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Reduced Rates For Taxable Gifts To Charities

Volume 887: debated on Thursday 6 March 1975

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

Amendment made: No. 72, in page 23, line 33, leave out Clause 30.—[ Mr. Joel Barnett.]

trade or profession where the assets transferred do not exceed £250,000 in value and where the transferee has been engaged in full-time employment in the company or partnership for not less than five years and the transferor has been engaged full time or as a director for not less than three years before the transfer and if the transferee continues in full-time employment in the business for the three succeeding years after the transfer then the rate of tax shall be one-half that in the second table, only'.

We shall also discuss Government Amendments Nos. 78, 79 and 81 and the following Opposition amendments:

No. 439, in page 27, leave out lines 12 to 30 and insert:

No. 80, in page 27, leave out lines 13 to 30 and add:

'Slice of Chargeable transfers—£000

Rate on slice %

0–15-
15–205
20–25
25–3010
30–4012½
40–5015
50–6017½
60–8020
80–10022½
100–12027½
120–15035
150–20042½
200–25050
250–30055
300–50060
500–1,00065
1,000–2,00070
2,000+75'.

Amendment No. 77 and the other Government amendments introduce into the clause a reduced scale of rates for lifetime transfers. If I have the opportunity to catch your eye at the end of the debate, Mr. Speaker, it might be for the convenience of the House if I save my remarks until then.

The pace at which we are moving indicates the constraints under which we are operating. We have now reached the point at which we have an opportunity to consider the quite monstrous and unjustifiable rates at which this ill-designed tax will continue to operate even after the concession contained in Amendment No. 77.

It is important to bring home to all hon. Members and to people outside this House the grave damage which will be inflicted by the tax on firms and farms, families and thrift. It appears—I say this advisedly—that even now the Government Front Bench has no comprehension of the scale and nature of the damage it is doing through its tax proposals. I return to the question which has baffled me ever since I began studying these proposals in detail: whether it is more serious to conclude that Ministers know and understand what they are doing and are, therefore, guilty of wilful destruction than it is to conclude that they still do not know and do not understand what they are doing and, therefore, should be subject to a verdict of not guilty by virtue of insanity.

I shall give an example which could apply to many different industries, companies and firms. It affects the building industry. Small firms are dominant as they are in the garage trade, in which there are many small garage businesses. There is also the farming industry, and in that context perhaps I should mention egg farming, many representatives of which are currently in the precincts of the House seeking to speak to hon. Members. Those of us who are taking part in the debate may not be able to see our egg farmers in person as they would wish, but I hope they will feel that we are fighting their battle for them in representing their case against the tax.

Perhaps I may quote the example of a farm worth, say, £100,000—a business which has been built up to that value over 25 years. That is by no means a high valuation in terms of small businesses or companies engaged in any of the activites to which I have referred.

It is, therefore, not an unreasonable example. Let me analyse step by step the effects of the Government's proposals on such an undertaking.

Let us suppose that a firm of that kind is being disposed of either by death or by gift to another member of the family to whom it is to be passed on. If we understand the Government's intention correctly, there will be payable, first, capital gains tax at the rate of 30 per cent. Under the amendment we are now considering, capital transfer tax will also be payable at a rate, now reduced in the case of a lifetime interest, of 50 per cent. on death. Let it be noted that if the tax is to be paid by the transferor or donor, the grossing-up provision applies and it is assessed on £150,000.

It is indeed scandalous. The scale of the scandal is set out in the answers to which we have referred, which cannot be studied too often and which appear at cols. 573 and 574 et seq. of the Official Report of 21st February, that were given to my hon. Friend the Member for Blaby (Mr. Lawson).

If one contemplates the position shown there under Table 1, which sets out the capital transfer tax and capital gains tax combined as a proportion of the assets transferred on a £100,000 business, one sees the quite astonishing figure of £106,000, rounded up by a pound or two. On that footing, therefore, the tax payable is in excess of the actual value of the business being transferred. Of course, a substantial element in that sum is represented by capital gains tax, but only by that tax payable on the growth in the cash value of a firm as a result of an assumed rate of inflation of 10 per cent. over 25 years. On that footing one has the absolutely ludicrous situation of tax being exacted in excess of the value of the assets in question. It can only be described as expropriation, as robbery without violence. That is only one of the ways in which one can approach it.

If one looks at the more generous Table 2 proposals, now the subject of an amendment moved by the Financial Secretary, in the case of somebody transferring as a gift during lifetime one sees that the rate of capital transfer tax is reduced. Even so, for a business of that kind worth £100,000 the cumulative tax payable, as set out in Table 3 of the answers given to my hon. Friend—£52,000—represents more than one-half of the value of the business in question. I have some questions to ask on that later. How far do the thousands of small business men up and down the country, in spite of all the letters we have been receiving from them, even now appreciate what is meant by that?

To take another example, that of a business worth £250,000, again under Table 3, the cumulative addition of capital gains tax and capital transfer tax, even on the reduced rate for lifetime transfers, makes the combined tax payable, on the assumptions I have indicated, more than £300,000. If one had not studied these things closely one would not believe one's eyes, one's ears or anything else. It is a wholly fantastic situation and I do not understand how any explanation or exposition from the Government can begin to justify such things.

Let us look again at the way the Chancellor, in the less-than-candid series of answers he gave in the Daily Express, described the situation of which I have just been speaking, which I hope you will remember, Mr. Speaker—a combined rate of more than £300,000 in capital gains tax and capital transfer tax on a business of £250,000. The Chancellor was asked:
"The Confederation of British Industry has said that the tax will damage small firms and therefore employment. How do you answer this charge?"
The Chancellor answered:
"I do not accept that the tax will have this effect, particularly now that we have reduced the rate on small- and medium-sized gifts. … On a gift of £250,000 the lifetime tax will be about two-thirds of the tax on death. We have introduced this relief to help small businesses in particular."
Some help! It is absolutely lunatic. One thing that has been made clear by the amendment that the Financial Secretary has just moved is that the original lifetime rates proposed in the Bill as introduced in this House were far too high. The amendment which the hon. Gentleman is seeking to move is not just an admission of error, an admission that goes nowhere near far enough. It is a confession of gross folly, and it is a pity that the standard by which we have had to judge it is the standard underlying this whole legislation.

6.45 p.m.

The Government still do not go and have not gone anything like far enough. They have not brought their proposals within 1,000 miles of sanity or justice. Be it noted that the schedule now introduced by the Financial Secretary applies only to lifetime gifts, and then only if the transference between donor and donee is made more than three years before death. The point of Amendment (b) is to reduce the period to make it comparable to that provided for charities, a period of 12 months. Even so, the exemption that the Government are seeking on relief provided in Table 2 is a first step.

Let us hope that we shall not in any subsequent discussion hear that referred to as a loophole. I would not put it beyond the rather ghoulish characters who have been occupying the Government Front Bench throughout these debates to begin suggesting, in a way suggested earlier but rather differently by my hon. Friend, that in face of this burden of taxation life itself should be regarded as a loophole which ought shortly to be stopped up. That argument would not surprise me. It would not surprise me if the more benevolent proposals of the second table were merely paving the way for the hon. Member for Bolsover (Mr. Skinner) when he finally succeeds to the distinguished position of the Financial Secretary, or even, God forbid, something more distinguished, to stop up even these loopholes.

Seriously, how is a family business expected to cope? I ask that in a genuine spirit of inquiry. On transferring a business worth £100,000, how does one find £106,000 of tax, even if the cost of doing so is at the new lifetime gift rate? How does one find £52,000 to pay the tax? How does one set about it? These are questions that I am being asked in letter after letter from all over the country. What is the intention in imposing this extraordinary and destructive burden on such businesses?

Amendments (c), (d) and (e), standing in the names of my right hon. Friends and myself, would offer some relief from that burden though probably still nothing like enough; but they are an attempt to improve the horrors that confront us. Of course it is true that similar problems could have arisen when we were facing only estate duty but—let the Financial Secretary hold his peace—they seldom did because of the existence, under provisions carefully worked out by advisers of the calibre of the Chief Secretary, who is not now with us, of trusts and other arrangements.

By those means businesses and farms were able to pass from one generation of a family to the next and to survive and prosper. By those means businesses and farms grew, prospered and created jobs and wealth for people in the communities in which they lived, creating wealth of all kinds for the community. That desirable effect, apparently, is said to be a loophole. It is the survival kit within the pattern of estate duty that is to be snatched from small farms and businesses and others, since it is identified as a loophole.

It is uncomprehending rubbish for that to be described as a loophole. The existence of continued capacity to make arrangements of that kind is the result of conscious decisions of successive Chancellors in face of the nature of estate duty to allow successful enterprise of that kind to continue to exist. It is wholly destructive to seek to stop up that so-called loophole.

Now that that is intended, I ask again not merely how business men, businesses and farmers are intended to cope, but what is the purpose of the change projected by the Government in relation to those businesses? What will be its effect? I can see only one way in which the situation can be met. The effect is bound to be to compel the sale in whole or in part of thousands of successful, thriving enterprises. One asks, sold to whom? They will be sold to giant public corporations if they, in face of the Government's other economic policies, can raise the cash to make the purchase, which is doubtful. They will be sold to the chiefs of satrapies in the Middle East or elsewhere, if they still have the courage to invest in the kind of Britain which will survive the imposition of that tax, or they will be sold, as it was suggested last night, by compulsion to the right hon. Member for Bristol, South-East (Mr. Benn), the ignoble Lord Stansgate. There can be no other consequence.

I have nowhere seen any attempt to answer the question I ask about what will be the effect. What other way, therefore, is to be seen? In what sense is it any exaggeration to say that enterprises will be destroyed within a generation and that workers in those enterprises and their jobs will be taken over and threatened? As sane men are presumed to intend the consequences of their acts, one can only conclude that the Labour Government mean to achieve just that desolation which lies in prospect. It is unbelievable.

I wish to give time for my hon. Friends to join in this extremely important debate, but I hope I may be forgiven for recounting to the House a conversation I had a year or two ago with a distinguished representative of the Chinese People's Republic. Finding myself short of immediate material for launching the conversation, I asked him to what extent dogs were in evidence in the Chinese People's Republic. I was told—perhaps not surprisingly—that there were only worker dogs to be found in that happy country. Dogs were found on farms, with jobs to do, but nowhere else. I asked what happened if such a worker dog strayed out of its agricultural compound and into the town. I received the crisp reply "Such a dog would not exist." Will someone please explain to the House why these taxes will not work in just that way? What is to be the future of small business in Britain? Within one generation of the Government's carrying through this legislation such a thing will not exist.

Is it any wonder that there are cars on the roads of this country displaying on the back window a sticker which will be the epitaph of the present administration, if they last that long, and which, if we are not careful, may turn out to be the epitaph of Britain. The legend is simple:
"Will the last small business man to leave Britain please turn out the lights?"
That is the prospect before many people in face of the Government's policies. We are determined, as we have been throughout the proceedings on the Bill, to do everything possible to protect people from that damage, and my right hon. Friend the Leader of the Opposition has already told the House of the Conservative Party's attitude towards this tax. It is a bad tax. I renew, on the Conservative Party's behalf, the pledge already given. We shall, therefore, repeal the tax. We shall take account of the fact that capital taxation in one form or another has existed since the latter part of the last century, but that which will replace the tax will bear in mind, as it should, first the weight of other capital and income taxes on the taxpayer, secondly the beneficial treatment of gifts to the family in other countries which have a gift tax, and thirdly the need to keep in this country those who can create the new wealth upon which our future depends.

I wish to refer Amendments (c), (d) and (e) to the Amendment. Amendment (c) refers to unquoted companies. Amendment (d) may, perhaps, appeal to the Financial Secretary because it includes a reference to trading close companies and may close a conceivable loophole. Amendment (e) puts on a limitation of £250,000 and provides that the recipient shall work for five full years before the transfer, the donor shall have been in the business for three years and the recipient shall continue to work in the business.

In Amendment (e) we deal specifically with the family business, the sort of business which passes on from generation to generation and is in many parts of the country the backbone of the local economy, particularly in the regions, including Scotland, Wales and Northern Ireland, where family businesses dominate in the economy.

Amendment No. 77 is in response to the debate in Committee of the whole House. We are grateful that there is to be some help, but regret that it is totally inadequate. The House may recall the definition of "gratitude in politics" made by Lord Boyd-Carpenter, who said that it was "a lively anticipation of further benefits to come". I trust that the Financial Secretary will act in that way tonight.

In the debate in Committee of the whole House, the Chief Secretary said that he could not accept an amendment which treated one group of assets differently from other assets. His words were that:
"it would be unfair, all other things being equal, for one taxpayer to pay considerably less than another. That would not be right."—[Official Report, 22nd January 1975; Vol. 884, c. 1662.]
On that basis he rejected our amendment.

Having set out that basis the Chief Secretary proceeded to shoot it to pieces in Standing Committee when he gave preferential treatment to certain deserving groups—in agriculture, with the 20-year valuation, and in forestry, where no payment is made till the asset is sold. That is a principle which is incorporated in Amendment (e), which might be favourably received by the Financial Secretary.

7.0 p.m.

It works on the same principle. A business is like a tree. It takes years to grow, but can be cut down overnight. One of the major problems which small businesses will face in the next few years is the situation that will follow the Government decision to cut down family businesses, small businesses and growing businesses—concerns which have taken years, sometimes generations, to build but which could be quickly destroyed.

Last night we had a brief debate, lasting 20 minutes before midnight, on the subject of small businesses. The Financial Secretary revealed the Government's defence. He said, if I may paraphrase his words, "What is the fuss all about? These businesses have survived estate duty, and capital transfer tax is at a lower rate than death duty. Since we are conferring a benefit on those businesses, why are the Opposition getting so worked up?" The Minister knows that most people did not pay estate duty. It was paid by those who were unlucky or ill-advised. Certainly many of those in small and medium-sized businesses did not pay estate duty. Because they were not prepared to see their life's work end up as a donation to the Treasury they sought advice on how to avoid it.

The Financial Secretary does not need to attack my argument—I am aware that he will try to do so—since he will find that in his speeches and in the remarks of his right hon. Friend the Chancellor in introducing capital transfer tax it was said that it was necessary to take this action to stop up the holes in estate duty. In other words, it was admitted that very large numbers of firms and people did not come within the scope of estate duty and used legitimate means to avoid the tax. Therefore, the whole of the Minister's defence is founded on sand. Since the majority of businesses did not pay duty it is not true to say that the CTT is less onerous than was the estate duty.

Yesterday at lunchtime I was with a man who was the third generation in a family business. It is not untypical of the sort of business we are dealing with in this debate. It provides jobs for 150 people. It is run by a go-ahead young man who has been trained for the job. Ever since he went to school he knew that one day he would go into the business and would try to build another storey on to the business which had been built up by his father and grandfather. He told me that he had introduced a system of worker participation—indeed, he had a meeting yesterday to consider how to extend that system. He was determined to see that the business forged ahead with the most modern concepts of management and that he would disprove the legend of clogs to clogs in three generations. What situation would now face that business if it had had to pay capital transfer tax when the young man got his hands on the levers of management?

I agree that he could not have afforded them.

Assuming that the business is worth £120,000, as a lifetime gift the tax would amount to £19,000, plus capital gains tax. If we ignore capital gains tax—and we cannot ignore it—we must envisage the person concerned paying £2,400 a year over a period of eight years. The salary of the man in question is about £6,000 a year. How can anybody, on such a salary gross, find £2,400 a year net, for eight years with which to pay the tax?

Let us consider the position of a larger company worth £250,000. In that case the capital gains tax liability could be £37,000 or more. If paid by the recipient on a lifetime gift, if we take the best possible option, the CTT liability would be £76,000. Over eight years the figure would amount to £13,000 a year. To obtain £13,000 a year a man would need a salary, before income tax and higher rate tax, of about £40,000—that is, assuming he has no money to live on. Even the Financial Secretary would admit that a person would have to keep himself, pay his mortgage and so on. Therefore, if he is to have just as much money as a moonlighting plasterer he would need to have £50,000 a year to pay the tax and to be able to live at a modest rate.

Where is the money to come from? We should repeat that question time and again. The Government seem to assume that a young man in this situation is born with a silver spoon in his mouth and has a small fortune behind him. But that is not the situation. Most of the people concerned are young men coming into business who have not a bean to their name, apart from what they earn from the business. How can one take £50,000 a year out of a business worth £250,000 for eight years to pay the tax? It is just not on the cards, and the Financial Secretary knows it. If he wishes to disprove my figures, I shall be happy to allow him to do so.

I have an interest in this matter, as do many of my hon. Friends, and countless people have written to me and my colleagues on this topic. The import of those letters is "There is no possible prospect of my business going on for another generation. Why sweat it out? Why work at it? What is it all worth? "John Chown, in a brilliant analysis in the Financial Times at the beginning of the week, showed what a small amount those working to build up a business can ever hope to pass on.

I am sure the hon. Gentleman will recall that in the course of that article by the distinguished commentator, Mr. Chown, it was made clear that there should be little difficulty for businesses up to a value of £250,000 in paying the tax.

I hear what the Minister says, and I shall be interested to hear him describe how somebody can take enough money out of a business—bearing in mind that that person must pay income tax on the money he takes out—to pay CTT and to meet the capital gains tax liability. In the most favourable circumstances in respect of a lifetime gift involving a £250,000 business, he will be required to earn about £50,000 a year. If the Minister wishes to dispute that figure I shall be delighted to give way to him. I invite him, and indeed challenge him, to do so in his reply.

Will he also include recognition of what will happen to a business over a period of eight years with inflation running at 20 per cent. per year? How much money will be needed to keep the business going? Will he also stress the difficulty in borrowing the money, and finding where it is to come from?

My hon. Friend is right. Inflation means that one needs more money to undertake the same volume of business. We must consider this matter against the background not only of CTT but of other taxes—income tax, corporation tax, advance corporation tax, capital gains tax and the promised wealth tax. If one envisages the impact of only half those taxes one sees how impossible is the situation.

One has only to consult those in industry to see what is happening. I do not know how greatly the Financial Secretary and the Government have consulted with the Small Businesses Association, the Small Firms Council of the CBI, the National Chamber of Trade, and the like. I have been conducting a careful analysis with those bodies.

Earlier this week I received a deputation of people involved in running these businesses. They told me what they are doing or planning to do. The Financial Secretary wants a growing and strong economy. The Government have said that that is their aim. However, the Financial Secretary should realise exactly what is happening. I was told: "We have spent our lifetime building up the business and ploughing back. That is the way in which a small business exists. We have put our lives into our business. Now we have to run it down, for otherwise it cannot pass on to the next generation."

I was also told "We have built up a major export business. We have been encouraged by the Government to do it. We put our backs into it and we have been proud of it. Now we have to seek to turn orders away, to wind our business down to make it small enough to be able to pass on."

A third person said: "At my board meeting last Friday we solemnly sat down and discussed ways in which to reduce our business, to reduce our turnover and to reduce our investment programme, and, unfortunately, to reduce our work force."

That is not my invention. There were 40 representatives from different parts of the country at that meeting, every one of whom would confirm the accuracy of what I have said.

Since this Government came to office, a new phrase has appeared—the terminal business. We have heard of terminal wards in hospitals but now we have a terminal section of the business community, comprising those who know that they cannot pass their business on to the next generation and those who do not see any motivation to go on working to build up a business for the benefit of the Chancellor of the Exchequer.

Such people see that there is no prospect either for themselves or, desperately unfortunately, for their employees, those who have joined the team, who have helped to build up and run the business. From my personal experience I know of the importance in a business of the team and the team spirit which makes it a success. Those people will say to themselves "How can we tie our careers to a terminal business?" They know that if they start such a job at 25 or 30 and the boss dies they will be out of a job in 10 or 20 years' time. Such people will not put themselves into that position.

We now have a serious situation about which the Government do not care and—looking at the empty Government benches—Government supporters do not care a damn, either. We shall have a situation in which the Government will terminate many businesses which provide much employment and the Government do not appear to care.

7.15 p.m.

The House knows of my own interests as a small business man.

Any concession is gratefully received by the business community, which is threatened so gravely by the new measures. My advisers tell me that if my wife and I died it might be virtually impossible for the business, in which we have worked so hard for so long, to survive, without reliefs other than those already proffered. It is not nice to hear that. It is dangerous threat to a useful part of the community, and to businesses which are of benefit to the economy.

There should be upper limits on the total capital taxation which can fall on any business. When a business grows it sometimes acquires substantial property assets. In these new circumstances those assets are a threat to the life of the business. However, there are many businesses with limited turnover that cannot survive without substantial property in which the work is done. Such businesses are at greater risk of destruction than those where there is substantial output in relation to the total property assets. That aspect deserves to be separately looked at and given further consideration.

How are the burdens of debt to be met? Insurance would cost far too much. The proprietor of any business of substance would not be able to afford the premiums, especially if the life assurance policy were taken out in middle age or later. I know that an opportunity is given to pay over eight years. However, most progressive businesses which are in a continuing phase of expansion require all the capital that they can find for investment. If that investment is taken out of the business and used to pay the debt for such taxation, it will be necessary to borrow money or to sell part of the business. That is nothing but destructive.

In any case how will that money be readily raised? What bank would advance money on any substantial scale in circumstances where the business must either be run down or at least not expanded? We know from common experience that a business either grows and prospers or shrinks and goes downhill.

In spite of the natural instinct of business men to make their businesses grow and expand, since the new tax was proposed, I have heard of cases where family firms were planning to reduce the size of their businesses, contrary to the national interest and to natural instincts. They see no other way of being able to pay the tax involved. The Minister has observed that it will be possible for smaller businesses to pay the tax. However, as soon as a business has reached a substantial size it is for the chopper!

Is that desirable? Why should a private family business suffer if it has assets or, say, £1 million, if the people working in it are happy and are doing a good job, and if the service it provides is excellent? Why wield this extraordinary tax to destroy the spirit of enterprise which has made our nation so great? Why destroy the profits on which the Government must draw if we are to pay for social services, defence and the other facilities needed by the community? What will happen to the staff in these businesses if their sense of security is removed? They may not know whether the business can survive the death of the proprietor. Every time the proprietor goes out for a walk they will wonder whether he will be run over by a bus. The livelihood of the people working in these firms will be placed at risk.

What will be the consequence? People will seek jobs in larger firms, in the bureaucracy, or, if they are anxious still to work where enterprise and effort are rewarded, they will go abroad. The Government wish to drive the proprietors of these businesses and their staff out of the Kingdom. It is wrong to put this element, of fear behind every person working in a medium-sized family business. I ask the Government to think again, to look at the figures, and to speak to business men running such businesses.

The Minister laughed. However, this is not funny. This tax is a destructive measure. It is not merely a revolutionary measure to change society. It is a measure designed to kill one part of our society. It is divisive of our community as a whole.

When we debated the Finance Bill in Committee on the Floor of the House, a number of Government supporters thought that I was exaggerating when I said that the Government seemed bent on creating a mixture of peasant economy and corporate State. I repeat that, because that is exactly what they are creating. There will be no room for the individual business owned and run by a family who care for it and have built it up over generations. There will be no room and no opportunity for the ordinary person of his own initiative to prosper.

I thought that my hon. Friends the Members for Basingstoke (Mr. Mitchell) and for Upminster (Mr. Loveridge) made extremely powerful speeches based on deep personal experience. I have no interest to declare. I have no small business in my family. I wish that I had. But I admire the talents of those who have developed, from what Napoleon scoffingly called a nation of shopkeepers, what I still believe to be the greatest nation in Europe.

In this Bill, the Government are discouraging talent and in some cases possibly perverting it. There will be two results from this measure. Many of the people referred to by both my hon. Friends will be discouraged from expanding their businesses for their own good and for the good of the community—enlightened self-interest has always been the best guide to any decent society. Others will be encouraged to use their talents to find ways round these provisions, and no doubt some will be suc cessful. In other words, talents which should be used in a creative and constructive way will be either discouraged or even perverted.

One of the most moving experiences that I have had in recent weeks occurred when I went to Wolverhampton Town Hall three weeks ago to attend a meeting of the self-employed. There were 1,250 people in Wolverhampton Town Hall that night. They were not fly-by-nighters. They were not people who wanted to cheat. Nor were they people who wanted to fold up and go away. They were ordinary decent men and women—not people born with silver spoons in their mouths. They were people who by their own efforts had created businesses or inherited them and made them prosper for the good of the community as well as for themselves.

Those people attended that meeting because they realised that this Government were acting in a way which would make life impossible for them. I do not mean just by means of the pernicious tax that we are discussing now. I mean the blow to the self-employed from the increased contributions which they will have to pay from April and the enormous difficulties created by the swingeing increase in rates. Of course, to talk about either of those now would be out of order. But it is appropriate to mention them because they illustrate the triple blow which has been aimed at the self-employed and the small business this year.

When I spoke to the people in that hall and they felt that I had some message of good cheer for them, in a way I sensed that I was cheating them because I knew that the Government would not be persuaded of what I consider to be an unanswerably good case. I knew that the Government would not give them the opportunity for which they were asking—the opportunity to serve the community, the opportunity to prosper and, yes, the opportunity to make money and to build up the capital of the nation.

I just hope that the eloquent plea of my hon. Friend the Member for Basingstoke, who knows possibly more about these matters than anyone in the House, will have not fallen on deaf ears. He talked about terminal wards. There is a terminal illness threatening the very existence of businesses in this country. It is the cancer of Socialism.

If only the Financial Secretary could take a leaf out of the book of some social democrats in other countries in Europe, who talk of their fine ideals, many of which the Opposition share, but do what they can to foster enterprise, to encourage initiative and not to snuff out the very life of our society, which is what this Government are in danger of doing.

The Government talk as though sums like £250,000 are vast sums of money. The Financial Secretary intervened in the speech of my hon. Friend the Member for Basingstoke to say that Mr. Chown argued that businesses worth less than £250,000 need not worry. Does not the hon. Gentleman understand that in terms of the inflationary society in which we are cursed to live, that is not a vast sum? If the Government propose hitting that type of company and business, they will be hitting at the root of society.

We are forced to one of two conclusions. The Government are bent on their destructive acts either through naivety, or by malice. It may be that it is a combination of the two. Being a charitable man, I prefer the first view. I hope that it is because of their naivety.

It may be that the lessons which have been put across by my hon. Friend the Member for Basingstoke, backed by the remarks of my hon. Friend the Member for Upminster, have not fallen on deaf ears. I hope that there is a desire in the Financial Secretary to learn from those who know from experience about this great problem.

My hon. Friend says that there is no desire. I hope that he is wrong. Up and down the country there are tens of thousands of ordinary decent people who hope that he is wrong.

Let the Financial Secretary show his good intentions by accepting just one of these amendments, and we shall believe that there is a little hope. If he does not, all that we can do is to encourage those people to hope for the future and to pray for the day when another Government, less envious and less malicious, will occupy the Treasury Bench and sweep away from the statute book this evil scheme.

My purpose in intervening is to ask my hon. Friend the Financial Secretary for some information about the purpose of the amendment and its relationship to the Bill.

I want to assure the Opposition, having listened to the muck thrown at my right hon. and hon. Friends earlier, that I have no business connections. I do not have a business. I do not have any stocks or shares. What I do not know about these matters would fill volumes. But I have been asked for some information about the operation of this tax, and I should like some facts and figures confirmed or denied by my hon. Friend the Financial Secretary.

One Scottish newspaper has been running a campaign designed to discredit the Chancellor of the Exchequer and the Government about the operation of the proposed tax. It has dealt in one article with the principle of the amendment which we are debating. I should like to know from my hon. Friend whether the facts and figures quoted in that article and quoted to me personally are accurate.

The writer of the article takes a number of examples of businesses of differing values which their proprietors propose to pass on to their sons so that they may take over the running of the firms. The writer claims that the cost of the application of this tax will be too high. He quotes the example of a business worth about £500,000, and he claims that that will attract £224,000 in tax.

In setting the tax as low as he has, the writer of the article must have ignored the likely effect of capital gains tax. Can the hon. Gentleman say whether capital gains tax is taken into account?

I had the impression that the writer was quoting the capital transfer tax. He set out to show that the tax was imposing an inordinate burden on the recipient of the transfer. I was interviewed about the matter in my constituency and, frankly, I could not come up with all the answers. I am hoping that my hon. Friend will be able to do so when he winds up the debate.

7.30 p.m.

It was put to me that when the man comes to transfer his business to his son, with a view to maintaining the business in Scotland, the proposed tax will amount to £224,000. That would be the taxation that would result from the transfer of the undertaking. Even accepting that the payments could be spread over eight years, that would mean £28,000 a year to meet the cost of the tax. The question is asked, Where is that to come from? "That is the question that I ask my hon. Friend.

I must give an answer to my constituents. I hope that my hon. Friend will pay attention. The undertaking may be valued at £500,000, but that does not mean that there is liquid capital of £500,000. That value may well include buildings, land, plant, equipment, stores and even credits. My constituents want to know how the payment of tax is to be made. That is the question that I am asking. That is the question that we have all been asking. I hope that my hon. Friend will be able to give me the answer.

I want to look at this matter from the point of view of practical politics. It is put to me that when a transfer is made to the young member of the family he cannot possibly produce £28,000 out of the hat. Therefore, he is face to face with what has been described as an inevitable implication—namely, the sale of the business to raise the money to pay the tax. Perhaps my hon. Friend will comment on that. Given the example that I have put forward, that would mean that 250 jobs could very well disappear in an area of persistently high unemployment.

I want to know how it is that the Chancellor expects to deal with the problem that I have outlined. When a father reaches the age when he wishes to hang up his boots and retire he will want to hand over his business to the young, vibrant, energetic and enthusiastic members of the family. He will do so with the intention that the business shall continue and that the younger members of the family will carry on the tradition of the business and the provision of employment in such parts of Scotland as I have in mind. I have been asked for information, but so far I have been unable to obtain it. I am very anxious to give a satisfactory reply to my constituents.

The newspaper that is running this tirade against the Government is no doubt giving an incomplete report. I am not saying that it is giving an inaccurate report, merely an incomplete report. I am hoping that when my hon. Friend replies I shall be able to pass on the information that is at the moment hanging in the air. We are a democratic assembly and it is our duty to give this information. It is our duty to provide facts. It is our duty to prove that this tax will create no undue hardship. If it will not do so, we should be able to glean the facts which are obviously missing from the newspaper article to which I have referred. The newspaper concerned is a well-known and reputable Scottish newspaper although it has unquestionably a Conservative bias and slant. Nevertheless, it is reputable in the presentation of facts.

In discussing this amendment I can understand the feelings of Conservative Members. I say that on the basis of the facts as they have been presented and portrayed to me not only by the business community but even by some of my own colleagues. They are anxious to ascertain the true implications of the operation of the tax. It is only fair that we should have the information for which I ask. I am hopeful that when my hon. Friend replies he will be able to disabuse the minds of those who believe the tax to be anomalous, unfair, inequitable and an imposition.

I happen to believe that in this country there must be two sectors of industry—namely, a public sector and a private sector. If we have a private sector we must be strictly fair about how it should operate. It must be encouraged to operate efficiently. We must ensure that a fair profit is earned not just to provide a decent standard of living for those who own the undertaking but to ensure regular consistent employment and an adequate investment policy so that the industry can be modernised and maintained in a competitive fashion to enable it to be successful in winning orders. I am especially concerned about such undertakings providing and maintaining jobs.

I have been asked to raise this matter and to get my hon. Friend to confirm that it is the Government's intention to ensure that if this tax is applied and becomes operative it will be implemented without any undue hardship being imposed on any individual or number of individuals.

I am only seeking to obtain information. I do not belong to this aspect of life. I am a person who has always had to work with his own hands. I have never managed, owned or possessed. I hope that Opposition Members will bear with me. I am not concerned with the management of industry. All I want to do is to ensure that what we are doing is in the best interests of the community. Of course, the community includes industrialists. It also includes management and work people.

My only concern is to ensure that the operation of this tax is not as vicious as we are led to believe and that it is not as unacceptable as has been claimed. I want to ensure that we have regard to all the factors that I have mentioned before any fiscal policy is determined. After all, the aim of any fiscal policy should be not only the provision of full employment but the provision of a rising standard of life for those who manage and those who work.

First, I must declare a small interest in a small business of which I am a director.

I congratulate the hon. Member for Coatbridge and Airdrie (Mr. Dempsey). He has made the best and the most farsighted speech on the Bill that we have heard from the Government side of the House. It was better than some that have been made from this side.

I should like to help the hon. Member for Coatbridge and Airdrie who slightly exaggerated the tax in the example that he gave. The hon. Gentleman read from the newspaper that the transfer of a business worth £500,000 might involve the payment of £224,000 tax. The actual figure is £223,875. That is capital transfer tax only. It does not include capital gains tax, development gains tax or any other tax which might be payable on the transaction. That is the capital transfer tax payable if the gift is made during the transferor's life. If he is unfortunate enough to die and the business passes to his son, the tax is considerably increased. The first thing that the hon. Gentleman should do if he has a constituent in this position, as we gather he has, is to advise him not to die. Otherwise the tax will be considerably increased. That is the rate of tax that applies if the transferee, the son, pays it.

We had a debate earlier on the various circumstances in which the father or the son might pay the tax. The figure of £223,875 is the lower rate if the son pays the tax. I do not know what the amount will be if the father pays the tax, but I believe that it will be more than £500,000. Again, the hon. Gentleman's constituent should be careful to take advice before he does anything. If he is well advised, if he is careful and lives long enough, he may get the capital transfer tax alone down to £223,875 in that instance.

The question which the hon. Gentleman quite properly asked—I hope that the Financial Secretary will do his best to reply to it when he winds up the debate—is, how can people pay? I do not believe that they can pay. I shall be interested to hear what the Financial Secretary has to say in answer to his hon. Friend's question.

I am delighted that the hon. Member for Coatbridge and Airdrie should have come into the debate and perceived the point which we have been trying to put across and which has been put across to us by small business men in this situation. People faced with these problems are wondering how they will find the money to pay the tax if they die or pass on their businesses during their lifetime.

The debate tonight is not about the principle whether there should be special cases in the capital transfer tax. My hon. Friend the Member for Basingstoke (Mr. Mitchell), in an excellent speech, made it clear that that was the case. Nor is it about whether small businesses should be a special case in capital transfer tax because they are already to the extent of being allowed to make payments by instalments if the transferees pay. This debate is about how special a case small businesses, however defined, are in this tax or how special they should be.

I think that there is a difference—the tax is correct to recognise it as far as it does, but I think that it should recognise it further—between the owner of general assets which are relatively easily realisable and useable and the owner of a small business. That difference lies in the ability to value the assets in the first place and to liquidate them in the second place. Primarily the difference lies in the fact that one cannot produce the tax which will be required without selling the business as a whole in almost every case.

7.45 p.m.

If people have money outside their businesses which they are able to use to pay the tax, they need not sell their businesses, but most people do not have such assets. I am almost certain that those who own shares in businesses will do their utmost to get and to keep money out of those businesses as much as possible from now on to build up funds of more realisable assets with which to pay the tax when the time comes. That will undoubtedly damage investment in the very sector where we would like to see a good deal of investment in future.

We know that some hon. Gentleman opposite want to see the last generation of every family business in this country. We also know that the intention of this tax cannot be to redistribute wealth, even in the sense in which Socialists use those words—that is, to take wealth away from the richer members of the community. The purpose behind the tax is simply to lock people into family businesses until the steamroller of the wealth tax can catch up with and squash them into the ground. The purpose of the tax is to prevent farms and other assets passing from one generation to another. If it is not amended, it will undoubtedly succeed in its purpose.

Frankly, I do not believe that that is the purpose of all hon. Gentlemen opposite. I do not believe that they want that to happen or that they think it is desirable from the country's point of view. Among hon. Gentlemen opposite who do not want this to happen I would include the Minister responsible for small businesses who was good enough to look into our debates last night when we briefly touched on the problems of small businesses. I am sorry that he is not here today. I know that he is an assiduous attender at debates on small businesses, but he has broken his record today. I expect that he had a good reason for doing so.

I understand that the right hon. Gentleman has a special reason for being away—namely, on small business work for his Department.

I am grateful to my hon. Friend for pointing that out on behalf of the Minister. I think that the Paymaster-General wants to encourage the small business sector and to see it flourish, not destroyed. I hope that hon. Gentleman opposite who have the same views will continue to hold them. We have had a good example today from the hon. Member for Coatbridge and Airdrie. I hope that we shall have more examples in the weeks between now and the Budget and between the Budget and the next Finance Bill of hon. Gentlemen opposite pressing their Front Bench to look at and consider these difficulties and doing their best to convince the Government that changes must be made in this tax if these businesses are to survive.

I am not hopeful that we shall get very far with any of these amendments tonight, but we shall do our best by going into the Lobby to carry them. That will not be the end of the matter. These businesses will not go overnight. They will be destroyed over a number of years. Until the last one has gone we shall continue fighting to try to keep them.

I do not know whether I shall be the small business man to whom my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) referred who will turn out the light, but until the light goes out we shall do our best to keep the light of small businesses burning. One way to do that is to vote for the amendments.

My hon. Friend the Member for Coatbridge and Airdrie (Mr. Dempsey) made an excellent speech in which he posed a clear and precise example. I have no doubt that my hon. Friend the Financial Secretary will give him the kind of answer that his constituent would like.

My hon. Friend was not referring to a typical small business when he referred to assets of £500,000. That does not mean that the example was bad for that reason. I suggest that he should tell his constituent that if, sadly, he had fallen under a bus before 25th March 1974 he would have paid at least £223,875 in estate duty, and probably more. I do not know the exact figure because I have not got the estate duty figures. He could have paid slightly less, but the figure would not have been very different under the old estate duty.

Would the hon Gentleman like to add to the sum which he suggests would have been paid the words "provided he was unlucky, was ill-advised and had failed to take effective action beforehand"?

The point I am making is that if my hon. Friend's constituent owned all the shares in this company on the day before this tax came into operation, and if the shares were worth £500,000, the sum payable wouid not have been very different. That was the position then, and it is much the same today. I am saying that the bill for estate duty would not have been less than he would have to find today should he give away the shares under the old régime or do so now.

Is the hon. Gentleman aware that under no circumstances was estate duty more than 100 per cent.? The aggregation of CTT and CGT can exceed 100 per cent. The hon. Gentleman seems to have missed that point.

The hon. Gentleman seems to have missed quite a lot. The fact is that £223,000 is not 100 per cent. of £500,000. I do not have the figures, but if what I have is incorrect no doubt my hon. Friend will put me right. I do not think there will be much difference between the position under the old estate duty legislation and what it will be now. If that is right, one can go further and say that if my lion. Friend's constituent had given away his shares in one block—which would be unusual—less than seven years before his death—and he could not with the best will in the world predict the exact date of his death—about the same amount of tax would have been paid under estate duty as will be paid under CTT.

It is not possible to say exactly what amount of estate duty would have been paid, because one cannot say what proportion of the assets would have come under the small business relief under estate duty. If all the assets came under that relief the tax would have been £170,000 if he had died owning all the shares in the business, but if he had been well advised he would not have owned them all.

Given the most favourable interpretation, with all the reliefs, he would have paid £50,000 less, but, as the figures were put, the fact is that there would not be much difference under estate duty and under CTT with figures of that amount. That is perhaps a not wholly unsatisfactory answer.

But one is not concerned with a person who holds his assets and dies owning them all. The position will not be very different if someone gives away his assets less than seven years before he dies, though there will be a difference if a longer period elapses.

The next situation about which my hon. Friend's constituent is complaining is that under the old régime if assets were given away more than seven years before death—and this was done legitimately in many instances—there was no tax bill when the person died, but that has changed because of CTT. To that extent, my hon. Friend's constituent is worse off in the sense that he cannot avail himself of the opportunity of giving away his assets more than seven years before his death. Conservative Members have said that if such a person were well advised he would not have got himself into that position, but he seems to be in just that difficulty, so one must conclude that he was badly advised under the old law.

I come back to the argument about a small business worth £100,000 on which a person would pay a certain amount of tax. I suggest to Conservative Members that they know very well that a person in that position would not, for many reasons—some of them not fiscal—give away all his shares in his company in one block. There may be an isolated case in which that is done, but a person would not do it if he were well advised. He might give for example his two sons 24 per cent. each, or give away 48 per cent. or 51 per cent. but it is unusual that a person will give away all his shares. In any case, he may not own all the shares. His wife may own some, his son may have some shares and trustees may own some shares in the company.

We are not challenging the figures, and the Opposition are entitled to put the extreme case. Reference has been made to a company worth £100,000. I am saying that that kind of situation would rarely occur because people would rightly and legitimately be advised to give away their assets over a period of time, and to that extent the burden of the tax would not be considerable.

Does the hon. Gentleman appreciate that on his slim figure of £100,000 this infant prodigy would have to start at birth, live to be 100, and give away £1,000 a year in order not to pay tax?

If he had a 100 per cent. interest in a family company, his son would pay £14,000 spread over eight years, which is £1,750 a year. I am not saying it is a minimal sum. Nobody likes paying tax, but that money would have to be found on a business worth £100,000 if all the shares were given away, and that amounts to £1,750 a year for eight years. It is a burden, but not an unreasonable or unfair one in all the circumstances.

We then have to consider the fact that a man might give away minority interests. The value of those minority interests would not be proportionally less than the total interest, but they would be less all the same. That is what happened in the past, and it will happen in the future. I do not think we should exaggerate the position. There is a problem, but the Opposition have marred their case by exaggerating it, especially in Committee, where they did so night after night, with the result that the case was not put as well as it should have been.

I am prepared to accept that CTT heaped on CGT makes life more difficult. In Committee, my right hon. Friend the Chief Secretary did not say very much, but he did say that he was going to look again at CGT and I hope he will do so. I do not see that it makes sense to heap one tax upon another. I do not know how it is possible to do it, but one has to be fair between taxpayers. I think that something should be done, and I hope that my right hon. Friend will pursue his investigations into the matter.

I now come to the question of reliefs for CGT. If a person gives away assets on his retirement, there are certain reliefs. It does not follow that the total value of the shares will be subject to CGT, because that may not be the total value of the gain. Nevertheless, there is a problem with capital gains tax and I hope that my right hon. Friend will look at it.

8.0 p.m.

We are concerned not only with business assets but with other assets. In Committee we considered what I would call a small farm, which in the Welsh context would be one of less than 200 acres. I was satisfied on that basis, especially by the new lifetime rates that there was not a problem. Let us consider the larger farm. I read with interest the speech of the right hon. Member for Cambridgeshire (Mr. Pym) yesterday, who seemed to forecast the demise of British agriculture. He said that we would be turned into a peasant community as a result of this tax. That, again, is an example of exaggeration which does not do Conservative Members any good.

Let us consider a farm of 500 acres which is a large farm, even by English standards. Assume a rental value of £10 an acre. Hon. Gentlemen may say that that is not high enough. I do not know. It is not too wide of the mark. If we take the valuation in this legislation it produces a farm worth £100,000 for capital transfer tax purposes. A gift of the whole of the farm to a son would be a gift of £100,000. Under capital transfer tax that would represent £14,000 spread over eight years—£1,750 for each year. In their quieter and calmer moments I believe that Conservative Members will agree that that could not be described as the destruction of British agriculture. People do not like paying taxes but I do not think that that is an unreasonable burden.

I believe that the hon. Gentleman will, on reflection, agree that his example is a little misleading. First of all this is because very few 500 acre farms, apart from the part of the world from which the hon. Gentleman comes, would be sold for £100,000. Beyond that the hon. Gentleman is overlooking machinery, stock, buildings and all those other items. I hope that on reflection he will prefer to tailor his example to the facts.

I never said that a farm of that size would be sold for £100,000. What I said was that using the valuation in the Bill that would be the value for capital transfer tax purposes.

I do not know about stock. I accept that the value of stock would be in addition and so the taxation figure would be a little higher.

Many farms of that kind would be owned by companies and the shares would not be given away immediately in one block. I understand that there is an amendment to enable a £1,000 exemption to be accumulated and passed on from year to year if it is not used. That affords a certain amount of relief if the assets have been held for a long time.

I do not believe some of the exaggerated statements made by Tory Members. They cannot be justified. I accept that there are some problems about capital gains tax when it is heaped on to capital transfer tax. Conservative Members have said that they do not like this tax and want to repeal it. But they have not said what they will put in its place. It is their duty to do so. Do they want the old form of estate duty? Presumably not, because many people in all parties saw the old system as being capricious, unfair and depending entirely on whether a person gave property away more than seven years before his death.

If this tax is not to be replaced with estate duty, what will be put in its stead? Will it be the inheritance tax system produced by Lord Barber in his Green Paper? There are advantages, in that assets can be moved around in the family at lower rates. But if the Conservatives wish to maintain the same yield as that which obtained under estate duty and the yield which hopefully, in a few years, will accrue under this tax, the rate of the inheritance tax would have to be high. I predict that hon. Gentlemen would scream in the same way as they are screaming now.

There is also the accessions tax. That is extremely complicated. I predict that in Committee hon. Gentlemen would be complaining and raising anomalies about it. They should explain to us what kind of tax they want, or else they should be honest and say that they do not want a tax on capital transfers. Alternatively, they should say that they will reduce the rate significantly, in which case the yield would be reduced. They must then tell us how they would make up the difference. There are problems, but these have been exaggerated by Conservative Members who consequently have not done justice to their case.

This is a tax that has changed its nature. Once upon a time taxation was something that redistributed part of the wealth of an individual or business, but did not destroy the capacity of that individual or business to continue generating wealth. With this tax we cross the frontier between taxation, as it has always been considered, and confiscation—the destruction of the wealth-producing assets grouped together in a business.

In the South-West the representative employer is a small employer, not a large firm. This is generally true in the private sector throughout the South-West. Indeed, this applies to a large proportion of employment in Britain.

The point that has been missed is that once we bring about a situation where capital assets are transferred, the point at which they are transferred—whether by death or a capital transfer more than seven years before death—is the point at which the business is no longer viable. In a taxation system where that happens, such businesses are no longer creditworthy. The banks and financial institutions will not gamble on supplying the working capital needed by a business knowing that it will suddenly become nonviable at a point in time which it is impossible to predict. That point is when death forces the dispersal of those assets or when their transfer in advance of death generates a situation in which the business either completely runs out of working capital—because working capital is the only liquid capital. Alternatively, when the assets are transferred the person or persons to whom they are transferred become so encumbered by debt to meet the tax liability that the annual interest payments to service those debts makes the business or the person, or both, uncreditworthy. That is the situation we have now reached.

I might say en passant that inflation has completely destroyed the distinction between a capital gains tax and a capital levy. The distinction is real only when there is a zero rate of inflation or a controlled rate. At the moment, because of inflation, what started as a capital gains tax has become a capital levy, although the arguments for the two and the effects of the two are totally different.

When anyone says that it was the Conservatives who brought in capital gains tax that is perfectly true, but it has to be remembered that it was brought in as a tax on capital gains at a time when inflation was about 3 per cent. per annum—a totally different situation from today. One of the factors that the late fain Macleod had closely in mind in his thoughts about the alterations that were necessary in taxation was that, so as not to blur the distinction between a capital levy and a capital gains tax when assessing liability for the latter, there should be subtracted from the accountable gain that which was the reciprocal of the changing value of money, which is something entirely different.

What should be taxed as a capital gain is a real increase in capital, irrespective of the change in the value of money. Our present inflation of over 20 per cent. means that what started as a capital gains tax has achieved the characteristic of a capital levy. When this is superimposed on a capital transfer tax which is itself grossed up, we have completely confiscatory legislation.

It is clear that some Labour Members have grasped this point. However, since at this crucial moment for every British business only four Labour Members are present on the back benches, clearly the point does not worry many of them.

We have not seen much of the hon. Member over the last two or three days.

If the hon. Gentleman thinks that, he could not have been here last night.

The effects of the Bill on small businesses are crucial. Part of this matter was discussed for a trivial time, less than half an hour, last night before the guillotine fell. We are having the rest of it today. It will be too late for Labour Members to say that they had not realised the consequences, when business after business in their constituencies collapses and unemployment caused entirely by this tax stalks their constituencies.

Too late then will Labour Members say that they did not know the consequences. They have been warned. It is not too late for them to heed that warning in the Division Lobby. But it will be too late if they merely trust to their Front Bench to have another think at some unspecified time, arriving at some unknown conclusion when it is too late for it to be effective anyway.

Even without paying a penny of this tax, businesses large and small are running out of working capital every day. Three weeks ago in my constituency, 40 men were laid off by one firm which collapsed. Twenty-five were laid off last week by another company running out of capital and 50 were laid off a few weeks before that at the other end of the constituency.

It is the creditworthiness of every firm that is at risk, even before this tax begins to bite. Merely knowing that these firms will be brought to their knees, no sane bank manager could regard them as creditworthy. The damage will be done the moment the Bill become law. Then they will have to go to the marginal financial institutions, some of which have already tottered—even hon. Members who should have known better have taken part in activities of that kind—to be charged a punitive rate of interest. The normal commercial banks recognise a bad risk when they see one, which the marginal firms do not.

Therefore the costs of these firms will increase further and further as they have to finance their increasing needs for working capital in a period of chronic inflation by going to the fringe so-called banks to pay usurious rates of interest for the working capital without which they cannot continue in busines at sufficient throughput to cover their overheads. Banks at the moment have claims on their available resources to lend far more than they can lend and, incidentally, far more than the Government want them to lend. The Treasury keeps a tight control on these matters at the moment.

8.15 p.m.

Where is the working capital to come from? That is the question that the Government have not answered, although their own Members have been asking them. The only available liquid funds will come from the businesses concerned and at an excessive rate because of grossing-up. Who will buy these little businesses which can be sold only as going enterprises? The alternative is simply to break them up and sell them for redevelopment, in which case the employees will lose their jobs, as we have seen so often.

That will happen throughout the country. Too late, the Labour Party and its supporters will suddenly discover how much employment depends on the small businesses as one after another collapses. The cascade effect will be set off remorselessly, and it will then be beyond the Government's power to arrest or reverse that process. We have seen the cascade effect of depression before, in the 'thirties. This cascade effect will have been deliberately generated by a Government who know what they are doing. If they did not know before, they should know now because they have been adequately warned.

We are still hearing a repetition of generalisations about the capital transfer tax. The hon. Member for Tiverton (Mr. Maxwell-Hyslop) talked about the effect on small businesses. He should concede that, following the Committee debates, the Government recognised that the effect of the tax as it originally stood on small businesses might have been more serious than anyone could reasonably justify. They have substantially lowered the rates on lifetime gifts and have introduced new lower levels to apply right across the range—not only to agriculture and small businesses—in order to avoid distortions.

For most small businesses, particularly shopkeepers, who have not been able to afford sophisticated advice to enable them to avoid tax, capital transfer tax will be a big improvement on the present situation. Widows will be able to inherit businesses without the tax applying and children will pay far lower rates than under estate duty. There have been accusations of discrimination and bias against small enterprises, yet most of the areas in which complaint has been made the lower rates of capital transfer tax will lead to substantial improvement.

I will extend to the hon. Gentleman the same courtesy that he extended to me by refusing to give way when I tried to intervene in earlier parts of the debate—

The debate has been going on not just today but yesterday and the day before. If he thinks back, the hon. Gentleman will remember the occasions to which I refer.

Perhaps in considering this matter the hon. Gentleman will talk about the effect of the capital gains tax, which, as he knows, did not apply with estate duty.

I am making my own speech. I am sure that if the hon. Gentleman wants to talk about the effect of capital gains tax and catches the eye of the Chair, the House will be only too interested to hear what he has to say.

On the particular problem of small businesses, we are comparing the effects of capital transfer tax with the effect of estate duty where in both circumstances capital gains tax applied. In many of the issues about which we are concerned the small business is preferentially treated now under the new proposals as compared with the situation which would have existed under estate duty.

I have not that degree of charity. Many hon. Members of the Opposition wish to speak in the debate. We want to make progress and to have as much discussion as possible.

I come, therefore, to one particular point of concern in the general tenor of the debate in the last couple of days, which has been re-emphasised this evening. Many people are suggesting that the rate of tax ought to be cut even further. Even after all the concessions in so many of the Government's amendments on Report, hon. Members are asking for more and more. The loss of revenue that is proposed with equanimity is reaching very serious proportions.

We ought now to contrast the enthusiasm of Opposition Members for cutting the revenue with the kind of hysteria they demonstrate so regularly about the level of the public borrowing requirement. This is hypocrisy of the first order. To complain about the level of public borrowing requirement and then to come before us with such monotonous regularity pressing further and further diminutions of the revenue from capital transfer tax is something that the House cannot accept.

I echo the words of my hon. Friend the Member for Llanelli (Mr. Davies). If Opposition Members have serious doubts about capital transfer tax—which they clearly have—it is obligatory that when they are criticising that tax and opposing it, as the hon. Member for Tiverton did, they should say clearly with what they would replace it. We have had totally destructive criticism and, so far, no adequate alternative.

Does not the hon. Gentleman recognise that we believe that the loss of revenue is likely to be far greater due to the forced sale of businesses which will arise under these taxes?

No doubt the hon. Gentleman genuinely believes that. I certainly do not recognise it.

The hon. Gentleman will, however, recognise that in the first year, when the country is facing perhaps its most dire problems, this tax will bring in less than would estate duty.

That point has already been dealt with in the debate. I do not recognise the interpretation that the hon. Gentleman puts upon it.

I want to emphasise the point that it is far too easy to come before the House, after all the concessions have been made and when the Government are proposing losses of revenue by their own concessions, and to propose far greater losses of revenue and, at the same time, to have this concern about the public borrowing requirement. I am concerned about the level of the borrowing requirement. During the Budget debate I criticised my right hon. Friend the Chancellor. I said that we must be seriously concerned about that matter and that our concern should manifest itself in trying to find better ways of raising revenue. I believe that capital transfer tax makes a substantial contribution to that process. That is why I hope that we shall leave the tax as it stands and not be receptive to the destructive ideas of Opposition Members.

The hon. Member for Meriden (Mr. Tomlinson) mentioned the word "hypocrisy" in relation to my hon. Friends on the Opposition side of the House. I say this to him. During the debate today I wish that he had spoken in the same way as he spoke between 2 o'clock and 3 o'clock this morning, putting forward economic arguments and expressing human sympathy about the Meriden co-operative. That, I presume, is a small business. But those particular arguments have been slightly lost during the intervening hours.

That gives rise to a very interesting concept of the small business. That business is valued at £4·95 million.

Perhaps I may leave the lush industrial Midlands of England and go a little further north to Scotland and, for example, to my constituency of West Aberdeenshire. Small businesses there form a far higher proportion than they do elsewhere in the country. When dealing with questions of small businesses and their taxation, we are not dealing with questions of rich men or people who can pay taxes out of money held. We are dealing with people who do not have liquid capital. We are dealing with small firms, farms, garages, small shops and small traders.

In Scotland, one in four persons is employed in a small business. That leads on to the fact that nearly half of those in productive industry are employed in small businesses. It is not for me to display the economic and technical arguments which have been so well put by some of my hon. Friends, not only at this stage but in Standing Committee. I want merely to point out the inevitable truth that we all know—that such businesses will have to sell.

Labour Members do not seem to realise that these businesses and the men who run them have no cash. They have stock, property and machinery, and probably an overdraft. Therefore, if they have to sell they can sell only their businesses. They are not directors of large companies. They are not in nationalised industries or getting large salaries and owning shares in other companies which they can sell. They have committed everything they have to their own enterprises.

Leaving aside the economic arguments, what also happens when such businesses are driven into the ground? If they are sold, we know perfectly well that they can be sold only to the State or to large corporations. The first thing that happens is that the local link goes. Some businesses support local charities. That will all stop. It gets covenanted from headquarters because they do not understand the necessity of supporting local charities. Where small businesses have contributed people to the local council, all this goes. A directive comes from head office indicating that there is no time to allow people to take part in local community activities.

That has been the result all over the country when small businesses have been taken over by large businesses. The community in which the small business exists suffers economically, socially, and in every other way.

The next thing we hear when small businesses are taken over is the word "rationalisation". That is the polite name for inefficiency. When a local or small business becomes less efficient, an excuse is made and it is closed. From the small business sector come the future entrepreneurs and the people on whom the nationalised industries and the large public corporations will rely to keep going. That is the sector we are damaging.

All the household names have come from small businesses, in textiles, the retail trade and the motor industry. They were all people who were prepared to risk their own money and to work any number of hours. We are killing the most efficient and least costly sector of British enterprise. When a small business gets into trouble it goes out of business, but when a large or nationalised industry gets into trouble the State steps in with money. We are doing something criminal affecting the whole of Britain. We are killing those upon whom we must rely in the future to lead the country into prosperity for all its peole.

8.30 p.m.

The hon. Member for Meriden (Mr. Tomlinson) and the hon. Member for Llanelli (Mr. Davies) said that the Opposition should come forward with their alternatives to the tax. They cannot accuse me of having no alternative, because even the Chief Secretary will recognise that I have advocated an accessions tax. I believe that that is the tax the Government should have introduced. I agree with the hon. Member for Llanelli that if I were introducing an accessions tax the Tory Party would be baying like the Society for the Preservation of the Rich that it is. I have no doubt that Conservative Members would squeal just as hard as they are doing today. An accessions tax would be a vast improvement on what we have now.

The hon. Member for Coatbridge and Airdrie (Mr. Dempsey) spoke forcefully about the possible effect of the tax on a firm in his constituency. We have had replies from Labour Members which indicate that they do not take these remarks too seriously.

I do not intend to debate small businesses tonight, because I want to turn my attention to another amendment. However, it is at least likely on the basis of the facts we have had—although we do not have too many—that the firm about which the hon. Member for Coat-bridge and Airdrie spoke was an industrial hereditament and that therefore, under estate duty, it would have had the 45 per cent. concession. Therefore the situation with estate duty, whether or not the owner of the firm had walked under a bus and had made no provision, would probably have been much better than may well be the position in this case.

The debate on the Government's amendment and on Amendment No. 80 in the name of my right hon. and hon. Friends and myself, to which I wish to turn my attention, is not primarily about small businesses. It is about the fundamental nature of the tax. As I am sure the Chief Secretary will recognise, I am not endeavouring to plead a special case in Amendment No. 80 but am trying to save the Chancellor and the Government from making an appalling error in the very character and essentials of the tax which they have introduced.

I understand that there were two things the Chancellor wanted to do when he introduced the capital transfer tax. He originally intended that it should be an anti-avoidance measure. I want to save him from the mistake he is making. He made it quite clear yesterday when he said that the central fact was
"that the Government are now replacing a tax which was ineffective and unfair—ineffective because it was avoided on a colossal scale and unfair because it was avoided by only a minority of those affected and observed by the rest—by a tax that we believe to be fair and effective".—[Official Report, 5th March 1975; Vol. 887, c. 1492.]
The right hon. Gentleman spent a considerable portion of that speech on the whole question of avoidance, primarily the avoidance through the lifetime loophole. I do not split hairs about this. I think it was a loophole, but that does not mean that it was illegal. Of course it was not. We all know that there was avoidance on a scale which the Chancellor thought was much larger than I supposed it to be, but it was obviously substantial and interfered with the basic concept of estate duty. To that extent I entirely agree with the Chancellor's motives for introducing the capital transfer tax.

When the Government have introduced a tax to get rid of the lifetime loophole, what on earth is the point of introducing an amendment which brings it right back again? The purpose of estate duty was presumably—we do not have to go back to Sir William Harcourt to find it—to reduce inequality of wealth caused by inheritance. Sir William was a Liberal, and I am a Liberal. I do not believe that the span of years distinguishes between us. That purpose is certainly something I wholeheartedly accept in principle, though how far inheritance causes inequality may be a matter of debate.

The only research that has been done on how far inheritance causes inequality in the distribution of wealth has been done by Professor Harbury. In yesterday's Press we were informed that he had renewed his dedication to the task by undertaking a study into where rich women get their riches. You will notice, Mr. Deputy Speaker, that he does not call it a study—

Order. I hope that the hon. Member will not read out a list of these women. There are insufficient numbers of hon. Members in the House already, and the place could become deserted if the hon. Member gave a list.

Indeed not, Mr. Deputy Speaker. I was going to point out that this gentleman was conducting a study not into how rich women get their riches but where they get them. If he had adopted the former course he would have had a best seller.

Inheritance is not the only cause of inequality. Estate duty may have stopped inequality getting worse but it did not do much to reduce it, and that was not only because of the lifetime loophole. Owners of great wealth usually get a higher return on their wealth. Certainly they get a much larger capital gain on their wealth than do owners of small wealth. Large wealth owners are also far better able to take advantage of the lifetime loophole because they are far better advised. They are able to pay for the advice. Now the Government are reintroducing the lifetime loophole. If it had not been for the fracas earlier over the remarks of the hon. and learned Member for Dover and Deal (Mr. Rees), I might almost have been inclined to think that it would be in the interests of the Chief Secretary, when in some future incarnation he goes back to his practice after having deserted the Front Bench to reintroduce the loophole. To do so would create a bed of roses for accountants. Our amendment, therefore, urges the Government not to go back to the lifetime loophole.

Let us take a step further the logic of what the Government are proposing concerning the rates. Without a gifts tax the avoidance of estate duty was far too easy, and because this reduced the power of estate duty to cut down the inequalities caused by inheritance the Government introduced the capital gains tax. The case of avoidance was lessened by the seven-year inter vivos provision for gifts. We know very little about the giving of gifts in Britain but we know a great deal about the giving of gifts in the United States. There the gifts tax is at a different rate from estate duty. The two taxes are not fully integrated. There is, therefore, considerable incentive to give gifts inter vivos. It is not as great an incentive as has hitherto existed here because in this country, provided that the donor survived the seven years, the gift was free of tax altogether.

The evidence in America suggests two things. First, among the less wealthy the giving option was not fully exercised. It also suggests—this is the point I want the Government to deal with—that the wealthiest people in America indulge in inter vivos gifts almost as a way of life. That will be the case here if the amendment is made in its present form. The wealthiest will find it easier to give their money away. After all, they are giving away only some of their wealth, not all of it. If a person has £1 million, it is not too irksome for him to give £300,000 of it and get the benefit of reduced tax rates. Under the American experience, however, someone who is less wealthy finds it very much more difficult to do that because he then loses his independence.

The Government's lower rates on gifts tax cover only cumulative gifts of £300,000, and this will still help the very wealthiest. The figure of £300,000 does not represent poverty by any manner of means. At lifetime rates £300,000 has a net value of £196,000, which is what remains after the tax has been paid. At the full rate £300,000 has a net value of £155,000, so that there is a saving of £40,000 on a total amount of £300,000, which is not to be sneezed at.

I wonder whether the Government in introducing this quite appalling principle of the lifetime loophole have looked at the American evidence and, if they have, whether they reckon that that experience will be repeated over here. I do not need to prove to the Government's satisfaction the exact extent of avoidance by the lifetime loophole. The Government have already stated that that is a major method of avoidance. They introduced the tax to remove the incentive to avoid estate duty. They have now reintroduced it, and I want to know why. They have never begun to tell us. I hope we may be told in the course of this debate.

Since this sum is so often represented by a business, if £10,000 represents one job we cannot go on arguing in this way without coming back to employment. Will the hon. Gentleman tell us how the Liberal Party would deal with that?

If the hon. Gentleman had looked at Amendment No. 80 he would have realised what we are doing. For every gift on death, what the Conservatives' amendment is seeking to do affects a very limited number of legacies on death; and I marvel at their moderation. They have been unnecesarily timid in limiting their amendment. But I do not actually believe that Opposition Members make their case much stronger by pretending that employment and small businesses will collapse and that the whole British economy will collapse and slide into the North Sea as a result of this tax. It may well be that the whole British economy will slide into the North Sea, but it will not be because of this tax. I can think of many other things which are much more likely to get us there.

Distinguishing between the rates of tax on gifts and on legacies produces great unfairness. Again, I do not quite understand what the Government are at. Not all people are as well able as others to make gifts. Some property or parts of property are easy to give while other property is not. Therefore some people will be able to avoid the full rate, not because they are generous or good people. There may be some who have patriotic objections to this method of avoidance. There will not be many of them today I suspect, but there may still be some left.

It is also a negative tax on gambling. It is gambling on death, and the price is a reduced rate of tax under the Government's amendments. The Government are saying "You may take a gamble on your death. If you win, we will reduce your tax. If you are dead, it does not matter to you anyway. But we will tax you more heavily as a penalty for dying too soon." That was what estate duty did.

I cannot think why the Government have introduced capital transfer tax at all. We might have gone on with estate duty at slightly lower rates. The greatest argument as between lifetime and death rates is the effect on inequality. The Chancellor and I both wish to reduce the inequalities of weath but I would make a better job of it than he has done. That is the essential difference between us. Here the right hon. Gentleman has introduced the wrong tax for that purpose and has changed it to produce an even worse effect on equality. He has decided that the rate to be introduced was too high for lifetime gifts. Therefore, he should accept the logic of the argument and reduce both rates. If he does not want to reduce his revenue because he is worried about his borrowing requirement—and I do not wonder at that—I would far rather he had introduced an amendment providing a compromise rate, somewhere between the two, so that at least it was the same for both types of gifts and ensured that his revenue would be maintained.

I hope that the Government will accept the argument I have adduced on the single rate of tax which is contained in our Amendment No. 80. I hope they will recognise that it is a totally logical argument and would produce a very much better tax than that originally introduced, and certainly very much better than the one we are to be stuck with this if the Government amendment goes through. We have taken the table which the Government introduced for the lower-level gift and have sought to apply it right across the board to all types of gift. That seems to be by far the most sensible thing that the Government could do.

8.45 p.m.

I should like to bring into the debate the Scottish dimension which was introduced by the hon. Members for Coatbridge and Airdrie (Mr. Dempsey) and Aberdeenshire, West (Mr. Fairgrieve). They might perhaps be more helpful to their constituents if they supported Amendment No. 439 on page 667, which seeks to give greater relief from the tax to small companies and goes further in the tax slice than do the Government for companies which are moving towards public quotation.

Large companies are well able to look after their growth and financial affairs, whereas small companies are not. When a company is worth £1 million or £2 million, I suggest that the time has come for an even more significant redistribution than that proposed by the Government. Small companies are different. They do not just happen. They are created by men and women of vision and imagination. I hope that the Minister will accept that my arguments are not made from a hyperbolic and doctrinal standpoint, as were the arguments put forward by the Conservatives, but from a practical point of view.

I am not talking about thousands of pounds being made in a few minutes on the Stock Exchange. I am not talking about companies like Wm. Lowdon & Son which has donated generously to the Scottish Labour Party. I am talking about what causes a seed to flower or an acorn to grow, or what causes one job to become two.

The hon. Member for Basingstoke (Mr. Mitchell) referred to Scotland and Wales. In Scotland there are proportionally more small businesses than there are in England, and the proportion will grow because of what the Scottish National Party calls Scottish oil. That development is spawning small companies in Aberdeenshire, in the North-East of Scotland and throughout the whole country, and similar developments are taking place in electronics.

The Under-Secretary of State for Industry recently said that almost 90 per cent. of all manufacturing establishments in Scotland employ fewer than 250 people. He went on to say that these smaller firms were specially important in a number of industries of key importance to the Scottish economy. I hope that the Under-Secretary of State and the Treasury will speak with one voice when they seek to promote small industries in Scotland.

The growth of locally-owned industries of high technology in Central Scotland is vital if we are to break away from our dependence on heavy industry. I am sure that the Minister wishes to see more—not fewer—indigenous jobs in Scotland. The severity of the level of the tax will lead to the break-up of Scottish-owned companies and asset strippers will be the first to benefit. It will also lead to the takeover of Scottish companies by London-based institutions, against which the Scottish Council, the STUC and the Scottish Council of the CBI have consistently and continually inveighed.

Let us take as an example a small Scottish company with an annual turnover of £300,000 or £400,000 and a net asset value of £100,000, £120,000 or £130,000. Let us assume that it has been going for 10 years and employs 100 people, and that it was started by a man aged 35 who is now 45. If that man dies, his wife and offspring must find £40,000, or even £50,000, and that effectively will lead to the end of the company. Therefore, the takeover of that company no doubt will soon follow by a London-based institution, thus once again bringing about centralisation.

We in the SNP do not wish this to happen. For the sake of the creation of more indigenous companies in Scotland and to prevent their takeover by institutions in London, we ask the Government to think again about Amendment No. 439. It seeks to give more relief at the lower end of the tax scale and is even more penal than is the Government's own provision at the top end of the scale.

I am grateful for this few moments in which to bring a somewhat different view to bear on capital transfer tax. We have heard a chorus of complaint from the Opposition, or certainly from the principal Opposition, about the effect of the tax. It was a wholly spurious argument.

Does not my hon. Friend agree that at present because of the interest in this debate the official Opposition is a combination of the Scottish National Party and the Liberal Party?

Order. I suggest that we do not have this usual cross-talk between the two hon. Members. Let us get on. There are a substantial number of amendments still remaining for discussion.

I know, Mr. Deputy Speaker, that you were using the word "usual" in a limited sense.

The capital transfer tax seeks to put into effect Labour Party policy. Whether the Opposition like it or not, the fact is that the Labour Party manifesto in two elections committed us to an irreversible shift in the possession of wealth.

Is the Labour Party committed to the destruction of private business?

It is absurd to say that the tax will destroy family businesses. It will not. I am concerned not about the fact that the tax is too hard but about the fact that it is too soft. The Labour Government made a number of concessions in Committee. For example, a joint business involving a man and wife will have to reach a value of £30,000 before it even contemplates paying any tax. Over a period of time, with the allowance of £1,000, the couple could manage to move a considerable amount of wealth from one person to another without the possibility of paying tax. That alarms me.

The Government Front Bench has been generous and has taken account of some Opposition representations. When the Opposition speak of the destruction of family businesses, it is all part of a united campaign to frighten people outside the House into believing that it is a penal tax. What is certain is that the tax will be difficult to avoid. That is the basis of the Opposition's fear. The CTT will not be like the old estate duty. It will be a tax that will be applied. If the Opposition are so keen on tax loopholes, why do they not say to the PAYE man, who has no alternative but to pay tax, "Look for loopholes and we shall provide you with accountancy services free." In the past the payment of tax has depended, not on eligibility but on the degree of the accountant's ingenuity. Ordinary working men and women do not employ an accountant to scrutinise their wages.

Does the hon. Member for Keighley (Mr. Cryer) appreciate that the PAYE man can take four weeks off and reclaim his tax, even if he is not sick? That is a loophole, too.

I am appalled at the hon. Gentleman's intervention. Is he saying that a doctor would conspire to provide an employee with a certificate to enable him to take several weeks' sick leave in a spurious circumstance? That is characteristic. If a small business man is ill, that is an onerous circumstance. However, if an employee is involved, that is a dodge. That is characteristic of the attitude of the Opposition towards this tax.

I shall quote evidence to support my point. The hon. Member for Cirencester and Tewkesbury (Mr. Ridley) said:
"This is not a tax which, in the words of the Opposition, is voluntary and avoidable. This is a tax which will have to be paid because all the loopholes have been stopped up. As I explained earlier, the only reason I always believed estate duty to be tolerable was that there were loopholes. Not that there are no loopholes in this tax, it is not tolerable."—[Official Report Standing Committee A; 4th February 1975, c. 658.]
It is not a question of equity, of redistribution of wealth, of a fairer society, of people making a contribution to society. Nor is it a question of the benefit of mankind or of the community. The question is what people can get out of it for themselves and what they can grab and put into their own pockets. That is the basis of the Opposition's attitude towards this tax. What do they say when they must pay it? They say, "It is a dreadful tax and we are embarking on a Marxist society. Family life will break down." That is the extraordinary overemphasis which the Opposition have produced. Yet the Government have given tax concessions to the do-it-yourself builder, who is the creator, more than anybody else, of the family home. The Labour Government did that—not the Conservatives when they were in power.

The Government are accused because greedy people have decided that this tax cannot be avoided and that they will have to pay it. Those greedy people are alarmed. When the Opposition say that the £30,000 allowance is not very much they will hear hollow laughter from the millions of working men and women for whom £1,000 is almost unattainable.

Does the hon. Member for Keighley (Mr. Cryer) claim that the average fisherman who has perhaps a fifth share of a family boat, the value of which is £60,000, is not a working man?

The hon. Member for Banff (Mr. Watt) and I share a good deal of concern for people with small businesses. The hon. Gentleman is critical of people owning big businesses such as Mr. Cummings, and obtained valuable publicity from a critical letter which he wrote to a Sunday paper. I do not think that there is much to divide us.

We must set the record straight. This tax is not onerous, nor is it heavy. I am concerned that Ministers have given away too many concessions. I hope that the Minister will give us an assurance that when this tax has been in operation and the position has been reviewed, it will be made to work even more equally than it does now, and that some of the concessions already granted, albeit in a generous, co-operative spirit, will be reviewed upwards rather than downwards.

The message must go out from the House of Commons that the Labour Party is embarking on a taxation system in which tax avoidance and loopholes are being stopped and that the man on the shop floor who pays his tax before he receives his money is not in a position to manipulate anything, since he cannot afford to employ an accountant to see what loopholes there are, and must face a greater burden of everyday life than some of the small business men who have been described by the Opposition.

I do not dispute that some business men make a useful contribution to the community. Those who do will be prepared to pay this tax because they are not the kind of people who pursue tax avoidance. Any person playing a part in the community will see that tax revenue provides the services and needs which the whole community shares. But those who say that the Labour Government are producing a tax which will burden the rich are people who for many years have been avoiding tax.

Outside this House people will say that that is precisely why they elected a Labour Government. They did not elect a Labour Government to provide those who have all the wealth with loopholes. The Labour Government represent the vast majority of working people who earn their livelihood either by brain or by hand. They have put us here to make sure that our policy of redistributing the nation's wealth is carried out so that those who have the wealth see it transferred to those who have not.

That is our policy. That is what this tax is about. We welcome this tax, and we shall go out from this Parliament proud of our Front Bench and proud of the Treasury. That is not a view which is universally maintained, but certainly on this issue they have done a good job. We shall remember the snide innuendoes from the Opposition, made in a discreditable and disgraceful attempt to disgrace the Treasury Bench. We shall remember how that attempt was put down firmly by the united action of back benchers and the Treasury Bench.

We are here to see that Labour policy is put into action, and the Treasury Bench need be in no doubt that when Labour Party policy is put into action, Government supporters feel proud of them and will go out in the country to spread the message that the Labour Government are working to redistribute wealth. That is why we are here.

I for one am glad to know why the hon. Member for Keighley (Mr. Cryer) is here, though his statement that the capital transfer tax was a splendid tax because it had appeared in two Labour manifestos was not a reason which I think would be shared universally. But it is the case that throughout the years Labour Governments have produced new taxes, additional taxes and even taxes which have not appeared in Labour party manifestos. One example was the selective employment tax. But I do not think anyone can claim rationally that the capital transfer tax is a good tax.

The hon. Member for Coatbridge and Airdrie (Mr. Dempsey) made a most striking intervention and raised a number of matters which his right hon. and hon. Friends on the Treasury Bench have been quite unable to deal with during the course of our debates in Committee and on the Floor of the House. Although the hon. Member for Llanelli (Mr. Davies) attempted in part to answer the hon. Gentleman's questions, his colleagues on the Treasury Bench failed to point out that the difference between the capital transfer tax and the estate duty is that, when the capital transfer tax is payable, the capital gains tax is by definition payable as well, whereas with the estate duty there is no capital gains tax to pay. For that reason, it is impossible to say what the rate of effective tax will be in any given disposition. It depends on the value of the asset at the time and on the appreciation in that value at the time.

What is certain is that the capital transfer tax will be a very considerable burden on businesses both large and small, but especially on small businesses. Again, the Government have failed to deal with inflation. Here, this will be a most difficult matter if inflation continues at anything like its present rate of some 20 per cent. a year. If it goes on like this—I do not believe it can without a collapse—it means that the table in the Bill for the capital transfer tax will bite very hard indeed. Of course, the capital gains tax will also come into play. That will make life for small businesses almost impossible.

I give a practical example of what could occur from what the Chief Secretary has said. The right hon. Gentleman gave us an example of a business worth £250,000 which is given by the owner to his son. The capital transfer tax payable would be about £76,000. That could be paid over eight years. What the Government have failed to point out is that most businesses of that kind are incorporated. How are the assets to be produced to pay the tax? That can be done only by selling assets within the business. It is very difficult to understand how the business can continue if the plant and machinery is sold. I suppose that the money could be provided, if the cash were in the business, by paying higher dividends, but dividends are taxed at a very high rate. Similarly, if a loan were made by the company to the son to pay the tax, that would be accounted for as if it were a dividend payment. The fact that most small businesses are incorporated makes the position extraordinarily difficult. That is a practical point which neither the Government nor their supporters have taken on board.

The Chief Secretary and other Treasury Ministers have talked a great deal in comparing the capital transfer tax with estate duty. They say that there is now an opportunity of blocking loopholes and putting right the situation which has existed for far too long. Estate duty has persisted in its present form for so long because previous Chancellors, both Labour and Conservative, have recognised what would happen if a capital transfer tax or a gifts tax were to be imposed. I do not know whether Sir Stafford Cripps or Mr. Snowden were Chancellors who were unwilling to raise taxation. I would not recognise them in that rôle. I am sure that in the past Socialist Chancellors have considered many ways in which taxation could be increased. The reason that they have not reverted to a capital transfer tax is probably that they recognise that the business of this country has been formed because of the existence of small businesses. What is likely to happen now is that the structure of industry and business will be affected by the capital transfer tax. It is difficult to know where the assets and resources are to be found to pay the tax. What is certain is that great difficulty will arise.

Perhaps my hon. Friend would like to deal with the position of a company which is assessed for capital transfer tax and capital gains tax combined. A company could be assessed for a figure in excess of the total value of its assets. How are those called upon to pay the tax to find the money.

My hon. Friend is absolutely right. That is one of the great drawbacks of the tax with which the Government have persistently refused to deal. We cannot consider the capital transfer tax in isolation. It is a tax that must be considered in conjunction with the capital gains tax. That is something that the Government have persistently refused to consider. It is clear that small businesses will be greatly affected. The Government have given great attention to the position of those who own the businesses and we have paid a great deal of attention to the employers who will be placed in the difficulty of finding the tax. But what will happen to the employees in small businesses? There are no fewer than 6 million people employed in small businesses. That is a matter to which the Government have not addressed themselves.

There can be only one solution to the problem. In many cases the tax will not be able to be found out of the resources of the businesses concerned. The only alternative will be to sell the business. Everyone knows what the position will be if the business is sold. It will be sold to a larger concern. The larger concerns will have much wider selection than before in picking out the small companies that they wish to buy and the price will in all probability be lower in consequence. It will not be a good bargain.

What will be the position of employees in these myriad businesses all over the country? The outlook is that the company will be taken over by a large concern. We all know from experience in our constituencies what happens when that kind of event takes place. The company loses its identify and direct contact with management, and employees lose the interest that they may have had in that company's direct success because they do not feel tied to the success of the larger organisation. They feel remote from the control. However successful that organisation may be in a general sense, the transfer of ownership and management to a remote centre will do great harm to the efficient running of a small business. This is a matter of grave concern.

The trend towards larger concerns has been going on over the last 10 years. Though it was popular at that time, I think that it is probably a mistaken trend. The trend towards large takeovers for the good reasons that have often been provided, such as economies of scale and so forth, have in retrospect largely been mistaken, and I believe that industrial organisations are finding that to be the case.

For example, one wonders whether Leyland Motors would have been greatly more successful had the merger not gone through. Leyland Motors in its old way was successful making buses, lorries, and some cars. In my view, that concern would have operated more successfully had it continued to act independently.

The result of large mergers and reorganisations in many companies has led to loss of identity which in turn has created great problems with the loss of management skill in being able to get through to the workers and, even more important, in the employees' ability to get through to management and the people who can take decisions. The capital transfer tax will exacerbate this tendency. We shall find many small companies getting into the net of large companies. We should do our best to reverse that unfortunate trend.

In this morning's Financial Times I read an interesting article by Sam Brittan who was contrasting the position in this country with that in other countries of the trend of working people going towards non-productive jobs. He suggested that 29 per cent. of the population are now employed in either the Civil Service or local authorities and services. That is a higher figure than in any comparable country. That is another bad trend. It is a trend both towards large organisations and out of production into non-productive and Civil Service organisations of one kind or another.

The capital transfer tax will have unfortunate social implications as well. It would be wrong to leave this point without recognising the effect of capital transfer tax and the wealth tax, whenever the provisions are made known, combined with the capital gains tax.

9.15 p.m.

The future for small businesses is very bleak. I am certain that hon. Members on both sides of the House will have had letters from constituents, small businessmen, who now see the future in very bleak terms. I wish to quote from one such letter:
"After years of study and then experience in the electrical industry I qualified for membership of the Association of Supervisory Electrical Engineers, now the Association of Supervisory and Executive Engineers. Now I am self-employed, having my own small business, and there are two factors worrying me.
Firstly, the measures designed with either malice or sheer ignorance to tax small businesses out of existence mean that I have now a powerful incentive to do what our enemies always accuse businessmen of doing—fiddling every penny possible. This I have never done in the past, having some respect for a system that seemed—if not quite fair—at least a reasonable compromise.
Colleagues who operate in Sweden tell me that the introduction there of extreme socialist measures similar to those now going through Parliament have resulted in the widespread growth of bribery and corruption. I can well understand this and unless there is some drastic moderation of the capital transfer measures and of the obvious bias against small free enterprises which cannot easily be nationalised I shall consider I am justified … in doing everything I can to hang on to every penny I earn … I have been approached by Canadian, Australian and South African organisations which are actively encouraging entrepreneurs to quit the United Kingdom for a more invigorating atmosphere in their countries, and may yet follow their advice."
I am certain that many small businesses throughout the country have had a similar experience. This trend towards larger concerns will bring about massive unemployment, and the situation is already extremely serious.

The letter which the hon. Gentleman just read is important, but it is equally important to hear how he replied to it. It is imperative that people who write that kind of letter should receive a lecture on law and order as it relates to tax evasion in the way that one hears one delivered in respect of so many other areas of policy.

That intervention demonstrates the hon. Gentleman's attitude to this whole matter. The writer of the letter was not talking about evading taxation. There was no question of evading taxation under estate duty. Small businesses were properly able to make their own arrangements.

Unless CTT is modified, and unless the wealth tax is far less onerous than we apprehend, the future for small businesses will be extremely serious. Productive enterprises in this country will suffer greatly as the result of this tax. That feeling is shared by many people and many small firms throughout the country. This provision will be carried through at great risk of further unemployment, which is already serious, and at the risk of damaging the economy of the country.

My hon. Friend the Member for Meriden (Mr. Tomlinson) seems to have developed a habit this week—I do not know whether he acquired it in Committee upstairs—of prolonging the speeches of Conservative Members by intervening 30 seconds before they decide to sit down. I assure my hon. Friend that I may need his help on occasions, but I am certain that Tory Members do not need any additional inducement to take up the valuable time allotted to the House for this debate.

I propose to take up two points made by the hon. Member for Horsham and Crawley (Mr. Hordern). He referred to non-productive jobs in local government. I do not know to which jobs he was referring but, having spent many years as an elected local government member, I view that as a slur upon the hardworking individuals who are employed by local authorities. They are men of integrity and they work extremely hard, and the hon. Gentleman's language does nothing but denigrate them. I deplore slanderous language of that kind.

The hon. Gentleman also referred to small businesses, and I propose to say something about them. I am the Member for Leicester, South. As hon. Members probably know, Leicester is famed as a relatively prosperous city. That prosperity has been built up by small private firms.

Last Tuesday a delegation of Leicester hosiery manufacturers came to see their Members of Parliament about the capital transfer tax. I said that I would report their views to the Chancellor. I have not yet conveyed that information to the Chancellor. Leicester is fortunate in having three Labour Members of Parliament, for which my right hon. and hon. Friends are in debt to the wisdom of the electorate of that city. I may have referred to Leeds on one or two occasions. I am not a Member for Leeds although I spent some of my formative years there, and if I refer to Leeds it is due to my enthusiasm for that city.

I shall mention a few of the points which the hosiery manufacturers made to me. The Minister has to reply to the points made by other hon. Members and I hope that he will be able to spend a little time on the points I wish to put to him so that the potential fears of the hosiery manufacturers and their employees can be allayed. I shall mention five points. The first is that companies will sell out to larger companies, if possible, who will then rationalise and thus reduce employment. Secondly, companies will decide to reduce their scale of operations to reduce the amount of tax they have to pay. Thirdly, many companies will refuse to spend money on a dead duck; they will not invest in new machinery and there will be a loss of employment. Fourthly, owners will refuse to face the difficulties facing them and will go out of business. Fifthly, many companies will not have sufficient finance and will simply fade away.

The Chief Secretary and the Financial Secretary have answered these points in Committee. I shall be grateful if they will indicate to the employers and employees of Leicester that it is the Government's intention not to reduce the level of employment in Leicester but to ensure that the present low level of unemployment will be reduced even further by their wise and commendable economic policies.

Having done my duty to my constituents I turn to Labour Party policy, because it is that policy which we are implementing in the Bill. I said on Tuesday that I fought two elections last year on this policy. It is our intention to redistribute not only income but wealth. This legislation is designed to bring that about. My hon. Friends do not intend to achieve that at the expense of employment, which lion. Friends opposite assert that the Bill will do—

Would not the hon. Gentleman agree that the Bill will do precisely what he says it will not do—that is create unemployment—simply because it does not differentiate between those who will not and those who cannot pay the tax?

I am sure the hon. Member knows the answer to that, which my hon. Friends on the Front Bench have provided ad infinitum. I refer him to the answer which already appears in Hansard this week. We are implementing Labour Party policy to which we are committed and we will ensure that it is implemented, we hope by Monday.

Only the unwise had to pay estate duty. I was delighted when the hon. Member for Cornwall, North (Mr. Pardoe) agreed with our policy and criticised us only for its lack of severity. It is good to know that Liberal Members support the Bill and will show by their votes that they want it passed as soon as possible. We must replace estate duty by a tax which is not paid only by the unwise. I and my hon. Friends support that aim.

I have put several points to the Ministers which were put to me by the Leicester deputation. If they can reply and give some assurance to the people of Leicester, I shall be greatly in their debt.

It is as well that we have largely been free from the headline-seeking jibes and political antics of the Chancellor yesterday and have returned to the cold reality of some of the implications of this tax. There have been one-and-a-half speeches from the Labour side, which have conscientiously and fairly reflected many of our worries. The speech of the hon. Member for Coatbridge and Airdrie (Mr. Dempsey) was particularly telling, and it is a pity that the hon. Member for Leicester South (Mr. Marshall) did not stop when he had put his five telling questions.

As the Chief Secretary and the Financial Secretary know, we have had many debates over the last few weeks about the overall effects of this tax as well as its details. I want to use this opportunity to make one last attempt to put to the Financial Secretary what I think is the main thrust—to use his favourite phrase—of our concern about this tax, which has nothing to do with the preservation—as he would seem to put it—of the position of a privileged few, but has everything to do with the deeply damaging effects the tax will have on many aspects of the economy.

9.30 p.m.

I want to put my case as coolly and practically as possible, without emotional or philosophical overtones, so that the Financial Secretary can try to answer my points at the end of the debate. He has signally failed to do this so far.

The Government have always concentrated, to date, on the total wealth of the transferor or transferee. However, it seems that throughout all our debates the Financial Secretary and the Chief Secretary have totally failed to distinguish between free assets—such things as houses, marketable stocks and shares and other personal assets—and assets which are tied up. I want to concentrate on that matter.

Regarding free assets, I suppose that it could be argued that individuals who are in the position of having totally free assets will not be severely affected by this tax because they will spend those assets during their lifetime. Indeed, I thought that a cartoon that I saw recently fairly aptly summed up the sort of situation that we shall see in solicitors' offices on the many occasions when wills are read—that the deceased had quite substantial assets not very long ago, but, being of sound mind, he had spent them. In this situation, therefore, it could be argued that the only people who will suffer will be the successors of those individuals.

I leave aside the argument that there is a general effect on the economy in the sense that savings will be severely affected, particularly when one takes account of the other capital taxes and the very high rates of taxation on savings income nowadays. We have heard those arguments many times and I shall not elaborate on them now, because I despair o; ever getting the present Government to see the point.

I want to return to the situation in which the assets are tied up. It is here that the economic effects come through—to the farms and the firms. I should still like to know what representations the Ministry of Agriculture has put to the Treasury about the effects of this tax on farming. But I deal now with the situation in regard to firms.

There are three arguments to which we have still not had satisfactory replies. The first is that in these situations the assets themselves are tied up. In other wards, they are not free to be spent by the family. The second argument—this has been brought out time and again in this debate—is that there is a genuine problem about where the money will come from to pay for this tax. The third argument is that it will have severe economic and employment effects in many areas, to which we have drawn attention time and again.

I am sorry that the hon. Member for Llanelli (Mr. Davies) is not in the Chamber at present. As he usually does, he made a very fair speech. He said that the tax, particularly on lifetime gifts, was not unduly onerous up to total assets of £100,000. Thanks to the concession which we obtained in Committee about lifetime gifts and the halving of the rates up to that point, it could be argued that that is so; although, as we have constantly pointed out, the levels of tax, even up to £100,000, are much greater here than in most other countries. However, I am concerned about the situation above the £100,000 point. This matter was not brought out by the hon. Member for Llanelli.

First, after the case where the total assets of the firm, let us say, are more than £100,000, the tax rates start to rise very steeply indeed. Second, at current rates of inflation increasing numbers of small businesses will be moving into the £100,000 position. Third, at current rates of inflation the houses and other personal assets of the owners concerned will have to be added to the assets, and that will immediately put up the tax rates on the business. Fourth—the most important point—we are talking about small businesses and private companies.

It is worth bearing in mind that it is the firms whose total value is well over the £100,000 mark—I shall come shortly to a £400,000 illustration—which are the major employers of substantial numbers of people. The very small businesses, shops and so on, up to the £100,000 mark are, by and large, not big employers, taken on their own. But firms above that level often employ substantial numbers of people and are the main employers in many of our smaller towns and villages.

The £1,000 annual exemption can easily be exaggerated. I believe that the hon. Member for Llanelli said that there was a Government amendment which would enable that exemption to be rolled over. As I understand the amendment, the rolling over is for only one year. We welcome the concession, but it does not have the implications that the hon. Gentleman suggested. The other point about the £1,000 exemption is that in the early years of the build-up of a firm, or when the owners are younger, they will not want to use the concession year by year.

The real point, however, is that the capital transfer tax rates, even on a business worth up to £100,000, must be added to the other capital taxes. It is the accumulation of different types of capital taxes which will cause the biggest damage. We now learn that the Government are to bring back the capital gains tax on top for the transfer on death.

The answer to the hon. Member for Meriden (Mr. Tomlinson), who put his case fairly, is that he may well be right about many businesses worth up to £100,000 but that there are all the other effects. We are particularly concerned with the smaller and medium-sized private companies valued well above that figure.

The point was brought home to me one evening in Standing Committee. I am glad that the Financial Secretary is to reply, because he will recall that I raised the illustration of a company worth £400,000 and pointed out the cumulative effect of capital transfer tax and capital gains tax on the original transfer, which I put at 100 per cent. in that case. I also said that if assets were realised to pay the tax, if they were available to the transferor or transferee elsewhere, capital gains tax had to be paid on those assets.

I shall not give the figures, because I do not want to quote too many, but the figures on those facts were horrifying. The hon. Gentleman said at that time that I had taken an extra example, and that he would put forward a more realistic and reasonable example.

There will be larger firms which will buy them to close them, in order to get rid of the competition.

I was about to come on to that point. Even where businesses can find a willing buyer, there will be implications of the sort my hon. Friend has mentioned.

But there will be other implications. The large public company, which will be the normal buyer in such situations, will often be looking for different rates of return on capital from those that the family business would be prepared to accept. If the family businesses are small and in peripheral areas, they will be less likely to give proper top management time to them. Therefore, the large firm may often run down the business, or simply eliminate the competition. Therefore, the situation will arise where, in times of economic stagnation or squeeze on profitability or cash flow, such as we now have, parts of the larger organisations will be vulnerable in a way in which they would not have been in if they had remained in private hands and control, and therefore that will immediately have implications for local economy and local employment.

Does the hon. Member agree that many of these small peripheral companies which will be taken over will be in Scotland and Wales?

I, too, am a Scot and, as I have told the hon. Member before, he must not be too partisan. There are many parts of England, including in my own constituency, where this effect will be felt, but I take the hon. Member's point that the provision will very much affect Scotland and Wales.

Another alternative is to find another private buyer. But again, knowing that he will eventually have to meet the heavy CTT and capital gains tax burden himself in due course there is no incentive for another private buyer to take on that extra burden knowing that little will come out of it. If the owner cannot find a buyer he will be unable to sell the business intact. The view may be taken that it is worth little and could therefore be pased on to the next generation at that price. However, since the business will be valued on the assets price the only way to meet the situation in which he wants to sell but cannot do so will be to break up the assets, with the consequential adverse effect that will have on local employment.

Another possibility is that the business may be run down and parts of it sold off to meet the tax. Perhaps it would be run down so that the owner could enjoy the fruits of his earlier labour in the knowledge that he would face a smaller tax bill in the end. There is therefore an element of the geriatric charter in the capital transfer tax. It is certainly correct to say that it will act as a disincentive to new investment in firms and farms. It will act as a disincentive to building a business up and it will have dangerous effects on employment.

I make one final plea to the Financial Secretary and the Chief Secretary to accept that there is a genuine argument that, with the higher rates on firms or farms where the assets are tied up and worth a fair amount of money, and where at some point because of the high rates of tax, the assets will be culled, there will be the most severely damaging economic effects.

I am all in favour of reform of capital taxes and I favour a great spread of wealth. I am strongly in favour of equality of opportunity, although I believe that part of the incentive to build up from that must be that it is possible to pass on a reasonable amount of the capital one has built up to one's children and future generations. In its present form, the capital transfer tax will have the most adverse effects on businesses and farms. If the Government are intent on introducing the capital transfer tax, as they obviously are, surely it is not beyond the wit of man to devise one which will take account of the situations of businesses and of farms.

On this account alone, the capital transfer tax is a devastating failure, hence our critical objections to it. It would be an advantage if we were considering much wider reforms of capital tax generally which would bring us more into line with other countries. In our debates we have considered the situation abroad a great deal. The more I look at the situation in Europe, the more I see a case for speedy harmonisation of taxation both of company and of personal taxation, certainly while this Government continue on their merry way.

Short of starting afresh with capital transfer tax and capital taxes generally, it seems to me that some of the amendments which are being put forward in this group would at least help to diminish the worst effects of the Bill on the businesses I have been describing.

9.45 p.m.

Tonight's debate, like the debate on the Finance Bill generally, shows that the subject under discussion is one of the two great subjects which divide the two sides of the House. Issues that always divide us are the distribution of power and the distribution of influence. Another, which we are now debating, is the distribution of wealth. One of the reasons that I have spent my working life in the trade union movement is that I was persuaded at a very early age that there was a great maldistribution of wealth. It was not that I subscribed to the politics of envy although I could not help sometimes being envious of those very much better off than I was; and I could not help but feel sorry as a child for those children who were very much worse off than I was.

I will not pursue tonight the politics of envy. This is an issue which is of very great concern to many of us. Before underlining why I feel strongly in favour of the introduction of capital transfer tax, and why I feel the Government have erred on the side of generosity, I suggest that the argument about the small business is one which has to be answered because if it were true that this tax would lead to reduced incomes for working people and reduced employment for them, I would listen to that argument very carefully.

The hon. Gentleman says that it will but my guess is that the argument is evenly balanced because in my experience—

The hon. Member for Macclesfield, as usual, acts in a discourteous way. I look to you, Mr. Deputy Speaker, to ensure that there is no shouting from a sedentary position.

I will protect the hon. Gentleman if it proves necessary.

The argument is evenly balanced because it has been my experience from observation that whereas some small businesses have brought advantages to our economic life, there is an argument that should be carefully considered that the rôle of the small business in British industry has been to minimise production, that the small business epitomises at the present time the lack of investment that has taken place in British industry and that it is in the small business that one finds inefficient, outdated methods and the second-generation inefficient management that has been so harmful to British industry.

How does the hon. Gentleman square the comments he is making with the findings of the Bolton Committee on Small Businesses, which showed that the small business sector as a proportion of the total economy had declined faster in this country than is the case with any of our major competitors?

Of course I have heard of the Bolton Committee Report. I was involved as PPS in the then Department of Technology as far back as 1969 when this subject was a matter of great concern. From my observation, bad pay is to be found in the small business and bad working conditions are to be found in the small business. If one wants to find the cowboys in the road haulage business one looks to the small road haulier. If one wants to find the most foul conditions in foundries, one looks at some of the small foundries. In North Staffordshire if one wants to see the worst conditions one goes not to Wedgwood or Doulton but to the very small potteries.

Does the hon. Gentleman claim that the strike records of small businesses are worse than those of big businesses?

I would certainly compare the strike record in Wedgwood with that of any of the small potteries or brickyards in North Staffordshire. I have no precise figures, but from my own knowledge workers generally are happier in my locality with the larger than with the smaller employers. The advocates of the small business will have to work hard to persuade me that the death of the small business would be harmful. I do not bemoan the loss of the small shopkeeper. I prefer to shop at the large co-operative store rather than at the corner shop.

The nub of the argument is not the small business but the distribution of wealth. In a letter that was quoted earlier, a most revealing phrase was used—"every penny I earn". The money that goes into the pockets of many business men has been earned not by their efforts but by the people who work for them. If the distribution of income was fair and rational there might be a case against a capital transfer tax, but anyone with eyes to see knows that the distribution of income is unfair.

There is no way in which one can demonstrate that the rich have earned their money in the way that the baker, the miner or the engineer has earned his money. A great deal of wealth has been inherited. In no sense can it be said that those who have inherited wealth have earned it. The inheritance of wealth is a fortune of birth.

The Opposition are defending the unjust distribution of wealth. Many rich people have gained their wealth from speculation or from gambling. Speculation is a form of gambling. There can be no moral justification for the wealth that some people acquire. Those of us who defend the capital transfer tax say that it is only right that the wealth that has been acquired in this haphazard and unjust way should be redistributed. I feel as though I am living in a different world—[HON. MEMBERS: "You are."]—from that of Opposition Members when they say that the first £100,000 is not too bad but that it is after that that the injustice comes. Of course I am living in a different world. The constituents I know best do not have £5 in the bank after Christmas or following their holidays.

The hon. Gentleman said that they spend it. Their average wage amounts to £50 a week before tax. It means that in a year they will earn at most £2,000. Over a lifetime those earnings amount to roughly £80,000. That is the sum Conservatives should be doing. The people I represent will earn only £80,000 during a lifetime of work. It is nonsense for the Opposition—rich, affluent, privileged—to scoff at my constituents who are broke after Christmas or after their summer holidays and who have no savings at all.

Many of my constituents who work in the potteries, electrical component factories, down the mines or in bakehouses have to think twice about going on strike for three weeks because they have not the capital resources to last them for that time. They have little share in the wealth of the country. Therefore, it does not become Conservative Members to scoff at the fact that those workers have so small an amount of savings from their earnings.

If one sees those men working in their bakehouses, in the potteries, in the mines or at conveyer belts, one does not take the view that they do not work hard to earn their money. Of course they do. If one goes into a classroom and sees a teacher one knows that she too works hard to earn her money, and yet at the end of the year she has little left to invest. Compare that situation with the situation of the bookmaker, the stockbroker or the barrister.

My hon. Friend the Member for Luton, West (Mr. Sedgemore), who has belonged to that privileged group, will appreciate that in no sense did he earn so much more than the miner, the engineer or the factory worker. What he can say is that he received more and that his income was greater. I am sure my hon. Friend has never earned in any real sense more than the faceworker or the car component worker in my constituency. It has been a matter of luck that his standard of living has been so much greater than that of so many of my constituents. I cannot accept the Opposition's argument that the money which some people have earned should be kept and not taxed, because they did not earn it in the first place.

It is very important at the present time—indeed, at all times—that the distribution of incomes should be fairer. I find it repugnant to have to face constituents who have not enough to live on. We all have constituents trying to live on £18 to £20 a week from social security. We are discussing whether the edge can be taken off that poverty at the expense of richer people. The issue is whether the poor should benefit at the expense of the better-off.

10.0 p.m.

The wealth referred to by the Opposition means not only income but also security. They demand for themselves and their kind massive security compared with the lack of security experienced by many of my constituents, who cannot face old age with a feeling of security since they have no savings. Although the Opposition may say that our people have spent it, they do not realise that men and women retiring today at 65 have received low pay during much of their lives and have not had the opportunity to save.

Wealth and title are possessed by a few people who can face a secure future. The Opposition, their class and their kind benefit from the poverty of the people I represent. That is the nub of the argument. That is why it is important for the Government to proceed with the capital transfer tax. My only regret is that the tax is not severe enough. When I hear the Opposition say that the tax is not too bad up to £100,000, my immediate reaction is that that means that the tax is not severe enough.

Referring to the figure of £80,000, if that is the total wealth which one of my well-paid constituents can earn in a lifetime—does the hon. Member for Macclesfield (Mr. Winterton) wish me to give way?

I should be grateful if the hon. Member would stop being rude. He is shouting once again from a sedentary position.

This is what we expect from the Conservative Party when it is faced with a Government measure to bring about the redistribution of wealth for which we have worked so hard. The possession of wealth has not only meant that the Opposition and the class they represent have enjoyed greater security than that enjoyed by the people I represent. The possession of wealth has also given them greater privileges in respect of health, housing, education and power.

We have a situation where there are still two nations in this country. There are still clearly defined rich people who are over-privileged and who take more than their fair share. There are others—the great majority, as my hon. Friend the Member for Cannock (Mr. Roberts) reminds me—who are distinctly underprivileged in every way.

The only way in which the Labour Party can tackle this problem is by taking the wealth and the privilege away from those who have them and transferring them to the vast bulk of the poor working people of the country.

I have been following my hon. Friend's argument closely. It is a very simple argument—[Laughter.] Opposition Members appear to find that funny. If, like my hon. Friend and myself, anyone has lived on that side of the fence, it is a simple argument. For anyone who has not lived on that side of the fence, it is far more difficult. Naturally, I sympathise with what my hon. Friend is saying. However, he has not made one important point, and I am sure that he will wish to develop it before he concludes his remarks—

The hon. Gentleman appears to be beginning to develop it himself in what is becoming a very long intervention. Mr. Golding.

I was just developing the point which I hoped that my hon. Friend was about to make.

I am sorry. I misunderstood the hon. Gentleman. May I suggest that he does so quickly.

My hon. Friend rightly said that one of the arguments related to giving the poor some benefit by taking away from the overprivileged section of the community. In addition there is an enormous benefit to be obtained in terms of the feeling of justice which it produces in our society. One of the great things operating against the effectiveness of our society is the injustice of society in the sense of injustice to working people, and this tax will make an important contribution towards reducing that.

It so happens that I was about to deal with that after making one or two further points. My hon. Friend's argument is a very good one. It has been one of the very great difficulties for Governments in this country since 1945 that appeals for restraint have generally had to be made against the background of conspicuous expenditure on the part of very many people in our society. Whether it be 1948, 1968 or 1975, it is very difficult for a Government to ask working people to restrain their expenditure when they see others living in conditions which are very much more comfortable than their own.

I do not believe that the argument of initiative carries very much weight in our society. It seems to me that, generally, the position to which we get in life is determined by—[Interruption.] I do not know whether you wish to call the Opposition to order, Mr. Deputy Speaker. I was tempted to talk of one-sided deafness.

I have never been persuaded of the argument that how far an individual progresses in life in this country is due to the amount of personal effort or initiative that he puts into his career. It seems that very much more important in our society is how much an individual has when he starts life. It seems that success is more dependent on the starting point than on the effort that the individual puts into his career. Basically that is unfair.

Many Conservative Members and the people they represent would have made a greater contribution to society had they not been given so much to begin with, had they not had handed to them a privileged place in our society. If they had not started life in that way they would have had to work very much harder and develop much more talent to arrive at the position that they now occupy.

It could well be argued that by taking privilege from individuals at an early age we shall get from them greater effort and greater achievement than we have seen so far. I apply that argument to the family business. A young person going into a public company is likely to exert far more effort and is likely to show much more initiative if his or her progression through the company is dependent upon effort and initiative. Such people will demonstrate much more initiative than those who have been given the golden pot and who are free to fritter it away.

Does my hon. Friend not agree that one of the great arguments of the Conservative Party—that concerning the initiative and drive that is shown by the founders of small firms, such as people who have built up their businesses and achieved considerable success—can be applied to the effect of this legislation, which is to put more people in a position which is so prized by the Conservative Party? Does my hon. Friend agree that from that point of view this tax makes a useful contribution to our society?

I would ask my hon. Friend not to intervene so often. I was just coming to that point. I was brought up in an area where it was believed that life was rags to riches to rags or clogs to clogs in three generations—

On a point of order, Mr. Deputy Speaker. Under Standing Order No. 22 is it not out of order for an hon. Member to persist in tedious repetition of the same argument?

Further to that point of order, Mr. Deputy Speaker. Would it be possible, without entering into the argument about Standing Orders, to draw to the attention of the hon. Member for Newcastle under-Lyme (Mr. Golding) that many amendments—many of them are Government amendments—will not be discussed if he continues in this manner?

I am aware that the Liberals, like the Tories, are trying to defend the distribution of wealth. They will try to prevent this discussion from continuing. I think that it is an important debate which should be continued. Were it not for the Whips on the Front Bench nodding, I would continue it. But, having seen the presence of the Deputy Chief Whip and having had some experience of what that means, I would simply urge the House to vote with gusto for the Government legislation.

10.15 p.m.

I want to make the briefest of interventions. I wish to draw the attention of the House to the schizoprhenia which is normally displayed on the Government benches. I have never come across a more glaring example than that which we have just heard from the hon. Member for Stoke-on-Trent—

On a point of order, Mr. Deputy Speaker. I think that in North Staffordshire it is well known that Newcastle-under-Lyme is a posher part than Stoke-on-Trent.

The Government say that they are interested in better industrial relations, efficiency and investment in industry. This tax on businesses and farms will lead to bigger organisations, worse industrial relations, less efficiency and a sapping of investment.

One hon. Gentleman said that the ordinary working man cannot distinguish between capital and income. The Labour Party pretends that it is interested in the human being. This tax will destroy 10 million employed human beings in this country. I believe that is what it is intended to do. Let no one, particularly those who sit at the west end of the Chamber, doubt that when it happens their hypocrisy and derision will come back in their own faces.

Having heard the briefest of interventions, I can say that it shows how one can be brief and wrong at the same time.

I think that hon. Gentlemen opposite must sort out whether they are or are not in favour of capital taxes. The hon. Member for Norfolk, South (Mr. MacGregor), who is not in his place, told us that he was in favour of capital taxes. Indeed, upstairs in Committee we heard other hon. Members say that they were in favour of capital taxes. But of what capital taxes are they in favour?

I should like to quote the words of one of the more revered Members of this House who, speaking of a certain capital tax, said:
"Many will mourn the passing of the loopholes more than those who will mourn the passing of the estate duty. What was so admirable about estate duty was that it was not always necessary to pay it. … The great virtue of estate duty was that it was very often avoided. That seems to me to be the reason why it survived for so many years and grew into a state of respect, if not affection, among so many people. I gladly join in the tribute to the Estate Duty Office. I am certain that the officials there are as sad as the vast majority of people in the country that this admirable tax is now passing from us".—[Official Report, Standing Committee A, 18th February 1975; c. 2237–8.]
It seems that in the end Conservative Members will come to love CTT in the same way as the hon. Member for Cirenceter and Tewkesbury (Mr. Ridley) came to love estate duty.

The House of Commons is basically a happy place, but a tear came to my eyes as I listened to the hon. Member for Horsham and Crawley (Mr. Hordern) telling us about patriotism and developing it as a theme in relation to this clause and CTT. A similar theme was developed in Committe upstairs, and the hon. Gentleman this evening read a letter to show how delicate a flower patriotism can be with his kind of people.

There seem to be a large number of people in this country who are playing this never-ending game of monopoly. They are for ever moving blocks of wealth and capital and capital into and out of Kruger-rands, into and out of real estate, into and out of hotels and when they fail they write a letter—

Does my hon. Friend agree that CTT will be a stimulus to patriotism? These people will feel that they are making a greater contribution to the nation and to the working people whom my hon. Friend the Member for Newcastle-under-Lyme (Mr. Golding) mentioned.

I agree with my hon. Friend that this tax is a genuine test of patriotism, but it seems extraordinary that when these people have moved blocks of capital into and out of this sort of income for the purpose of tax avoidance and tax evasion they write to the hon. Member for Horsham and Crawley, and when that fails they decide to take themselves off to the Channel Islands or some rat-infested swamp which serves as a tax haven in some curious part of the world.

Within these limits of condemnation, what degree of discretion will the hon. Gentleman give to the managers of trade union pension funds?

One of the best things we can do is to ensure that they get their £10 million as rapidly as possible.

The other thing that disturbs me is the ingratitude of Conservative Members for the unfailing efforts of the Chancellor of the Exchequer, the Chief Secretary, the Financial Secretary and other spokesmen from the Treasury to try to meet their needs. Tory Members make these proposals and ask for reductions and concessions, and when they get them they complain that they are not enough.

I want to raise one serious constitutional point about the operation of CTT in respect of this clause and in relation to the changes that have been made. I do not go all the way with the hon. Member for Cornwall, North (Mr. Pardoe) in claiming that the whole apparatus of Government in this country is rotten and in need of reform, but there is something slightly strange about the way in which we have introduced this amendment.

It was many months ago that we published a White Paper in which we set out the rates of tax which eventually appeared in Clause 35. The Bill was then published, and we had plenty of time to look at it. There followed a Second Reading debate, and there were no complaints from the Government benches about the rates in Clause 35. The House went into Committee and debated Clause 35, and I believe that my right hon. Friend the Chancellor of the Exchequer was involved in that debate on the Floor of the House. There was a long discussion about the merits and demerits of CTT in relation to the rates in the Bill, and we agreed them. Then we went into Committee and for 60 hours every speech made by Government spokesmen defended the rates of tax in the Bill.

Suddenly we find bits of paper on our desks telling us that rates of tax for transfers in life up to £100,000 are to be halved and that the rates are to be cut by one-third for transfers during life up to £250,000. Even with my admiration for the Treasury Front Bench team and for the civil servants—I speak as a former civil servant—this seems to be an extraordinary way to run a country.

Why did this come about? Was it because the Chancellor, the Chief Secretary and the Financial Secretary decided that the rates had been pitched too high? I do not believe that it was. Or was it related to the threat by the right hon. Member for Finchley (Mrs. Thatcher) that she would repeal this tax? We all know that that is an idle threat. It is easy enough for Opposition spokesmen to tell us that they will repeal this or that tax. When the crunch comes, the Treasury never repeals these taxes. Somehow income tax did not disappear and I very much doubt whether capital transfer tax will disappear.

What is the effect of the right hon. Lady's threats on the sensitive minds of the Revenue officials? They might conceivably argue that if she really means it people will not make transfers of capital in life and therefore the Revenue will suffer. If those officials are unpatriotic, they may also say that it is conceivable that the Labour Party will lose the next General Election. The combination of the right hon. Lady's threat, the insensitivity of the Revenue and the lack of common sense in believing that it is a genuine possibility that Labour will lose the next election might be the real reason for these tax reductions.

In that sense some of us are worried about the scale of the reductions. I shall not vote against the Government tonight because I believe that we should show our good faith towards small shops and businesses, small farms and the like. We should say that we are prepared to give this a try. If, once the tax has settled down and people start to pay it and are not encouraged to adopt Poujadiste excesses, we can raise the rates to appropriate levels.

It is a pity that Conservative Members have used this harum scarum, hocus pocus nonsense about the effect of this tax on small shops and businesses. It does not behove them to create panic and carry on with these scare tactics. On Monday I told the House that I had received one letter objecting to the capital transfer tax. As a result of the hysterical pressure of Tory Members this week, I have now had another letter objecting to this tax. My hon. Friend the Member for Bolsover (Mr. Skinner) is right when he says that this exercise is part of the virility symbol of the right hon. Member for Finchley.

I see that the hon. Member for Blaby (Mr. Lawson) is about to leave the Chamber. Before he does, may I say that the contortions—the hon. Member has come back. May I say that even a second's absence is too long for all of us. The hon. Member's remarks on this tax have summed up the contortions and distortions that have gone on about its effect. I distinctly remember his telling the House on Second Reading that this tax would lead to a Marxist State. In Committee I heard him say that the tax would mean that every small business would be bought out by Arabs and Americans, thus, presumably, developing the capitalist State. It is that sort of nonsensical dialectic in the hon. Member's mind which brings the House into disrepute.

I am grateful to find that the hon. Member listens to my speeches with case. If he had listened with more care he would know that my thesis was that, although the intention, which I queried, was to create a Marxist State, the result would be that the conglomerates and the Arabs as well as the Secretary of State for Industry would take over the small firms which are the backbone of British industry and the British economy.

I am sure everyone will realise that this tax is an important step towards the irreversible shift of wealth and power which we have promised the electorate and which the electorate so desperately want. We regard it as a modest measure on the road to Socialism.

10.30 p.m.

Not for the first time, I am in the difficult position of having to resolve the problem of not trespassing on the time of the House and yet at the same time not, unintentionally, failing to refer to any of the speeches which have been made.

Without going into detail on all the points raised, I would say that certain themes have come through clearly in the debate. First, many of the examples put to us by hon. Members opposite have assumed, as is perfectly proper for debating purposes, extreme situations—small businesses with no assets outside their business or businessmen who had taken no previous steps to mitigate the possible incidence of capital transfer tax. If all those assumptions were true in any one case, of course the effects on the business concerned would be far worse under estate duty than that under our proposals. That is a fact which Conservative Members have been unable to deny. The more fair minded of them have recognised this. I am sorry that the hon. Member for Norfolk, South (Mr. MacGregor) is not in his place. He made one of the most reasonable speeches here, as he so frequently did in Committee, and I am sure that he would be one of the first to recognise that.

I am grateful for that agreement.

I recognise that many Conservative Members have legitimate concern about the whole array of capital taxes existing and proposed. That is why the House has set up a Select Committee to consider the wealth tax. Its terms of reference enable it completely to review the incidence and interaction of taxes now on the statute book and those contemplated for the near future.

Do I take it from the hon. Gentleman's remarks that it is within the Select Committee's terms of reference to recommend the repeal of capital transfer tax should it not fit in easily with wealth tax?

It is up to the Select Committee to take into account the interaction of the whole structure of capital taxes. I understand that its remit is quite wide.

The whole problem—I am sorry that I do not see the hon. Member for Basingstoke (Mr. Mitchell) among us—

I beg the hon. Gentleman's pardon. I am glad to see him.

My main text tonight would have served as the text for my hon. Friends the Members for Newcastle-under-Lyme (Mr. Golding) and Luton, West (Mr. Sedgemore). It is true, of course, that one does need a text. I took down most carefully the words of the hon. Member for Basingstoke. They are akin to the words of the hon. Member for Cirencester and Tewkesbury (Mr. Ridley), which were quoted by my hon. Friend the Member for Luton, West. The hon. Member for Basingstoke said that most people did not pay estate duty and that most small and medium-sized businesses did not pay tax. I gather that it is suggested that I have admitted that. I do not know whether that is the right verb to use. I certainly said that I never conceived that estate duty was a totally avoidable tax—I have made that quite clear—otherwise the Treasury would not have benefited from the yield it has had from the tax down the years.

What I said about estate duty was that it was largely paid by the unlucky, the ungenerous and the unwise, and that I could not see that that made a foundation for a fiscal system which would commend itself to reasonable men, whatever their political philosophies. Again, I am glad to see that some of the more enlightened Opposition Members are acknowledging that, though, despite the reassurances from the right hon. and learned Member for Surrey, East (Sir. G. Howe) and some of his hon. Friends that the Conservative Party is now unequivocally in favour of a tax on lifetime transfers, I am sure that he will have difficulty in persuading all of his hon. Friends to join him in support of that general principle.

On the point about the unlucky, the ungenerous and the unwise, the Financial Secretary will be aware that the tables of the Inland Revenue published every year show the figures for the payment of estate duty over the whole range of estates, over a complete distribution. These tables show that several hundred millions of pounds were paid in estate duty last year over a wide range of estates. Is the hon. Gentleman saying that all these people—and there are many thousands of them paying sums varying from a few hundred pounds to millions of pounds—are either ungenerous, unlucky or unwise?

I would say that they were one of those three, if there were so many others who could have avoided paying it altogether. I am glad to have the acknowledgement of the hon. Member for Basingstoke. I hope that the hon. Gentlemen will communicate with each other and resolve their problems. The view of the hon. Member for Basingstoke was that most people did not pay estate duty.

I hope that the hon. Gentleman will not say "Rubbish" when it was he who said it.

I think that the word I used was "many", but I accept the Minister's thesis.

By all means. I do not go as far as the hon. Gentleman. I accept what the hon. Member for Havant and Waterloo (Mr. Lloyd) said—that the revenue from estate duty was considerable.

But the fact remains that it has been possible for many years for those who are well advised in these matters and who have the funds at their disposal to hire the best advice to be able to arrange their affairs so as to attract virtually no tax in the transmission of inherited wealth from generation to generation. As my hon. Friends have pointed out many times during the debate, that is what the capital transfer tax is all about. It is to bring a basic fairness into our tax system, to reduce the rates of estate duty, and to make sure that transmissions of wealth, however they occur—whether of free assets or settled property, or whether the discretionary trust is used or some other form of trust instrument—are taxed in the same way as they would be if those assets were kept free from arrangements or settlements.

There have been many suggestions from Opposition Members that my right hon. Friend the Chief Secretary and myself, with my right hon. Friend the Chancellor, are deliberately setting about a course of trying to destroy small businesses. That, of course, is a preposterous accusation. [HON. MEMBERS: "Oh!"] Of Course it is. Hon. Members of the Opposition know better than that. I accept the hyperbole of debate. I am quite prepared to stand here and take the hyperbole seriously and deal with it in a moment.

If we were persuaded that the rates of tax were such as to lead to serious difficulties for small firms or lead to unemployment, of course we would look at them again. But my right hon. Friend and I are persuaded at present of nothing of the sort.

I hope that the hon. Gentleman will not fail to reply to the question which has been repeatedly posed from the Opposition side, and was posed by the hon. Member for Coatbridge and Airdrie (Mr. Dempsey)—where is the money to come from to pay the capital transfer tax on a company valued at £100,000 or £200,000?

I was about to discuss the three general types of business which one may encounter. First, there is the unsuccessful business, which, almost by definition, will have no tax problem because its assets will not be growing at a great rate, so that the higher rates of capital transfer tax will not apply to it. Then there are two other types of business—the successful business which is growing very fast and is ploughing back all the money into the business, and the successful business which is not growing all that fast but is taking money out by way of dividend or payments to the proprietors, however it may be done.

For the third type of business, almost by definition there is virtually no problem because, in the situation I posed, there will be a constant flow of free assets into the hands of the owners of the business.

Is the hon. Gentleman suggesting that the tax liability can always be met out of the yield on capital employed in the company?

It depends on whether the business is successful. We had these discussions in Standing Committee at great length. I should have thought it self-evident, and we had various examples given in Standing Committee. If businesses have been making considerable profits such as we are talking about and have then been distributing them, it will be quite possible for the owners to pay the capital transfer tax out of that [HON. MEMBERS: "Oh."] All right. Hon. Members say that that is madness and that no one can accumulate capital in that way. All I can say is that if that is the case, we come back to what we were saying last night, that if it is impossible to accumulate assets in that way, and it is impossible to accumulate substantial amounts of wealth in that way, it follows that substantial amounts of wealth must have been inherited. As my hon. Friend the Member for Newcastle-under-Lyme said, it depends where one starts.

We are talking about small businesses. I am sure that the hon. Gentleman knows all the details of price restraint.

Is the hon. Gentleman saying that small businesses are exempt in terms of the price code? The methods of surveillance may be different, but the burden of the price code is just as severe on businesses of the kind we are now discussing as it is on others, and the Minister must not seek to conceal his own ignorance of the problems with which he is supposed to be dealing.

It is absurd—the right hon. and learned Gentleman knows it—to suggest that the burden of price restraint is as heavy on small businesses as it is on large. He is well aware of that.

With a 20 per cent. rate of inflation, for most companies the replacement of assets means that they are on a negative cash flow. Unless one earns more than 30 per cent. after tax, one is on a negative cash flow. It is the incompetence of the present Government which has organised the 20 per cent. rate of inflation, which must, in these terms, be ruining every company in the country.

Successful companies—we have been talking about successful companies—are coping successfully with the rate of inflation. Of course they are. I recognise, as I have said throughout, that at a time of rapid inflation the operation of the capital gains tax can be an additional burden. The Opposition should not abuse us about that, because they did nothing about the rate or structure of capital gains tax when they had the opportunity.

10.45 p.m.

Many serious questions were asked from the Government back benches. My hon. Friend should get on to them, rather than be diverted by irrelevant points raised by the Opposition.

I undertake to come to the important points raised by my hon. Friend. I do not want to trespass too long on the time of the House.

The Minister has just accepted that in a time of high inflation, capital gains tax is a heavy burden. At least the last Conservative Government removed capital gains tax on death as an additional burden, and inflation then was nothing like as high as it is now. Why, then, are the Government allowing the continuance of the heavy burden of the capital gains tax here, which is what makes the burden penal on the small and medium-sized businesses?

It depends entirely on the structure of the capital gains tax. As the hon. Gentleman is well aware, the absence of capital gains tax on death created a distortion of economic markets and a locking-in effect of which the hon. Gentleman has been one of the first to complain.

The hon. and learned Gentleman has recovered his voice to intervene from a sedentary position.

The hon. Gentleman cannot have it both ways. If he thinks that the absence of capital gains tax at death created distortion, the remedy is simple: abolish it during life. As the Financial Secretary talked about the free flow of funds from a company to its shareholders, will he explain in simple language, so that the House can grasp it, just how shareholders can extract funds from those companies without incurring tax.

Of course tax is involved. The hon. and learned Gentleman is insulting the intelligence of the House. If his recipe is to remove capital gains tax entirely, I suggest that he communicates with his right hon. Friends on the Conservative Front Bench, and sees whether that is the banner the Conservative Party wishes to use in the next election, with all the unfairness that such a repeal would produce.

I was unable to be present during the speech of the hon. Member for Cornwall, North (Mr. Pardoe), but I gather that most of his remarks were addressed to the question of a donee tax, an accession tax, rather than a donor tax.

The hon. Gentleman also addressed himself to Amendment No. 80, in the name of his right hon. Friend the Member for Devon, North (Mr. Thorpe), which would in effect reduce the death rates to those we are suggesting for lifetime rates. That amendment would cost about £8 million in 1974–75 and £60 million in 1975–76. It will be no surprise to the hon. Gentleman that that is a shortfall in revenue that I cannot recommend to my hon. Friends.

That is less than a satisfactory reply to what was quite a long speech, which was not at all about accession tax but entirely about the fact that the tax should be at one rate on gifts and deaths. I made the point that as the Government had accepted the principle right at the start of the tax, I expected that they would compromise on the rate, meeting us half way, so that they retained their revenue and did not increase their borrowing requirement.

Order. We cannot have interventions upon interventions.

The whole purpose of the lifetime rate was to be of assistance to small businesses. The sort of relief that the Opposition were urging us to provide becomes the subject of mockery when we provide it.

The Financial Secretary said that the Liberal amendment would cost £60 million in 1975–76. Will he now say, since he consistently refused to do so in Committee, what is the yield of tax as the Government propose it for 1975—x2013;76? He must know this since he can tell us the cost of the concession.

I have checked with my right hon. Friend the Chief Secretary. When we gave the estimate it was about £360 million for 1975–76. In the nature of things the figure must be very much an estimate.

I cannot give way. I must have given way a dozen times already and I owe it to the House to try to finish and to give the hon. Member for St. Ives (Mr. Nott) an opportunity to speak.

On a point of order, Mr. Deputy Speaker. Is it in order for the Financial Secretary to mislead the House and double the rate of CTT compared with the figures which were given earlier?

The hon. Member for Perth and East Perthshire (Mr. Crawford) spoke of the effect of the CTT on Scottish agriculture and forestry. Both these activities are protected by specific reliefs, some of which we discussed yesterday and which will no doubt be debated at greater length when the Report stage resumes on Monday.

My hon. Friend the Member for Leicester, South (Mr. Marshall) made a series of important points concerning his constituency, as did my hon. Friend the Member for Coatbridge and Airdrie (Mr. Dempsey). I hope I have demonstrated to my hon. Friends that we are quite confident that the proposals will have no adverse effect on employment in their constituencies.

One is forced to come back repeatedly to the basic principle advanced by my hon. Friend the Member for Newcastle-under-Lyme. Many things in this world depend not on merit but on how much a person has to begin with. That is what the tax is about.

Will my hon. Friend deal with the question of the concessions made in Committee which was raised by my hon. Friend the Member for Luton, West (Mr. Sedgemore)? We should like more information on the arguments for those concessions.

I am obliged to my hon. Friend for reminding me, and I wish no discourtesy to my hon. Friend for Luton, West. The rates of this tax fall to be reviewed at any time—

What is so surprising about that? The rates of income tax fall to be varied at any time. The surprise of the hon. and learned Member for Dover and Deal (Mr. Rees) is extraordinary. The rates of capital transfer tax, as of any other tax, fall to be reviewed from time to time. That is almost a banality. If it transpired that they appeared too low, or that certain reliefs were inappropriate, we would review them.

The affection and nostalgia of the hon. Member for Cirencester and Tewkesbury for estate duty are so great because it is a tax that one does not have to pay. We hope that we have successfully blocked all the major loopholes on the transfer from one generation to another of settled property and trusts. That is what the tax does, and that is why I commend it to the House.

With my recognised and well-known talent for understatement I have to say that the Financial Secretary's speech was not a particularly good one. This is probably the last of our major debates on the effect of capital transfer tax. It has gone on for many hours, and the speeches made by Opposition Members have been of a high quality. I regret one or two interventions from Labour supporters who had not sat through the debate and heard many of the questions posed by my hon. Friends, none of which has been answered by the Financial Secretary.

Every speech from the Opposition side emphasised the threat to the continuing identity and even the existence of small firms and the possible bankruptcy of the proprietors. Unless the Government change the whole basis on which capital gains tax interacts with capital transfer tax, the rate of tax will be in excess of the total value of the business. It is the manner in which one tax is being heaped upon another—to use the words of the hon. Member for Llanelli (Mr. Davies)—that makes the proposals so outrageous.

In reply to a question asked by my hon. and learned Friend the Member for Dover and Deal (Mr. Rees) a few minutes ago, the Financial Secretary said that it was up to the Select Committee to consider the interaction of all these capital taxes. In that case, why does this measure have to be put on the statute book at this time? Under the Bill the tax takes effect from 26th March and there was never the slightest need to push the Bill through in the way in which the Government are doing. The matter could have been referred to the select Committee on Wealth Tax and dealt with in a thorough and proper manner.

The Financial Secretary even resorted in his summing-up to saying that the rates would fall to be reviewed at any time. In five weeks' time, we have another Budget and expect to see the rates of tax brought down to reasonable levels.

Since my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) told one anecdote in opening the debate, I shall do the same in closing it. I was reminded of the old tramp who had a cart which was drawn by a donkey. But on the route the tramp took the cart and the donkey through a tunnel. The donkey kept knocking its ears on the ceiling of the tunnel and eventually the donkey became very demoralised indeed. The tramp took a chisel and began to channel a little route on the top of the tunnel so that the donkey's ears could be accommodated. One of his friends came up to him and said, "Why do you cut those channels in the roof of the tunnel? Why don't you cut a channel in the ground so that he can walk along it?" The tramp said, "Don't be ridiculous. It is not his legs which are too long. It is his ears." I accept that my little anecdote is not particularly relevant to the Bill, but it is very much more relevant than was the Financial Secretary's reply.

I come to the central question which has run through the debate. It was posed by one speaker after another and was not put better than by the hon. Member for Coatbridge and Airdrie (Mr. Dempsey). He posed the question "How will the owners of these businesses pay the tax? Where is the money to come from?" We have had no answer to that question from a single member of the Government throughout the passage of the Bill.

My hon. Friend the Member for Basingstoke (Mr. Mitchell) gave an example of a firm where it would be necessary to take £50,000 a year out of the business for eight years to pay the tax liability on the lifetime receipt of a business worth £250,000. The Financial Secretary said, "The company would pay dividends and there would be no problem. The proprietors could build up a fund from which to pay the tax."

Let us take my hon. Friend's example. I have in my hand the Government's tax tables which were published with the Budget. To generate £10,000 from investment income, the individual would need to have dividends of £100,000 a year. The amount of money which would be necessary to generate a fund to pay capital transfer tax on a business of that size would involve dividends of up to £1 million a year on a company worth only £250,000. How can the Financial Secretary in answering this debate have made such a fatuous statement?

My hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) pointed out that the banks will not lend these sums. He said that if they foresaw eventual liquidation facing a business of that size they would not support the proprietor by lending him the money to pay the tax.

The Financial Secretary said that the proprietors must take steps to mitigate the tax. However, any money that they fail to put into the business will mean less investment in those firms and therefore fewer jobs. Is that what the Labour Government require? Do they require the proprietors of small businesses to withhold money, to put it in a fund to pay the tax, and thereby to ensure that there is less investment?

The Financial Secretary did not refer to the example given by the hon. Member for Coatbridge and Airdrie. It falls to me, from the Opposition, to answer the question asked by an hon. Friend of the Financial Secretary.

The hon. Member for Coatbridge and Airdrie asked what would be the effect on a £½ million business in Scotland, which he understood would have to generate £28,000 a year to pay the capital transfer tax. He did not include capital gains tax but referred only to the CTT. I think that the hon. Gentleman was interrupted by the Financial Secretary, who implied that the proposed rates on death were no different from those during the time the Conservative Government were in office. Since the Treasury Ministers seem to be ignorant of the comparative situation, I remind them that while the Conservative Government were in power the estate duty on a business worth £½ million, including the small business relief, could have amounted to £170,000. The capital transfer tax on death would amount to £264,000. Therefore, under the original arrangements the tax would have been about £100,000 less.

The hon. Member for St. Ives (Mr. Nott) will be the first to acknowledge that those figures depend on arbitrary assumptions as to the type of assets involved.

Certainly. The 45 per cent. rebate applied to particular classes of asset. However, if the Financial Secretary suggests that the class of assets involved would be unlikely to be sufficient to close the margin of £100,000, he is wrong. Throughout the passage of this measure, repeated statements were made by Treasury Ministers that the taxes on companies were less under their proposals. That is not necessarily true on death.

Our forebears in the House who devised our tax legislation, which had the approval of many Labour Chancellors in its time, produced what were known as death duties. They did not intend to impose a duty on lifetime transfers. The seven-year rule for gifts inter vivos did not exist on the statute book by default. It was there because it was intended to be there. It has enabled prospering firms to survive through the generations to the great benefit of the nation and of the firms' employees.

The Chief Secretary shakes his head. Does he suggest that small firms do not benefit their employees and the nation? If so, the right hon. Gentleman should say so.

The hon. Member for St. Ives (Mr. Nott) quotes an extreme example. I could quote 100 extreme examples where, under the system of estate duties, small companies would do much worse than under the capital transfer tax. Let the hon. Gentleman quote an average case, not an extreme case.

Let me take the type of company which has been referred to many times in these debates, which is the type of thriving British concern probably employing about 200 to 300 workers which might be endeavouring to go public. The right hon. Gentleman must have many in his constituency. Shall we see a company go public worth about £1 million if the capital transfer tax and the capital gains tax that it will have to pay will possibly be in excess of the total net worth of the firm? If the Chief Secretary suggests that a £1 million business will be able to generate enough capital transfer tax and capital gains tax to meet its liability, perhaps he will demonstrate this.

If the company is worth £1 million and floats, at that point there is no question of any capital transfer tax.

Surely there is a capital transfer tax on the disposition of the proprietor's interest.

When he is floating off, say, 40 per cent. of the shares, there is no question of liability to capital transfer tax. The 40 per cent. of the shares are transferred at the proper value. I wish that the hon. Gentleman would understand the tax.

I understand the tax perfectly well. The CTT may not be payable on the actual disposition in value. That is the case. But it does not alter the fact that a business of this size will meet a liability on lifetime transfers which is totally out of proportion to what the tax was in earlier times. In my view, it is a travesty to suggest that the new tax will lead to lower rates than those prevailing under the previous administration.

We cannot have anything but a feeling of amazement at the incompetence which has characterised the handling of this measure. Only at 6.30 this evening, the Government were still tabling manuscript amendments to their own Bill. How are we meant to consider this matter in a mature and sensible way if the Government are still tabling manuscript amendments on the evening that we are meant to be considering the clause?

It is clear that this measure was forced upon on ill-equipped Revenue Department with a timetable which the Department was not able to honour. The rates have been shown to be confiscatory as more and more people outside have begun to understand the full impact of the tax. Having found themselves facing a monumental degree of confusion, misunderstanding and criticism as a result of the measure, the Chancellor of the Exchequer has fallen back upon the tactic of abusing the critics among business of this tax as being tax avoiders. Even when we have quoted to the Chief Secretary from reputable newspapers, he has simply smiled and implied that The Guardian, the Financial Times and The Times are all politically motivated against the Labour Government—and that is hopelessly untrue.

I deal with one final matter. The Financial Secretary said that it was totally preposterous for us to make the accusation that the Treasury Bench sought to destroy the small business. That is what he said tonight. I remind him of what he said last night in answer to a speech made by the hon. Member for Luton, West (Mr. Sedgemore), because it shows the depth to which Treasury Ministers will descend to pacify their supporters.

The Financial Secretary said:
"It might well be to the greater health of the British economy if those businesses"
—small 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."—[Official Report, 5th March 1975; Vol. 887, c. 1599.]
The hon. Gentleman said clearly last night that he did not mind at all if a business passed out of the hands of a family in the second, third or fourth generation. But tonight he is saying that it is a preposterous accusation to make against Treasury Ministers that they are trying to destroy the small firms.

11.15 p.m.

That is a totally different proposition. The hon. Gentleman, who is usually so fair about these matters, must recognise that. I was saying last night that it was of great economic benefit to the country that small businesses grew big enough to move outside the family business concept, and that there was no reason to think that entrepreneurial talent was handed down from generation to generation. I said that it was in the interests of the employees of such firms that they were successful enough and big enough to be sold off to larger companies.

The Financial Secretary cannot wriggle out of it like that. Anyone reading his words would say that he said something quite different. Furthermore, when discussing the distinction between lifetime and death transfers last night the point was made that a lifetime transfer was more satisfactory and at a lower rate than a death transfer. The margin was referred to, and the Financial Secretary said that it would be widened subsequently as the Government would be introducing capital gains tax on death. Where does it end?

We all know that the undertaking to introduce a gifts tax was in the Labour Party's manifesto, but that assuredly gives the Government no mandate to introduce this tax at these rates. It is more than likely that within a generation it will change the whole structure of the small firm sector and the agricultural sector as well.

Division No. 133.]

AYES

[11.18 p.m.

Adley, RobertBerry, Hon AnthonyBudgen, Nick
Aitken, JonathanBiffen, JohnBulmer, Esmond
Alison, MichaelBiggs-Davison, JohnBurden, F. A.
Amery, Rt Hon JulianBlaker, PeterCarlisle, Mark
Atkins, Rt Hon H. (Spelthorne)Bradford, Rev RobertCarson, John
Awdry, DanielBraine, Sir BernardChalker, Mrs Lynda
Bain, Mrs MargaretBrittan, LeonChurchill, W. S.
Banks, RobertBrotherton, MichaelClark, Alan (Plymouth, Sutton)
Beith, A. J.Brown, Sir Edward (Bath)Clarke, Kenneth (Rushcliffe)
Bennett, Dr Reginald (Fareham)Bryan, Sir PaulCockcroft, John
Benyon, W.Buck, AntonyCooke, Robert (Bristol W)

The hon. Member for Cannock (Mr. Roberts) says "Hear, hear". I do not believe that there is one Labour supporter who understands that that is what the hon. Gentleman intends or supports. I must warn the Government that they have no mandate for this tax.

Does the hon. Gentleman accept that not only Labour supporters but the great mass of the British public realise that the era of despotism in business is over and that we should move to a much more efficient business system based on genuine managerial skill?

There are 6 million people who are employed by small firms, and I do not believe that many of them understand what the Treasury Bench is doing by means of this tax or would agree with it if they knew.

I conclude by saying that the State can go so far but it cannot require of any citizen that he works for a lifetime, and successfully so, only to find that his heirs wind up in the bankruptcy court in trying to meet the unjust claims of the Revenue and to see his employees redundant on the streets. That offends all laws of natural justice. It is in that spirit, and it is because the Government's measures offend against natural justice, that I must ask my right hon. and hon. Friends to divide against this measure by voting against the amendment.

Amendment ( d) proposed to the proposed amendment, at end add—

'Provided that only the second table shall apply for a transfer made in respect of shares in a close trading company or assets used in a trade, profession or vocation'.—[Mr. Nott.]

Question put, That the amendment to the proposed amendment be made:—

The House divided: Ayes 215. Noes 228.

Cope, JohnJessel, TobyRenton, Rt Hon Sir D. (Hunts)
Cormack, PatrickJohnson Smith, G. (E. Grinstead)Rhys Williams, Sir Brandon
Costain, A. P.Jones, Arthur (Daventry)Ridley, Hon Nicholas
Craig, Rt Hon W. (Belfast E)Kaberry, Sir DonaldRifkind, Malcolm
Crawford, DouglasKellett-Bowman, Mrs ElaineRippon, Rt Hon Geoffrey
Crouch, DavidKimball, MarcusRoberts, Wyn (Conway)
Crowder, F. P.Kirk, PeterRoss, Stephen (Isle of Wight)
Davies, Rt Hon J. (Knutsford)Lamont, NormanRossi, Hugh (Hornsey)
Dean, Paul (N Somerset)Latham, Michael (Melton)Rost, Peter (SE Derbyshire)
Dodsworth, GeoffreyLawrence, IvanSainsbury, Tim
du Cann, Rt Hon EdwardLawson, NigelSt. John-Stevas, Norman
Durant, TonyLester, Jim (Beeston)Scott-Hopkins, James
Dykes, HughLloyd, IanShaw, Giles (Pudsey)
Eden, Rt Hon Sir JohnLoveridge, JohnShaw, Michael (Scarborough)
Edwards, Nicholas (Pembroke)Luce, RichardShelton, William (Streatham)
Elliott, Sir WilliamMcCusker, H.Shepherd, Colin
Emery, PeterMacGregor, JohnSilvester, Fred
Evans, Gwynfor (Carmarthen)Macmillan, Rt Hon M. (Farnham)Sims, Roger
Eyre, ReginaldMcNair-Wilson, M. (Newbury)Skeet, T. H. H.
Farr, JohnMarshall, Michael (Arundel)Smith, Dudley (Warwick)
Fell, AnthonyMarten, NeilSpeed, Keith
Finsberg, GeoffreyMates, MichaelSpence, John
Fisher, Sir NigelMather, CarolSpicer, Jim (W Dorset)
Fletcher-Cooke, CharlesMaude, AngusSpicer, Michael (S Worcester)
Fowler, Norman (Sutton C'f'd)Maudling, Rt Hon ReginaldSproat, Iain
Fox, MarcusMaxwell-Hyslop, RobinStainton, Keith
Fraser, Rt Hon H. (Stafford & St)Meyer, Sir AnthonyStanbrook, Ivor
Freud, ClementMiller, Hal (Bromsgrove)Stanley, John
Fry, PeterMiscampbell, NormanSteel, David (Roxburgh)
Gardiner, George (Reigate)Mitchell, David (Basingstoke)Steen, Anthony (Wavertree)
Gardner, Edward (S Fylde)Molyneaux, JamesStewart, Donald (Western Isles)
Gilmour, Sir John (East Fife)Montgomery, FergusStewart, Ian (Hitchin)
Glyn, Dr AlanMoore, John (Croydon C)Stokes, John
Goodhart, PhilipMore, Jasper (Ludlow)Stradling Thomas, J.
Goodhew, VictorMorgan-Giles, Rear-AdmiralTaylor, R. (Croydon NW)
Goodlad, AlastairMorris, Michael (Northampton S)Tebbit, Norman
Gow, Ian (Eastbourne)Morrison, Charles (Devizes)Temple-Morris, Peter
Grant, Anthony (Harrow C)Morrison, Hon Peter (Chester)Thatcher, Rt Hon Margaret
Griffiths, EldonMudd, DavidThomas, Dafydd (Merioneth)
Grimond, Rt Hon J.Neave, AireyThompson, George
Hall, Sir JohnNelson, AnthonyThorpe, Rt Hon Jeremy (N Devon)
Hall-Davis, A. G. F.Neubert, MichaelTownsend, Cyril D.
Hamilton, Michael (Salisbury)Newton, TonyTrotter, Neville
Hampson, Dr KeithNormanton, TomTugendhat, Christopher
Harrison, Col Sir Harwood (Eye)Nott, Johnvan Straubenzee, W. R.
Hastings, StephenOnslow, CranleyVaughan, Dr. Gerard
Hawkins, PaulOsborn, JohnViggers, Peter
Heseltine, MichaelPage, John (Harrow West)Wakeham, John
Hicks, RobertPage, Rt Hon R. Graham (Crosby)Walker-Smith, Rt Hon Sir Derek
Higgins, Terence L.Paisley, Rev. IanWatt, Hamish
Holland, PhilipPardoe, JohnWeatherill, Bernard
Hooson, EmlynParkinson, CecilWells, John
Hordern, PeterPattie, GeoffreyWelsh, Andrew
Howe, Rt Hn Sir GeoffreyPenhaligon, DavidWiggin, Jerry
Howell, David (Guildford)Percival, IanWilson, Gordon (Dundee E)
Howell, Ralph (North Norfolk)Peyton, Rt Hon JohnWinterton, Nicholas
Howells, Geraint (Cardigan)Powell, Rt Hon J. EnochWood, Rt Hon Richard
Hunt, JohnPrior, Rt Hon JamesYoung, Sir G. (Ealing, Acton)
Hurd, DouglasRaison, Timothy
Irving, Charles (Cheltenham)Rees, Peter (Dover & Deal)TELLERS FOR THE AYES:
James, DavidRees-Davies, W. R.Mr. Adam Butler and
Jenkin, Rt Hon P. (Wanst'd & W'df'd)Reid, GeorgeMr. Russell Fairgrieve.

NOES

Abse, LeoBoyden, James (Bish Auck)Crosland, Rt Hon Anthony
Allaun, FrankBradley, TomCryer, Bob
Anderson, DonaldBrown, Robert C. (Newcastle W)Cunningham, G. (Islington S)
Archer, PeterBrown, Ronald (Hackney S)Dalyell, Tam
Armstrong, ErnestButler, Mrs Joyce (Wood Green)Davidson, Arthur
Ashton, JoeCallaghan, Jim (Middleton & P)Davies, Bryan (Enfield N)
Atkins, Ronald (Preston N)Carmichael, NeilDavies, Denzil (Llanelli)
Bagier, Gordon A. T.Carter, RayDavis, Clinton (Hackney C)
Barnett, Guy (Greenwich)Carter-Jones, LewisDeakins, Eric
Barnett, Rt Hon Joel (Heywood)Castle, Rt Hon BarbaraDean, Joseph (Leeds West)
Bates, AlfClemitson, Ivorde Freitas, Rt Hon Sir Geoffrey
Bean, R. E.Cocks, Michael (Bristol S)Dell, Rt Hon Edmund
Benn, Rt Hon Anthony WedgwoodCohen, StanleyDormand, J. D.
Bennett, Andrew (Stockport N)Coleman, DonaldDouglas-Mann, Bruce
Bidwell, SydneyColquhoun, Mrs MaureenDuffy, A. E. P.
Blenkinsop, ArthurCook, Robin F. (Edin C)Dunn, James A.
Boardman, H.Corbett, RobinDunnett, Jack
Booth, AlbertCox, Thomas (Tooting)Dunwoody, Mrs Gwyneth
Bottomley, Rt Hon ArthurCronin, JohnEdelman, Maurice

Edge, GeoffLee, JohnRodgers, William (Stockton)
Edwards, Robert (Wolv SE)Lever, Rt Hon HaroldRooker, J. W.
Ellis, John (Brigg & Scun)Lewis, Ron (Carlisle)Roper, John
Ellis, Tom (Wrexham)Lipton, MarcusRose, Paul B.
English, MichaelLoyden, EddieRyman, John
Ennals, DavidLuard, EvanSandelson, Neville
Evans, Ioan (Aberdare)Lyon, Alexander (York)Sedgemore, Brian
Evans, John (Newton)Lyons, Edward (Bradford W)Selby, Harry
Ewing, Harry (Stirling)McCartney, HughShaw, Arnold (Ilford South)
Fernyhough, Rt Hon E.McGuire, Michael (Ince)Sheldon, Robert (Ashton-u-Lyne)
Fitt, Gerard (Belfast W)Mackintosh, John P.Shore, Rt Hon Peter
Flannery, MartinMaclennan, RobertShort, Mrs Renée (Wolv NE)
Fletcher, Ted (Darlington)McNamara, KevinSilkin, Rt Hon John (Deptford)
Foot, Rt Hon MichaelMadden, MaxSilkin, Rt Hon S. C. (Dulwich)
Ford, BenMagee, BryanSilverman, Julius
Fowler, Gerald (The Wrekin)Mahon, SimonSkinner, Dennis
Fraser, John (Lambeth, N'w'd)Marquand, DavidSmith, John (N Lanarkshire)
Freeson, ReginaldMarshall, Dr Edmund (Goole)Snape, Peter
Garrett, John (Norwich S)Marshall, Jim (Leicester S)Spearing, Nigel
Garrett, W. E. (Wallsend)Meacher, MichaelSpriggs, Leslie
Gilbert, Dr JohnMellish, Rt Hon RobertStallard, A. W.
Ginsburg, DavidMikardo, IanStott, Roger
Golding, JohnMiller, Dr M. S. (E Kilbride)Strauss, Rt Hon G. R.
Gould, BryanMillar, Mrs Millie (Ilford N)Summersklll, Hon Dr Shirley
Graham, TedMitchell, R. C. (Soton, Itchen)Taylor, Mrs Ann (Bolton W)
Grant, John (Islington C)Molloy, WilliamThomas, Jeffrey (Abertillery)
Grocott, BruceMoonman, EricThomas, Mike (Newcastle E)
Hardy, PeterMorris, Alfred (Wythenshawe)Thomas, Ron (Bristol NW)
Harper, JosephMorris, Charles R. (Openshaw)Thorne, Stan (Preston South)
Harrison, Walter (Wakefield)Mulley, Rt Hon FrederickTierney, Sydney
Hatton, FrankMurray, Rt Hon Ronald KingTomlinson, John
Hayman, Mrs HeleneNewens, StanleyTorney, Tom
Healey, Rt Hon DenisNoble, MikeVarley, Rt Hon Eric G.
Heffer, Eric S.Oakes, GordonWainwright, Edwin (Dearne V)
Hooley, FrankOgden, EricWalker, Harold (Doncaster)
Horam, JohnO'Halloran, MichaelWalker, Terry (Kingswood)
Howell, Denis (B'ham, Sm H)O'Malley, Rt Hon BrianWard, Michael
Hoyle, Doug (Nelson)Orbach, MauriceWatkins, David
Huckfield, LesOvenden, JohnWatkinson, John
Hughes, Rt Hon C. (Anglesey)Owen, Dr DavidWeitzman, David
Hughes, Mark (Durham)Padley, WalterWellbeloved, James
Hughes, Robert (Aberdeen N)Palmer, ArthurWhitehead, Phillip
Hughes, Roy (Newport)Park, GeorgeWhitlock, William
Irving, Rt Hon S. (Dartlord)Parker, JohnWilley, Rt Hon Frederick
Jackson, Colin (Brighouse)Parry, RobertWilliams, Alan (Swansea W)
Jackson, Miss Margaret (Lincoln)Pavitt, LaurieWilliams, Alan Lee (Hornch'ch)
Janner, GrevillePeart, Rt Hon FredWilliams, Rt Hon Shirley (Hertford)
Jay, Rt Hon DouglasPendry, TomWilliams, W. T. (Warrington)
Jeger, Mrs LenaPerry, ErnestWilson, Rt Hon H. (Huyton)
Jenkins, Hugh (Putney)Prentice, Rt Hon RegWilson, William (Coventry SE)
Johnson, Walter (Derby S)Prescott, JohnWise, Mrs Audrey
Jones, Dan (Burnley)Price, C. (Lewisham W)Woodall, Alec
Kaufman, GeraldRadice, GilesWrigglesworth, Ian
Kerr, RussellRichardson, Miss JoYoung, David (Bolton E)
Kilroy-Silk, RobertRoberts, Albert (Normanton)
Lamborn, HarryRoberts, Gwilym (Cannock)TELLERS FOR THE NOES:
Lamond, JamesRoderick, CaerwynMiss Betty Boothroyd and
Latham, Arthur (Paddington)Rodgers, George (Chorley)Mr. David Stoddart.
Leadbitter, Ted

Question accordingly negatived.

Main Question put and agreed to.

Amendments made: No. 78, in page 27, line 7, leave out 'the Table' and insert 'each of the Tables'.

No. 79, in page 27, line 12, at beginning insert 'FIRST'.—[ Dr. Gilbert.]

Amendment proposed: No. 80, in page 27, leave out lines 13 to 30 and add—

'Slice of Chargeable transfers—£000

Rate on slice %

0–15
15–205
20–25
25–3010

'Slice of Chargeable transfers—£000

Rate on slice %

30–4012½
40–5015
50–6017½
60–8020
80–10022½
100–12027½
120–15035
150–20042½
200–25050
250–30055
300–50060
500–1,00065
1,000–2,00070
2,000+75'.

—[ Mr. Pardoe.]

Question put, That the amendment be made:—

Division No. 134.]

AYES

[11.34 p.m.

Adley, RobertGrimond, Rt Hon J.Paisley, Rev. Ian
Aitken, JonathanHall, Sir JohnPardoe, John
Alison, MichaelHall-Davis, A. G. F.Parkinson, Cecil
Amery, Rt Hon JulianHamilton, Michael (Salisbury)Pattie, Geoffrey
Atkins, Rt Hon H. (Spelthorne)Hampson, Dr KeithPenhaligon, David
Awdry, DanielHarrison, Col Sir Harwood (Eye)Percival, Ian
Bain, Mrs MargaretHastings, StephenPeyton, Rt Hon John
Banks, RobertHawkins, PaulPowell, Rt Hon J. Enoch
Bennett, Dr Reginald (Fareham)Heseltine, MichaelPrior, Rt Hon James
Benyon, W.Hicks, RobertRaison, Timothy
Berry, Hon AnthonyHiggins, Terence L.Rees, Peter (Dover & Deal)
Biffen, JohnHolland, PhilipReid, George
Biggs-Davison, JohnHooson, EmlynRenton, Rt Hon Sir D. (Hunts)
Blaker, PeterHordern, PeterRhys Williams, Sir Brandon
Bradford, Rev RobertHowe, Rt Hn Sir GeoffreyRidley, Hon Nicholas
Braine, Sir BernardHowell, David (Guildford)Rifkind, Malcolm
Brittan, LeonHowell, Ralph (North Norfolk)Rippon, Rt Hon Geoffrey
Brotherton, MichaelHowells, Geraint (Cardigan)Roberts, Wyn (Conway)
Brown, Sir Edward (Bath)Hunt, JohnRoss, Stephen (Isle of Wight)
Bryan, Sir PaulHurd, DouglasRossi, Hugh (Hornsey)
Buck, AntonyIrving, Charles (Cheltenham)Rost, Peter (SE Derbyshire)
Budgen, NickJames, DavidSainsbury, Tim
Bulmer, EsmondJenkin, Rt Hon P. (Wanst'd & W'df'd)St. John-Stevas, Norman
Burden, F. A.Jessel, TobyScott-Hopkins, James
Butler, Adam (Bosworth)Johnson Smith, G. (E. Grinstead)Shaw, Giles (Pudsey)
Carlisle, MarkJones, Arthur (Daventry)Shaw, Michael (Scarborough)
Carson, JohnKellett-Bowman, Mrs ElaineShelton, William (Streatham)
Chalker, Mrs LyndaKimball, MarcusShepherd, Colin
Churchill, W. S.Kirk, PeterSilvester, Fred
Clark, Alan (Plymouth, Sutton)Lamont, NormanSims, Roger
Clarke, Kenneth (Rushcliffe)Latham, Michael (Melton)Skeet, T. H. H.
Cockcroft, JohnLawrence, IvanSmith, Dudley (Warwick)
Cooke, Robert (Bristol W)Lawson, NigelSpeed, Keith
Cope, JohnLe Marchant, SpencerSpicer, Jim (W Dorset)
Cormack, PatrickLester, Jim (Beeston)Spicer, Michael (S Worcester)
Costain, A. P.Lloyd, IanSproat, Ia'n
Craig, Rt Hon W. (Belfast E)Loveridge, JohnStainton, Keith
Crawford, DouglasLuce, RichardStanbrook, Ivor
Crouch, DavidMcCusker, H.Stanley, John
Crowder, F. P.MacGregor, JohnSteen, Anthony (Wavertree)
Davies, Rt Hon J. (Knutsford)Macmillan, Rt Hon M. (Farnham)Stewart, Donald (Western Isles)
Dean, Paul (N Somerset)McNair-Wilson, M. (Newbury)Stewart, Ian (Hitchin)
Dodsworth, GeoffreyMarshall, Michael (Arundel)Stokes, John
du Cann, Rt Hon EdwardMarten, NeilStradling Thomas, J.
Durant, TonyMates, Michael