Mellish, Rt Hon RobertSeiby, HarryWoodall, Alec
Mikardo, IanShaw, Arnold (Ilford South)Wrigglesworth, Ian
Millan, BruceSheldon, Robert (Ashton-u-Lyne)Young, David (Bolton E)
Miller, Dr M. S. (E Kilbride)Shore, Rt Hon Peter
Miller, Mrs Millie (Ilford N)Short, Mrs Renée (Wolv NE)TELLERS FOR THE NOES:
Milchell, R. C. (Soton, Itchen)Silkin, Rt Hon John (Deptford)Mr. John Ellis and
Molloy, WilliamSillars, JamesMr. James Hamilton.

Question accordingly negatived.

Clause added to the Bill.

7.0 p.m.

On a point of order, Mr. Speaker. I am raising no query about the Division. I am not asking that it should be taken again or anything like that. The point I wish to raise is that I understand from a number of Members on the interview

New Clause 7

Disposition For Maintenance Of Family

'.—(1) A disposition is not a transfer of value if it is made by one party to a marriage in favour of the other party or of a child of either party and is—
(a) for the maintenance of the other party, or
5(b) for the maintenance, education or training of the child for a period ending not later than the year in which he attains the age of eighteen or, after attaining that age, ceases to undergo full-time education or training.
(2) A disposition is not a transfer of value if it is made in favour of a child who is not in the care of a parent of his and is for his maintenance, education or training for a period ending not later than the year in which—
10(a) he attains the age of 18; or

floor that the Division bells were not ringing. I wish to put it on record, so that somebody can be made aware, that the Division bells are not ringing throughout the Palace. They were not ringing on the interview floor or in other parts of the Palace. Will somebody please find out why, and do something about it?

(b) after attaining that age he ceases to undergo full-time education or training; but paragraph (b) above applies only if before attaining that age the child has for substantial periods been in the care of the person making the disposition.
15(3) A disposition is not a transfer of value if it is made in favour of a dependent relative of the person making the disposition and is a reasonable provision for his care or maintenance.
20(4) Where a disposition satisfies the conditions of the preceding provisions of this section to a limited extent only so much of it as satisfies them and so much of it as does not satisfy them shall be treated as separate dispositions; and where a disposition satisfying those conditions is a disposal of an interest in possession in settled property, the interest shall not, by virtue of paragraph 4(1) of Schedule 5 to this Act, be treated for the purposes of that Schedule as coming to an end.
(5) In this section—
25"child" includes a step-child and an adopted child and "parent" shall be construed accordingly;
30"dependent relative" means, in relation to any person, a relative of his, or of his spouse, who is incapacitated by old age or infirmity from maintaining himself, or the mother of that person, or of his spouse, if the mother is widowed or living apart from her husband, or, in consequence of dissolution or annulment of marriage, a single woman;
"marriage", in relation to a disposition made on the occasion of the dissolution or annulment of a marriage, and in relation to a disposition varying a disposition so made, includes a former marriage; and
"year" means any period of twelve months ending with 5th April.'—[Mr. Healey.]

Brought up, and read the First time.

With this we are to take New Clause 25 (Chargeable transfer of assets between relatives), and the following amendments:

No. 728, in Clause 20, page 16, line 25, at end insert:
'(4A) A disposition is not a transfer of value if it is in favour of a child of the transferor who is under the age of 16 years at the time of the disposition or, if the child is at that time over the age of 16 years, the transfer consists of, the maintenance and education of the child, while he is receiving full time instruction at any university, college, school or other educational establishment'.
(4B) Section 10 of the Taxes Act, shall apply for determining whether a child is receiving full time instruction at an educational establishment.
No. 734, in page 16, line 25, at end insert:
'(4A) A disposition is not a transfer of value if it consists of a payment to or for the benefit of a lineal descendant, brother, sister, nephew or niece of the transferor, or any such relative of the husband or wife of the transferor, who is by reason of some mental or physical disability incapable of maintaining himself and who if female, is not at the time of the disposition married'.
No. 505, in page 16, line 27, at end insert:
'and other than a transfer made by an individual to a relative of himself or his spouse or to an employee or former employee if that relative, employee or former employee is disabled or incapacitated and the transfer provides or helps to provide special care, maintenance, education, equipment or modifications or additions to any building for the benefit of the disabled or incapacitated person'.
Government Amendments Nos. 200 and 201 and the proposed amendments to new Clause 7.

I gather that it is agreeable to you, Mr. Speaker, that we may refer to Amendment No. 779, which seeks to insert in the Sixth Schedule a paragraph entitled "Trusts for handicapped child".

New Clause 7 results from an undertaking given by my right hon. Friend the Chief Secretary in Standing Committee upstairs to consider the treatment of payments for the maintenance of dependent relatives and for the maintenance, education and training of children, including children over 18 in full-time education. Such payments are, of course, normally made out of income, and others would be covered by the £1,000 annual exemption. But we have accepted that where payments are made out of capital for these purposes it would be right to give relief.

The clause puts beyond doubt also that a disposition made on the occasion of the dissolution of a marriage will be covered by the spouse exemption. Doubt was expressed about that in Standing Committee in the debate on Amendment No. 442.

It may be for the convenience of the House if I now go briefly through the salient provisions of the new clause. Subsection (1) exempts a disposition for the maintenance of the disponer's spouse or former spouse, and, second, for the maintenance, education or training of a child, including a step-child or adopted child, of either spouse, for a period ending not later than the year ending 5th April in which the child attains the age of 18 or ceases to undergo full-time education.

Subsection (2) exempts a disposition made for the maintenance of a child who is not in the care of either of his parents, including step-parents or persons who have adopted the child; and a disposition for maintenance in this case after the child has attained the age of 18 may qualify for the exemption, but only if before that age the child has for substantial periods been in the care of the disponer.

Subsection (3) exempts reasonable provision for the care or maintenance of a dependent relative of the disponer. What is reasonable must necessarily depend on the circumstances of the disponer and the relative and the degree of incapacity or infirmity of that relative. The term "dependent relative" is defined in subsection (5) in the same terms as those used in the Finance Act 1965, which exempts from capital gains tax a house provided rent-free for a dependent relative.

Subsection (4) accomplishes two objectives. First, it provides that a disposition which would not be exempt merely because it did not wholly satisfy the conditions of subsections (1) to (3)—that is, where, for example, a disposition for a dependent relative was more than could be considered reasonable in the circumstances—may be split into two dispositions, the part that would be treated as exempt and the part that is chargeable.

Second, subsection (4) provides that a disposition of an interest in possession in settled property which satisfies the conditions in subsections (1) to (3) is not to be chargeable by virtue of paragraph 4(1) of Schedule 5, which treats an interest in possession as coming to an end when it is disposed of.

With respect further to the provisions of subsection (4), with reference to divorce and separation settlements and variations of existing settlements, I was pressed in Standing Committee by, I think, the hon. and learned Member for Dover and Deal (Mr. Rees) to take care of the situation where there were variations of settlements, and I undertook so to do. I hope that in this respect the new clause meets the point which the hon. and learned Gentleman made and the undertaking which I gave.

There is one basic point here which, I think, should be made for the assistance of the House. The relief provided by the new clause is in no respect less generous than that provided by paragraph 15 for settlements made on the occasion of a divorce or separation. If there are any questions relating to divorce and separation settlements, I shall gladly deal with them.

7.15 p.m.

Can the hon. Gentleman be a little more explicit about variation? It is difficult to follow how that would be covered by the proposed clause. If the hon. Gentleman has a little note in his brief about it, will he tell us a little more?

I am only too happy to oblige the right hon. Gentleman. I was seeking to make progress because I know that hon. Members are anxious to conclude this debate and move on to other things as soon as possible.

The second half of subsection (4) meets the point which the right hon. Gentleman has raised. It provides that where there is a disposal of an interest in possession which satisfies the qualifying conditions—that is to say, being in satisfaction of a claim for maintenance—there shall be no charge on the coming to an end of an interest in possession. This is linked with the definition of "marriage" in subsection (5), which makes clear that a disposal by variation of a settlement on a former spouse attracts the relief. I hope that that answers the question.

I come now to the amendments to the new clause, and I take first, Amendments (b) and (i), which I understand have basically the same effect—that is, to exempt from the tax a disposition by a person for the maintenance of his or her illegitimate child. Subsection (1) of the Government's new clause, to which Amendment (b) attaches, exempts from tax a disposition made by one party to a marriage in favour of a child of either party. Because Amendment (b) fails to define the parties to the marriage as the mother and the reputed father, I have to advise the House that it holds no meaning as it stands.

However, with respect to Amendment (i), I take it that the right hon. and learned Member for Surrey, East (Sir G. Howe) and his hon. Friends have in mind the case where the reputed father does not wish to adopt the child or take it into his care or marry the mother but is willing to pay for the child's maintenance. Such a case is not covered by the new clause as drafted, and I am happy to tell the House that the Government are prepared to accept Amendment (i).

The set of amendments (e), (f), (h), (j), (l) and (m) would have three effects. The first would be to take out of the new clause the requirement that the provision must be reasonable and to substitute the requirement that it must be made solely for care or maintenance. If this substitution has any significant meaning at all, it would enable a very large gift to be exempted provided that it was labelled as being solely for care or maintenance, and this would be going further than I could advise my hon. Friends to go.

The second effect—this attaches also to Amendment (f)—would be to exempt a provision for the care or maintenance of a former employee. I must say that I hardly think it appropriate to lump together amendments dealing with both ex-employees and members of the family, but, however that may be, there are two points to be made. First, we have provided relief for bona fide superannuation schemes in paragraph 16 of Schedule 5. I am aware that in Standing Committee there was discussion about gifts to old family retainers which could be deemed to stand in lieu of pension plans. I undertook to look at that. I regret to have to tell the House that I am not yet in a position to put final proposals before it, but we are looking into the matter as diligently and as sympathetically as we can, and I hope to be able to come back to it before very long.

The third effect of this group of amendments would be to eliminate the requirement that the relative should be dependent—that is to say, that the relative should be incapacitated by old age or infirmity from maintaining himself. The result would be to enable gifts to be made under the label of care or maintenance for relatives who were perfectly able-bodied or, indeed, perhaps extremely wealthy. It will come as no surprise to the Opposition to learn that this also is not a proposal which I could commend to my hon. Friends.

Amendment (g) would also widen the exemption to a great extent. In this case it would exempt dispositions for the care or maintenance of a relative residing with the disponer, again irrespective of the age, need or health of the relative. If the Opposition have in mind with this amendment the case of a child who is being brought up by a relative other than one of his parents, I can assure them that such a child, though admittedly not a dependent relative as defined under subsection (5), would be taken care of by a disposition for his maintenance which would be exempted under subsection (2).

New Clause 25 seeks to provide that the tax on any transfer of assets to a member of a transferor's family shall be reduced to 45 per cent. of the tax which would otherwise be payable on a lifetime scale, and, moreover, that it should be paid by interest-free instalments, but that the relief should cease if the transferee disposes of the assets within three years. The clause is drawn so widely that it would apply to the great majority of transfers likely to come within the charge of the capital transfer tax. A member of the transferor's family is defined as including relatives, which means ancestors, descendants, brothers, sisters, uncles, aunts, nephews and nieces of the transferor or of the transferor's spouse, and spouses and relatives. This clause could well include almost every likely beneficiary of the average donor and testator. It will come as no surprise to the Opposition that this would result in such a diminution of the charge to tax that we are not able to recommend its acceptance.

I think I have dealt with all the amendments other than that which was referred to by the right hon. Member for Down, South (Mr. Powell). I was not anticipating having to deal with that amendment at this stage, but I shall look into it while the right hon. Gentleman is on his feet and hope to return to it if I am fortunate enough to catch your eye, Mr. Speaker, and receive the consent of the House at the end of the debate.

We are naturally satisfied that the Government should have put down new Clause 7, but we feel that gratitude is not the emotion we should express because it only clarifies matters which should have been much better expressed originally. It is good to see the position over the maintenance of children and dependent relatives expressed more succinctly than was originally the case.

Anybody reading the debate on Clause 18 in Committee must be a little astonished that the legislation should ever have been presented in the form in which it originally came before the House. It took one whole sitting of the Committee to find out exactly what the clause was expressing, and now it is rather unfortunate that we should be considering the whole crucial question of family life and obligations under the pressure of the guillotine. I shall move ahead fairly quickly because we want to get on to the later debates on agriculture and small businesses, although it is entirely up to the House as to whether or not it wishes to proceed at the sort of speed I have in mind.

Those of us who did not serve on the Standing Committee have been treated with a fair amount of—perhaps "contempt" is too strong a word—disdain in the presentation of marshalled amendments. To give but one example of the problems we have faced throughout the passage of the Bill I shall refer to Amendment No. 200. It is down for debate and was published only this afternoon in marshalled form. Although the amendment was in the great sheaf of papers we received on Monday it should have been possible to have obtained Government amendments in a marshalled form more than just a few hours before we were due to debate them.

I have only two substantive points on the new clause. In spite of the remarks of the Financial Secretary, the dependent relative definition is very narrowly drawn. Perhaps I misunderstand the wording, but the new clause says:
'dependent relative' means, in relation to any person, a relative of his, or of his spouse, who is incapacitated by old age or infirmity from maintaining himself, or the mother of that person—
I do not see why the father of that person should be excluded. Is there something special about the mother in such a case? The provision appears to apply only to the female side of the family. That may be a minor point, but it could be of great importance to a family.

The clause is generally rather narrowly drawn. We are very glad to hear that the Government will accept Amendment (i) in the names of my right hon. and hon. Friends. It deals with the case of an illegitimate child and we are grateful that the provisions can be broadened in this way.

We are grateful to hear that the Government are still considering what might be done in the case of an ex-employee of a family. That might be a nurse, who has devoted the whole of her life to looking after a disabled child, and it would seem unfortunate, in spite of the reference by the Financial Secretary to bona fide superannuation schemes, if a wealthy family—it would have to be above the threshold, but the cumulative totals would build up—were presented with a major disincentive from providing for that nurse in her retirement.

I come to new Clause 25, which is the main Opposition new clause. The Financial Secretary's answer to it was unsatisfactory. Our clause seeks to include a lower rate of capital transfer tax where a disposition is made in favour of a person's family. I accept that it may appear to go very wide, but it does no more than propose a principle which is accepted in virtually every country, and certainly a principle accepted in almost every European country that has a gifts or wealth tax.

The Select Committee on the Wealth Tax is considering in respect of the wealth tax, the question of consanguinity, but why, if the Government have an open mind on consanguinity in relation to the wealth tax, should the Financial Secretary feel that it is somehow wrong in relation to the capital transfer tax. When the Chancellor spoke on the first new clause he made rather snide comments about gifts in consideration of a marriage, but if the right hon. Gentleman had followed his own Bill—and I regret to say that, having heard him speak several times, I feel he has not followed it closely—he would have found the principle of consanguinity already contained in the legislation.

7.30 p.m.

I have had great difficulty ploughing my way through the amendments, because I did not serve on the Standing Committee. Under paragraph 5(1)(a) of Schedule 6 an outright gift to a remoter descendant of the transferor is exempt up to £2,500. If somebody who is not connected directly with a family gives a gift in consideration of marriage, the sum of £2,500, as opposed to the normal £1,000, is exempt for the purposes of the capital transfer tax. The Government have on the Notice Paper another amendment which has not yet been marshalled. It is extraordinarily difficult for us to follow the point when we do not have marshalled amendments. A Government amendment which appeared in the blue Notice Paper of 25th February said that if a parent makes a gift in consideration of marriage to one of his children the exemption is £5,000.

Therefore, it appears that the principle of consanguinity, the principle that the rate of tax should be lower where dispositions are made in favour of both relatives has already been accepted by the Government. We are seeking an extension of this in new Clause 25.

The Green Paper on the inheritance tax published by the Conservative adminitration in March 1972 pointed out—and I have no reason to believe that the rates have changed—that the maximum rate on bequests and gifts to surviving spouses and direct dependants was 20 per cent. in France and 15 per cent. in Germany. In Germany the top rate and in France the flat rate on bequests to strangers is 60 per cent. France and Germany are examples of countries where gifts made to close relatives and to members of the family are on a far lower rate than gifts made outside the family.

We should certainly wish the Government to consider the whole principle of a lower rate of capital transfer tax for dispositions within a family than is enshrined in the Bill. The rates of tax are the most pernicious aspects of this measure. They will destroy the family farms and businesses. Coupled with capital gains tax, they have led to the Bill being referred to as a geriatric charter.

If it were possible to include generous reductions for transfers within a family on exactly the same principle as applies in almost every country of the world with the exception of Sri Lanka—that is the only country we have been able to discover that does not have a lower rate for gift-passing within a family—much of the Opposition's criticism of the whole measure would be mitigated.

I shall have to ask my right hon. and hon. Friends to divide on new Clause 25 if we cannot get a better answer from the Financial Secretary on the whole principle of dispositions within a family. I accept that possibly it is slightly too widely drafted and needs to be looked at in more depth. If the Financial Secretary were to give an undertaking now that he will enshrine in the forthcoming Finance Bill the principle of consanguinity, we should probably be able to leave the matter there. Short of any such undertaking I must ask my right hon. and hon. Friends to divide on new Clause 25.

That is all I wish to say now. If any hon. Members wish to raise other points, I may ask the leave of the House to reply, very briefly.

I was grateful to the Financial Secretary for the concluding remarks of his opening speech, in which he expressed himself ready to consider the subject matter of Amendment No. 779 to Schedule 6. Nevertheless, I was rather surprised at his surprise, because when my hon. Friend the Member for Londonderry (Mr. Ross) moved an identical amendment in Committee he withdrew it after a very short debate—the report of which will be found at col. 893 and following of the Official Report of the Standing Committee proceedings—after the Chief Secretary had indicated that the point involved would be covered by what it was intended to do more largely, as I gather is now proposed to be done by the Government's new clause.

I should be grateful if the Financial Secretary could indicate in more detail how the clause will cover the special position of a disposition made for the exclusive benefit of a handicapped child. When we envisaged the problem in Committee we were concerned with a child so severely mentally or physically handicapped that he or she would require constant care or protection.

When we look at the clause with such a child in mind, we see that it is evident that subsections (1) and (2) would not meet the case. I suppose it could be argued that under subsection (2) such a child might be under training after the age of 18, and, indeed, indefinitely, but I cannot believe that that is a satisfactory way of bringing such a child within the scope of the clause.

One is driven forward to subsection (3) concerning a disposition in favour of a dependent relative. I hope that the Financial Secretary will confirm that a dependent relative—I am not sure that it is clear—would include a child prevented by infirmity from maintaining himself or herself. At any rate provisionally, unless I am mistaken in that, I will accept that subsection (3) covers such a child. It requires not merely that the disposition is made in favour of a dependent relative but that it is a reasonable provision for his care or maintenance.

I was slightly alarmed when I heard the Financial Secretary, in his commentary upon the word "reasonable", indicate that reasonableness would be judged in relation to the means of the parent or the degree of incapacity of the child. I can quite understand that, the subsection being at large as it stands in the clause, some limitation is desired to be placed upon it by the Government, and I understand, when it is general, what is the function of the word "reasonable". But I cannot think it right that any such consideration should be applied by the Treasury in deciding on a disposition in favour of a severely handicapped child, a child handicapped so severely that he or she will be in some form of care, for physical or mental reasons, for the whole of his or her life.

We are all acquainted with cases where the entire thoughts, efforts and lives of a couple are devoted to just such a child. Such a couple might be poor or very affluent. Their dominating thought for the future is what will happen to that child when they have gone. One can well see that many of them would wish to make a disposition of their entire estate for the benefit of that child. They would not wish to say to themselves "What portion of the estate would be regarded as reasonable by the Treasury in regard to our means and to the state of the child? Let us try to fix upon a figure and leave that figure, and that figure alone, for the child in our will, or make it over by gift during our lifetime." They would think it wholly unreasonable that they should not be allowed to make over for the benefit of that child whatever they were able to provide and whatever they wished to provide.

I very much doubt whether in drafting the clause the Government have taken into account this special category. I want the Financial Secretary to make reference to it and to indicate that there will be no restrictive intention in the application of this relief in cases of the kind that I have mentioned. There can be no defeat of the objectives of the Bill in such an approach, and there is no question of this matter becoming a loophole for the transfer without tax of large masses of wealth. Nor is there any question of such wealth being in any ordinary sense enjoyed by the recipient.

I feel that the whole House will be in sympathy with what I am asking for, and I hope that the Financial Secretary will ensure that the clause covers without any restriction what my hon. Friend the Member for Londonderry was seeking in Standing Committee. Perhaps, when the hon. Gentleman is doing that, he will ensure that there is nothing which will operate in this respect differently in Northern Ireland from the rest of the United Kingdom. I say that as I am advised that the law in Northern Ireland is differently drawn at any rate in regard to care and protection.

I take the point that was made by my hon. Friend the Member for St. Ives (Mr. Nott) that the provision should have been in the Bill in the first place. However, as one who participated in the lengthy debate in Standing Committee on this subject, I express my gratitude to the Financial Secretary not only for listening to all the representations that were made at that stage but for covering most of them in the new clause.

I wish to make only three points. I shall make two points on new Clause 7 and one on new Clause 25. On new Clause 7, I must say to the Financial Secretary that it is a pity that he did not extend the exemptions in subsection (1) to certain transfers of value made by those other than parties to the marriage in specific circumstances.

I have in mind gifts by grandparents to grandchildren for such expenditure as university fees. I do not wish to get into the area of school fees as I do not wish to prolong the debate or to be tendentious, but if a grandchild wishes to go to university and it so happens that the parents' income is such that the means test is applied, it is often the situation that it is difficult for the parents to find the wherewithal to meet the extra expenditure required for university fees and the maintenance thereof.

The effect of inflation coupled with tax levels not keeping pace with inflation is such that for many families it is extremely difficult to meet the commitment of university fees. That is particularly so when the parents have no capital. If they have capital subsection (1) assists them, but if they do not have capital they may have to turn to grandparents or to others for assistance in the highly worthwhile objective of meeting university fees on behalf of their children. The Financial Secretary may say that there is the £1,000 exemption. Nevertheless, that is an exemption that is used for all general purposes.

I believe that gifts to meet university expenditure are highly worthwhile objectives which should be taken outside that exemption. There is unfair discrimination involving children whose parents have to meet the means test. Those parents come within the means test criteria for university fees. In many cases that will mean that the children do not go to university or training college. Surely the provisions could be extended to the extent that I have suggested. I am sorry that the Financial Secretary could not extend it as far as that. I hope that he will look at the matter again in a future Finance Bill.

7.45 p.m.

My second point concerns subsection (2). Why is it necessary to put in the condition to paragraph (b)? This relates to a situation where the child is not in the care of his parents. I am bound to say that I cannot see that there would be many loopholes were the child beyond the age of 18, if the condition were removed. I shall give one or two examples. First there is the means test situation. If the child at the age of 17 is moved into somebody else's care I suppose it could be argued that that child becomes eligible for a student grant, but if somebody is prepared to contribute to the child's education why is it necessary to go to these lengths? Would it not be better to allow the exemption to stop there? Given the present level of university expenditure we know that student grants are not meeting the total expenditure that the student has to find.

Where gifts are made to assist the student further, they will be caught by the clause. That does not apply only to universities. It may well be that the child is an orphan or in the care of a guardian, and that it moves on into the care of somebody else and wishes to undertake a professional education to acquire professional qualifications. Again, he will be disadvantaged by that condition remaining in the clause. It seems that fiscal objectives have been allowed to overcome educational objectives. From that latter point of view it seems desirable that we should encourage anyone in any situation to contribute to somebody else's education. I believe that that condition in the clause will not assist the objective that I have outlined.

My third point relates to new Clause 25. I agree with all the points that have been made by my hon. Friend the Member for St. Ives, but I have one additional reason for advocating the clause. The Financial Secretary will recall that on many occasions in Standing Committee mention was made of what became known as the famous "Gilbert and Sullivan shop". The owner of the shop was able to pass on to his children by taking advantage of all the various exemptions. I have taken quite a lot of professional advice on this matter. We may or may not be able to debate it, but it is relevant to the clause. I understand that one of the Government amendments will remove the cumulative possibility of having the £1,000 exemption, the small gifts exemption, which the Government have introduced, and various other matters of that sort. That is the reading that we have all been getting of one amendment that the Government have brought forward, and which was raised with the Financial Secretary earlier this afternoon.

I believe that as matters now stand, and as we interpret the provisions, gifts to charities will be affected and that we will be taken backwards from the additional exemption which the Government have provided. As I understand it, where somebody makes a gift of £1,000 a year to a charity he will not get an exemption if he wants to give a further gift to his own relatives. On top of all the other arguments that have been put by my hon. Friend, I believe that if we were able to have a lower eventual tax bill on all gifts to relatives—for example, to immediate children—and others we would help to alleviate the damage that would be done by a later Government amendment. I hope that the Financial Secretary will be able to persuade me that I am wrong in my interpretation, but that is the interpretation held by many people outside the House. It will mean that people will have to choose between making annual gifts to charities or gifts to their relatives.

If the rate of tax on lifetime gifts to relatives were lower there would be more of an incentive to pay it. That is an additional argument for new Clause 25.

I wish to address my remarks to Amendment No. 201, which is bracketed with others following Amendment No. 200. The hon. Member for St. Ives (Mr. Nott) said that he had some difficulty in finding Government Amendment No. 200. I had difficulty in finding my Amendment No. 201. It is on page 747—in case the Financial Secretary should wish to read it.

Amendment No. 201 goes marginally wider than new Clause 7. It is an amendment to Schedule 5 but it is extremely relevant to the new clause. Schedule 5 deals with changes in settlements already created. Paragraph 15 of the Schedule exempts the creation of a settlement on divorce which would have been a chargeable event outside the scope of Schedule 5, but does not exempt a chargeable event inside settlements where the settled property has been relied upon in the divorce maintenance arrangements.

If Amendment No. 201 to Schedule 5 is not accepted it will mean that the making or the variation of a settlement on divorce will be exempt, but the subsequent changes of interest in the settlement will not. That would heavily penalise settlements. I am sure that the Financial Secretary will agree that divorce provision in settled form is normal and standard practice approved by the courts and Parliament, with additional factors such as income provision during widowhood. Very often a settlement will be varied on divorce, and quite often a settlement, whether or not varied, will be envisaged at the divorce as providing for the wife until remarriage and thereafter for the child or children. The amendment is needed to avoid the taxation of a change on the variation of a settlement or on the termination of the wife's interest on remarriage.

The amendment is consistent with estate duty practice as it has been over the years. It is consistent with estate duty practice as it has been in the case of a variation of settlement, though estate duty law was not entirely clear on the matter and probably much of this fell in the area of concession rather than statute law. We should not leave it for discretion and concession in future. We should write it into statute law.

I hope that the Financial Secretary will recognise, first, that the amendment is necessary to do what I want it to do, secondly, that what I want it to do is perfectly reasonable, and, thirdly, that it will cost peanuts and therefore should be accepted. I hope that he will accept it.

I was surprised to hear the hon. Member for St. Ives (Mr. Nott) say that he was not grateful for the introduction of the clause. In so saying he was being less than his usual generous self. The clause and the Opposition amendment which my hon. Friend the Financial Secretary has accepted show all the signs that he is doing precisely what the Opposition wanted him to do. The Government listened carefully, took note and have come back to the House with just the amendments that were asked for.

I was equally surprised when the hon. Member for St. Ives suggested that the House should move on quickly from the clause, possibly without examining it properly. Yesterday we had a hysterical and wretched debate on the timetable motion. Now it seems that the hon. Gentleman, who spoke from the Front Bench, is imposing a guillotine on his side. I think that we should look at the clause carefully before we decide whether to accept it.

I sincerely believe in subsection (3), which is in these terms:
"A disposition is not a transfer of value if it is made in favour of a dependent relative of the person making the disposition and is a reasonable provision for his care or maintenance."
In subsection (5) the definition of "dependent relative" is as follows:
"dependent relative" means, in relation to any person, a relative of his, or of his spouse, who is incapacitated by old age or infirmity from maintaining himself, or the mother of that person, or of his spouse, if the mother is widowed or living apart from her husband, or, in consequence of dissolution or annulment of marriage, a single woman;"
That is an eminently sensible amendment which, as has been said, should have been in the Bill from the beginning.

I go along with the right hon. Member for Down, South (Mr. Powell) in expecting the Inland Revenue to interpret the clause to the point of generosity for someone who is incapacitated. It would be churlish to limit the maintenance of someone who was genuinely incapacitated, and I am sure that the Financial Secretary will give us some encouragement on that matter.

My admiration for the clause stops at that point. Subsection (1) reads as follows:
"A disposition is not a transfer of value if it is made by one party to a marriage in favour of the other party or of a child of either party and is—
  • (a) for the maintenance of the other party, or
  • (b) for the maintenance, education or training of the child for a period ending not later than the year in which he attains the age of eighteen or, after attaining that age, ceases to undergo full-time education or training."
  • This is a financial statute in which we deal with taxation and revenues. As in all taxation matters, we are talking about the social, economic and political policies which the Government wish to pursue. Paragraph (b) refers to children, but the words "maintenance, education or training" are not defined. One could put almost any interpretation on them. Even if the concept of reasonableness were introduced, within the confines of those words concessions could be made about which we should not be happy. One does not have to stretch the meaning of those words to show that they could be offensive to the Labour Party and to the manifestoes which it presented to the electorate in February and October last year.

    The hon. Member for Norfolk, South (Mr. MacGregor) touched on the making of a disposition, not a transfer, in relation to education. He carefully and skilfully spoke of university fees, which the right hon. Member for Finchley (Mrs. Thatcher) discussed in Committee. It must be obvious to anyone who considers the clause with any realism that when we talk about education and transfers of value of capital transfer tax in relation to the new clause we are not talking about university fees. We are talking about fees for children who go to school, and that means fees for independent and public schools.

    Would not the clause also exempt fees paid to direct grant schools? Would not that be contrary to the policy announced by the Secretary of State for Education and Science, who wishes direct grant schools to be brought within the State system? Would not that be welshing on the programme of the Secretary of State for Education and Science?

    8.0 p.m.

    I was coming to that point. I would expect the Financial Secretary in replying to tell the House how much consultation there has been with the Secretary of State for Education. I find this subsection extraordinary. It concerns not merely public schools but direct grant and independent schools. It even touches the question of private universities. I understand that a private university has been set up. The subsection could be used for fees involved in sending people to that university, which presumably has been set up with a view to destroying the State university system.

    I was under the impression that it was part of the Government's policy to exempt direct grant and public schools from charitable status. Now we are proposing a clause which, if we exempt these institutions from charitable status, will enable parents who are determined to send their children to independent, direct grant and public schools to do so by the back-door method of a transfer of capital. The Financial Secretary must come clean, together with the Chief Secretary and the Chancellor and tell us whether he is directly opposed to the educational policies set out in our manifesto. We must have an explanation.

    If we are to allow people to deal with educational expenses through a transfer of capital we are doing exactly what Tawney said in one of his famous books. We are encouraging people to send their children to public schools. We are encouraging the social vanities of the middle classes. If we approve this clause we shall be encouraging people to send their children to public schools, thereby encouraging divisions in our society which we find most objectionable. We would also be encouraging the misuse of resources as between the public school sector and the State school sector. We are trying to encourage these middle class people to send their sons and daughters to the State schools so that they will use the energies about which Tory Members are always telling us to improve the State sector.

    This subsection goes against all those aims of the Labour Party. We must have an explanation. If we do not, I must tell my hon. Friend that we shall be standing outside the Division Lobby and directing the troops on the Labour side of the House into our Lobby. It may well be that we shall get the bulk of our back benchers and, in this case, most Front Bench members of the Labour Party. It may be that by a side wind the Treasury has completely misunderstood the purport of this subsection.

    It does not end there. What do we mean by the word "training"? There is no definition. I have looked at the definition clause and at the interpretation clause but have failed to find "training" defined. It is not defined in the clause. The clause defines "child", "dependent relative", "marriage", and "year". It is good of the Treasury to define "year". I would have been more obliged if it had defined "training". What does it mean? Tax lawyers and tax dodge accountants will get hold of this and advise people how to make transfers of capital which they might not otherwise make and so avoid paying tax.

    What about someone in one of Her Majesty's training establishments, commonly known as a detention centre or borstal, who is under the age of 18? Are we to discover that under this subsection transfers of capital made to boys and girls at borstal are exempt from tax? That would appear to be contrary to public policy. Is it really the intention of the Treasury to act in this way and to give criminals, or potential criminals, favoured treatment when their parents have enough capital to come within the ambit of this subsection?

    People can train for all kinds of things. They can train for the ballet. No doubt that would come within the ambit of this clause. People can train as apprentices. I would like to know whether the clause covers apprenticeship training. A person can train to become the world's finest athlete. What happens if a boy of 16 decides that he wants to become the fastest miler in the world and asks his rich father to provide him with a private running track at a cost of £7,000? A transfer of capital is made and the running track is given to the son. Is that £7,000 to be exempt from the tax?

    I do not want to pick on unlikely examples, although I remember that in 135 hours in Committee there were some of the most unrealistic examples imaginable. I can remember a young athlete age 16 who decided to become the world's best shot putter. His name was Arthur Rowe. One of the things he needed, apart from a shot to putt, was 100 lbs of steak a week to build up his body. If we are to remain in the Common Market 100 lbs of steak a week could become an expensive business. It could not be borne out of income. It could mean a transfer of capital. Are we to say that a budding Arthur Rowe, eating 100 lbs of steak a week, is to gain exemption from a transfer of capital from his parents merely because he decided one night that he wanted to become the world's great shot putter? This seems absurd.

    In some circles it is deemed to be training for life to learn how to handle oneself at a debutantes' ball. Are we saying that 16-year-old girls should be encouraged to attend debutantes' balls as a training for life and that the expense of those balls, paid for out of transfer of capital, is to be exempt from this tax? Is that what the Financial Secretary has in mind?

    I turn to "maintenance". Under Section (1)(a) maintenance applies not merely to the children but to the maintenance of one spouse by or for the other. In some circles it may be considered a normal part of the maintenance of the one spouse by or for the other that they should have a decent wine cellar. Most working-class people in Luton have a couple of empty, rusty cans of beer in their wine cellars. Are we saying that for the maintenance of one spouse by the other the provision of a wine cellar with the best red and white wines of France is to be included and that if those wines are bought out of a transfer of capital these people will be exempt from the tax?

    I ask the Financial Secretary to look at this clause again and see whether these definitions should not be tightened up.

    I move to new Clause 25, the purport of which seems to be special exemptions for transfers to relatives. What I find offensive about the clause is that it stands against every Conservative principle we have ever heard since the days of Edmund Burke. As I understand it, the fundamentals of Conservatism are concerned with individuals going through life and exerting qualities of enterprise, thrift and determination by standing on their own feet. Surely that central pillar of Conservatism should be upheld by Conservative Members—or do they intend to attack their own political philosophy? Certainly that philosophy will be vitiated if we approve the new clause, which will give preference to any transfer of gifts between one citizen and another and between one relative and another. Adam Smith would never have stood for that, nor would Bentham or Ricardo—and certainly Malthus would probably have had a fit and given up the church at the same time.

    Provisions on the lines of new Clause 25 have led to some of our industrial problems. The Labour Government have introduced the capital transfer tax for the precise purpose of preventing vast accumulations of wealth being handed down from father to son, father to daughter, father to cousin and father to third cousin and father to even more distant relatives.

    The Opposition in their wrecking, irresponsible amendments inform us that we should make special exemptions to prevent what the provision is all about. New Clause 25 and the other amendments strike at the heart of the tax.

    If we look at British industry, we know that there is some good management, some second generation management and some third generation management. What encourages such a system? Management of that kind is encouraged by giving preference in the transfer of gifts from one relative to another relative. That form of management has been encouraged because since 1884 we have had on the statute book estate duty—which, as the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) said, was admirable because one did not always have to pay it and could avoid it, unless one was unlucky in the timing of one's death.

    New Clause 25 would take us back to estate duty and to second generation management. It does not follow that because a father hands money down to his son or daughter or hands down his business and thus avoids paying tax the business will continue to flourish under the second and third generation of management as it flourished under the father's guidance. I plead with my hon. Friend the Financial Secretary to define the terms in his own new clause and, secondly, emphatically to reject the irresponsible Conservative wrecking amendments.

    8.15 p.m.

    There were occasions in Committee upstairs when I thought that the Financial Secretary was not giving full rein to the generosity which we know lurks in the recesses of his character. The reason has become more and more apparent. It is quite clear that behind him was the glowering figure of the hon. Member for Luton, West (Mr. Sedgemore), who in Committee represented the interests of the Tribune Group. It is not for me to comment on the balance of power in the Labour Party, but I thought that it was a little arrogant for the hon. Gentleman to claim that on this issue he spoke for all Labour Party Members.

    I wonder whether those hon. Members opposite who send their sons to private schools—and I do not deplore their judgment on this matter—are grateful to the hon. Gentleman for suggesting that school fees paid out of their own taxed income should now be subject to capital transfer tax. I wonder whether people outside the House will feel that this is a fair way of conducting their affairs.

    I do not think this is the time or the place to discuss public or private education; we can do so on other occasions. However, it is a pity that we did not hear the hon. Member for Luton, West on these matters upstairs in Committee, when we had plenty of time at our disposal, rather than in the short discussions which we are now allowed on Report following the Government's machinations.

    I find the comments of the hon. and learned Gentleman about my hon. Friend the Member for Luton, West (Mr. Sedgemore) a little churlish. Since we are now discussing a new clause, it is hardly likely that my hon. Friend could have elaborated on it upstairs in Committee when at that time its terms were unknown.

    The hon. Member for Keighley (Mr. Cryer) reinforces our point that the Bill which we are now debating is not even the Bill that emerged from Committee but is an entirely new Bill following the major amendments tabled during the past 10 days. I was seeking to make the point that if the hon. Member for Luton, West feels as strongly as we do on these matters, he could have voted against the guillotine motion.

    I agreed with the hon. Member for Luton, West when he suggested that the implications of the clause deserve close consideration. There is an important principle at stake, but it was not the one to which the hon. Gentleman drew attention. The principle in question relates to the question of how far, for tax purposes, we should regard the family as a unit. We have been remarkably inconsistent on this score. Under capital gains tax it was possible to make a transfer free of capital gains tax to wives but not to children. In other words, wives and husbands were treated as one unit but whole families were not so treated. On the question of income tax it appears that in a matter of weeks we shall be debating a new clause which the Chancellor, ever conscious of his undertakings to his back benchers, will introduce to aggregate the investment income of children with that of their parents. I hope that we may look for consistency and logic. If children are to be treated as one unit with their parents for income tax purposes, let them be treated as one unit for CTT purposes.

    The Chancellor of the Exchequer, with stern, unbending Marxist principles, takes no account of these ties of blood and affection. However, I am happy to say that on this occasion he has evidently paid some attention to the debates upstairs in Committee. No doubt the Chief Secretary and the Financial Secretary relayed to him the interesting points that were made. But the right hon. Gentleman has not advanced far down the road along which we are endeavouring to coax him. The fruits of our coaxing are embodied in new Clause 7, but I do not believe that its provisions go far enough. However, they show that the right hon. Gentleman recognises that some consideration is due to family feeling and that people should be entitled to pass on, without excessive charge, the fruits of their labours. One of the most deeply founded instincts is the desire to provide for one's family and to pass on what one has created.

    As my hon. Friend the Member for St. Ives (Mr. Nott) pointed out, the only country in the world which in its tax system does not recognise this deep-seated human instinct is Sri Lanka. Although perhaps we share that country's political objectives, I do not believe we should look to it for fiscal innovation, particularly when it has been counselled in these matters by Lord Balogh and Professor Kaldor. On another occasion we can perhaps explore the consequences in the countries to which the two gentlemen I have mentioned have offered their fiscal advice.

    While I congratulate the Financial Secretary on having deferred to our susceptibilities in introducing new Clause 7, I ask him to go further along the road, taking with him the diffident hand of the Chancellor. I ask him to consider new Clause 25 more closely than he might otherwise be disposed to do.

    I hope that the Financial Secretary will deal with the three detailed points concerning new Clause 7. He said that the clause would cover provision for wives and former wives, and he referred to a point which the Opposition made in Committee concerning Schedule 5, paragraph 15. The definition provision refers to the varying of a former disposition relating to a former marriage. Possibly a provision for maintenance after the dissolution of a marriage would be covered by that. However, will it cover provision for a former wife after the dissolution of a marriage, since she would then no longer be a party to the marriage?

    It is wrong that relief should turn on fine points such as whether the maintenance agreement or settlement was made before or after the decree became absolute, because very often these matters are not finalised until after the decree is made absolute, when the former wife will no longer be a party to the marriage.

    New Clause 7 applies to dispositions. I have assumed that it will cover notional disposition on death. I hope so, because I see no distinction. If it is right to exempt from capital transfer tax a provision made by the father during his lifetime, it is even more important that that exemption should apply on his death when he is no longer in a position to care for his family. The variation of a settlement is covered by subsection (4), which was introduced in deference to the arguments of the Opposition.

    As regards Schedule 5, paragraph (15), let us assume that the life interests of the husband and wife in a marriage settlement are to be succeeded on their deaths by a discretionary trust in favour of their children. Let us assume that on the dissolution of their marriage the life interests of husband and wife are to be extinguished so that the discretionary trust is accelerated. As I read subsection (4), notwithstanding the extinction of those life interests the interest in possession is to be regarded as continuing. Therefore, does it follow that there will be no periodic charge on the discretionary settlement which arises in favour of the children?

    These points are of some technicality but are nevertheless important, and I hope that the Financial Secretary will address himself not only to the more general points exemplified by new Clause 25 but also to the narrower points.

    I was surprised that the hon. and learned Member for Dover and Deal (Mr. Rees) began his remarks with a long, rambling and irrelevant diatribe against my hon. Friend the Member for Luton, West (Mr. Sedgemore), when he speculated how uniformly held were the sentiments which my hon. Friend expressed. As a totally unrepentent member of the Manifesto Group, I give the assurance that I endorse much of what my hon. Friend said. There is in the Labour Party a basic degree of common understanding on such principles, which does not divide us.

    Will my hon. Friend accept that the Labour Party stands on the manifesto? Will he accept further that one of the manifesto principles was that tax relief for the so-called public schools should be ended and that there is solid unanimity within the Labour Party that there should be close scrutiny of the private sector of education? We believe that direct grants should be absorbed into the public sector so as to allow more sons and daughters of underprivileged people to attend these schools, if necessary.

    I congratulate my hon. Friend on his assiduity and understanding of the party manifesto in that regard.

    No. I had better not. The right hon. Member for Yeovil (Mr. Peyton), who has just left the Chamber, muttered something about a filibuster during the relevant contribution of my hon. Friend the Member for Luton, West.

    I should like to deal with one aspect of the contribution of the hon. and learned Member for Dover and Deal who seems to have an obsession with Marxism and Marxists. We have heard that insinuation from him before. I am sure that he will take no offence if I suggest that the quality of that kind of contribution makes him more akin to Groucho than to Karl.

    Does my hon. Friend agree that the hon. and learned Member for Dover and Deal (Mr. Rees) could not distinguish between a Marxist and a priest?

    There is a great deal of business to be completed before 12 o'clock. I hope that hon. Members will try to avoid interventions of the kind that we have experienced recently.

    I respect the decision of the Chair. Having dealt with the irrelevancies which have infiltrated into the debate, I come to the real issues.

    Despite the reservations of some of my hon. Friends about the terminology of the clause and the effects of that terminology, the clause will give effect to the points raised in Committee by the Opposition. Here we have an example of a clause where the Government, with the openness of mind for which they are renowned, have listened to the arguments, accepted the good and rejected the bad. The Government have now decided to incorporate the good points into legislation. Yet we have experienced a further demonstration of the churlishness of the Opposition. The new clause is to the credit of the Government, since they have kept the promise they gave in Committee.

    The hon. and learned Member for Dover and Deal expressed his doubts about the circumstances of the dissolution of a marriage. I am convinced that the clause puts beyond any doubt the fact that a disposition made on the occasion of the dissolution of a marriage will be covered by the spouse exemption. That is made clear in new Clause 7. I cannot see the reason for his reservations.

    I want now to deal with one or two of the specific matters raised by the hon. Member for Norfolk, South (Mr. MacGregor). He talked about education and training and was concerned especially with the effect on university fees. I do not want to take up any of the examples quoted by my hon. Friend the Member for Luton, West but it is clear that many of the arguments that he advanced in the debate have to be considered closely by the Treasury. However, in view of the obsession about university fees, even when we know that there are more extreme examples, we have to remember that there are a great many people undergoing education and training who are in a much more serious position than people in universities. I have in mind especially people in colleges of further education studying for higher national certificates and higher national diplomas. Many of the more backward Conservative-controlled authorities are not even giving them grants, let alone worrying about the consequences of their having to meet commitments after parental contributions have been deducted from them.

    The hon. Member for Norfolk, South went on to talk about the qualification in line 12, which he did not like. It says that the
    "… above applies only if before attaining that age the child has for substantial periods been in the care of the person making the disposition."
    The qualification is wholly reasonable, in my view. At this stage of the argument, it is totally wrong of the hon. Member for Norfolk, South to say that if we remove that qualification it will not create many loopholes. Our aim should be not to create any more loopholes but to block up the many loopholes which have existed for far too many years in the area of capital taxation.

    8.30 p.m.

    New Clause 7 will meet with the approval of most Government supporters. If we get the assurances that we seek about some of the definitions, it will probably meet with our unqualified approval.

    When we come to new Clause 25, however, the situation is very different. I urge my hon. Friend the Financial Secretary not to be too receptive to the blandishments of the Opposition. The hon. Member for St. Ives (Mr. Nott) gave us a very interesting discourse on consanguinity. But then he went on to say that he would ask his right hon. and hon. Friends to support new Clause 25 despite the fact that in his view it was already too widely drafted and needed to be looked into in depth. The hon. Gentleman is engaging in an exercise in irresponsibility if he is prepared to seek to get the clause on the statute book when he accepts that in major areas it is far too wide. I hope that my right hon and hon. Friends will reject his arguments.

    I am very concerned about the comments made by the right hon. Member for Down, South (Mr. Powell). The concern that he showed about new Clause 7(3) is exceedingly important. The use of the word "reasonable" always worries me. In far too many areas of legislation the word "reasonable" seems reasonable at the time this House is considering a Bill, and then we see the effect of it afterwards. We have a good example of the use of the word in the Offices, Shops and Railways Premises Act. Reference is made there to "a reasonable temperature". A great many industrial disputes have arisen over the interpretation of the word "reasonable".

    If we are to leave subsection (3) as it is drafted at present, there must be a clear understanding not only of the criterion on which "reasonable" will be interpreted but that the person who believes that he has been affected adversely by the interpretation of the word shall have a right of appeal. Failing such an understanding, the inclusion of the word will be regarded by many people as unsatisfactory.

    On the whole, I congratulate my right hon. and hon. Friends for bringing forward this new clause. It is yet another example of the redemption of promises made in Committee. I hope that the Opposition will accept it in good faith and with good grace and not continue with their churlishness and criticism. After all, to a large extent they have got what they wanted.

    I am not sure whether this is the first time that the hon. Member for St. Ives (Mr. Nott) has been back on the Opposition Front Bench. It is the first time I have had the pleasure of debating with him, and I am glad to see him there again. I sympathise with him in his difficulty concerning the marshalling of amendments. I am afraid that I cannot add anything useful at this stage. It is a situation that we all regret.

    My best course, I believe, will be to deal with the matters of detail raised by the hon. Gentleman rather than with his general points. He asked me about dependent relatives. "Dependent relative" is defined in the same way as it is defined under the 1965 capital gains tax relief. As I understand it, it covers the case of the father who is incapacitated. To that extent, therefore, there is symmetry, although it is not perfect.

    The hon. Gentleman again pressed the point about the family retainer. I hope to come back to the House before too long with concrete proposals on that matter. I am sure that the hon. Gentleman recognises—indeed, he did in his temperate speech—that unless it is defined fairly tightly there could be scope for very large avoidance of tax. For example, a close relative could be taken on as a quasi employee for a month or so and thereafter be treated as an ex-employee. In that way a coach and horses could be driven through the tax provisions.

    The hon. Gentleman talked at some length, quite properly, about new Clause 25 and my hon. Friend the Member for Meriden (Mr. Tomlinson) also reverted to the general principle. I am sure the hon. Member for St. Ives will recall that in the Green Paper published by the then Chancellor of the Exchequer, now Lord Barber, there was no commitment to the principle of consanguinity. That matter was left in the air for discussion.

    I cannot accept the principle of new Clause 25. We have gone some way in making a preferential distinction regarding gifts on marriage. The particular instance cited by the hon. Gentleman of a £5,000 transfer from a parent was introduced into the Bill to take account of the one-parent family.

    The hon. Gentleman made some international comparisons. I am sure that with his sophisticated knowledge of the international fiscal scene—I say that in no way with tongue in cheek—the hon. Gentleman will recognise that international comparisons are not very useful. He referred to France and Germany, where the surviving spouse rate is so much lower than the rate to other donees. I think that makes my point. The hon. Gentleman had to pray in aid that there was a 20 per cent. rate to a surviving spouse in France and a 15 per cent. rate in Germany and he asked why we could not be as generous in that respect. In fact, we are being more generous than either the French or German provisions because there will be a nil rate to surviving spouses under our tax system. I do not wish to make a major point of that. However, it helps to keep in perspective many of the international comparisons that we hear from time to time when discussing this tax.

    On a point of clarification. My point related to surviving spouses and direct descendants in France.

    So be it. I am happy to take that point on board as well. The fact is that it is not profitable to compare isolated elements in the tax system of one country with those of another. These matters will vary as long as we do not have harmonisation imposed on us.

    The right hon. Member for Down, South (Mr. Powell) was rightly concerned about the problems of the severely handicapped child. As I construe our new clause, the case about which the right hon. Gentleman was concerned will be covered by subsection (3). The right hon. Gentleman asked more questions arising from the fact that he inferred that subsection (3) would cover the case he was putting forward.

    The right hon. Gentleman asked about the word "reasonable". My hon. Friend the Member for Meriden was also concerned about this. We have the word "reasonable" in the Bill, as I am sure that right hon. Gentleman recognises, to cover all possible situations from the very serious case that he introduced to the rather less serious case. The application of the provision is subject to the right of appeal if reasonableness is not, in the taxpayer's view, deemed to have been interpreted in a fair way. The right of appeal is enshrined in Schedule 4, paragraph (7).

    The right hon. Gentleman asked whether we had any restrictive intention. We do not intend to operate subsection (3) in a restrictive way. I hope that this gives the right hon. Gentleman the assurance he was seeking.

    The right hon. Gentleman asked about different circumstances in Northern Ireland. I have no immediate knowledge of any situations in Northern Ireland which would affect the application of this provision. If the right hon. Gentleman has in mind anything in particular, I shall be grateful if he will write to me about it and I shall look into it.

    The hon. Member for Norfolk, South (Mr. MacGregor) raised three questions. He asked why we did not under this relief cover gifts by grandparents to their grandchildren for university fees. If grandparents are paying for the education of their grandchildren this will be tantamount to a gift to the parents, because in the normal course of events the parents would be expected to pay. If the parents are not in a sufficiently strong financial position to do that, and if somebody else stands in to provide the necessary money, clearly that is tantamount to a gift to the parents.

    The hon. Gentleman asked me not to pray this argument in aid but I cannot avoid doing so. The exemption of £1,000 a year is available to grandparents. That should cover university fees, even in this inflationary age, particularly if one adds to that the gifts out of income relief.

    The hon. Gentleman asked about the removal of the cumulative effect of various reliefs according to an amendment which appears later on the Paper. I was asked about this earlier today. I assure the hon. Gentleman that there is no intention on our part to remove the cumulative effect of the relief, but I shall look into it. The hon. Gentleman has his advisers and I have mine. In the last resort these things are interpreted neither by us in this House, on either side of it, nor by our advisers, but by the courts. I am advised that the relief is as good as it was always intended to be.

    The hon. Member for Cornwall, North (Mr. Pardoe) referred to Amendment No. 201 and talked about the variation of a divorce separation settlement when the wife remarried. The exemption applies so long as the maintenance condition is settled. This relates also to one of the points raised by the hon. and learned Member for Dover and Deal (Mr. Rees). It covers subsequent variations as well as the first variation of a settlement. There will be no exemption if the former wife remarries and the variation is not in satisfaction of a maintenance claim. Other than that, I am sure the House will be aware that Government Amendment No. 200, to which I did not refer, removes paragraph 15 of Schedule 5 completely to make way for the new clause. As far as we can see, all the situations covered by Amendment No. 201 where there is a case for relief should be within the ambit of the new clause.

    The hon. and learned Member for Dover and Deal asked three questions. He asked about the provision for a former wife after the dissolution of marriage and where settlement came after the decree absolute. The words "former marriage" could have no purpose at all if they did not apply where the marriage had ended. Perhaps this is one of the things which seem self-evident to a layman but not to a lawyer; but that, I am informed, covers the point raised by him.

    With regard to disposition on death, the provision as it stands applies.

    The hon. and learned Gentleman asked about discretionary trusts where, following the dissolution of a marriage, the extinction of a life interest discretionary trust would come into effect. If there is a discretionary trust it will be subject to periodic charge. There will be no interest in possession in the settled property. Therefore, the normal discretionary trust rules will apply.

    Subsection (4) of the new clause states:

    "where a disposition satisfying those conditions is a disposal of an interest in settled property, the interest shall not … be treated for the purposes of that Schedule as coming to an end."
    It seems to follow that, whatever the subsequent interest after the extinction of the interest in possession, the interest in possession would be treated as in existence and, therefore, there could not be a periodic charge. Will the Minister reconsider what he said? If he cannot give me the answer now, perhaps he will write to me.

    I am much obliged to the hon. and learned Gentleman. I certainly undertake to do that.

    8.45 p.m.

    Will the hon. Gentleman also look again at the question I raised about lines 12 and 13 in the new clause and why they are necessary? On his other point about cumulative gifts, I hope that it will be possible to return to this matter later so that we can argue the point that he has put back to me.

    I apologise to the hon. Gentleman for not covering his point about lines 12 and 13. If they were withdrawn, as the hon. Gentleman suggests, the grandparents could take over the parental responsibilities whether or not they had ever been in loco parentis. The prime responsibility and the natural responsibility is on the parents for taking care of the children. Again, we are back to the situation about which the hon. Gentleman was talking. In other words, it would be, in effect, a concealed transfer for the benefit of the parents to relieve them of responsibility which they would otherwise normally assume.

    I hope that I have dealt with most of the points raised by Opposition Members.

    I turn now to the extremely powerful speeches made by my hon. Friend the Member for Luton, West (Mr. Sedgemore) and my hon. Friend the Member for Meriden. I listened with admiration to the analysis of my hon. Friend the Member for Luton, West. It may well be that some of the points of definition about maintenance and training that he raised will need to be looked at. I am indebted to him for raising them. I thought that some of the examples he put before us were a little fanciful—about large transfers to donees in borstal institutions and other institutions provided by Her Majesty for the training of the less fortunate members of the community, and the provision for debutantes' balls to be a form of on-the-job training. These are all matters that need to be looked at. If it turns out that there are abuses of the sort to which my hon. Friend has referred, I assure him that we shall not be backward in dealing with them. We shall be happy to have him chasing us to see that we do so.

    The new clause goes wider than that. I am sure that my hon. Friend the Member for Luton, West would agree with my hon. Friend the Member for Meriden that there are circumstances in which people are taking courses at colleges of further education to gain diplomas and higher national certificates where it would be appropriate for relief to be given. This is one of the difficulties that all my hon. Friends, including my hon. Friend the Member for Keighley (Mr. Cryer), would accept as being a proper case for relief.

    As to the more general point, I have a great deal of sympathy with my hon. Friend the Member for Luton, West. I would not by any means go as far as agreeing with him that second generation management is necessarily second-rate management—of course not. On the other hand, it has never been any part of our philosophy to believe that entrepreneurial talents are transmitted hereditarily any more than are academic or athletic talents. It might well be to the greater health of the British economy if those businesses which are relatively successful were sold outside the family before a second, third or fourth generation was running them. All the most successful businesses that were quoted to us in Standing Committee time after time were examples of businesses which had started as family businesses and had then gone public or been taken over by bigger enterprises. Opposition Members made the case for us many times. However, it is inappropriate to go much wider on that general theme, although the contributions of my hon. Friend the Member for Luton, West were very valuable on that point.

    My hon. Friend has given a very good assurance, but will he address his mind to the specific point about payments for public schools being exempt under the clause? That is a cause of very great concern, as my hon. Friend the Member for Luton, West (Mr.

    Division No. 127.]


    [8.52 p.m.

    Adley, RobertBudgen, NickDouglas-Hamilton, Lord James
    Aitken, JonathanBulmer, Esmonddu Cann, Rt Hon Edward
    Alison, MichaelBurden, F. A.Durant, Tony
    Atkins, Rt Hon H. (Spelthorne)Butler, Adam (Bosworth)Dykes, Hugh
    Awdry, DanielCarlisle, MarkEden, Rt Hon Sir John
    Banks, RobertChalker, Mrs LyndaEdwards, Nicholas (Pembroke)
    Bell, RonaldChurchill, W. S.Elliott, Sir William
    Bennett, Dr Reginald (Fareham)Clark, Alan (Plymouth, Sutton)Ewing, Mrs Winifred (Moray)
    Berry, Hon AnthonyClark, William (Croydon S)Eyre, Reginald
    Biffen, JohnClarke, Kenneth (Rushcliffe)Fairbairn, Nicholas
    Biggs-Davison, JohnClegg, WalterFairgrieve, Russell
    Blaker, PeterCockcroft, JohnFarr, John
    Bowden, A. (Brighton, Kemptown)Cooke, Robert (Bristol W)Fell, Anthony
    Boyson, Dr. Rhodes (Brent)Cope, JohnFinsberg, Geoffrey
    Brittan, LeonCormack, PatrickFletcher, Alex (Edinburgh N)
    Brotherton, MichaelCorrie, JohnFletcher-Cooke, Charles
    Brown, Sir Edward (Bath)Costain, A. P.Fookes, Miss Janet
    Bryan, Sir PaulCrouch, DavidFowler, Norman (Sutton C'f'd)
    Buchanan-Smith, AlickCrowder, F. P.Fox, Marcus
    Buck, AntonyDodsworth, GeoffreyFraser, Rt Hon H. (Stafford & St)

    Sedgemore) pointed out. I do not think that my hon. Friend has satisfied the House that the clause will not provide a loophole and afford these people a tax advantage when, as he knows, the Labour manifesto states that this will be excluded.

    I am obliged to my hon. Friend. I take his point seriously. I assure him that this is a matter that we shall consider. There will be difficulties again about drawing a line between support for people attending such institutions and the sort of situation to which my hon. Friend the Member for Meriden referred. I certainly undertake to look at the matter again.

    I commend the clause to the House. I am prepared to recommend my hon. Friends to accept Amendment (i). I can give the hon. Member for St. Ives no encouragement that I can look favourably on new Clause 25.

    With the leave of the House, may I clarify what the official Opposition would like to do? We wish to divide on Amendment (e). We reserve our position to move new Clause 25 formally at the appropriate stage after new Clause 20 has been debated.

    Question put and agreed to.

    Clause read a Second time.

    Amendment proposed to the proposed Clause: ( e), in line 14, leave out 'dependent'.—[ Mr. Nott.]

    Question put, That the amendment be made:—

    The House divided: Ayes 238, Noes 286.

    Fry, PeterLloyd, IanRoberts, Wyn (Conway)
    Galbraith, Hon. T. G. D.Loveridge, JohnRossi, Hugh (Hornsey)
    Gardiner, George (Reigate)Luce, RichardRost, Peter (SE Derbyshire)
    Gilmour, Rt Hon Ian (Chesham)MacCormick, IainSainsbury, Tim
    Gilmour, Sir John (East Fife)McCrindle, RobertScott, Nicholas
    Glyn, Dr AlanMacfarlane, NeilScott-Hopkins, James
    Goodhart, PhilipMacGregor, JohnShaw, Giles (Pudsey)
    Goodlad, AlastairMacmillan, Rt Hon M. (Farnham)Shaw, Michael (Scarborough)
    Gorst, JohnMcNair-Wilson, M. (Newbury)Shelton, William (Streatham)
    Gow, Ian (Eastbourne)McNair-Wilson, P. (New Forest)Shepherd, Colin
    Gower, Sir Raymond (Barry)Madei, DavidShersby, Michael
    Grant, Anthony (Harrow C)Marten, NeilSilvester, Fred
    Gray, HamishMates, MichaelSims, Roger
    Grieve, PercyMather, CarolSinclair, Sir George
    Griffiths, EldonMaudling, Rt Hon ReginaldSkeet, T. H. H.
    Grist, IanMawby, RaySpeed, Keith
    Hall, Sir JohnMaxwell-Hyslop, RobinSpence, John
    Hall-Davis, A. G. F.Mayhew, PatrickSpicer, Jim (W Dorset)
    Hamilton, Michael (Salisbury)Meyer, Sir AnthonySpicer, Michael (S Worcester)
    Hampson, Dr KeithMiller, Hal (Bromsgrove)Sproat, Iain
    Hannam, JohnMiscampbell, NormanStainton, Keith
    Harrison, Col Sir Harwood (Eye)Mitchell, David (Basingstoke)Stanbrook, Ivor
    Harvie Anderson, Rt Hon MissMoate, RogerStanley, John
    Hastings, StephenMonro, HectorSteen, Anthony (Wavertree)
    Havers, Sir MichaelMontgomery, FergusStewart, Donald (Western Isles)
    Hawkins, PaulMoore, John (Croydon C)Stewart, Ian (Hitchin)
    Hayhoe, BarneyMore, Jasper (Ludlow)Stokes, John
    Henderson, DouglasMorgan-Giles, Rear-AdmiralStradling Thomas, J.
    Heseltine, MichaelMorrison, Charles (Devizes)Tapsell, Peter
    Higgins, Terence L.Morrison, Hon Peter (Chester)Taylor, R. (Croydon NW)
    Holland, PhilipMudd, DavidTaylor, Teddy (Cathcart)
    Hordern, PeterNeave, AireyTebbit, Norman
    Howe, Rt Hn Sir GeoffreyNelson, AnthonyTemple-Morris, Peter
    Howell, David (Guildford)Neubert, MichaelThatcher, Rt Hon Margaret
    Howell, Ralph (North Norfolk)Newton, TonyThompson, George
    Hunt, JohnNormanton, TomTownsend, Cyril D.
    Hurd, DouglasNott, JohnTrotter, Neville
    Irving, Charles (Cheltenham)Onslow, CranleyTugendhat, Christopher
    James, DavidOppenheim, Mrs Sallyvan Straubenzee, W. R.
    Jenkin, Rt Hon P. (Wanst'd & W'df'd)Osborn, JohnVaughan, Dr. Gerard
    Jessel, TobyPage, John (Harrow West)Viggers, Peter
    Jones, Arthur (Daventry)Page, Rt Hon R. Graham (Crosby)Wakeham, John
    Jopling, MichaelParkinson, CecilWalker, Rt Hon P. (Worcester)
    Joseph, Rt Hon Sir KeithPattie, GeoffreyWalters, Dennis
    Kaberry, Sir DonaldPercival, IanWarren, Kenneth
    Kellett-Bowman, Mrs ElainePeyton, Rt Hon JohnWatt, Hamish
    Kilfedder, JamesPink, R. BonnerWeatherill, Bernard
    Kimball, MarcusPym, Rt Hon FrancisWells, John
    King, Evelyn (South Dorset)Raison, TimothyWelsh, Andrew
    King, Tom (Bridgwater)Rathbone, TimWhitelaw, Rt Hon William
    Kirk, PeterRawlinson, Rt Hon Sir PeterWiggin, Jerry
    Kitson, Sir TimothyRees, Peter (Dover & Deal)Wilson, Gordon (Dundee E)
    Knight, Mrs JillRees-Davies, W. R.Winterton, Nicholas
    Lamont, NormanRenton, Rt Hon Sir D. (Hunts)Wood, Rt Hon Richard
    Lane, DavidRenton, Tim (Mid-Sussex)Young, Sir G. (Ealing, Acton)
    Langford-Holt, Sir JohnRhys Williams, Sir BrandonYounger, Hon George
    Latham, Michael (Melton)Ridley, Hon Nicholas
    Lawrence, IvanRidsdale, JulianTELLERS FOR THE AYES:
    Lawson, NigelRifkind, MalcolmMr. Spencer le Marchant and
    Lester, Jim (Beeston)Rippon, Rt Hon GeoffreyMr. W. Benyon.
    Lewis, Kenneth (Rutland)Roberts, Michael (Cardiff NW)


    Abse, LeoBradley, TomConlan, Bernard
    Allaun, FrankBray, Dr JeremyCook, Robin F. (Edin C)
    Anderson, DonaldBrown, Hugh D. (Provan)Corbett, Robin
    Archer, PeterBrown, Robert C. (Newcastle W)Cox, Thomas (Tooting)
    Ashley, JackBrown, Ronald (Hackney S)Craigen, J. M. (Maryhill)
    Ashton, JoeBuchan, NormanCronin, John
    Atkins, Ronald (Preston N)Butler, Mrs Joyce (Wood Green)Crosland, Rt Hon Anthony
    Bagier, Gordon A. T.Callaghan, Jim (Middleton & P)Cryer, Bob
    Barnett, Rt Hon Joel (Heywood)Campbell, IanCunningham, G. (Islington S)
    Bates, AlfCanavan, DennisCunningham, Dr J. (Whiteh)
    Bean, R. E.Cant, R. B.Dalyell, Tam
    Beith, A. J.Carmichael, NeilDavidson, Arthur
    Benn, Rt Hon Anthony WedgwoodCarter, RayDavies, Bryan (Enfield N)
    Bennett, Andrew (Stockport N)Carter-Jones, LewisDavies, Denzil (Llanelli)
    Blenkinsop, ArthurCastle, Rt Hon BarbaraDavies, Ifor (Gower)
    Boardman, H.Clemitson, IvorDavis, Clinton (Hackney C)
    Booth, AlbertCocks, Michael (Bristol S)Deakins, Eric
    Boothroyd, Miss BettyCohen, StanleyDean, Joseph (Leeds West)
    Bottomley, Rt Hon ArthurColquhoun, Mrs Maureende Freitas, Rt Hon Sir Geoffrey
    Boyden, James (Bish Auck)Concannon, J. D.Dempsey, James

    Doig, PeterJudd, FrankRobertson, John (Paisley)
    Dormand, J. D.Kaufman, GeraldRoderick, Caerwyn
    Douglas-Mann, BruceKelley, RichardRodgers, George (Chorley)
    Duffy, A. E. P.Kilroy-Silk, RobertRodgers, William (Stockton)
    Dunn, James A.Kinnock, NeilRooker, J. W.
    Dunnett, JackLambie, DavidRoper, John
    Dunwoody, Mrs GwynethLamborn, HarryRose, Paul B.
    Eadie, AlexLamond, JamesRoss, Stephen (Isle of Wight)
    Edelman, MauriceLatham, Arthur (Paddington)Ross, Rt Hon W. (Kilmarnock)
    Edge, GeoffLeadbitter, TedRowlands, Ted
    Edwards, Robert (Wolv SE)Lee, JohnRyman, John
    Ellis, John (Brigg & Scun)Lewis, Ron (Carlisle)Sandelson, Neville
    Ellis, Tom (Wrexham)Lipton, MarcusSedgemore, Brian
    English, MichaelLitterick, TomSelby, Harry
    Evans, Gwynfor (Carmarthen)Lomas, KennethShaw, Arnold (Ilford South)
    Evans, Ioan (Aberdare)Loyden, EddieSheldon, Robert (Ashton-u-Lyne)
    Evans, John (Newton)Lyon, Alexander (York)Shore, Rt Hon Peter
    Ewing, Harry (Stirling)Lyons, Edward (Bradford W)Short, Rt Hon E. (Newcastle C)
    Fernyhough, Rt Hon E.McCartney, HughShort, Mrs Renée (Wolv NE)
    Fitt, Gerard (Belfast W)McElhone, FrankSilkin, Rt Hon John (Deptford)
    Flannery, MartinMacFarquhar, RoderickSillars, James
    Fletcher, Ted (Darlington)McGuire, Michael (Ince)Silverman, Julius
    Ford, BenMackenzie, GregorSkinner, Dennis
    Forrester, JohnMackintosh, John P.Small, William
    Fowler, Gerald (The Wrekin)Maclennan, RobertSmith, Cyril (Rochdale)
    Fraser, John (Lambeth, N'w'd)McMillan, Tom (Glasgow C)Smith, John (N Lanarkshire)
    Freeson, ReginaldMcNamara, KevinSnape, Peter
    Freud, ClementMadden, MaxSpearing, Nigel
    Garrett, John (Norwich S)Magee, BryanSpriggs, Leslie
    Garrett, W. E. (Wallsend)Mahon, SimonSteel, David (Roxburgh)
    Gilbert, Dr JohnMarks, KennethStewart, Rt Hon M. (Fulham)
    Ginsburg, DavidMarquand, DavidStott, Roger
    Golding, JohnMarshall, Dr Edmund (Goole)Strang, Gavin
    Gould, BryanMarshall, Jim (Leicester S)Strauss, Rt Hon G. R.
    Gourlay, HarryMason, Rt Hon RoySummerskill, Hon Dr Shirley
    Graham, TedMeacher, MichaelTaylor, Mrs Ann (Bolton W)
    Grant, John (Islington C)Mellish, Rt Hon RobertThomas, Dafydd (Merioneth)
    Grocott, BruceMikardo, IanThomas, Mike (Newcastle E)
    Hamilton, James (Bothwell)Millan, BruceThomas, Ron (Bristol NW)
    Hamilton, W. W. (Central Fife)Miller, Dr M. S. (E Kilbride)Thorne, Stan (Preston South)
    Hamling, WilliamMiller, Mrs Mille (Ilford N)Thorpe, Rt Hon Jeremy (N Devon)
    Hardy, PeterMitchell, R. C. (Soton, Itchen)Tierney, Sydney
    Harper, JosephMolloy, WilliamTinn, James
    Harrison, Walter (Wakefield)Moonman, EricTomlinson, John
    Hart, Rt Hon JudithMorris, Alfred (Wythenshawe)Torney, Tom
    Hattersley, Rt Hon RoyMorris, Charles R. (Openshaw)Urwin, T. W.
    Hatton, FrankMurray, Rt Hon Ronald KingVarley, Rt Hon Eric G.
    Hayman, Mrs HeleneNewens, StanleyWainwright, Edwin (Dearne V)
    Healey, Rt Hon DenisNoble, MikeWainwright, Richard (Colne V)
    Heffer, Eric S.Oakes, GordonWalden, Brian (B'ham, L'dyw'd)
    Hooley, FrankOgden, EricWalker, Harold (Doncaster)
    Hooson, EmlynO'Halloran, MichaelWalker, Terry (Kingswood)
    Horam, JohnO'Malley, Rt Hon BrianWard, Michael
    Howell, Denis (B'ham, Sm H)Orbach, MauriceWatkins, David
    Howells, Geraint (Cardigan)Orme, Rt Hon StanleyWatkinson, John
    Hoyle, Doug (Nelson)Ovenden, JohnWeitzman, David
    Huckfield, LesOwen, Dr DavidWellbeloved, James
    Hughes, Rt Hon C. (Anglesey)Padley, WalterWhite, Frank R. (Bury)
    Hughes, Mark (Durham)Palmer, ArthurWhite, James (Pollok)
    Hughes, Robert (Aberdeen N)Pardoe, JohnWhitehead, Phillip
    Hughes, Roy (Newport)Park, GeorgeWhitlock, William
    Hunter, AdamParker, JohnWigley, Dafydd
    Irving, Rt Hon S. (Dartford)Parry, RobertWilley, Rt Hon Frederick
    Jackson, Colin (Brighouse)Peart, Rt Hon FredWilliams, Alan (Swansea W)
    Jackson, Miss Margaret (Lincoln)Pendry, TomWilliams, W. T. (Warrington)
    Janner, GrevillePenhaligon, DavidWilson, Alexander (Hamilton)
    Jay, Rt Hon DouglasPerry, ErnestWilson, Rt Hon H. (Huyton)
    Jeger, Mrs LenaPhipps, Dr ColinWilson, William (Coventry SE)
    Jenkins, Hugh (Putney)Prentice, Rt Hon RegWise, Mrs Audrey
    Jenkins, Rt Hon Roy (Stechford)Prescott, JohnWoodall, Alec
    John, BrynmorPrice, C. (Lewisham W)Wrigglesworth, Ian
    Johnson, James (Hull West)Price, William (Rugby)Young, David (Bolton E)
    Johnson, Walter (Derby S)Radice, Giles
    Johnston, Russell (Inverness)Rees, Rt Hon Merlyn (Leeds S)TELLERS FOR THE NOES:
    Jones, Alec (Rhondda)Richardson, Miss JoMr. Donald Coleman and
    Jones, Barry (East Flint)Roberts, Albert (Normanton)Mr. David Stoddart.
    Jones, Dan (Burnley)Roberts, Gwilym (Cannock)

    Question accordingly negatived.

    Amendment made: ( i), in line 16, at end insert:

    '(4) A disposition is not a transfer of value if it is made in favour of an illegitimate child of the person making the disposition and is for the maintenance education or training of the child for a period ending not later than the year in which he attains the age of 18 or, after attaining that age, ceases to undergo full-time education or training'.—[Mr. Nott.]

    Clause, as amended, added to the Bill.

    New Clause 8

    Relief For Woodlands

    'Schedule (Relief for woodlands) to this Act shall have effect for giving relief where the value transferred by a chargeable transfer made on death is determined by reference to the value of woodlands and the conditions mentioned in that Schedule are satisfied'.—[ Mr. Joel Barnett.]

    Brought up and read the First time.

    With it we shall also take new Clause 3 (Agriculture assets). I must inform the House that new Clause 8 refers to a new schedule which appears on page 688 of the Amendment Paper. It will, of course, be in order to refer to that schedule and to the amendments to it which have been tabled by hon. Members. Mr. Speaker has not had an opportunity of selecting these amendments, but the right of hon. Members to move amendments at a later stage will be preserved.

    The clause meets an undertaking I gave in Committee to provide a concession in relation to woodlands. I shall refer briefly to what is in the schedule without going into the detail which is normally involved in moving a schedule.

    On death the value of the growing timber would be excluded, but it would be optional on the owner of that timber to do so. Then there would be certain conditions. First, the owner should have been beneficially entitled to growing timber for the five years preceding death. The second condition, which would apply only after 31st December 1975, would be that it must be part of a dedication scheme. Those are the basic conditions.

    A third point is that the rate of tax in relation to woodlands will be the rate or rates which would have applied on death. That is covered by paragraph 3 of the schedule. This seems a reasonable way of dealing with the matter given that we are agreeing to a considerable deferment of the tax, particularly in the case of hardwoods. There may be deferment of the tax for four or five generations.

    I know that the Opposition would prefer us to go further, but our proposals go a long way to deal with the main problem. The Opposition's aims would create a situation in which owners of that particular type of asset would be in a vastly better position than most ordinary taxpayers. The case for woodland owners generally has been grossly exaggerated. Many incentives remain. First, there are grants under the dedication scheme. Then there is the way the tax system works for woodland owners. As the legislation stands, the woodland owner will be dealt with under income tax or corporation tax, and all his expenses in the years up to when the trees mature, since there would be no revenue receipt, would be allowed against other income, including investment income. This is a substantial incentive particularly for woodland owners.

    When the trees come near to maturity there is frequently a switch to Schedule B, and no income tax or corporation tax is paid at all.

    There is then the question of capital gains tax. We have also been told constantly that there is a substantial hedge against inflation. Those are quite substantial incentives without putting in, as hon. Gentlemen seek to do, the old estate duty relief, which was a substantial bonus on top of the already substantial existing incentives. The bonus of the estate duty relief, as hon. Gentlemen who are objective about these matters will know, was enormously abused, and the abuse was growing on a substantial scale. Investment companies were offering woodlands to wealthy taxpayers on their deathbeds. That was of no help to the genuine woodland owners.

    Under the clause we have excluded that type of operation by insisting that there shall be five years' beneficial ownership before the clause operates. Any reasonable hon. Member would regard that as a sensible way of dealing with the matter. In that way we give relief where it is intended and exclude it from the place where I hope even Opposition Members would not wish to give it.

    Perhaps I can say to some of my hon. Friends who have been concerned with this—[HON. MEMBERS: "Where are they?"] They will come. When they hear about some of the things we are likely to hear from Opposition Members they will pour in. I can tell my hon. Friends that the Trades Union Congress strongly opposed even the relief we are giving. I apologise to the TUC, but I believe that the clause is reasonable and that the relief we are providing will help genuine woodland owners. I am very fond of trees. Anything we can do to help genuine woodland owners, we are happy to do. That is why the clause is being introduced.

    The genuine woodland owners, through their representatives, have repeatedly approached the Revenue and Treasury about ending precisely the abuse to which the hon. Gentleman is referring. Both they and the forestry workers are genuinely concerned to see that the end result of the process is something which will enable planting to continue.

    That is precisely what we are doing under the clause. I look forward to having the support of the hon. Gentleman and his hon. Friends. The genuine foresters will have a fair deal. One should not go further than that, because one has to bear in mind the majority of other taxpayers who will pay capital transfer tax on their assets. Therefore, it would be to go much too far if we went as far as some of those who made representations to us want to go. I hope that the hon. Gentleman, being a reasonable man, will accept that. I am glad to see him assent.

    A number of amendments to the schedule have been tabled. I imagine that when we come to it some hon. Gentlemen will wish to speak to them. I shall be happy to deal with those and the new clause on agricultural assets when I have heard the remarks which I am sure one or two hon. Members will wish to make on behalf of their constituents. I hope that my hon. Friends will support the new clause and the schedule when we come to it.

    On a point of order, Mr. Deputy Speaker. There appears to be a misprint of a rather mystifying character in the first line of the new clause, as originally tabled. In it we find the unusual word "haze". I do not know whether in this connection it should be "axe" or whether it is due to some kind of illiteracy which is not usually to be expected even on the Government side.

    It has probably been influenced by the fact that we are dealing with trees, and axes are used for cutting down trees. The printer's mind was probably on "axe". I am sure that the right hon. and learned Gentleman knows full well what is meant.

    9.15 p.m.

    I wish first to speak to new Clause 3, in the names of my right hon. and hon. Friends and myself.

    I declare an interest both as a landowner and as a tenant. The first request I make of the Government is whether it is possible for the Minister of Agriculture, Fisheries and Food to be present to hear the debate this evening. I am glad to see that the Parliamentary Secretary is present. He has made some comments in public about the capital transfer tax, but his right hon. Friend the Minister has been strangely silent about it. I wonder what is the right hon. Gentleman's attitude to this tax. With many of my hon. Friends and other hon. Members, I should like the Minister himself to reply to the debate and to speak as the leader of the industry for the time being. I regret that he is not here tonight.

    The Chief Secretary has an altogether too glowing opinion of the new schedule which he referred to in relation to forestry. I do not propose to speak about forestry in detail since, as you have said, Mr. Deputy Speaker, this falls to be debated on Monday, but my hon. Friend the Member for Ludlow (Mr. More) may catch your eye later this evening.

    The new clause is designed to bring to agriculture a measure of genuine relief that does not exist in the Bill at present. The effect of the tax as it stands on farming will be immensely serious unless it is mitigated in a reasonable and fair way. It is a devastating imposition on many thousands of families who are amongst the hardest working families in the land. What is more, these are the people who are engaged in the most primary of all activities—the production of food. Apart from the war years, there never has been a time when their enthusiasm was so much needed as it is now.

    The tax hits farming hard because of the nature of the industry. It is highly capital-intensive with an ultra-low level of return. It consists of thousands of diverse units each of which is extremely valuable because of the value of the land. That land cannot be realised by sale without destroying the viability of the farm as a business. The wealth exists on paper and is "locked in" as an indispensable part of the activity.

    All Governments, of both parties, until the present one have thought it good economic sense to move towards larger units. Our success in this is one reason why British agriculture is amongst the most efficient and productive in the world. That has been achieved in part by recognising the unique wealth aspect of land and making special provision for it in land capital taxation.

    At least the Chancellor acknowledges in principle that agriculture ought to have some relief. To that limited extent there is common ground between the Front Benches. But the relief that the Chancellor proposes cannot properly be described as relief. It is wholly inadequate, to the extent that I can only describe the effect of the tax as naked confiscation. We are asking the Chancellor to make the relief adequate and sensible. Unless he does so, the result will be to decrease the production and productivity of farms. The burden of the tax on the assets of farms will be far too heavy. Farms will have to be fragmented, the opposite course to the one which has made our agriculture so efficient. Who will buy the fragments? How will they be farmed? I reckon that the tax is enough to set our agriculture back on a course that could lead to the peasant type of agriculture which is such a problem in certain parts of Europe.

    The Parliamentary Secretary to the Ministry of Agriculture has a pathological mental blockage about anyone who possesses land, whether or not he farms it. The rural economy of the country is based on the family unit. This tax is nothing less than a threat to that whole structure. No other structure could work anything like as well. It is the very character and independent mind of our farming families that is the heart and strength of our agriculture. The Parliamentary Secretary said in Scotland in January:
    "it is ludicrous to argue … that the application of the capital transfer tax to land represents a threat to the level of food production in this country."
    He is wrong. It does represent such a threat, unless the tax is adjusted to take account of the unique circumstances.

    As time is so limited I shall list only three inadequacies of the so-called relief as the Bill now stands. First, the multiplier of the rental value is too high at 20. When the Bill was drafted, values were relatively high and rents relatively low. The position is already different today, with the result that in many cases 20 times the rent is the same as or even higher than the capital value. At least the Government recognised in Standing Committee that the rate of 20 will have to be changed from time to time. We are grateful for that. But is it not ominous that in the conditions now prevailing there is no Government amendment to reduce the multiplier? It most certainly should be reduced. Are the Government's proposals to alter the rate by order a means only of putting it up? In view of what is happening to values and rents it should go down now. If ever there was a case to put it down, that case now exists. I am deeply suspicious of the fact that the Government, having recognised the need to change, have not responded to the circumstances that now exist and will not put it down now.

    Secondly, the relief, such as it is, does not apply to let land. The tenant is no less worthy of relief than the owner-occupier. The Chancellor of the Exchequer and the Chief Secretary have not so far justified the exclusion of tenants from some measure of relief. There is no provision in the Bill for alleviating the tax load on working capital on livestock, crops and machinery. The average requirement today is about £120 per acre. Therefore, enormous sums are involved. My hon. Friends and I believe that there is an overwhelming case for giving appropriate and full relief to working capital as well as to land itself.

    The third inadequacy is that that there is a very important element of continuity between generations of farming families. That applies to other business, but especially to agriculture. That is basic to the whole way of life in the countryside. I am convinced that it is fair and civilised to make sure that handing on continues to be possible, and to make it financially practicable for a farmer to hand over his farm to his widow, son or near relative before or after death without placing an intolerable burden on them which will have a deleterious effect on the possible production of food from that farm. The Labour Party loves to think of itself as compassionate. It has not shown compassion here; it has shown the jackboot.

    I shall not continue to list the weaknesses and dangers of the Bill as drafted. I could talk at length about the relief that is necessary from the multiplicity of other taxes, the need for relief for quick succession and the need for more favourable terms for payment by instalment, but my right hon. and hon. Friends have tabled the clause to bring a straightforward and genuine relief to people whose life is on the land.

    It seems that it was the original intention of the Chancellor to create relief, and that his intention was not so widely different from the 45 per cent. relief that operated before. Maybe the relief was not to be so great, but in principle the intention was not so different. However, if that was his intention he has signally failed to achieve it.

    The Parliamentary Secretary, in the speech to which I referred a short while ago, said:
    "let me stress that … the Government is concerned that the capital transfer tax should not adversely affect the real interests of the agricultural and forestry industries."
    I must tell him that as it exists in the Bill it adversely affects the real interests of both those great industries.

    It is wrong that on a debate on a tax which will have such a devastating effect on agriculture the Minister of Agriculture, Fisheries and Food is not present. He has not shown any inclination, either in public or in the House, to express any opinion about the effect of the capital transfer tax. That is a dereliction of his duty. I am sorry to criticise him when he is not here, but I had reason to assume that he would be present. Further, no Minister from the Scottish Office or the Welsh Office is present. I make these comments with no offence whatever to the Chief Secretary. We know his competence and versatility, but the Minister of Agriculture, Fisheries and Food is the present political leader of agriculture and I wish he were here. I believe that he was in the House earlier this afternoon and he may well be here now. The House is entitled to have the right hon. Gentleman's presence during a debate of such importance relating to food production.

    The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food
    (Mr. Gavin Strang)

    The right hon. Gentleman is making rather a meal of this. [HON. MEMBERS: "No."] He cannot fail to be aware of the deep interest which my right hon. Friend has shown in this matter and the discussions he has had with interested parties. [Hon. Members: "Where is he?"] I can assure hon. Members that I am representing my right hon. Friend because he wholeheartedly supports the decision of the Government on this matter.

    I do not think I am exaggerating things in any way. If the Minister supports it he has never justified this in public. He has never put forward an intellectual case to justify it in terms of agriculture and forestry. He should do that tonight in the execution of his duties. However, he is not present. I make no criticism of the Chief Secretary.

    We believe that it is vital to have a thriving and productive farming industry, and, therefore, I commend the new clause or one similarly drafted.

    I declare a dual interest. I own a farm and woodland. I, too, have strong reservations about the new clause. I believe that it is not sufficiently stringent.

    A number of problems are associated with affording relief to farmland, not least of which is that if relief is granted the effect is that it will become another source of tax avoidance for wealthy people. The price of farmland will increase and will be out of the reach of the very farmers about whom the right hon. Member for Cambridgeshire (Mr. Pym) is making so much fuss. Even with the relief that might be afforded, the new land prices will mean that the farmer will be faced with raising the same amount of capital to pay the tax.

    There is a sharp distinction between the ownership of land and the farming of land. What takes place on the land gives it its importance, not the ownership of the land. The problem with the new capital transfer tax is that it is only 50 per cent. If it is 20 times the rent it may be somewhat less than that. Farmland in many cases is an indivisible asset. This means that a farmer may have to sell something. The solution is obvious. We make the tax 100 per cent. In that case the whole farm goes to the State, thereby avoiding problems.

    I have no objection whatever to the farmer's son getting the tenancy of the farm from the State. In that way we would continue this magnificent family tradition about which the right hon. Gentleman is so enthusiastic, and the State would get the farm. Ultimately there would be larger and larger farming units, thereby fulfilling yet another of the wishes of the right hon. Gentleman.

    Would the hon. Gentleman not agree that the last man who tried that was Stalin?

    We must not make comparisons between Stalin and my right hon. Friend. I appeal to my right hon. Friend and to the Chancellor to look again at this clause to see whether we cannot make a special concession and have a 100 per cent. tax.

    9.30 p.m.

    The hon. Member for Dudley, West (Dr. Phipps) made such an asinine beginning to his speech that I will not follow him.

    The Minister gave an assurance in the latter part of January that he would look at this again. It is singularly disappointing that he has come forward with such an amendment. It does not begin to fulfil our expectations.

    There are some areas of agriculture which the Minister must re-examine. First, there is the multiplier, which was referred to by my right hon. Friend the Member for Cambridgeshire (Mr. Pym). The Chief Secretary must accept that the multiplier, if it is to exist at all, should be flexible. Secondly, he must look again at the relief for tenants' assets. He does not begin to understand them—and he certainly will not understand them if he does not listen. While he is having a little conversation with his hon. Friend, perhaps I may remind him that we Scots are particularly dissatisfied with the fact that the Secretary of State for Scotland is not present for this debate. In an important debate on agriculture and forestry we expect the two responsible Ministers to be here to listen, particularly when we know that both are present in the House. If they have something more important to do, we should like to know what it is.

    I believe that the Minister has given no worthwhile concession. It is almost incomprehensible that the right hon. Gentleman the Chief Secretary will not listen to advice which he seems to seek. He said that he had representations from the excellent Forestry Action Group, but he has not followed what the group told him. Perhaps he will say in his reply what advice the Forestry Commission gave him in recent months. It would certainly be interesting to know. I have a very good idea that the commission's thinking is very much more on the lines of the Opposition's thinking than the Government's thinking.

    We all know that forestry is a long-term investment. However, it appears that the Government are setting out to destroy it. Unless they listen to sense tonight, they will succeed—and I do not think it is a success which they really want to achieve. The results of Government policy will be devastating, and particularly to the Minister's Department. We pressed upon the right hon. Gentleman in Committee at the end of January that the escalation of imports of timber will increase even further as our forestry industry begins to reduce its output in the years ahead.

    Many of us have many worries about unemployment in the industry. There has been active lobbying by foresters not only in our constituencies but also in the House of Commons. We sought to explain in Committee the effect which the tax will have on employment in the forests, particularly in regard to foresters and haulage and saw mills workers. It will also have its effects in the chipboard industry and in other ancillary trades. I explained in Committee that a fifth of my constituency was under afforestation. If planting is to be reduced in future, I can see substantial unemployment developing in the rural areas. Will the Minister take responsibility for rural depopulation in the years to come? What will happen to houses and schools built in the forestry areas? We impressed on the Government in Committee that the tax will affect the social lives of people in the rural areas. Yet the Chief Secretary has produced the most mini-amendment to meet this situation. He believes that he has made a major concession but he must be alone in that view in the House, with the exception of a few hon. Friends now behind him on the Labour benches.

    The tax on final sale value will more than cancel any benefit which might accrue from deferment of tax. In any event the Chief Secretary has set the tax at the top rate, which is far too high. We have already told the right hon. Gentleman that planting this winter has been ruined. About 30 million fewer trees than normal have been planted this winter. Does that not register with the right hon. Gentleman? It does not appear to do so.

    The Chief Secretary must understand that if we want to retain a viable forestry industry, private woodlands and Forestry Commission activities must be complementary. They both go forward together. The Government must see reason and accept a suitable amendment to the Bill now, or certainly by the end of the Report stage.

    Why has the right hon. Gentleman included dedicated woodlands only? Will he explain why he came to that surprising conclusion? Will the individual forester have the right to choose whether or not to enter the dedication scheme in the future? Will he say why he underestimates the importance to farming and forestry of the concessionary relief of 45 per cent. which has proved so satisfactory in the development of woodlands in the past? It is not the reason which he gave, since he knows that forestry yields a low return on capital investment, perhaps of the order of 3 per cent.

    The Government should give more incentives for the planting of timber and the expansion of the forestry industry in the years ahead. Instead, they hammer away at this industry. If that policy continues there will be serious consequences for Britain, not only for this generation but for several generations ahead. Why is the Minister destroying that industry by means of his fiscal foolhardiness?

    I ask the Minister to think again between now and Monday. This is a vindictive tax imposed by a Socialist Government who are legislating for unemployment in the rural areas, for rural depopulation, and for further balance of payments deficits in the years ahead. The Government's position is intolerable. I totally oppose this amendment as regards forestry and the subsequent amendments which deal with farming.

    I was surprised at what the right hon. Member for Cambridgeshire (Mr. Pym) said. I assumed that he would advance cogent and detailed arguments, instead of which he devoted most of his time to bemoaning the fact that my right hon. Friends were not present. If my right hon. Friend the Minister of Agriculture had been present, the right hon. Gentleman would doubtless have produced his other speech out of his pocket, complained about the Minister wasting time and suggested that he should have discussed the importation of eggs, despite the fact that fewer eggs were imported in January 1975 than in January 1974—a fact which seems to have escaped the memories of the Opposition.

    A number of Government supporters who are concerned with and slightly informed about forestry believe that during the next 20 years this country will have to maintain a considerable planting programme. I do not mind whether that programme is carried out by the Forestry Commission or by the private sector. However, I am convinced that that programme must be maintained. I have the real anxiety that if the Treasury persists with its public expenditure policy the Forestry Commission will not have the resources to make up for any decline in the private sector. Clearly the Report stage of the Finance Bill is not a time to discuss implications of this kind. [Interruption.] I frequently spend my holidays in Scotland. I am fond of the Scottish people. I should like to remind the Opposition that trees grow in England and that we are entitled to talk about English trees.

    It is appropriate for the Chief Secretary to be concerned with the long-term implications of public expenditure. If the worst prognostications of the hon. Member for Dumfries (Mr. Monro) are realised and there is a continuing decline in tree planting in this country, it seems to me that a radical reappraisal of public expenditure policy will be required, because the need for timber will be greater in 10 years' time than it is now. That need has grown alarmingly in the last decade, and I am anxious that we should maintain timber production.

    My right hon. Friend has spent a little time in recent weeks looking at this matter, despite the fact that the Opposition have sought to waste time in the House and in Committee with long, protracted and unnecessary debates largely involving debating points of the kind we have heard from the right hon. Member for Cambridgeshire when there were serious aspects to consider.

    It would be wrong to look in detail at many of these matters now, but I ask my right hon. Friend whether he will be prepared to look carefully at the situation in agriculture in general and in forestry in particular and to watch how the situation unfolds. If it is clear that the balance of payments will be affected adversely, that tree planting in Britain is to be reduced and that the production of food is not to be maintained at the highest possible level, I hope he will bring forward in the next Finance Bill—we seem to have Finance Bills reasonably regularly—the necessary amendments to the law which will ensure that the country grows as much timber and food as it can.

    The hon. Member for Rother Valley (Mr. Hardy), who spoke with good, robust, English nationalism, talked a great deal of sense about the necessity to watch the outcome of this Bill.

    I remind the hon. Member for Dudley, West (Dr. Phipps) that we have experienced an increase of 100,000 since 1973 in the number of local government employees under Conservative local govern- reform and that we do not want another 100,000 bureaucrats to run the land under Socialism.

    The people in the North of Scotland are deeply attached to their land, and this is a very important factor in the whole situation. They have fought to retain it against landlords and Governments. They do not intend to be turned off it now by legislation which may suit England but which may have unforeseen effects in the North.

    I do not, however, take quite so pessimistic a view as was expressed by a number of earlier speakers. But since this is a brief debate, I shall not rehearse the arguments. I want to hear the Government's comments about the multiplier. The right hon. Member for Cambridgeshire (Mr. Pym) made a very good point when he said that in the present economic situation we know too little about what the effect of the multiplier will be.

    We are anxious to keep some land available to tenants. There is a severe danger that virtually no land for tenants will come on to the market at a reasonable cost. Investment in land drives it out of the reach of many people, especially of families who have lived on the land for generations and wish to remain there.

    In the North of Scotland agriculture is very different from what it is in various other parts of the country. What is more, there are great variations in the area. It is divided into small crofts, large estates and, in Orkney, dairy and arable farms. Have the Government consulted the Crofters Commission about possible repercussions from this legislation? We are hoping to have crofting legislation introduced in the not too distant future. We hope that nothing in the present legislation will prejudice the desirable reforms which we hope to see made.

    We still have the figure of 1,000 acres in the legislation, which represents an enormous farm in the South. It is a different situation in hill country. However, I do not believe that this with its restricted application will in itself now be a serious limitation on the concessions made to agriculture.

    I do not wish to delay the House. I have serious reservations still about the effects of this Bill in a highly inflationary situation in which the cost of working capital and everything else are constantly increasing. It is impossible to sell part of a farm without ruining the whole holding. The situation in farming is totally different from that involved in other forms of capital. I hope that we shall keep continuity of local people on the land. Although I accept that the Government have gone some way to meeting our fears when the Bill was first introduced, there are still a number of criticisms to be made.

    I hope that the Minister will comment on some of the matters which I have raised.

    9.45 p.m.

    Is this country really in an economic crisis? Were we really short by £4,000 million last year? If so, is it not time that the country faced the situation and did something tangible about it? Looking at the books, we find that no less than £2,000 million of that deficit came from imports of timber and timber products. Yet we have hon. Gentlemen opposite screaming tonight because one or two companies appear to be making some profit from trees.

    There is no profit in a tree until it is cut. Until the woodman cuts that tree there is no true profit in it. The value begins when the tree is cut and manufactured.

    Does it matter who grows trees in this country as long as trees are grown? The important thing is for us to have a green revolution. We must grow our way out of this crisis. We must grow a percentage of that £2,000 million. Only 8 per cent. to 10 per cent. of our timber requirement is produced in this country. Therefore, why should we scream when one or two forestry companies plant trees? Let us get things in perspective, if we can.

    I do not wish to spend any more time on forestry. I want to move to agriculture. Hon. Gentlemen opposite are unbelievably naïve when it comes to agriculture. I suggest that, looking at the scale set by the Government for the application of capital transfer tax, the amount of money that will be milked out of the industry, which has already been squeezed dry, will cripple it entirely.

    The harsh reality of present-day agriculture is such that the income derived from the average farm in Britain is so low that the farmer cannot afford to pay a worker to help him. He has to rely not only on what casual workers he can find in the district, but, even more, on the hard work of his own family to keep going. The level of profitability in agriculture is so low that his business does not generate sufficient capital to pay income tax, let alone capital transfer tax.

    Does the hon. Gentleman agree that on a train journey from Glasgow to London about two or three weeks ago he and I had a long discussion about the effect of capital transfer tax on agriculture in which he said that he was wholeheartedly behind the Labour Government's proposals for capital transfer tax as it affected agriculture?

    On a point of order, Mr. Speaker. Is it not totally contrary to the traditions of this House ever to raise in debate what purport to be private discussions outside?

    Further to that point of order, Mr. Speaker. Do not the scenes during the past few days, when democratic procedures in this House were brought to a standstill, indicate that some of the traditions followed by the Opposition are not worth a penny?

    I am dealing with the question of private conversations. It is not in accordance with the convention of the House that private conversations should be quoted.

    I will ignore that intervention and repeat what I said. The level of profitability in agriculture today is so low that the business does not generate sufficient capital to pay income tax, let alone capital transfer tax. Any young relative who may take over a farm usually has such a tremendous burden of debt round his neck that it takes him all his time to screw up the courage to make a start. I know, because I have been in that situation. If there is to be capital transfer tax on top of an already crippling burden, I assure the House that most young men will not bother getting started.

    The Scottish National Party, throughout the passage of the Bill, has sought to educate the Government to the fact that the average family farmer is no financial wizard, although many hon. Gentlemen opposite may think so.

    Am I not right in recalling that during the Second Reading debate the hon. Lady the Member for Moray and Nairn (Mrs. Ewing) said that the SNP came into the Chamber to support the CTT?

    I am with the distinguished Lady the right hon. Member for Finchley (Mrs. Thatcher), who is now the Leader of the largest Opposition party in England, but not in Scotland, in saying that I am for CTT in principle but not this particular tax unless certain important reservations are made for forestry, fishing, small businesses and farms.

    I hope that hon. Members who have the Floor will not give way to let other hon. Members make speeches.

    I was answering the point made by the hon. and learned Member for Kinross and West Perthshire (Mr. Fairbairn). It was not my fault.

    Thank you, Mr. Speaker. I must impress upon the Government that the average farmer today is overworked and underpaid, and the only thing that keeps him going is the hope that one day he may be able to hand over his land, his livestock that he has bred and his dead stock—not the fancy names that are used here—

    No. Farmers today are prepared to carry on only because they know that, as of now, they can hand over their farms in some degree intact to those who come after them. If the act of handing on their heritage is to be brutally taken from them and brutally taxed, the last incentive will have gone.

    Order. The hon. Member for Banff (Mr. Watt) is not giving way. The hon. Member for Dudley, West (Dr. Phipps) must resume his seat.

    I cannot warn the Government too strongly that if they insist on pushing through this crippling Bill they will damage for ever the one section of our agriculture industry which they should be preserving.. I hold no brief for landlords or for large multiple farmers, many of whom are represented by Members on the Conservative benches. I speak strongly for the average family farmer, and I ask the Government to take back the Bill and bring forward a CTT that will be reasonable.

    I ask the Government to accept the amendment in the name of my hon. Friend the Member for Perth and East Perthshire (Mr. Crawford) and give relief for 75 per cent. of the value of the land, the livestock and the dead stock which farmers hand over before attaining the age of 60. This should apply to men who farm land in the following categories, and I categorise them by acreage, not by value. Values are constantly changing. Acreages do not change. Therefore, as exemptions from capital transfer tax, I suggest the following scale: hill farmers who have 2,000 acres or under; animal farmers who have 300 acres or under; and dairy farmers who have 250 acres or under.

    It will be appreciated that I am in no way defending the large landlords or the multiple farmers. The country is in grave economic crisis. That being so, why do the Government not let agriculture play its full part in trying to produce some of the £1,600 million-worth of temperate foodstuffs that could and should be grown in this country? That amount of food must be grown, but the extra production demands extra capital. What farmer will take the trouble of finding extra capital if he knows that that capital will be brutally penalised by the capital transfer tax?

    I should like to support what was said by my hon. Friend the Member for Rother Valley (Mr. Hardy) on the whole question of forestry. I am sorry that my hon. Friend did not go a little further in what he said on the matter. I have always found the Treasury a strong opponent of any expansion of forestry, and I am sorry to see that that condition continues to a considerable extent.

    We must face the fact, with the world as it is today, that a union of Russia, Finland, Sweden and Canada controls timber prices. They are in exactly the same position as regards timber as are the oil sheikhs regarding petrol. They have pushed up the price of timber products enormously already. At any time they could do so again.

    Let us face the fact that in the world as a whole there is likely to be a growing shortage of timber and a growing demand for it. We should therefore be supplying more for ourselves. I should have thought that the Government ought to be thinking further ahead and ought to have a production programme. As I have said previously, we ought to have at least another 1 million acres planted by the end of the century. We shall not get that done wholly by the Forestry Commission. The Government will not find the money for that purpose. There must be a union of private money as well as Government money to achieve such a programme. There is an enormous amount of land, particularly in Wales and Scotland—and the hilly areas generally—which is not used to full advantage and should be planted up and made productive.

    We therefore want to encourage a certain amount of capital to be put into doing that. This means that there must be an adequate return on that capital to attract it. I shall not labour that point further at present beyond saying that there are many people concerned with private forestry who feel strongly that their interests are greatly hit by the Government's present proposals. I hope that some attempt will be made to look at their arguments reasonably and responsibly.

    I should like to make a suggestion. The Forestry Commission is not only a body that produces timber. It does the research for timber. It is the body which represents the whole of the timber interests of the country in discussions with the Government. Could not the Government ask the Forestry Commission, in that capacity, to look at the case put up by private foresters and make a report to them—and, let us hope, to the House as well—about what should be done to try to improve production by private forestry? That is a way out of the difficulty.

    If the Government could accept an inquiry of that kind and we could know the results, we could see whether, when the next Budget comes along—which will be quite soon—the results could then be implemented. I hope, therefore, that the Government will look at this matter in this light and ask the Forestry Commission to look at the case of the private foresters and report to them and to the House.

    Not having been able to participate in the debate in Standing Committee, I feel that my first duty when speaking on forestry at this stage of the Bill is to pay tribute to those colleagues who fought the battle on forestry night and day in Standing Committee, and that tribute includes hon. Members on both sides of the House. I have read those debates closely. I am bound to say that I find no evidence of the motivation for tax avoidance in forestry which seems to obsess the Chief Secretary.

    Speaking on behalf of the Forestry Committee of Great Britain, which represent the forestry owners—

    It being Ten o'clock the debate stood adjourned.

    Business Of The House


    That, at this day's Sitting, the Motion relating to Financial Assistance for Industry (Norton Villiers Triumph Limited) may be proceeded with, though opposed, until Three o'clock or three hours after it has been entered upon, whichever is the later.—[Mr. Pavitt.]

    Finance Bill

    Question again proposed.

    —in England and Scotland, I should like to say that not only has it tried in the past to have talks with the Inland Revenue on the question of alleged tax avoidance but it also positively welcomes the five-year rule which has now been proposed as a means of putting an end to death bed purchases.

    It would be ungracious not to acknowledge that there has been some response from the Government in the form of the new clause and schedule which have appeared on the Notice Paper. At the same time, it would be hypocritical not to say that the Bill as originally presented was an outrage to the forestry industry.

    It would be untrue to say that the clause and schedule now presented go any appreciable way towards removing this evil. The clause has a title to the effect that it is a relieving clause. This at once raises the question, as it appears to affect only cases of transfer on death, whether it is intended that transfers in life should remain under the main charging provisions. If this is so, surely the clause is immediately at fault in inhibiting such transfers and ossifying the private forestry industry.

    The Government measures are apparently directed against owners. The Chief Secretary must realise that the real victims of this will be all sections engaged in the private forestry industry and, most of all, the forestry workers. I have had letters from the Economic Forestry Group, the Woodland Management Association Limited, the Flintshire Woodlands Limited, and the Association of Professional Foresters. The Association of Professional Foresters, together with the British Foresters Action Group, represents about 10,000 workers employed in the forestry industry.

    The Chief Secretary should hear just one or two things that the Association of Professional Foresters has said in a letter to myself which arrived this morning:
    "the grossing up principle"
    which is inherent in the capital transfer tax
    "will place a very high tax burden on woodlands. However, by far the most … disastrous principle appears to have been … that the tax will be assessed on the sale value of the timber. … Inevitably therefore, all future forestry will take place on a short term rotation … those people who derive their livelihood from the private sector of British forestry are likely to lose their jobs, and also cause heavy depopulation in the rural areas … the traditionally long term hardwood rotation will cease and be succeeded by soft woods on a short term rotation. There will be no replacement of long term hardwood woodlands such as areas of Beech, Oak, etc.…
    We trust that you will find time to try to ensure that the livelihood of those employed in forestry is safeguarded and that the future landscape of the country is protected."
    It is clear from the clause and the schedule that many of the practical implications have not been thought out. The 45 per cent. relief on agricultural land which hitherto has been available also for forestry land has been lost. No alternative form of relief has been substituted. It is surely reasonable to ask that as long as land remains committed to forestry it should receive the same treatment for capital transfer tax purposes as the trees grown thereon—that is, that it should be left out of account in determining the value transferred on death and tax charged only if and when it is sold.

    Nothing has been considered, apparently, with regard to underwood. This has never been subject to estate duty. It is now to be made liable to the tax. The deductions allowable from the proceeds of sale are considerably less generous than those which were permitted in the case of estate duty.

    The clause appears to cover only the case of woodlands owned by individuals and not to deal with trusts and companies. There is no mention of the things which are bound to happen in forestry, mostly windfalls and losses resulting from windblows. It has been suggested that the new clause appears to relieve only dedicated woodlands. This is surely nonsense in a fiscal context. Whatever the advantages of dedication, it is surely nonsense that the existence or not of dedication should determine a liability to tax. Quite apart from other considerations, the main object of the dedication scheme has always been the use of the land for timber production. It is the land—not the trees—which is dedicated. Many amenity woods, small woods, copses, and all hedgerow and park timber have been deliberately kept outside the scheme. The trees and woods involved account for about 29 per cent. of all privately-owned timber, and for 37 per cent. of all hardwoods growing in Great Britain.

    Unless such timber is to be penalised as regards capital transfer tax, with disastrous consequences for the appearance of the countryside, the rules of the dedication scheme will require substantial modification, and all restrictions on what can and cannot be dedicated will have to be lifted. Whether this is practicable, whether it will be welcome to the Forestry Commission as the authority responsible for the administration of the scheme, and whether the scheme will benefit as a result are all open questions.

    I come to the major objections which have already been referred to in the letter which I read from the association representing forestry workers. There are two main objections—first, the question of the basis of value on which the tax is to be paid, and, secondly, the question of the rate at which the tax is to be paid. As regards the basis of value, it is proposed that the deferred tax should be chargeable not on the value of the trees at the time of death but on the proceeds of their eventual sale. The latter value, due to the growth of the trees in the interval, could be anything up to 10 or more times higher than the former. It is thus the intention to tax values which to a greater or lesser extent will have been non-existent at the time when the transfer took place—that is, at the date of death.

    This is patently unjust and contrary to the principles of the capital transfer tax, and will place on forestry a tax burden suffered by no other industry. There is no comparison with the objects dealt with in Clause 31, which can be left out of account in determining the value of the transfer on death, but in the case of which, if they are subsequently sold, the proceeds of sale rather than the value at death become chargeable to tax.

    The second question is the rate of duty. This is the second serious short- coming in the Government's new clause; namely, the proposal to charge the tax on the proceeds of eventual sales at the rate applicable to the top slice of the estate transferred on death.

    I take it that there can be three ways in which the rate could have been fixed. It could have been done by reference to the average rate on the main estate. It could have been done by assessment on the timber as a separate estate, or it could have been done at the highest rate of the main estate. The Government have chosen the third and most onerous of those three methods.

    The extraordinary situation could arise, as a result of these Government proposals, that in cases where woodlands are divided and left to more than one individual, the felling or selling decisions of any one of the beneficiaries will affect the capital transfer tax liability of the others.

    I sum up in this way the case which the Government must accept before this tax passes into law. In view of the nature of the tax, the only just basis for levying it is on the value at the date of transfer, and in these circumstances the simplest and fairest method for dealing with the problem is to treat the timber as a separate estate but without the benefit of the £15,000 exemption limit.

    On a point of order, Mr. Speaker. I am curious to know what is happening. Are we listening to a speech from the hon. Gentleman, or is he reading a brief prepared by someone else?

    I hope that the Chief Secretary will give us the views of the Forestry Commission on what the Government have proposed. If tomorrow or on Monday we come to discuss the new schedule which has been put down, and if Mr. Speaker looks favourably on some of the amendments thereto, the Chief Secretary will, I hope, understand that there are several issues, including those to which I have referred, which we shall wish to raise again.

    I found the response of my hon. Friend the Member for Dudley, West (Dr. Phipps) to the Opposition's new Clause 3 most refreshing. I am sure all will agree that my hon. Friend is someone who could be described as a typical British farmer, and he called for a 100 per cent. tax, which would, incidentally, have the effect of giving the lands back to the people.

    Is not the hon. Gentleman capable of distinguishing between the people, who are human beings, and the State, which is not?

    I should have expected that suggestion to bring delight to the faces of hon. Members on the Liberal bench, but I imagine that Lloyd George is now turning in his grave at the response of the right hon. Member for Orkney and Shetland (Mr. Grimond).

    New Clause 3 should be rejected because it does not take account of a number of reliefs already granted by the Treasury in respect of both farmers and small businesses. The Opposition will recall the announcement that the rates of tax on transfers during life were halved on transfers up to £100,000, and they were reduced by one-third on transfers up to £250,000. That was done in part specifically to help small farmers and small businesses.

    Second, the Opposition will remember that the Treasury introduced an amendment to reduce the value upon which the tax is charged to farmers by the introduction of the multiplier of 20. Third, owner farmers are helped by the Treasury's proposal to enable them to pay by eight yearly or 16 half-yearly instalments.

    Taking those concessions together, I calculate—my right hon. Friend will tell me whether I am right—that the capital transfer tax will be charged to farmers at roughly the same rate at which estate duty would have been charged, namely, with effectively a 45 per cent. relief. Hon. Members will say that the situation is not, the same because many farmers never paid estate duty, but one thing which is slowly sinking in during our long debates—

    The hon. Gentleman is utterly out of touch with agriculture in his constituency. Will he take it from me that farmers in the Highlands of Scotland—poor men, men probably earning less than he does—will be literally forced out of business by this tax? Does he imagine that that in any way helps his Socialist cause?

    10.15 p.m.

    If anything, the Opposition's proposal would force a lot of owner farmers and working farmers out of business, as was obvious from comments by my hon. Friend the Member for Dudley, West (Dr. Phipps). My constituency contains one field and two cows. When they look healthy, I take it that the state of British agriculture is healthy.

    Since the amended capital transfer tax is roughly in line with the old estate duty, and since there have been special concessions to owner farmers, it must be regarded as fair.

    One of the problems in considering new Clause 3—its effect would be to halve the value of the transfer upon which the tax will be levied—is that it would produce an unfair tax. A second problem of the clause is that it would cause economic distortions. In the year that I have been a Member of this House I have heard right hon. and hon. Members on the Opposition benches state repeatedly that it was central to their political philosophy that they did not want to cause economic distortions. In view of the question of fairness and the creation of distortion, we should reject their clause.

    In view of the concessions already given to farming, if the value at which tax is to be charged were reduced to 50 per cent. this would obviously provide special help to farmers but not to small businesses, retailers or others who are concerned with the payment of the tax. That means—it is a point that the Treasury must consider when introducing a new tax—that it would be unfair as between one class of taxpayer and another. Immediately this concession was granted, the small business men, retailers and others who were liable to pay the tax would demand the same treatment.

    The hon. Member says that distortions might be introduced if certain allowances were given to agriculture and not to other businesses. Are not agricultural land values so much out of parallel with other asset values that distortions already exist and steps must be taken to make up for this?

    If the hon. Member is saying that agricultural land values are too high I agree with him, but he must think of what would happen to agricultural land values if we accepted the Opposition's new clause. It would lead to further investment in agricultural land purely for investment purposes. Land values would inevitably be forced up, which would mean fewer owner farmers and fewer worker farmers. I am sure that the Opposition do not want that.

    Therefore, because the Opposition's clause would be unfair and because it would introduce distortions, I shall vote against it if the Chief Secretary is prepared to accept it.

    Some Conservative Members did not have the pleasure of listening to their comrades speaking in Committee on the capital transfer tax. Perhaps I could tell them of the words of the hon. Member for Cirencester and Tewkesbury (Mr. Ridley). He developed a new species of man called "Tewkesbury Man". He said that there were plenty of farmers in his constituency worth £500,000 a year. They got up at five o'clock in the morning to do the milking, seven days a week, 52 weeks a year. They had threadbare clothes and they did not go on holiday. He said that they were the people who would be hurt.

    I do not think that it is the purpose of my right hon. Friend the Chief Secretary or of the Treasury to hurt small businesses, large businesses or farmers. I am sure that all my hon. Friends are concerned to see small businesses, large businesses and farms flourish. The only matter at issue, and the divide between us, is how that can be done. I believe that new Clause 3 would not help the future of farming.

    I turn to the woodlands concession. My right hon. Friend the Chief Secretary rightly said that the TUC thinks he has gone a little too far, but I may just feel able to support him. I do not have with me the figures that the TUC gave me, but I am sure I am right in saying that since 1970 the amount of private planting has increased and the amount of planting for the Forestry Commission has reduced. I accept that the import of timber is a serious matter and that it is reaching proportions almost equivalent to the import of oil. Therefore, the future of forestry is a serious subject which we must consider. I agree with the TUC that we must take steps to ensure that planting by the Forestry Commission increases radically. That may mean an alteration in the Treasury's public expenditure plans.

    Does the hon. Gentleman seriously suggest that all the planting of trees must be done by the Forestry Commission? Does he not appreciate that it is vital that the private sector of forestry plants as many trees as it can?

    I did not say that, and I do not argue that all the planting should be done by the Forestry Commission. What I say is that if the effect of the tax is to diminish private planting, the Government should take systematic steps to ensure that that is more than made up for by the increases in Forestry Commission planting and use the Bill as an opportunity to see that that comes about.

    Everyone knows that the TUC was right in saying that forestry had become a traditional area of tax avoidance. By investments in forestry one could avoid the payment of not only capital gains tax but in certain circumstances, if one was clever enough, income tax.

    We on this side of the House are not against forestry, but we are against the sort of pressure campaign we have seen in the House over this issue. There has been whipped up a campaign allegedly concerned with forestry workers, but more concerned with the interests of landowners. I am sure that the Government have come to a reasonable compromise on the matter, and we should congratulate them on that.

    I am sure that the farmers in Luton and Dudley will rejoice, but I am sure also that the heaviest, most profound and most disastrous tax over which the present Government are presiding is the tax of inflation at 20 per cent. a year. That is the root of our problem. It is only proper to look at the taxes proposed on agriculture and forestry in the light of that rate of inflation.

    The hon. Member for Dudley, West (Dr. Phipps) is a farmer. I am sure he is a good employer. Let me give him some idea of the effect of a 20 per cent. rate of inflation. If the hon. Gentleman takes on a new dairyman to milk his cattle he will be paying him, given the present rate of inflation, £2 million a year by the time he retires. That is the rate of inflation over which the Government are presiding, and that is the situation that they are not lifting one finger to abate. The gravamen of the charge against the Government is that on top of this inflation they come forward with this kind of tax.

    I think the whole House will agree—the hon. Member for Rother Valley (Mr. Hardy) and Dagenham (Mr. Parker) rightly made this point—that the taxation of farming and agriculture needs to be considered from the long-term point of view. Such taxes cannot be changed overnight as has been suggested. We must take a long look at agriculture and forestry. The hon. Members for Luton, West (Mr. Sedgemore) and for Dudley, West are closely in touch with the TUC on these great problems. Doubtless they will be reinforced by the arrival of Mr. Shelepin. He will be able to give us his views on State farming and on how to treat the peasant in the Ukraine. Perhaps a report will be passed to the subservient Government Front Bench by the hon. Members for Luton, West and Dudley, West on how these things are better done.

    The hon. Member for Rother Valley rightly said that taxation is not merely a question of squeezing the rich, trying to get money from the rich or trying to redress a social grievance. Those may be some of the functions of taxation, but a fundamental function of taxation, as employed by an inteligent and percipient Government, should be to apply principles which ensure that our resources are spent in the most fruitful areas for the nation as a whole.

    It is precisely for those reasons that I would attack the proposals that have been put forward for farming and forestry. Taxes on farms, whether it be the proprietor or the tenant who is involved, will undoubtedly lead to the fragmentation of farming. Whether we are Marxists, Conservatives, supporters of the school of Balogh or supporters of the school of Keynes, such taxation can only do one thing—namely, to increase the cost of food.

    As I have said, 40 years from now we shall be paying farmhands £2 million a year, given the present rate of inflation. Let us consider the price of the fragmentation of farming and the replacement of already over-expensive building. With respect, there is already far too much investment in building in agriculture. On that basis fragmentation will lead to an immense distortion of the cost of food production. The tenant farmer will be faced with heavy outgoings on his working capital.

    I do not know whether the hon. Member for Dudley, West is a large or small farmer. Undoubtedly he is of Matto Grosso type and just right for dealing with the peasantry and all that sort of thing. Of course, Shelepin can tell us how to deal with the kulaks. But even today on a comparatively small farm the outgoings when a farmer gets out of the business or dies run into £60,000 to £80,000. That is the position on a comparatively small farm.

    With this new heavy burden, agricultural production will be distorted. That is not good planning. The Government and their supporters are merely pursuing a policy which forms part of this mysterious social contract, on which one either is or is not welshing. I should refer the matter to the Victoria Club to decide who is welshing. If the two Ministers appeared before the bookmakers they would undoubtedly get a fair judgment.

    10.30 p.m.

    It is certain that the purpose of the tax is not to improve agriculture, not to make better use of resources, but to win votes in Luton, West and Dudley, West by attacking in a vindictive way the people who oppose the Government's policies.

    A point about forestry which has perhaps been missed by the Government Front Bench but has been seen by the hon. Member for Rother Valley and many of my hon. Friends is that the calculation should not be based on the actual value of a tree cut down in this country but on the value of the imports which are saved. Every £100 worth of timber grown in this country saves £400 worth of sawn timber from abroad. That is the key point which is always missed by Treasury officials.

    The policy being pursued by the Government is not the conservation or improvement of national resources. On the contrary, it will lead to a reduction in the amount of timber we produce. The Government's proposal does not go far enough, and in all reason they should accept our proposal and that of the Scottish Nationalists.

    The trouble with the right hon. Member for Stafford and Stone (Mr. Fraser) is not so much that he objects to my hon. Friends wanting to take lessons in how to treat the peasants but that he and the Conservative Party are continually irritated by the fact that the British people are no longer content to be treated by the Conservatives as peasants.

    The debate has been a mixture of stupidity and naivety. I had some sympathy with the hon. Member for Banff (Mr. Watt), who made this subject the major part of his previous campaign as a member of the Conservative Party. Tonight he expressed views similar to those of the Conservative Party, but he is extremely naive if he thinks that the main problem in relation to land is the capital transfer tax. It is not. The main problem is the inflated land values over the last few years which have resulted from land being bought for investment purposes and as a hedge against inflation. The story told by the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) about farmers worth £500,000 working a seven-day week and wearing threadbare clothes is true, and it is true because the value of land has been distorted. The tax will not raise the value of land to that extent.

    The proposals made by the Conservatives in new Clause 3 are supported, to my astonishment, by the Scottish National Members who at one time claimed to be radical. I notice that when radical proposals are discussed there is always one Welsh Nationalist present and one Scottish Nationalist missing—the hon. Member for Clackmannan and East Stirlingshire (Mr. Reid). I am astonished that the SNP, with its pretence at radicalism, should be supporting—

    It is the attendance that alarms me. I might have expected one hon. Member from the SNP but not the whole bench.

    Does that mean that the 37 Scottish Labour Members who are not in the Chamber disagree with the hon. Member for Renfrewshire, West (Mr. Buchan)?

    That is the point I was making. If the hon. Gentleman wants a historical record I will give it. We were discussing industrial development certificates last week. Not one Member from the Scottish National Party was present. We discussed regional policy. Not one Member from the SNP turned up. They all turned up on Wedensday to vote for the increased pay for the Queen. That was the party's record last week.

    The support of the SNP for new Clause 3 is based on a mixture of naivety and stupidity—stupidity because it has not looked at the consequences and naivety because it has listened to the siren voices of the Conservative Party. The effect of the clause would be to distort land values. It would make agricultural land an investment, and when that happened we would be on the road to destroying agriculture in this country.

    Does the hon. Member want the people of Scotland to have a system of collective agriculture such as was introduced in the USSR? That seems to be the natural end to what he is suggesting.

    I said that the SNP argument was based on naivety and stupidity. The naivety is illustrated by the hon. Member for Banff and the stupidity by the hon. Member for Argyll (Mr. MacCormick). This clause would have the effect of increasing the value of farm land beyond any agricultural value. That would hurt the farmer and his family. If the hon. Member wants collectivisation, he will get it—collectivisation by the large institutions.

    There was a story told of Robert Blatchford who was walking across a field with some scouts when the owner came up and said "Get off my land." "What do you mean by 'my land'?" asked Blatchford. "It is my land. I inherited it from my ancestors", said the landowner. "How did your ancestors get it?" "Oh", said the landowner, "they fought for it." "Right", said Blatchford, "I'll fight you for it."

    The British people have a right to determine the use of land and a right to take action which prevents the drift of good agricultural land into the hands of institutions, using it as a hedge against inflation, which distorts its value and harms the working farmer, owner-occupier or tenant farmer. It is these people we are out to protect.

    Does the hon. Member agree with my condemnation of his Government who, between 1967 and 1970, boasted that they did not allow the Forestry Commission to use its powers of compulsory purchase in respect of one acre of land?

    I shall deal with that when I get on to forestry matters. With respect to the hon. Lady, I was talking about farming. I was not condemning it. Indeed, I was responsible for the policy in Scotland at that time.

    I thank my hon. Friend the Minister for ensuring that the change in values will help the lower taxpayer, whether in business or in agriculture, and also for the concession made to the widow. That is an extremely important point in agriculture. Opposition Members would know all this if they knew more of the people who live and work on the farms rather than listening to the views of the landowners.

    The real problem in forestry has not been dealt with by Opposition Members. The problem is the lack of investment in forestry and the lack of planned planting. Therefore, the real solution is to increase the investment in forestry—[Interruption.] I will deal with whether it be public or private in a moment. The second requirement is enhanced planning of large-scale forestry planting.

    It is not enough to leave these matters to the private forestry developer. Historically, private activity has been one of the main methods used to evade tax. By carrying out private development, those people evaded estate duty, income tax and capital gains tax. [An HON. MEMBER: "Avoided."] I am corrected. I should have said "avoided". At any rate, they so framed the laws that they avoided tax by legal methods. Secondly, they did not let timber and forestry planting be seen as a national asset to add to the economy. It was planting carried out often uneconomically, often on good agricultural land, and often in an unplanned direction.

    Let us look at the situation in South-West Scotland. I agree that we did not do enough in earlier administrations. I agree that I would like to have seen the use of compulsory purchase powers. I was working on the subject when the election came in June 1970. It took time to analyse the situation. The situation was that private forestry was buying good agricultural land for planting and the Forestry Commission was debarred from buying land for planting.

    The answer to the problem is not simply to purchase land for forestry planting. The answer is to get planned use between forestry and agriculture. For this reason I asked the Highlands and Islands Development Board to take action in the Strath of Kildonan, the glen in which the clearance took place and in which I was born. For the first of these historical reasons—not for the second—I asked for a land use survey. But when I got it, I said that it was too timid. That land, the equivalent of stretching from here to Birmingham, was in the hands of seven landowners. These are problems which we must seek to deal with in taxation policies. This is why the story involving Robert Blatchford is so important.

    The hon. Gentleman spoke of a part of Scotland I know well since I used to manage an estate above the Strath of Kildonan. Does he agree that those landowners, whatever their faults, spent large sums of money over a period of 20 years draining and restoring land for planting, and that much money has gone into those areas from the pockets of landowners, whether they be from the South or from the North?

    10.45 p.m.

    Some of the home farms were well managed. However, the planting was not sufficient, nor was there a sufficient carving out of mixed forestry and agricultural use. That is what was lacking. Furthermore, it gave a comparatively small amount of employment compared with employment on the support side of the industry. I therefore hope that new Clause 3 will be rejected.

    I request the Minister to look closely at the points raised during this discussion on forestry. We require more money for forestry, and that money should be made available through the Forestry Commission. I am sorry for the many workers who came to protest, and who appealed to the naive side of the Scottish National Party, in regard to jobs in private forestry. However, the task is to initiate a properly planned programme of public investment in public planting and ancillary industries in the rural areas.

    I shall not refer to the long-winded and ill-informed speech of the hon. Member for Renfrewshire, West (Mr. Buchan) except to point out that the Forestry Commission probably has a worse land use policy than that of any other landlord in the country.

    The problems of horticulture will be made much worse by this legislation. We are all aware of the difficulties which farmers will face if they are forced to fragment their holdings to pay this heavy impost. It will be even worse for the horticulturist whose holding is even more compact, since the capital value per acre of such a holding is very much greater.

    The hon. Member for Banff (Mr. Watt) made a fundamental mistake in his assessment when he spoke about acreages, because in horticulture and intensive agricultural situations the values of glasshouses run to perhaps £40,000 or £45,000 per acre at today's prices. The glasshouse sector of the horticulture industry is suffering desperately. The hop growers are in grave difficulties because of European competition. Of all the hop growers in the E.E.C., the British are the only ones not to expand their industry. The British fruit growers are experiencing great difficulties. Yet an extra burden is now put upon them.

    Since it appears that Finance Bills come once a quarter, I hope that British industry will be remembered kindly when the next one comes along.

    There has been a great deal of levity in this debate instead of the seriousness which I would have wished to see, considering the gravity of the situation we are discussing.

    There was a great deal of talk in Committee about forestry and agriculture. We were promised relief of a certain type, which eventually arrived for forestry. However, that relief does not meet the points made in Committee and does not go far enough to meet the requirements of public and private forestry.

    Forestry does not necessarily start with planting out the trees. It starts with the plans for producing the seedlings. I fear that grave damage has already been done to the private forestry industry. Many trees have not been planted this year because of the difficulties which people could see ahead. As a result, many of those trees will be lost. Producers will lose those young trees, and they will see no reason to produce more. The repercussions of the present difficulties will extend for several years ahead.

    If this nation needs timber, we must encourage people to grow trees. The Bill positively discourages investment in timber, on the grounds that there are vast profits to be made. Whether that is so is a moot point. However, profit certainly does not come quickly. Profit will not be reaped for about 50 years. Therefore, as we do not know what will happen in the next 50 years, it seems the rankest foolishness to discourage planting at this time.

    In this regard I should like to turn to a point that I have made previously not only in this Chamber but in Committee. If the land were not used for growing timber, it would be producing mutton, wool and beef. Therefore, we must consider the profit to be made from mutton, wool and beef compared with the profit from timber at the end of 50 years. That is what the private forester will consider. It is on that basis that he will decide whether to plant trees.

    If forestry in this country declines, many of the 10,000 or 11,000 people employed in the industry will lose their jobs and move not so much to other industries as to other nations where their expertise and hard work will be used for the benefit of other peoples and will be lost for ever to Britain.

    A suggestion was made by one right hon. Gentleman that planting was carried out on good agricultural land. The policy of the Northern Ireland Government was that good agricultural land should not be used for planting trees. The small private grower in Northern Ireland—there are only two or three private growers of medium size—will not plant trees on good agricultural land because he needs it for farming. Such people should be positively encouraged as the Minister of Agriculture, Fisheries and Food is encouraging them. If the Minister of Agriculture is encouraging and the Treasury is discouraging the planting of trees, may I suggest that they put their heads together and endeavour to come up with a reasonable and sensible policy which will demonstrate that the Government are heading in the same direction?

    The hon. Member for Banff (Mr. Watt) said that farmers were overworked and underpaid. As a farmer I feel sure he was speaking the truth, because I have often felt underpaid and overworked. Of course I am overworked here, as are all hon. Members, but that is only to be expected.

    This is the second or third time that this point has been made by Opposition Members. If farming is such an unpleasant, poorly paid and fearsome life, are we not doing the farmer's children a favour by taking the burden of the farm off them?

    If the hon. Gentleman considers farming to be a profitable business, why is he not in it?

    I am pleased to hear that. That is no doubt why the hon. Gentle- man needs another source of income. As a farmer, he will be aware that there is a steady drift from farming into other industries. If farming is all that good, why are so many people leaving the industry? Why is there not a tremendous rush from other professions into farming? People are not going into farming. The drift is out of the industry.

    The Government have not made their land policy clear. What do they want? Do they want the family farm to continue or to disappear? If this tax is allowed to run its course, two things can happen. I think that this point has often been made. The family farm will either fragment, become a totally uneconomic part-time farm and have a low level of productivity, or it will fall into the hands of the State. Precisely how the State will run it I am not clear. The State will have to put in civil servants to run that kind of farm, otherwise it will fall into the hands of a large corporation.

    I believe that the system of owner-occupiers in Northern Ireland is the best system, all things being taken into account, and I think that this House, which was responsible for bringing about that situation in Ireland, should look at the situation at home and try to bring it about here if it wants to improve the position in the rest of the United Kingdom.

    We have not had a clear definition of what "agricultural property" really is. It is in this respect that new Clause 3 draws attention to a principle which the Government have failed to take into account. Paragraph 7 of Schedule 8 defines "agricultural property" as
    "agricultural land or pasture and includes woodland … cottages, farm buildings"
    and so on. What it does not include, unfortunately, are crops and the animals which produce most of the profit and most of the living wage for the farmers. On that aspect of farming the full rate of tax will have to be paid, and it will have the most disastrous effects for those who wish to continue in family farming.

    The hon. Member for Luton, West (Mr. Sedgemore) thinks that this is a fair tax. That is a matter of opinion. But if it is a fair tax, he is therefore saying that before the changes were made it was not fair. If it was not fair then, why did he not seek to get changes made at that time rather than support them now?

    Hon. Members have asked why special help is needed for farming. The special help that has always been given to farming is a reflection of the low return for the work and capital employed in trying to get a reasonable living from farming.

    There are many things wrong with this tax in so far as it affects farming and the private forestry interests. I ask the Minister to go away, look at this again and for Heavens sake present something that is reasoned and presentable to the House.

    I shall be brief because of the little time that is available. I do not want to reiterate the points that have been made so far, nor to go over the ground which we shall cover when Schedule 8 is debated and the amendments considered and I hope that the Treasury Bench will take a sensible and careful look at the amendments.

    I do not think that the forestry and farming industries are looking to the Government for compassion or anything like that. They want a serious appraisal of the long-term prospects of their respective industries, and they do not feel that that has so far been done.

    I wonder whether the Minister and his hon. Friends have looked at some sample farm accounts in order to see the impact of the tax upon them and taken a strict and practical view of what farms of specific sizes will have to pay under the tax proposed. Have the Government taken a close and practical look at the impact of the tax on individual farms, which is necessary in order to get some understanding of why these fears are so strong and widespread?

    The farming community wants to feel that its prospects of contributing to future food production have been taken seriously by the Government. It is not interested in who is clobbering whom, or to what extent concessions have been made, or whether the Government have yielded sufficient concessions. They want to know whether the Government have done their sums right, and whether they have calculated that food will be grown and produced in the future. People in the industry believe that the Government have either not made that calculation, or that they have got their sums wrong.

    There are some things which bear out this fear. Reference has been made to working capital, which is one of the crucial problems facing any farmer at the present time. Another is the 20-years' purchase value, which is clearly out of line with what has happened to land values since somebody thought it out while sitting at a desk in some Government Department. There is a lack of appreciation in the Government's proposals of the differences in farm sizes in different parts of the country. It does not make sense to talk about a farm of 500 acres as if it were a standard size farm. That is not a standard size in an area where a large portion of the farm is hill or marginal land. There are areas in which 500 acres is a large farm, while in other areas it is quite a small farm and where the impact of the tax would be quite different.

    11.0 p.m.

    There are obviously ideological problems for hon. Members opposite, with some of which I can sympathise, about the fact that, on paper, farmers look rich men who are in a position to hand over to their descendants what look like large sums of money, but hon. Members must not be bemused by what they see on paper.

    As long as it stays in agriculture, this is not money but assets to be used, to set against the liabilities and to keep farming going.

    If the Labour Party are concerned to achieve changes, we would be with them in some things, but surely they do not want to bring about fragmentation, tenancies to be taken in and the enlargement of home farms, the consolidation of estates and the removal of tenants, with no farms being available to tenants.

    If they want state ownership of land they surely do not want it to result from acquisitions, in lieu of tax, of parcels of land in different parts of the country, from those struggling to pay taxation. What kind of State land management could be based on pieces of land on estates throughout the country made over for the purpose of making tax payments, without regard to sensible management?

    However some of the fears expressed about the Opposition's new Clause 3 are fears which I share, so I am not readily disposed to give support to new Clause 3 in the way it is phrased, giving wider relief than did the old estate duty. If there had been some other amendment which the Government would accept—we suggested £50,000 as a slice on which the Government could give exemption—it would have been different. They have made it difficult by not producing an amendment of their own, since we have fundamental fears about the effects of their proposals on agriculture.

    One cannot serve two masters, and I would remind the Conservative Party that they cannot serve the farmer and the speculator at the same time. We must distinguish between the two, but the Government do not make it easy to draw a distinction if they give no indication of a willingness to accept proposals which would preserve farming production in this country. It would not be preserved as the Bill stands.

    We have had an interesting debate on two subjects which go together—agriculture and woodlands.

    I would say to my hon. Friend the Member for Dudley, West (Dr. Phipps) that I am obliged for his support and I hope he will not mind if I do not go quite so far as he would have me go. I hope to be able to convince hon. Members that we are concerned about the genuine full-time working farmers. I am sure he will understand.

    I would say to the hon. Member for Banff (Mr. Watt)—he is not here—that there seemed to be a debate there which might have been better placed in the Scottish Grand Committee, but he told us how difficult it was going to be for the small working farmers in Scotland, particularly for those of whom he had experience. I do not know whether that is the experience of his hon. Friends. I see they nod, but the hon. Member said that none of those farmers earned enough to pay income tax or capital transfer tax, so I assume that they do not need to worry.—[Interruption.] That is exactly what he said. I should be happy if he looked at it in Hansard tomorrow.

    I was glad to hear that the Liberal Party and the hon. Member for Berwick-upon-Tweed (Mr. Beith) noted that new Clause 3 was not at all concerned with the small full-time working farmer. That was not the purpose behind that new clause, as was fairly recognised. What that new clause does is once again to seek to insert into the legislation even higher relief than applies under estate duty—50 per cent. relief on assets. That is what the Opposition seek to put up. It would be well beyond what was available under estate duty. The Opposition seek once again to have a most favoured asset.

    As my hon. Friend the Member for Luton, West (Mr. Sedgemore) said, with his great knowledge of farming, that has done very great harm to the whole of our farming community—the real working farmers. The economic distortions have been immense. I am astonished that the right hon. Member for Cambridgeshire (Mr. Pym) should seek to put that kind of relief back on the statute book. If new Clause 3 went on the statute book—I do not know whether this was the right hon. Gentleman's intention, but this is what would happen—a man with no interest in farming could buy a farm and then give it to his son, and the son could sell it immediately thereafter and receive the cash having had 50 per cent. relief from the tax. That is the sort of thing which happened under estate duty.

    But the right hon. Gentleman seeks to go even further, because not only does he want to have a relief in excess of the relief under estate duty; he wants it on top of the reliefs we have already in the Bill. That is the kind of situation that the right hon. Gentleman seeks to create. I think that not all of my hon. Friends would support that kind of situation, and I am glad that the Liberal Party will not support it—[Interruption.] I am sorry. The Liberal Party is very independent. But at least the hon. Member for Berwick-upon-Tweed could not support that kind of situation.

    My hon. Friend the Member for Berwick-upon-Tweed (Mr. Beith) speaks for us all.

    I am interested to hear that the hon. Gentleman speaks only for himself and that there are divisions within the Liberal Party.

    I apologise to the hon. Gentleman. That is excellent. I am delighted to hear it, especially when such excellent things were being said.

    In the Bill we have a number of reliefs. The right hon. Member for Orkney and Shetland (Mr. Grimond) referred to the multiplier, which at 20 times the rental value, as I explained in Standing Committee, would in most cases—I am not giving the favoured asset situation, because obviously we are talking about an average—give a similar situation to the 45 per cent. relief but without giving the avoidance opportunities of that kind of relief. Furthermore, it is better in a number of ways. First, it goes to those who are genuinely full-time working farmers, as defined in the Bill. Second, the relief is for the top rate, as opposed to the average rate under estate duty for the 45 per cent. relief. The multiplier is better in every way.

    I have agreed—there is a later amendment on the Order Paper—that we are prepared to look constantly at the size of this multiplier to see that it is right. Depending on what happens to the values of land, we shall be able to reduce the value of the multiplier in order to reduce the value of the land by order. I hope that this will be acceptable to the House.

    I should be happy to give way, but I gather that the Opposition would like to debate the next new Clause. I see that the right hon. Member for Cambridgeshire would rather that I continued.—[Interruption.]

    Will the right hon. Gentleman give the same undertaking about the rate of inflation?

    The right hon. Member for Cambridgeshire was quite right. I should not have given way.

    The other relief that we gave is to reduce the lifetime rates, particularly for the small full-time working farmer. Rates below £250,000 will help small farmers, business men and traders. That is what that relief is there for. In addition to that, both the working farmer and the agricultural landlord may benefit from the instalment arrangements to spread the tax over eight years by 16 half-yearly instalments.

    All these reliefs are fairly substantial. I should have thought that they would be helpful to most full-time working farmers.

    I turn now to the issue of agriculture. Again the hon. Member for Banff was very honest. He said that he did not care if there was tax avoidance as long as trees were planted. That is a very interesting argument. The implication of that argument, if this is the general view of the Scottish National Party—and, no doubt, they will qualify it at a later stage—is that the only reason we had a substantial amount of planting before was the avoidance which used to be available under estate duty. Much of the private planting was done under investment companies. That is precisely what happened. That is not what my hon. Friends the Members for Rother Valley (Mr. Hardy) and for Dagenham (Mr. Parker) would have wanted to happen. They would not want effects of that kind to reappear.

    A number of hon. Members asked us to find more money by way of public expenditure to improve the amount of planting. I know that the right hon. Member for Cambridgeshire is constantly asking us to spend a great deal more money in all areas of agriculture. Perhaps he has not spoken to his other right hon. Friends on the Opposition Front Bench, not least his new Leader. She is not interested in increasing public expenditure. That is not, as I understand it, the Opposition's policy. I must assure the right hon. Gentleman that while I am concerned to see whether we can find more money to improve planting, through the Forestry Commission and through dedication grants, one has to have a tight control on public expenditure, and I cannot promise more at present, although I can assure my hon. Friends that if there are any really harmful effects I will look at the matter again. I can promise that. That is why we have put into the Bill the opportunity, for example, in agriculture, for altering the multiplier, and that is why I have given an assurance that we shall be looking at this matter constantly.

    I was asked the reason for the provision in the new clause which gives relief for genuine woodlands; why the dedication scheme? The answer is quite simple. It is to stop the sort of devices that existed under estate duty whereby a man could buy woodlands on his death bed and save an enormous amount of estate duty. If hon. Members opposite do not know that that was going on, they are rather more naive than I think they are. It certainly has been going on under estate duty.

    I think, and I am sure that my hon. Friends also think, that our proposals on woodlands go a long way to meet the case that was made to us on behalf of the genuine foresters, and I hope my hon. Friends will support the new clause. I hope at the same time that they will vote against new Clause 3 on agricultural relief, against going back to the bad old days, showing the country that what the right hon. Member for Cambridgeshire seeks to do is to represent, as his party does with business men, not the small traders, small shopkeepers and small farmers, but the very large ones and the large landowners as well.

    We have a very short time in which to wind up this debate, and I am certain that the largest single industry in this country—agriculture—coupled with that of forestry, will note the timetable that has been forced upon us to deal with this tax which will have such a serious effect on both these industries, as indeed they will note the absence of the right hon. Gentlemen the Minister of Agriculture and the Secretary of State for Scotland from these debates.

    I hope that under this tight timetable we may have a short period in which to debate the new schedule on forestry. Therefore, I will confine my remarks to one or two of the points which have been raised.

    The Government consistently seem to fail to understand that forestry requires special taxation relief solely and only due to the length of time that the crop takes to grow. Inevitably some people in the past have taken advantage of the relief for taxation purposes. But both the CLA and the forestry interests have gone to the Treasury time and again and said that they would be perfectly happy to see such tax avoidance loopholes closed. Therefore the argument that special tax treatment for forestry could be used as a tax avoidance dodge is particularly inappropriate.

    11.15 p.m.

    I am interested to hear that the TUC has been able to get its views across to the Government on forestry in general and on the Government's forestry amendment. That is a great deal more than the Forestry Commission of Great Britain has been able to do, and it represents all the forestry interests in the United Kingdom. It is deplorable that in spite of repeated requests to see the Inland Revenue it has been unable to put its representations since the statement by the Chief Secretary in Standing Committee.

    The hon. Member for Dagenham (Mr. Parker) made a most constructive contribution to the debate and pointed out succinctly the country's enormous need for timber. Because of the extended timescale involved the disastrous effect of the introduction of the tax may take a long time to be felt. I am certain that in the end this country will be deeply sorry for what has been done here tonight. My hon. Friend the Member for Ludlow (Mr. More) covered comprehensively a number of the technical faults in the forestry amendment, and I hope that the Chief Secretary will answer those criticisms when we debate the schedule on Monday.

    I turn now to agriculture and declare an interest not, unfortunately, as a land owner, but as a tenant farmer deeply to be affected by the tax. There are three important faults in the proposals. First is the rate of relief. At 20 times rental value it can be shown quite easily, particularly with rents going up and land values coming down, that the present relief referred to by the Chief Secretary is worth little or nothing to the industry. It is easy for him to say that he is to introduce an order to change matters, but we want to know why he has not introduced it already, or why he has not written a different rate into the Bill, which he could have done.

    The right hon. Gentleman talks about the relief he has given on gifts inter vivos. This is rather like the situation of the condemned man who is to be hanged, drawn and quartered and is subsequently told that he is, after all, only to be hanged. That would no doubt be a relief, but it is of small comfort. That is how the land owners and farmers will greet the Government's proposals.

    The relief given under New Clause 8 applies to less than half our land. Let land is totally excluded and both the NFU and the CLA have made it clear that without the let land relief there will be a substantial change in the pattern of British farming. It will become increasingly hard for anyone to come in, and will remove one of the advantages this country has over its Continental neighbours—the landlord and tenant system. Obsessed as it is with the problems of the domestic tenant the Labour Party has totally failed to understand the great benefits which accrue to agriculture from our landlord and tenant system.

    The tax will apply to breeding stock, to growing crops and to the machinery that is used in the industry. These were subject to relief under the old estate duty. Both the tenant farmers and the owner-occupiers will find it extremely hard to find the money to pay the tax and continue in business.

    The Chief Secretary said that he believed that part of the virtue of this measure was that it would make it harder to avoid the tax and that one of the difficulties of the amendment was that it could be easily used to transfer large sums by the purchase and sale of agricultural land. We should be happy to see some such arrangement as is in the forestry amendment, to ensure that such a means of evasion could not be used, by providing that ownership of the land should last for, say, five or more years.

    No Opposition hon. Member wishes to see these concessions used for tax avoidance, but we do not wish to see the total destruction of the present landowning structure. The hon. Member for Dudley, West (Dr. Phipps) put his finger on the matter when he made it clear that he and his hon. Friends wanted the total nationalisation of all agricultural land. Whether it comes within one generation or two, as a result of the tax, come it surely will.

    I believe that some of the points made by Scottish National Party Members may well lead to their voting with us. I can only advise the hon. Member for Banff (Mr. Watt) to be careful what company he keeps, particularly among the more hirsute Labour Members. I believe that it will be found that the genuine farmer in Scotland is as concerned as the genuine farmer in England and Wales to see the tax substantially ameliorated.

    One or two reasonable points have been made from the Liberal bench. I hope that I can persuade Liberal Members into our Lobby. They continually wish to have things all ways. The speech of the hon. Member for Berwick-upon-Tweed (Mr. Beith) was much the same as it always is.

    In Committee we put down an amendment, which was debated, dealing with a 60 per cent. application of the tax. To ensure a debate here, we have put down a different rate. I make no apology for that. What I hope the Liberal Party will support tonight is the principle. From the fact that the complex Schedule 8 gives a little relief, I believe that the Government's intentions are clear, and that they mean to give relief of about 40 per cent. for agricultural land, if the figures used were those that I am informed they were. If that is not the case, no doubt we shall find out what percentage relief they had in mind.

    We are offering a simpler alternative, which can be understood in advance and easily applied as a rule of thumb. What farmer will be able to take advantage of giving away £1,000 a year? How will he know what acreage to give? He will not be able to measure in advance. It can only be valued afterwards. The relief that we propose is simple and straightforward. We are prepared to accept an extension of ownership to cover tax avoidance.

    The Government are obsessed with avoidance. That obsession should be forgotten in the interests of seeing that we do not break up that which is important and valuable to us.

    As crumbs from the table, new Clause 8 should be accepted by us. I hope that my hon. Friend will vote in favour of new Clause 3.

    Question put and agreed to.

    Clause read a Second time and added to the Bill.

    New Clause 3

    Agriculture Assets

    'Agricultural land, standing crops, production herds, and agricultural plant and machinery shall be excluded property to the extent of one half of the value thereof, and nothing in Schedule 8 of this Act shall operate to

    Division No. 128.]


    [11.25 p.m.

    Adley, RobertFry, PeterMcCrindle, Robert
    Aitken, JonathanGalbraith, Hon. T. G. D.McCusker, H.
    Alison, MichaelGardiner, George (Reigate)Macfarlane, Neil
    Atkins, Rt Hon H. (Spelthorne)Gardner, Edward (S Fylde)MacGregor, John
    Awdry, DanielGilmour, Rt Hon Ian (Chesham)Macmillan, Rt Hon M. (Farnham)
    Bain, Mrs MargaretGilmour, Sir John (East Fife)McNair-Wilson, M. (Newbury)
    Banks, RobertGlyn, Dr AlanMcNair-Wilson, P. (New Forest)
    Beith, A. J.Goodhart, PhilipMarshall, Michael (Arundel)
    Bell, RonaldGoodlad, AlastairMarten, Neil
    Bennett, Dr Reginald (Fareham)Gorst, JohnMates, Michael
    Berry, Hon AnthonyGow, Ian (Eastbourne)Mather, Carol
    Biffen, JohnGrant, Anthony (Harrow C)Maudling, Rt Hon Reginald
    Biggs-Davison, JohnGray, HamishMawby, Ray
    Blaker, PeterGriffiths, EldonMaxwell-Hyslop, Robin
    Bowden, A. (Brighton, Kemptown)Grimond, Rt Hon J.Mayhew, Patrick
    Boyson, Dr. Rhodes (Brent)Grylls, MichaelMeyer, Sir Anthony
    Bradford, Rev RobertHall, Sir JohnMiller, Hal (Bromsgrove)
    Brittan, LeonHall-Davis, A. G. F.Miscampbell, Norman
    Brotherton, MichaelHamilton, Michael (Salisbury)Mitchell, David (Basingstoke)
    Brown, Sir Edward (Bath)Hampson, Dr KeithMoate, Roger
    Bryan, Sir PaulHannam, JohnMolyneaux, James
    Buchanan-Smith, AlickHarrison, Col Sir Harwood (Eye)Monro, Hector
    Buck, AntonyHarvie Anderson, Rt Hon MissMontgomery, Fergus
    Budgen, NickHastings, StephenMoore, John (Croydon C)
    Bulmer, EsmondHavers, Sir MichaelMore, Jasper (Ludlow)
    Burden, F. A.Hawkins, PaulMorgan-Giles, Rear-Admiral
    Carlisle, MarkHayhoe, BarneyMorrison, Charles (Devizes)
    Carson, JohnHenderson, DouglasMorrison, Hon Peter (Chester)
    Chalker, Mrs LyndaHeseltine, MichaelMudd, David
    Churchill, W. S.Higgins, Terence L.Neave, Airey
    Clark, Alan (Plymouth, Sutton)Holland, PhilipNelson, Anthony
    Clark, William (Croydon S)Hooson, EmlynNeubert, Michael
    Clarke, Kenneth (Rushcliffe)Hordern, PeterNewton, Tony
    Clegg, WalterHowe, Rt Hn Sir GeoffreyNormanton, Tom
    Cockcroft, JohnHowell, David (Guildford)Nott, John
    Cooke, Robert (Bristol W)Howell, Ralph (North Norfolk)Onslow, Cranley
    Cope, JohnHowells, Geraint (Cardigan)Oppenheim, Mrs Sally
    Cormack, PatrickHunt, JonnOsborn, John
    Corrie, JohnHurd, DouglasPage, John (Harrow West)
    Costain, A. P.Irving, Charles (Cheltenham)Page, Rt Hon R. Graham (Crosby)
    Craig, Rt Hon W. (Belfast E)James, DavidPaisley, Rev. Ian
    Crawford, DouglasJenkin, Rt Hon P. (Wanst'd & W'df'd)Pardoe, John
    Crouch, DavidJessel, TobyParkinson, Cecil
    Crowder, F. P.Johnson Smith, G. (E. Grinstead)Pattie, Geoffrey
    Davies, Rt Hon J. (Knutsford)Johnston, Russell (Inverness)Penhaligon, David
    Dodsworth, GeoffreyJones, Arthur (Daventry)Percival, Ian
    Douglas-Hamilton, Lord JamesJopling, MichaelPeyton, Rt Hon John
    du Cann, Rt Hon EdwardJoseph, Rt Hon Sir Keithpink, R. Bonner
    Durant, TonyKaberry, Sir DonaldPowell, Rt Hon J. Enoch
    Dykes, HughKellett-Bowman, Mrs ElainePym, Rt Hon Francis
    Eden, Rt Hon Sir JohnKilfedder, JamesRaison, Timothy
    Edwards, Nicholas (Pembroke)Kimball, MarcusRawlinson, Rt Hon Sir Peter
    Elliott, Sir WilliamKing, Evelyn (South Dorset)Rees, Peter (Dover & Deal)
    Emery, PeterKing, Tom (Bridgwater)Rees-Davies, W. R.
    Evans, Gwynfor (Carmarthen)Kirk, PeterReid, George
    Ewing, Mrs Winifred (Moray)Kitson, Sir TimothyRenton, Rt Hon Sir D. (Hunts)
    Eyre, ReginaldKnight, Mrs JillRenton, Tim (Mid-Sussex)
    Fairbairn, NicholasLamont, NormanRhys Williams, Sir Brandon
    Fairgrieve, RussellLane, DavidRidley, Hon Nicholas
    Farr, JohnLangford-Holt, Sir JohnRidsdale, Julian
    Fell, AnthonyLatham, Michael (Melton)Rifkind, Malcolm
    Finsberg, GeoffreyLawrence, IvanRippon, Rt Hon Geoffrey
    Fisher, Sir NigelLawson, NigelRoberts, Michael (Cardiff NW)
    Fletcher, Alex (Edinburgh N)Le Marchant, SpencerRoberts, Wyn (Conway)
    Fletcher-Cooke, CharlesLester, Jim (Beeston)Ross, Stephen (Isle of Wight)
    Fookes, Miss JanetLewis, Kenneth (Rutland)Ross, William (Londonderry)
    Fowler, Norman (Sutton C'f'd)Lloyd, IanRossi, Hugh (Hornsey)
    Fox, MarcusLoveridge, JohnRost, Peter (SE Derbyshire)
    Fraser, Rt Hon H. (Stafford & St)Luce, RichardRoyle, Sir Anthony
    Freud, ClementMacCormick, IainSainsbury, Tim

    diminish the partial exclusion hereby accorded—[ Mr. Pym.]

    Brought up, and read the First time.

    Motion made, Question put, That the Clause be read a Second time:—

    The House divided: Ayes 267. Noes 277.

    St. John-Stevas, NormanSteen, Anthony (Wavertree)Wainwright, Richard (Colne V)
    Scott, NicholasStewart, Donald (Western Isles)Wakeham, John
    Scott-Hopkins, JamesStewart, Ian (Hitchin)Walters, Dennis
    Shaw, Giles (Pudsey)Stokes, JohnWarren, Kenneth
    Shaw, Michael (Scarborough)Stradling Thomas, J.Watt, Hamish
    Shepherd, ColinTapsell, PeterWeatherill, Bernard
    Shersby, MichaelTaylor, R. (Croydon NW)Wells, John
    Silvester, FredTaylor, Teddy (Cathcart)Welsh, Andrew
    Sims, RogerTebbit, NormanWhitelaw, Rt Hon William
    Sinclair, Sir GeorgeTemple-Morris, PeterWiggin, Jerry
    Skeet, T. H. H.Thatcher, Rt Hon MargaretWigley, Dafydd
    Smith, Dudley (Warwick)Thomas, Dafydd (Merioneth)Wilson, Gordon (Dundee E)
    Speed, KeithThompson, GeorgeWinterton, Nicholas
    Spence, JohnThorpe, Rt Hon Jeremy (N Devon)Wood, Rt Hon Richard
    Spicer, Jim (W Dorset)Townsend, Cyril D.Young, Sir G. (Ealing, Acton)
    Spicer, Michael (S Worcester)Trotter, NevilleYounger, Hon George
    Sproat, IainTugendhat, Christopher
    Stainton, Keithvan Straubenzee, W. R.TELLERS FOR THE AYES:
    Stanbrook, IvorVaughan, Dr. GerardMr. Adam Butler and
    Stanley, JohnViggers, PeterMr. W. Benvon.
    Steel, David (Roxburgh)


    Abse, LeoDormand, J. D.Janner, Greville
    Allaun, FrankDouglas-Mann, BruceJay, Rt Hon Douglas
    Anderson, DonaldDuffy, A. E. P.Jeger, Mrs Lena
    Archer, PeterDunn, James A.Jenkins, Hugh (Putney)
    Armstrong, ErnestDunnett, JackJenkins, Rt Hon Roy (Stechford)
    Ashton, JoeDunwoody, Mrs GwynethJohn, Brynmor
    Atkinson, NormanEadie, AlexJohnson, James (Hull West)
    Bagier, Gordon A. T.Edelman, MauriceJohnson, Walter (Derby S)
    Barnett, Guy (Greenwich)Edge, GeoffJones, Alec (Rhondda)
    Barnett, Rt Hon Joel (Heywood)Edwards, Robert (Wolv SE)Jones, Barry (East Flint)
    Bean, R. E.Ellis, John (Brigg & Scun)Jones, Dan (Burnley)
    Bates, AlfEllis, Tom (Wrexham)Judd, Frank
    Benn, Rt Hon Anthony WedgwoodEnglish, MichaelKaufman, Gerald
    Bennett, Andrew (Stockport N)Evans, Ioan (Aberdare)Kelley, Richard
    Bidwell, SydneyEvans, John (Newton)Kerr, Russell
    Blenkinsop, ArthurEwing, Harry (Stirling)Kilroy-Silk, Robert
    Boardman, H.Fernyhough, Rt Hon E.Kinnock, Neil
    Booth, AlbertFitt, Gerard (Belfast W)Lambie, David
    Boothroyd, Miss BettyFlannery, MartinLamborn, Harry
    Bottomley, Rt Hon ArthurFletcher Ted (Darlington)Lamond, James
    Bradley, TomFoot, Rt Hon MichaelLatham, Arthur (Paddington)
    Bray, Dr JeremyFord, BenLeadbitter, Ted
    Brown, Hugh D. (Provan)Forrester, JohnLee, John
    Brown, Robert C. (Newcastle W)Fowler, Gerald (The Wrekin)Lever, Rt Hon Harold
    Brown, Ronald (Hackney S)Fraser, John (Lambeth, N'w'd)Lewis, Ron (Carlisle)
    Buchan, NormanFreeson, ReginaldLipton, Marcus
    Butler, Mrs Joyce (Wood Green)Garrett, John (Norwich S)Litterick, Tom
    Callaghan, Jim (Middleton & P)Garrett, W. E. (Wallsend)Lomas, Kenneth
    Campbell, IanGilbert, Dr JohnLoyden, Eddie
    Canavan, DennisGinsburg, DavidLuard, Evan
    Cant, R. B.Golding, JohnLyon, Alexander (York)
    Carmichael, NeilGould, BryanLyons, Edward (Bradford W)
    Carter, RayGourlay, HarryMcCartney, Hugh
    Carter-Jones, LewisGraham, TedMacFarquhar, Roderick
    Castle, Rt Hon BarbaraGrant, John (Islington C)McGuire, Michael (Ince)
    Clemitson, IvorGrocott, BruceMackenzie, Gregor
    Cocks, Michael (Bristol S)Hamilton, James (Bothwell)Mackintosh, John P.
    Cohen, StanleyHamilton, W. W. (Central Fife)Maclennan, Robert
    Coleman, DonaldHamling, WilliamMcMillan, Tom (Glasgow C)
    Colquhoun, Mrs MaureenHardy, PeterMcNamara, Kevin
    Concannon, J. D.Harrison, Walter (Wakefield)Madden, Max
    Conlan, BernardHart, Rt Hon JudithMagee, Bryan
    Cook, Robin F. (Edin C)Hattersley, Rt Hon RoyMahon, Simon
    Corbett, RobinHatton, FrankMarks, Kenneth
    Cox, Thomas (Tooting)Hayman, Mrs HeleneMarquand, David
    Craigen, J. M. (Maryhill)Healey, Rt Hon DenisMarshall, Dr Edmund (Goole)
    Cronin, JohnHeffer, Eric S.Marshall, Jim (Leicester S)
    Crosland, Rt Hon AnthonyHooley, FrankMason, Rt Hon Roy
    Cryer, BobHoram, JohnMeacher, Michael
    Cunningham, G. (Islington S)Howell, Denis (B'ham, Sm H)Mellish, Rt Hon Robert
    Dalyell, TamHoyle, Doug (Nelson)Mikardo, Ian
    Davidson, ArthurHuckfield, LesMillan, Bruce
    Davies, Bryan (Enfield N)Huckfield, LesMiller, Dr M. S. (E Kilbride)
    Davies, Denzil (Llanelli)Hughes, Mark (Durham)Miller, Mrs Millie (Ilford N)
    Davies, Ifor (Gower)Hughes, Robert (Aberdeen N)Mitchell, R. C. (Soton, Itchen)
    Davis, Clinton (Hackney C)Hughes, Roy (Newport)Molloy, William
    Deakins, EricHunter, AdamMoonman, Eric
    Dean, Joseph (Leeds West)Irving, Rt Hon S. (Dartford)Morris, Alfred (Wythenshawe)
    de Freitas, Rt Hon Sir GeoffreyJackson, Colin (Brighouse)Morris, Charles R. (Openshaw)
    Dempsey, JamesJackson, Miss Margaret (Lincoln)Mulley, Rt Hon Frederick
    Doig, PeterMurray, Rt Hon Ronald King

    Newens, StanleyRooker, J. W.Thorne, Stan (Preston South)
    Noble, MikeRoper, JohnTierney, Sydney
    Oakes, GordonRose, Paul B.Tinn, James
    Ogden, EricRoss, Rt Hon W. (Kilmarnock)Tomlinson, John
    O'Halloran, MichaelRowlands, TedTorney, Tom
    O'Malley, Rt Hon BrianRyman, JohnUrwin, T. W.
    Orbach, MauriceSandelson, NevilleVarley, Rt Hon Eric G.
    Orme, Rt Hon StanleySedgemore, BrianWainwright, Edwin (Dearne V)
    Ovenden, JohnSelby, HarryWalden, Brian (B'ham, L'dyw'd)
    Owen, Dr DavidShaw, Arnold (Ilford South)Walker, Harold (Doncaster)
    Padley, WalterSheldon, Robert (Ashton-u-Lyne)Walker, Terry (Kingswood)
    Palmer, ArthurShore, Rt Hon PeterWard, Michael
    Park, GeorgeShort, Rt Hon E. (Newcastle C)Watkins, David
    Parker, JohnShort, Mrs Renée (Wolv NE)Watkinson, John
    Parry, RobertSilkin, Rt Hon John (Deptford)Weitzman, David
    Pavitt, LaurieSilkin, Rt Hon S. C. (Dulwich)Wellbeloved, James
    Peart, Rt Hon FredSillars, JamesWhite, Frank R. (Bury)
    Pendry, TomSilverman, JuliusWhite, James (Pollok)
    Perry, ErnestSkinner, DennisWhitehead, Phillip
    Phipps, Dr ColinSmall, WilliamWhitlock, William
    Prentice, Rt Hon RegSmith, John (N Lanarkshire)Willey, Rt Hon Frederick
    Prescott, JohnSnape, PeterWilliams, Alan (Swansea W)
    Price, C. (Lewisham W)Spearing, NigelWilliams, W. T. (Warrington)
    Price, William (Rugby)Spriggs, LeslieWilson, Alexander (Hamilton)
    Radice, GilesStallard, A. W.Wilson, Rt Hon H. (Huyton)
    Rees, Rt Hon Merlyn (Leeds S)Stewart, Rt Hon M. (Fulham)Wilson, William (Coventry SE)
    Richardson, Miss JoStott, RogerWoodall, Alec
    Roberts, Albert (Normanton)Strang, GavinWrigglesworth, Ian
    Roberts, Gwilym (Cannock)Strauss, Rt Hon G. R.Young, David (Bolton E)
    Robertson, John (Paisley)Summerskill, Hon Dr Shirley
    Roderick, CaerwynTaylor, Mrs Ann (Bolton W)TELLERS FOR THE NOES:
    Rodgers, George (Chorley)Thomas, Mike (Newcastle E)Mr. Joseph Harper and
    Rodgers, William (Stockton)Thomas, Ron (Bristol NW)Mr. David Stoddart.

    Question accordingly negatived.

    New Clause 20

    Provisions As To Transfer Of Property

    (1) Where property transferred consists of—

  • (a) shares, loans, stocks or debentures in a company registered in the United Kingdom none of whose shares are quoted on any stock exchange, or
  • (b) assets of a partnership carrying on business in the United Kingdom, or
  • (c) assets of a trade, vocation in profession wholly owned by the transferor and situate in the United Kingdom,
  • then, subject to paragraph (2) below, that transfer shall not be a chargeable transfer until the transferee sells the property transferred.

    (2) Paragraph 1 above shall only apply where the property received by the transferee consists of at least one-tenth of the shares of the company, or one-tenth of the assets of the partnership, and where the transferor has owned the property transferred for a minimum of five years prior to the date of transfer.'—[ Mr. David Howell.]

    Brought up, and read the First time.

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

    The purpose of the new clause is clear. It is to prevent the break-up of small businesses and family firms up and down the land. By the courtesy and generosity of the Government we have been left 22 minutes in which to discuss this issue and the tens of thousands of jobs that are involved in it. It is disgraceful. There used to be a courtesy of this House that when the Government imposed a guillotine, Government back benchers, out of courtesy and understanding, would hold back in their verbosity. Like many other aspects of good manners, however, that is one thing which has been thrown over by the present Government, and it is no surprise to us.

    Throughout the debate so far the Chief Secretary has maintained that the lower lifetime rates that were introduced on a piece of rather scruffy photo-copied paper in Committee upstairs as a so-called concession would help small business. First, if they help anybody—obviously, lower rates make the reprieve or stay of execution to some extent valid—they apply not only to small business but to everybody in the ranges concerned up to £250,000.

    We say that this concession is no concession and that small firms will still be strangled. We are not the only people who say it. Not only the Opposition parties in this House say that. Throughout the country every Member has had the same experience. Letters have come, and hon. Members have been inundated with correspondence from firms all over the country who will be damaged and from jobs all over the country that will be lost.

    Every time the Chief Secretary says that only a few people will be affected, I know he does not really believe that. He well knows that it will be many thousands of jobs, but he is obliged to say that particularly on the Floor of the House in front of his critical hon. Friends behind him who believe that this is the case and want to hear him say that. But it is not true. Thousands of jobs are affected. A motion was moved this afternoon under the Standing Order No. 9 procedure drawing the attention of the House to the loss of jobs in the textile industry. This is the way to lose jobs in the textile industry. This is the way to make sure that in a few years firm after firm in wool, textiles and knitting will close down, or be taken over by a large corporation with distant headquarters which will not have the slightest interest in the firm.

    The same goes for printing, removals and the unquoted sector of shipping which will be damaged beyond repair and sold abroad. The same goes for light engineering and the building industry.

    There are 6 million workpeople in the country who will be affected before long as the boss gets to retiring age and the time comes to consider what to do about the firm. With this tax, even at the lifetime rates, there will be only two choices. One is to sell up and the other is to sell out to a larger firm. That is the possibility, and it brings the shadow of redundancy into every firm of a size which will be affected by the capital transfer tax, and that is every size except the smallest.

    Throughout the debate the Chancellor has gone to great lengths, with the Chief Secretary trotting behind him, through statistical variations, at which he is extremely good, to prove that the rates are very low—lower than estate duty. He even wrote an article in the Daily Express—which we looked at in Committee—in which he said that on a £50,000 garage the rate would be only £3,875. But he forgot a few things. He forgot capital gains tax which, as the table published in the Official Report showed, could put the tax up to £28,988. He conveniently forgot to mention that if the tax was paid in instalments by the donor, unless it came out of the £1,000 exempt transfer—which was so derided by the Chancellor earlier today as being something which only Opposition Members knew about—it would not be £3,875 but £4,697. He forgot to mention that those figures applied only if there were no previous gifts. He forgot all the conditions and all the qualities that make the tax not lower but far higher than estate duty.

    Government supporters may say that a firm worth £350,000 is enormous, but it is not a very big firm. They will know many working people in family firms of about that size. The tax that has to be paid to pass that firm on is £361,000—over 100 per cent. That is another way of saying that the firm must be brought to an end and those jobs must be brought to an end, and that is what will happen to tens of thousands of workpeople. If we cannot get that into the heads of Labour Members, we shall have failed to bring home to them that throughout the country they will damage thousands of small firms in the independent sector in all kinds of industry in many of the constituencies they represent.

    Not the Chief Secretary, but many hon. Members behind him are against the independent sector. They want the National Enterprise Board to take it over. We are not. We are against big units, big corporations and big bureaucracy. That is why, throughout, we shall defend the independent sector and the small firms against the tax which is being imposed upon them and which will destroy them if it goes through.

    11.45 p.m.

    It is, of course, permissible for the hon. Member for Guildford (Mr. Howell) at this time of night to engage in a little generous hyperbole. On this occasion he has exceeded himself. I do not doubt that his postbag has been full of letters from firms throughout the country worried about the effects of this tax. I am not at all surprised, bearing in mind the sort of remarks he and his hon. Friends have been making over the past few weeks. There has been such a campaign of misrepresentation about this tax that it is virtually unrecognisable.

    When the hon. Gentleman says that there has been a campaign of misrepresentation is he referring to the article in the Daily Express by the Chancellor?

    I am not sure what the effect of that intervention was meant to be. The hon. Member for Guildford and his hon. Friends have conjured up images of Arab-laden Cadillacs cruising around the industrial areas of the country, looking for small firms to swallow up. I have not seen any in my part of the country and I have not heard of them from any of my hon. Friends.

    We have heard that this tax will mean the destruction of small firms when the hon. Gentleman knows perfectly well that the rates of duty, even allowing for the withdrawal of the 45 per cent. relief, are lower than they were under estate duty. He has continuously tried to misrepresent the effect of grossing-up and has totally ignored the comparative rates for estate duty and capital transfer tax.

    Does the hon. Gentleman agree that, from figures given in Hansard recently, the operation of the capital transfer tax will mean that when the family of a man who has built up a business over several years, becomes liable to tax that tax will be in excess of the total value of the business?

    I am coming to the capital gains tax. Tory Members have continuously misrepresented this proposal. The hon. Member for Guildford does not seem to understand the Bill—I impute no malice. He misrepresents the effect of grossing-up. He talks of a rate of over 100 per cent. When he talks of a grossed-up rate he knows that that is equivalent to 50 per cent. of a net transfer. He knows that a net rate of 50 per cent. comes in at a higher level under capital transfer tax than it ever did under estate duty. The rates are considerably lower and he knows it. If he does not know it he has not read the Bill or he is not familiar with estate duty provisions.

    Conservative Members have told us that under the tax régime of this country it is impossible for a business to generate savings and for people to build up fortunes in their lifetime. If that is so, and I do not believe it, we are talking about the transmission of fortunes that have been inherited and not accumulated through savings or earnings. I take it from the silence of Tory Members that they take that point. I will be happy to give way if any hon. Gentleman wishes to intervene.

    The hon. Gentleman has forgotten to take into account the effect of capital gains tax. Will he give an undertaking that capital gains tax will not apply to death at any stage in our considerations?

    Of course I will not give any such undertaking. One of the complaints hon. Gentlemen have been making is that the tax will lock entrepreneurs into a situation where they will not want to hand on their businesses during their life. They say that it is a disincentive to lifetime transfers. That is a serious criticism. Probably the most enormous disincentive to lifetime transfers is that capital gains tax is at present not chargeable on death. They will be glad to know that we propose to remove that disincentive to lifetime transfers by reimposing the capital gains tax charge on death, as we have indicated all along we would do.

    We do not suggest that the capital gains tax in its present condition is a perfect tax. I have made no secret of my view on the tax, nor have my right hon. Friends in the Treasury. But the capital gains tax has been in situ for many years and the Conservatives have done nothing whatever to remedy the defects which they now claim to see in it. It is a most preposterous suggestion.

    I will do the House the justice of examining new Clause 20—which was more than was done by the hon. Member for Guildford in moving the provision. The clause, which ostensibly seeks to relieve transfers involving small businesses, exempts from tax transfers of certain classes of asset until such time as the transferee sells the assets. The assets in question are shares in an unquoted company, assets of United Kingdom partnerships, and assets of a United Kingdom trade or profession wholly owned by the transferor. There is no condition in the clause to suggest that the amounts involved should be restricted in any way. Massive amounts of capital could be involved in the transfers for which relief is contemplated in new Clause 20. Some large companies are unquoted. Furthermore, the assets of some partnerships are large.

    Representations were made to us about relief which my right hon. Friend introduced for stock appreciation in the Bill. He was asked about stock in a partnership amounting to £1¼ million. It was put to him that this was a deserving case for relief and he was asked why we could not make relief available this year. My right hon. Friend said that he was unable to give relief this year. A huge amount of assets in a partnership could be let through the loophole provided by the clause.

    The purpose of the clause is to place owners of certain types of assets in a privileged position—a situation which we believe to be intolerable. It would also cause serious economic distortions and lead the transferee to feel locked into assets which he had acquired, when it might be in his and in the nation's interest to sell them.

    My right hon. Friend the Chief Secretary has made clear the reliefs which we have made available to small businesses. The lifetime scale provides for a substantial reduction at the lowest level in the effective rate of tax and a reduction of about one-third at a level of £250,000. These rates are lower than the rates on death which are themselves lower than the rates for estate duty.

    We are told that we are not sufficiently considering the needs of small business. That is a preposterous charge and I invite my right hon. Friends to reject it with the contempt which it deserves.

    The speech made by the Financial Secretary was a disgrace to the merits of the argument. It is impossible to discover how the Government expect any small business to survive the imposition of a tax on this scale.

    We are not concerned only with the private possessions of those who run these businesses—those who own them; we are concerned with the fact that these businesses provide jobs and occupations for many people throughout the country. What is more, they represent the seed corn of the future or the growth points from which future companies are likely to develop. The prosperity of Britain depends on their continued capacity to exist. How in Heaven's name can such companies possibly survive the rates of tax which the Government propose to introduce? The Financial Secretary has never provided an answer to that question.

    I take the example of a business worth £100,000 which has been running for a generation but which is not now growing in real value. It is now only keeping pace with inflation at a rate of 10 per cent. in money terms. We were told in a Written Answer that a business worth £100,000 would pay a combined capital gains tax and capital transfer tax of £105,000, which is more than 100 per cent. That is not taxation. It is not confiscation. It is wanton destruction.

    This provision is founded upon a total misconception, which dominates the minds of Government supporters, that proprietors of small businesses are sitting upon spare cash and resources which they can spend on sweets and their own comfort and which they are free to raise and to pay to the Exchequer when their businesses change hands. That is a total misconception. The reason is that the Government are determined to destroy small businesses without any justification.

    The effect of the example quoted will be to make the legatees bankrupt.

    My hon. Friend is right. There is a fundamental misconception in the mind of the Government.

    How will the legatees preserve the business and raise enough money to pay the tax? The Chief Secretary suggested that they could do so by dividing the business up between the husband and wife. On another occasion the Financial Secretary said that they could do so by giving away £1,000 slices, using salami tactics. I dare say, they could do that if they sought the advice of the right hon. Gentleman. However, as soon as they did so they would be denounced by the Chancellor of the Exchequer for tax avoidance and for seeking to find loopholes in this monstrously absurd tax.

    If those people are driven to selling those businesses, or parts of them, there will be nobody able to buy them, apart perhaps from Lord Kearton, the Arabs, Sir Don Ryder or Lord Stansgate, which is the other name of the Secretary of State for Industry. This is a prescription for domination by the State and for the destruction of small businesses.

    The Government deserve to be indicted on all counts, and I invite my hon. Friends to reject the Government's proposals as enthusiastically as possible.

    This talk of businesses being sold when the proprietor reaches retirement is untrue. Those businesses will be closed in the immediate future as a result of this legislation.

    Division No. 129.]


    [12 midnight

    Adley, RobertFletcher, Alex (Edinburgh N)Lane, David
    Aitken, JonathanFletcher-Cooke, CharlesLangford-Holt, Sir John
    Alison, MichaelFookes, Miss JanetLatham, Michael (Melton)
    Atkins, Rt Hon H. (Spelthorne)Fowler, Norman (Sutton C'f'd)Lawrence, Ivan
    Awdry, DanielFox, MarcusLawson, Nigel
    Bain, Mrs MargaretFraser, Rt Hon H. (Stafford & St)Le Marchant, Spencer
    Banks, RobertFreud, ClementLester, Jim (Beeston)
    Beith, A. J.Fry, PeterLewis, Kenneth (Rutland)
    Bell, RonaldGalbraith, Hon. T. G. D.Lloyd, Ian
    Bennett, Dr Reginald (Fareham)Galpern, Sir MyerLoveridge, John
    Benyon, W.Gardiner, George (Reigate)Luce, Richard
    Berry, Hon AnthonyGilmour, Rt Hon Ian (Chesham)MacCormick, Iain
    Biffen, JohnGilmour, Sir John (East Fife)McCrindle, Robert
    Blaker, PeterGlyn, Dr AlanMcCusker, H.
    Bowden, A. (Brighton, Kemptown)Goodhart, PhilipMacfarlane, Neil
    Boyson, Dr. Rhodes (Brent)Goodlad, AlastairMacGregor, John
    Bradford, Rev RobertGorst, JohnMacmillan, Rt Hon M. (Farnham)
    Brittan, LeonGow, Ian (Eastbourne)McNair-Wilson, M. (Newbury)
    Brotherton, MichaelGrant, Anthony (Harrow C)McNair-Wilson, P. (New Forest)
    Brown, Sir Edward (Bath)Gray, HamishMarshall, Michael (Arundel)
    Bryan, Sir PaulGriffiths, EldonMarten, Neil
    Buchanan-Smith, AlickGrylls, MichaelMates, Michael
    Buck, AntonyHall, Sir JohnMather, Carol
    Budgen, NickHall-Davis, A. G. F.Maudling, Rt Hon Reginald
    Bulmer, EsmondHamilton, Michael (Salisbury)Mawby, Ray
    Burden, F. A.Hampson, Dr KeithMaxwell-Hyslop, Robin
    Carlisle, MarkHannam, JohnMayhew, Patrick
    Carson, JohnHarrison, Col Sir Harwood (Eye)Meyer, Sir Anthony
    Chalker, Mrs LyndaHastings, StephenMiller, Hal (Bromsgrove)
    Churchill, W. S.Havers, Sir MichaelMiscampbell, Norman
    Clark, Alan (Plymouth, Sutton)Hawkins, PaulMitchell, David (Basingstoke)
    Clark, William (Croydon S)Hayhoe, BarneyMoate, Roger
    Clarke, Kenneth (Rushcliffe)Henderson, DouglasMolyneaux, James
    Clegg, WalterHeseltine, MichaelMonro, Hector
    Cockcroft, JohnHiggins, Terence L.Montgomery, Fergus
    Cooke, Robert (Bristol W)Holland, PhilipMoore, John (Croydon C)
    Cope, JohnHooson, EmlynMore, Jasper (Ludlow)
    Cormack, PatrickHordern, PeterMorgan-Giles, Rear-Admiral
    Corrie, JohnHowe, Rt Hn Sir GeoffreyMorrison, Charles (Devizes)
    Costain, A. P.Howell, David (Guildford)Morrison, Hon Peter (Chester)
    Craig, Rt Hon W. (Belfast E)Howell, Ralph (North Norfolk)Mudd, David
    Crawford, DouglasHowells, Geraint (Cardigan)Neave, Airey
    Crouch, DavidHunt, JohnNelson, Anthony
    Crowder, F. P.Hurd, DouglasNeubert, Michael
    Davies, Rt Hon J. (Knutsford)Irving, Charles (Cheltenham)Newton, Tony
    Dodsworth, GeoffreyJames, DavidNormanton, Tom
    Douglas-Hamilton, Lord JamesJenkin, Rt Hon P. (Wanst'd & W'df'd)Nott, John
    du Cann, Rt Hon EdwardJessel, TobyOnslow, Cranley
    Durant, TonyJohnson Smith, G. (E. Grinstead)Oppenheim, Mrs Sally
    Dykes, HughJohnston, Russell (Inverness)Osborn, John
    Eden, Rt Hon Sir JohnJones, Arthur (Daventry)Page, John (Harrow West)
    Edwards, Nicholas (Pembroke)Jopling, MichaelPage, Rt Hon R. Graham (Crosby)
    Elliott, Sir WilliamJoseph, Rt Hon Sir KeithPaisley, Rev. Ian
    Emery, PeterKaberry, Sir DonaldPardoe, John
    Evans, Gwynfor (Carmarthen)Kellett-Bowman, Mrs ElaineParkinson, Cecil
    Ewing, Mrs Winifred (Moray)Kilfedder, JamesPattie, Geoffrey
    Eyre, ReginaldKimball, MarcusPenhaligon, David
    Fairbairn, NicholasKing, Evelyn (South Dorset)Percival, Ian
    Fairgrieve, RussellKing, Tom (Bridgwater)Peyton, Rt Hon John
    Farr, JohnKirk, PeterPink, R. Bonner
    Fell, AnthonyKitson, Sir TimothyPowell, Rt Hon J. Enoch
    Finsberg, GeoffreyKnight, Mrs JillPym, Rt Hon Francis
    Fisher, Sir NigelLamont, NormanRaison, Timothy

    of a small company. I am the part owner of a company which in February exported £104,000-worth of door handles. Government supporters may think it amusing but it will not be worth while for that firm to export door handles of that value in future.

    Question put, That the Clause be read a Second time:—

    The House divided: Ayes 262, Noes 277.

    Rawlinson, Rt Hon Sir PeterSims, RogerTrotter, Neville
    Rees, Peter (Dover & Deal)Sinclair, Sir GeorgeTugendhat, Christopher
    Rees-Davies, W. R.Skeet, T. H. H.van Straubenzee, W. R.
    Reid, GeorgeSmith, Dudley (Warwick)Vaughan, Dr. Gerard
    Renton, Rt Hon Sir D. (Hunts)Speed, KeithViggers, Peter
    Renton, Tim (Mid-Sussex)Spence, JohnWainwright, Richard (Colne V)
    Rhys Williams, Sir BrandonSpicer, Jim (W Dorset)Wakeham, John
    Ridley, Hon NicholasSpicer, Michael (S Worcester)Walters, Dennis
    Ridsdale, JulianSproat, IainWarren, Kenneth
    Rifkind, MalcolmStainton, KeithWatt, Hamish
    Rippon, Rt Hon GeoffreyStanbrook, IvorWeatherill, Bernard
    Roberts, Michael (Cardiff NW)Stanley, JohnWells, John
    Roberts, Wyn (Conway)Steel, David (Roxburgh)Welsh, Andrew
    Ross, Stephen (Isle of Wight)Steen, Anthony (Wavertree)Whitelaw, Rt Hon William
    Ross, William (Londonderry)Stewart, Ian (Hitchin)Wiggin, Jerry
    Rossi, Hugh (Hornsey)Stokes, JohnWigley, Dafydd
    Rost, Peter (SE Derbyshire)Stradling Thomas, J.Wilson, Gordon (Dundee E)
    Royle, Sir AnthonyTapsell, PeterWinterton, Nicholas
    Sainsbury, TimTaylor, Teddy (Cathcart)Wood, Rt Hon Richard
    St. John-Stevas, NormanTebbit, NormanYoung, Sir G. (Ealing, Acton)
    Scott, NicholasTemple-Morris, PeterYounger, Hon George
    Scott-Hopkins, JamesThatcher, Rt Hon Margaret
    Shaw, Giles (Pudsey)Thomas, Dafydd (Merioneth)TELLERS FOR THE AYES:
    Shaw, Michael (Scarborough)Thompson, GeorgeMr. Adam Butler and
    Shepherd, ColinThorpe, Rt Hon Jeremy (N Devon)Mr. Fred Silvester.
    Shersby, MichaelTownsend, Cyril D.


    Abse, LeoDavis, Clinton (Hackney C)Huckfield, Les
    Allaun, Frank