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Commons Chamber

Volume 660: debated on Monday 21 May 1962

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House Of Commons

Monday, 21st May, 1962

The House met at half-past Two o'clock

Prayers

[Mr. SPEAKER in the Chair]

Private Business

Assay Offices Bill Lords

University Of Sussex Bill Lords

Read the Third time and passed, with Amendments.

Grimsby Corporation Bill Lords (By Order)

Read a Second time and committed.

Manchester Corporation Bill Lords (By Order)

Second Reading deferred till Tuesday, 29th May.

Oral Answers To Questions

Employment

School Leavers

1.

asked the Minister of Labour how many children who left school at Christmas, in the employment exchange areas covered by the Durham constituency, are unemployed.

Ten on 14th May.

Is the hon. Gentleman aware that even though those figures may seem small they are still pretty important and are the largest we have had for some time? Does the hon. Gentleman not think it is shocking that young people should still be without a job five months after leaving school? What consultation has the hon. Gentleman had with the President of the Board of Trade to try to ensure that these young people obtain suitable employment?

We have every sympathy with the need to get these young people as soon as possible into good work, and particularly into work with training attached to it. The hon. Member knows that a good deal of work is being done by my right hon. Friend the President of the Board of Trade to meet the needs of the area.

2.

asked the Minister of Labour, in view of the fact that the problem of finding employment in the north-east of England for a large number of children who left school at Christmas has been further intensified by children seeking jobs in the area after leaving school at Easter, what new action he proposes to take in order to deal with the problem.

By mid-April, all but 262 of nearly 13,700 Christmas school leavers in the Northern Region had entered employment. I am hopeful that the Easter school leavers will get jobs without undue difficulty. The Youth Employment Service is doing all it can to help the young people find employment.

Has the hon. Gentleman taken any surveys recently among the industrial firms in the North-East to find out their intentions in the matter of increasing their intake of apprentices and learners? Is he aware that our information is that a number of private industrial concerns who can if they so desire alleviate the serious position among juveniles in the North-East are showing great reluctance to do anything about it? Will the hon Gentleman look into the matter?

There is a later Question on the Order Paper which deals more specifically with this subject. Last year 42 per cent. of the boys obtained apprenticeships in the area, compared with 38 per cent. for the country as a whole. This suggests that a considerable drive is being made locally.

Is the hon. Gentleman aware that his reply is most disappointing, as the electors of Middlesbrough, West, will shortly show? Is he aware that the reply is not a true reflection of the numbers who cannot obtain work since many are staying at school because there are no prospects of employment?

With great respect to the right hon. Gentleman, whose experience I very much appreciate and understand, staying on an extra year at school is surely to be encouraged rather than to be put down solely to the fact that young people cannot obtain work. This extension of the use of educational facilities should be welcomed.

Is my hon. Friend aware that in Darlington private employers and British Railways foresaw this situation several years ago and took appropriate action by expanding training and apprenticeship facilities?

4.

asked the Minister of Labour what is the reason for the 2·8 per cent. drop in the number of boys leaving school last Christmas who entered apprenticeships, compared with last summer; what additional steps he will take to stimulate the provision of apprenticeships for the record number of school leavers this summer; and whether he will make a statement.

Many firms have their annual intake of apprentices at the end of the summer term and it is therefore normal for fewer school leavers to enter apprenticeships at Christmas and Easter. Despite this, the number and percentage of boys getting apprenticeships in the first quarter of 1962 was higher than in the corresponding quarter of 1961; and in the first four months of 1962 a higher number and proportion of boys got apprenticeships than in the first six months of last year. This is very satisfactory and indeed it is a record; but nevertheless the Government will continue to impress on industry the vital need to continue to increase the number of apprenticeship opportunities.

While I am sure that everyone will welcome the progress shown by the figures, might I put two points to the Minister? In regard to the comparison between Christmas school leavers and summer school leavers, is it not a fact that proportionately more 15-years-old pupils leave school at Christmas, and, therefore, the drop of 2·8 per cent. is a more serious decline than one might otherwise think? Secondly, in regard to the number leaving school this summer, does the Minister think that his present plans are adequate, bearing in mind the counter-effects of the Government's economic policy, which may discourage firms from taking on extra skilled labour?

As I indicated in the first part of my answer to the Question, it is not fair to compare Christmas school leavers with summer and Easter school leavers. On the second point, there is no room for complacency. I hope I made that clear in my answer. I think that it is satisfactory that we got an 11 per cent. increase in 1961 compared with 1960. Later figures indicate that we shall do a great deal better in 1962 than we did in 1961.

13.

asked the Minister of Labour what proportion of school leavers in Great Britain, registered as unemployed, were registered in Scotland at the latest convenient date.

On 9th April, out of 859 unemployed Christmas school leavers 134 or 15·6 per cent. were in Scotland.

Does not the right hon. Gentleman think that this is far too high a proportion of young people who are unable to find work, and will he ask his right hon. Friend to take whatever steps are necessary to get new industry into Scotland so that young people there can find the right kind of job? What we are not told is what kind of jobs these young people are finding.

I think that the hon. Gentleman and the House must keep a sense of proportion on this matter. The 859 young people who are unemployed were the balance of 178,891 school leavers in Great Britain. The 134 which applies to Scotland were left out of the total there of 22,524. I am glad to say that young people are coming into employment reasonably well. None of us wants to see any young person without a job.

Is the right hon. Gentleman aware that the number of apprenticeships in Scotland has been decreasing and that the jobs that they are taking up are more or less dead-end jobs? Will he look at the kind of employment that is being offered to them?

The hon. Gentleman is not really aware of the facts. I am glad to say that the number of apprenticeships in Scotland has been increasing.

24.

asked the Minister of Labour how many boys and girls left school in Dundee on the last leaving date; and how many are still unemployed.

Pneumoconiosis, Stoke-On-Trent

3.

asked the Minister of Labour if he is aware of the growing concern within the city of Stoke-on-Trent about the number of people who die from pneumoconiosis and from other causes aggravated by pneumoconiosis, and that 80 people have died of the disease this year; what action he has taken since the joint conference held in the Town Hall at which his Department was represented; and what further action he intends to take.

There has been an encouraging decline in the numbers of new cases, but I share the continuing concern at the incidence of pneumoconiosis amongst pottery workers. An expanded programme of research into means of reducing the dust hazard is being undertaken by the British Ceramic Research Association, grant-aided by the Department of Scientific and Industrial Research. The Joint Standing Committee for the Pottery Industry under the Chairmanship of H.M. Superintending Inspector of Factories, which includes representatives of both sides of the industry and of the Research Association, considers results of research as they emerge and has already recommended to all firms in the industry a number of specific measures for controlling dust. Continuing attention to high standards of workshop practice remains of fundamental importance in combating the dust hazard.

While I appreciate that sympathetic reply, might I ask whether the Minister is aware that in this area we suffer relatively more than any other area because there we have affected by this disease not only miners but pottery and foundry workers? Is he aware that in view of the cumulative effect of these three industries, as a result of which a serious situation exists in the area, great concern is being expressed? Will the hon. Gentleman now carry his sympathy a step further by asking his officials to organise a similar conference so that all Government Departments can pool their ideas and experiences in an effort to minimise the seriousness of this matter?

I appreciate the hon. Gentleman's concern. I will certainly consider his suggestion. I would at the same time draw his attention to the fact a great deal of research is being carried out into this problem.

Steel, Shipbuilding And Metal Industries

5.

asked the Minister of Labour if his attention has been drawn to the continuing increase in the unemployment rate in the steel, shipbuilding, ship-repairing and metal manufacturing industries in the North-East Region of England; and what new proposals Her Majesty's Government have to assist these industries and so reduce the level of unemployment.

Of course, I am aware that unemployment in these industries continues at a relatively high level in the North-East. I hope that the discussions which I am having with the shipbuilding employers and trade unions may help the industry to improve its competitive ability. The recovery of the iron and steel industry will depend upon the state of the economy and on world trade. The industry is well equipped to take advantage of any improvement in demand.

Is the right hon. Gentleman aware that every time the Government implement policies which retard industrial expansion and production the industries which I have mentioned in my Question are the first in the North-East to suffer? Can he tell when he will introduce a policy which will bring about a permanent upsurge in the production of these industries and guarantee security of employment for their workers?

The hon. Gentleman must be fair and recognise that in the last ten years 63,000 new jobs have been created in the North-East Region. That is progress for which industrial development certificates are responsible. Also, as the hon. Gentleman knows, we are not sitting back content with what we have done. There are at the moment about 22,000 jobs in prospect in the region.

Is the right hon. Gentleman aware that we are not so much concerned about the jobs in the pipeline, which we regard as a pipe dream, but we are conscious of the fact that nothing tangible is coming to the North-East to absorb the unemployment which is occurring there? When can we have something done to absorb the unemployment created by redundancy in the mines und other occupations?

The hon. Gentleman must be careful about terms that he uses. On occasions the 63,000 jobs which have been created in the area were termed by hon. Members opposite as "jobs in the pipeline" and "mere pipe dreams". There is no reason why the 22,000 jobs in prospect should not become physical facts of life like the other 63,000.

Unofficial Strikes

6.

asked the Minister of Labour how many work days were lost in 1961 from unofficial strikes, and how many from official strikes.

There are difficulies in defining and classifying strikes as official and unofficial. About 3 million days were lost in 1961 through all the strikes reported to my Department. Of these, about 860,000 days were lost through strikes which were definitely stated to be official.

Does my right hon. Friend consider that the unofficial strikes are due more to Communist strength or to trade union weakness?

I think that both sides of industry condemn unofficial strikes. They have increasingly done so and shown so by action. I am sorry that I cannot answer my hon. Friend's question more specifically. Some strikes start as unofficial and end as official. Some are "official" only when they are over. Some are official at district level and are repudiated at headquarters. It is difficult to give the break-down.

Can the right hon. Gentleman say from his analysis of un-official strikes, which we all deplore, how many can be directly attributed to bad managements whose knowledge of channels of communication which the workers seems so limited?

I do not think that any of us in this House want to make political issues out of this matter. I think that in some oases the management has been shown to be responsible. In other cases irresponsible conduct on the part of certain trade union members has been the cause. What we want to obtain is a real acknowledgement of this fact by both sides of industry and an effort to eliminate it.

Redundant Workers (Severance Payments)

7.

asked the Minister of Labour what steps he is taking to promote arrangements for severance payments to workers who become redundant.

I have missed no opportunity of emphasising the importance of proper arrangements in industry for dealing with the problem of redundancy. With the co-operation of my National Joint Advisory Council I have recently published the booklet Security and Change which gives an account of redundancy policies, including arrangements for severance payments. This has received wide publicity. My officers are always available to advise managements on redundancy problems and are constantly doing so.

Do not the requirements of the time demand something more positive than the publishing of booklets? Will the right hon. Gentleman give the House a statement of his attitude towards the Redundant Workers (Severance Pay) Bill introduced by my hon. Friend the Member for Gloucester (Mr. Diamond)? Also, has the right hon. Gentleman read page 26 of the Labour Party's publication Signposts for the Sixties, which gives the ideas of the Opposition on this matter? Is it not time the Government came forward with positive ideas in this respect?

I do not think we ought to under-estimate what has already been achieved by methods of which the hon. Gentleman apparently does not think much. Between 3 million and 3½ million workers are covered by redundancy policies. We are making considerable progress by means of voluntary agreements. We must certainly press on with these. On the broader subject of legislation, I am prepared to keep my mind open.

Is my right hon. Friend aware that many of us on this side of the House appreciate that some of the best schemes for redundancy payments are in the private sector of industry and that they are growing, and that we hope that the worst offenders in private industry which have not got such schemes will come up to the level of the best? Is my right hon. Friend aware that any encouragement in this direction which can be given by his Department will certainly be appreciated on this side of the House?

I thank my hon. Friend for what he has said. I will certainly give all the encouragement I can. It would be a pity to take too low a view of what has been achieved. We must keep our minds open on this.

Disabled Persons, St Helens

8.

asked the Minister of Labour how many unemployed workers, who are at present signing the register in St. Helens, are registered disabled persons and what are their prospects of finding jobs.

On 16th April, 333 registered disabled persons were unemployed. There is a substantial number of new jobs in prospect in the area and this should improve the outlook for employment of disabled people.

Is this not a very high figure for one Ministry of Labour employment exchange area? Is the hon. Gentleman aware that most of the people concerned, through sickness or injury, have no hope whatever of ever being given employment again unless the Minister and the Parliamentary Secretary and other Ministers are prepared to consider ways and means of overcoming this long-standing unemployment which arises from various causes? Might I suggest that consideration should be given to the commutation of pensions schemes, such as the Civil Service pensions scheme, whereby a man could be assisted to step out on his own, to help himself, where he could not get other employment? Another point is, should there not be extension of the Remploy scheme? I should like to know whether the Government have considered the extension of such schemes.

The first parts of the hon. Gentleman's supplementary question are not really for me to answer, particularly with regard to pension commutations. The Remploy factory provisions have been extended over the past 12 months and a few more new places have been found in the hon. Gentleman's constituency in the last six months. This matter will, of course, continue to be sympathetically considered.

Steel Industry, Lanarkshire

9.

asked the Minister of Labour if he will state the percentage changes in the numbers employed in the steel-making industry in Lanarkshire between mid-1948 and the latest available date.

I estimate that between mid-1948 and mid-1961 there was a reduction of the order of 4 per cent. in the number of insured employees in the industry in Lanarkshire, excluding the City of Glasgow.

Is the Minister aware that this is one of the industries upon which the greatest hope has been placed for industrial expansion in Scotland? Does he not feel that, at a time when we are all concerned with the very slow rate of industrial growth in Scotland, this key industry shows very slight sign of expansion?

I understand that the main reason for this delay at the moment is destocking, following an actual increase in the capacity of the industry. If the hon. Gentleman would like a survey of the future prospects, perhaps he would address himself to my right hon. Friend the Minister of Power.

Can the Minister tell me why he excludes the City of Glasgow? Is it because he wants to boost his figures that he ignores the fact that during the period to which he referred there was a very large pay-off of people engaged in this industry in Scotland?

I was trying to reply, with as much accuracy as I could within the terms of reference, to the question put down on the Order Paper.

Young Persons

10.

asked the Minister of Labour what proportion of the total for Great Britain of young men of 20 years and under, unemployed for more than six months, was in Scotland and the Midlands, respectively, at the latest available date.

In December, 1961, 34.8 per cent. of those under 20 years of age were in Scotland and 4·2 per cent. in the Midlands. However, since then there has been an improvement in Scotland but not in the Midlands.

Does the Minister not feel that it is a humiliating position for Scotland that so many of the young men under 20 should be out of work for such a long period? Does this not indicate that the policies followed by himself and his right hon. Friends are quite inadequate to deal with the industrial problem in Scotland?

I know that the hon. Gentleman takes a great interest in this matter. The number of young men under 20 unemployed in Scotland for more than six months has, in fact, dropped by 26 per cent. since a year ago.

12.

asked the Minister of Labour what was the ratio of wholly unemployed boys of 18 years and under to the number of notified unfilled vacancies for boys in Lanarkshire and Warwickshire, respectively, at the latest convenient date.

At mid-April this year, for every 100 unemployed boys, there were 31 vacancies in Lanarkshire (excluding Glasgow) and 362 in Warwickshire.

Does the Minister realise that these figures show the very dire plight of these young people in Scotland? Is he also aware that most Scottish people have come to the opinion that the Act, which was supposed to bring so many jobs to our country, is not bringing them, and what do the Government propose to do to make people in Scotland really believe that the Government do not think that they are merely expendable?

The hon. Lady has put three Questions to me. So far this year school leavers in Scotland have been entering employment without undue difficulty and at much the same rate as in Great Britain as a whole. The increase in the number of school leavers in Lanarkshire this year is expected to be less than that for Scotland as a whole. The northern part of the county, where the bulk of the population is concentrated, is scheduled as a development district and 7,700 jobs are expected to accrue because of it.

Is it not the case that a large number of the young men who have been unemployed for over six months in Scotland are not genuinely seeking employment elsewhere, and can my hon. Friend say to what extent they are being kept in Scotland by the very satisfactory rates of unemployment benefit?

I think that my hon. Friend must have misheard the first part of my reply—that so far this year school leavers in Scotland have been entering employment without undue difficulty and at much the same rate as for Great Britain as a whole.

Would the hon. Gentleman on his next visit to Scotland take the noble Lord with him in order that he may learn the facts of life and the misery and tragedy which is being caused to many of the young people there?

Employment

14.

asked the Minister of Labour if he will state in numbers and percentages the increase or decrease in the total numbers of male civil employees in Great Britain and Scotland, respectively, between mid-1957 and the latest available date.

Between mid-1957 and mid-1961, the number of male insured employees in Great Britain rose by 310,000 or 2·2 per cent.; in Scotland it fell by 26,000 or 1·8 per cent.

Do not these figures demonstrate that even the present very unsatisfactory unemployment figures in Scotland are being maintained only at that level because of the continuing migration from Scotland? Is this not another indication, as with the right hon. Gentleman's replies to other Questions, of the need for a much more vigorous and tougher distribution of industry policy?

I do not know whether the hon. Gentleman realises that since the Local Employment Act came into force on 1st April, 1960, over 30,000 new jobs have been provided in Scotland, or whether he is also aware of the fact that over one-half of the assistance afforded in Great Britain in the first two years of the operation of the Act has been to Scotland.

Unemployment

18.

asked the Minister of Labour how many persons per thousand of the insured population are currently unemployed in the United Kingdom and in the European Economic Community, respectively.

On 9th April, 1962, for every thousand employees in the United Kingdom, 21 were registered as unemployed. I am afraid that exact comparisons cannot be made between the United Kingdom and the European Economic Community, owing to variations in the form and content of national statistics. I will write to my hon. Friend and let him have such information as is available.

Would not my right hon. Friend agree that the Common Market countries have effectively solved their unemployment problem, and is he satisfied that if we were to join the Common Market there will not be floods of people coming here seeking jobs?

I think that what my hon. Friend has said is true. There is little doubt that unemployment in France, West Germany, the Netherlands and Luxembourg is low. In Belgium the rate is rather higher, and in Italy substantially so, although it is falling. In Italy, however, there is for the first time a real shortage of skilled labour.

Instead of writing to the hon. Member for Cirencester and Tewkesbury (Mr. Ridley), will the right hon. Gentleman publish the figures in HANSARD?

Because of the different ways in which these statistics are compiled, it is difficult to obtain proper comparisons. I will not make a promise now, but I will discuss the matter with the hon. Member for Southwark (Mr. Gunter) and also write to my hon. Friend.

Would not the right hon. Gentleman agree that, whether we join the Common Market or not, there is great need for an expansionist industrial policy in this country?

I thoroughly agree with the hon. Gentleman, and I hope that everyone else does, too.

Wages

19.

asked the Minister of Labour whether he will list those industries where wage increases granted so far during this year have been over two and a half per cent.

As the answer consists of a tabular statement, I will, with permission, circulate the information in the OFFICIAL REPORT.

In view of the fact that any increase over 2½ per cent. harms the economy as a whole, does not such a list constitute a black list of those putting their sectional interests in front of the national interest?

It is true that, in many cases, settlements have been reached far in excess of what the Government would have considered reasonable within the terms of their incomes policy. It is my view, however, that the policy has had a tremendous effect, taken over all, in seeing that settlements have not been as high as they would otherwise have been.

Would it not be more accurate for the right hon. Gentleman to say that, as the list is so long, he does not wish to reveal it at this moment? Will he not admit, in view of what that list will contain, that the "guiding light" is rather dim? Can he also tell us at what stage the 1922 Committee will discuss this situation in the light of his answer?

The hon. Gentleman will not deny that the incomes policy has had a very considerable success. One of the obvious reasons why it may be shown to be a success is that we are now more competitive than we have ever been in our history. That would not have been so unless costs had been kept down to a reasonable level.

As there has been a certain amount of inconsistency in these increases, does not my right hon. Friend think it necessary for the Government to take more powers to ensure more fairness between one award and another?

That is a very different question, although I would be only too delighted to answer it.

The following is the statement:

Industries in which so far this year settlements have resulted or will result in the minimum rates for manual workers being increased by more than 2½ per cent.

(Similar information in respect of salaried workers is not available.)

  • Forestry.
  • Coal mining.
  • Roadstone quarrying.
  • China clay industry.
  • Ball clay industry.
  • Flour Milling (electricians and mechanics).
  • Baking (multiple bakers in England and Wales; Wages Council for Scotland).
  • Cocoa, Chocolate and sugar confectionery manufacture.
  • Food manufacture.
  • Milk products manufacture (Scotland).
  • Brewing (Scotland and Birmingham).
  • Tobacco manufacture.
  • Coke ovens and by-products works associated with coalmining.
  • Heavy chemicals manufacture.
  • Chemical fertiliser manufacture.
  • Drug and fine chemicals manufacture.
  • Paint, varnish and lacquer manufacture.
  • Plastics manufacture (chemical side).
  • Fat melting and bone degreasing.
  • Boot and floor polish manufacture
  • Electrical cable making.
  • Vehicle building.
  • Railway workshops (British Railways and London Transport Executive).
  • Perambulator and invalid carriage manufacture.
  • Tin box manufacture.
  • Rayon yarn production.
  • Woollen industry (Scotland)
  • Jute manufacture.
  • Narrow fabrics industry.
  • Linen and cotton handkerchiefs and household goods and linen piece goods manufacture.
  • Leather producing industry.
  • Leather belting and strap butt currying.
  • Mechanical and "hydraulic" leathers manufacture.
  • Buffalo picker "manufacture".
  • Leather goods, saddlery and harness manufacture.
  • Retail saddlery and leather goods trade.
  • Rubberproofed garment making.
  • Shirts, collar, tie, etc., making.
  • Corset manufacture.
  • Umbrella manufacture (Glasgow).
  • Silica brick manufacture (England and Wales)
  • Fletton brick manufacture.
  • Pottery manufacture.
  • Ready-mixed concrete industry.
  • Pre-cast concrete products industry (Scotland).
  • Asbestos cement manufacture.
  • Sawmilling (Skilled workers in England and Wales).
  • Fencing manufacture and erection.
  • Coopering.
  • Wood box, packing case and wooden container manufacture.
  • Paper making, building board, etc.
  • Paper box making.
  • Paper bag making.
  • National newspaper printing (London and Manchester electricians and mechanics only).
  • Rubber manufacture.
  • Brush and broom making.
  • Hair, bass and fibre processing.
  • Drawing office materials manufacture.
  • Organ building.
  • Match manufacture.
  • Exhibition stand, construction and erection, etc.
  • Electrical contracting (England and Wales).
  • Gas supply.
  • Water supply.
  • Cold storage.
  • Railways (British Railways and London Transport Executive).
  • Road passenger transport (London Transport Executive and Company-owned undertakings).
  • Inland waterways.
  • Dock labour.
  • Wholesale grocery and provision trade (England and Wales).
  • Milk distribution (Scotland).
  • Coal and coke distribution.
  • Cotton waste reclamation.
  • Unlicensed places of refreshment.
  • British Transport (Howls and Catering Services).
  • Government Industrial Establishments ("M" rated workers).
  • Local authority services (England and Wales—manual workers and workers in school meals service and civic restaurants).

Wigan

22.

asked the Minister of Labour what percentage of the insured population of Wigan was registered as wholly unemployed at the latest convenient date.

Is the hon. Gentleman aware that, whilst the comparative figure may seem small, there has been an in. crease in the number of those wholly unemployed in Wigan and district at a time of the year when that number usually falls? Will he watch this situation very carefully?

I accept the fact that there has been this increase, and we are keeping a close eye on it. If the hon. Gentleman would like to keep in close touch with me, I should be glad if he would do so.

Gas Workers, Dundee

23.

asked the Minister of Labour whether his attention has been drawn to impending redundancy among Dundee gas workers; and what steps he is taking to provide alternative employment.

Yes, Sir. Our local officers have arranged to register the men affected in advance of their discharge and they will do everything possible to find alternative work for those seeking it. Generally the prospects for these men are good.

Is the hon. Gentleman aware that this redundancy was foreshadowed two or three years ago? Technical change showed that it would come about. Is it not disappointing that a Government board should not have taken more adequate steps to run the establishment down without redundancy? How early was his Department informed of this, and what steps did it take to prevent unemployment?

I cannot answer the hon. Gentleman's last point without notice, but I will endeavour to find out and let him know.

Would not the hon. Gentleman agree that it is not altogether the fault of the board but also of the Government for not producing alternative employment for these men earlier in Dundee when it was known for a long time that this situation would arise?

The right hon. Gentleman should bear in mind that that is part of the reason why the Government have scheduled this area as a development district. Over 11,000 workers there are now employed in jobs created since the war. Of these, about 7,000 are employed in Government-built factories.

Employment Exchange Offices

26.

asked the Minister of Labour what consultations are held, and with whom, before decisions are made about the siting of employment exchanges; and to what extent such decisions are based on a population basis within a given area.

Under the Employment and Training Act, 1948, my right hon Friend has to decide what is a fit place for an employment exchange and, in doing so, an account of local opinion is naturally taken. There are not necessarily any formal consultations. The population of the area in question is among the matters to which attention is given.

Does not the hon. Gentleman agree that it would be to the advantage of many people who have to sign on the unemployment register if sub-offices could be opened? He has had correspondence with me about one specific case where people signing on had to take two different buses to the main office. It would be an advantage if more sub-offices were opened.

Wherever it is convenient to do so, either an out-office is established or some other arrangement is made. I will see whether something convenient can be done if the hon. Gentleman will write to me about the details of any particular case.

Sedgefield

27.

asked the Minister of Labour how many children in the Sedgefield Parliamentary constituency who left school at Christmas are still unemployed; and what are their immediate prospects of employment.

Five on 14th May. The Youth Employment Service is making every effort to help them obtain suitable employment.

If there are only five, they must be in the street where I live. The Sedgefield constituency ranges over 240 square miles. Is he telling me that there are no children unemployed in Darlington Rural District, Stockton Rural District or even Sedgefield, apart from these five?

I said no such thing. The hon. Gentleman's question referred exclusively to those who left school at Christmas. He asked how many are still unemployed. The answer I have given is five on 14th May.

Newmilns, Ayrshire

29.

asked the Minister of Labour if he will state the number of unemployed registered at the Newmilns, Ayrshire, Employment Exchange at the latest available date, for the preceding six separate months, and for April, 1960 and 1961, respectively; and how many of these are women in each case.

As the reply consists of a table of figures, I will, with permission, circulate it in the OFFICIAL REPORT.

Following are the figures:

align="center">Nos. REGISTERED UNEMPLOYED
(The number of women included is shown in brackets)
14th May, 1962155 (93)
9th April, 1962186 (96)
12th March, 1962191 (94)
12th Feb., 1962181 (87)
15th Jan., 1962160 (66)
11th Dec., 1961162 (71)
13th Nov., 1961136 (67)
10th April, 1961225 (120)
11th April, 1960141 (54)

Science

Road Research Laboratory, Crowthorne

31.

asked the Parliamentary Secretary for Science what plans he has for the expansion of the Road Research Laboratory at Crowthorne, and for the co-ordination of its work with that of the Organisation for Economic Co-operation and Development.

The main object of moving the Road Research Laboratory to Crowthorne is to concentrate in one place units now scattered over six sites. Expansion of staff numbers will be continued as the resources of the D.S.I.R. permit. Discussions are now taking place through the O.E.C.D. on possible forms of international cooperation in road research.

Is my hon. Friend aware that the Road Research Laboratory at Crowthorne is the most advanced institute for the study of road safety in Europe? Will he do all he can to reach an agreement with O.E.C.D. in order to ensure that co-operation between these two bodies is expedited?

I am grateful to my hon. Friend for his tribute to the very good work done by the Laboratory, and I can assure him that we are all very keen on getting international co-operation on road construction and road safety.

Water Conservation

32.

asked the Parliamentary Secretary for Science if he will increase the funds available for research into water conservation.

The funds available for research into water conservation and utilisation have increased in recent years and under current plans will continue to increase.

Are the funds available to water authorities and river boards increasing? Is the hon. Gentleman aware that before the new central authority envisaged in the White Paper can operate a great deal more research will be needed into the very complicated problems of water conservation?

I agree that more research must be done into water conservation and utilisation, and we now have a hydrological research unit, recently set up at the Hydraulics Research Station. The bodies mentioned by the hon. Gentleman are not the responsibility of my noble Friend.

Space Research

33.

asked the Parliamentary Secretary for Science if he will state the total expenditure to date, and the estimated expenditure in the next 12 months on space research.

As regards the first part of the Question, I would refer the hon. Member to the answer which I gave the hon. Member for Eastleigh (Mr. David Price) on 19th February. On the same basis, expenditure in 1962–63 on scientific space research for which my noble Friend is responsible is expected to be about £1·1 million.

Does the hon. Gentleman agree that this expenditure is mainly, if not exclusively, for war purposes?

Would it not be better if instead of reaching for the moon we concentrated on making it easier for the harassed Londoner to get from Hyde Park to Piccadilly Circus?

Radioactivity

34.

asked the Parliamentary Secretary for Science if he will give the weekly figures supplied by the Atomic Energy Authority for the concentration of radioactivity per kilogram of air in Great Britain for each of the last three weeks and the average for May, 1961.

I am advised that the comparison of figures relating to fallout at particular dates can be misleading because it is the long term trend which is significant. However, representative figures for total beta activity in air near ground level for the last three weeks have been—

For the week ending May 5th—2·5 pico curies per kilogram of air.

For the week ending May 12th—2·0 pico curies per kilogram of air.

For the week ending May 19th—1·8 pico curies per kilogram of air.

The corresponding average figure for May, 1961, was 0·07 pico curies per kilogram of air.

The current levels of fallout in air are running at under half the levels experienced in the corresponding period in 1959 following the American. British and Russian tests in the previous year.

Do not those figures show that the level is roughly 30 times what it was last May? Is it or is it not now the Government's considered view that even small doses of radiation are dangerous?

The figure now is well under half the level for May, 1959, and substantially lower than that for May, 1957, and that for May, 1958, so taking one particular year alters one's mathematics considerably. I can only repeat that I am advised that it is considered most unlikely that the fall-out to be expected this spring will rise to levels requiring special measures to be taken.

Would my hon. Friend be good enough to give me five minutes of his time some time to explain what his original Answer meant?

May I repeat the question which the Minister did not answer? Is is or is it not now the Government's view that even a small dose of radiation is dangerous?

All radiation has an effect upon human beings, but what we are now considering is the matter of the cumulative effect of natural radiation and man-made radiation. The radiation caused by nuclear tests has so far been relatively small, taken overall, in relation to natural radiation.

Social Science Research Council

35.

asked the Parliamentary Secretary for Science if he will make a statement about the proposed Social Science Research Council.

I have nothing to add to the answer I gave to the hon. Member for Lanark (Mrs. Hart) on 27th February.

I think that the Parliamentary Secretary said some time ago that discussions about this matter were going on. Can he give us any idea about when they are likely to come to fruition?

Fishing Vessel "Red Crusader" (Incident)

37 and 38.

asked the Lord Privy Seal (1) if consideration has yet been completed of the Report of the Commission of Inquiry into the incident between the Danish Gunboat "Niels Ebbesen" and the Aberdeen fishing vessel "Red Crusader"; and what steps he intends to take to prevent the occurrence of such incidents and to promote and maintain harmonious relations between the Danish Government and British fishing vessels;

(2) in view of the finding by the Commission of Inquiry into the incident which occurred between 29th and 31st of May, 1961, in the North Sea between the Danish gunboat Niels Ebbesen "and the Aberdeen trawler" Red Crusader "that that gunboat exceeded the legitimate use of armed force on two counts by firing without warning of solid gun-shot and by creating danger to human life on board the "Red Crusader" and, that the cost of the repair of the damage caused by the firing at and hitting the "Red Crusader" submitted by the British Government was considered reasonable by the Danish agent, what steps are being taken to obtain the payment of that cost of repair and also compensation.

The Commission's report is being examined by the Departments concerned. In considering what further action should be taken, full weight is naturally being given to the findings of the Commission about the use of gun-fire against the "Red Crusader". In the interests of improving relations between the two sides, we intend to discuss with the Danish Government the methods of enforcing fishery limits.

Is the Under-Secretary aware that it is now, unfortunately, part of the express policy of the Danish Government to abandon its friendly relations with the Scottish fishing fleets in favour of violence such as that referred to in the Questions? Will he give an undertaking to embark on top-level conversations with the Danish Government with a view to restoring the harmonious relations which have hitherto existed between it and the Scottish fishing fleets? Does he realise that the answer to that throws a very sinister light on the negotiations about the Common Market?

First, may I be permitted to say how delighted I am that the hon. and learned Member is quite obviously fully recovered from his unfortunate indisposition? I entirely disagree with him in his strictures against the Danish Government. The position, as he knows, is that we have had these findings of fact from the Commission. They are complex and they involve questions of far-reaching importance. I am sure he will agree that it is important that we give great consideration to them before we eventually decide what we should do.

Does not the hon. Gentleman appreciate that the sum mentioned in my Second Question is now liquidated debt due by the Danish Government to the owners of the "Red Crusader", and will he see that that sum is recovered speedily?

I only wish that the matter were as simple as that. The Danish Government's view is that there are counter-charges against the captain and the "Red Crusader".

European Economic Community

39.

asked the Lord Privy Seal if he will make a statement on his discussions with Mr. George Ball regarding the European Economic Community.

I have nothing to add to what I said on 18th April in reply to questions from my right hon. Friend the Member for Thirsk and Malton (Mr. Turton) and the hon. Gentleman the Member for Ashfield (Mr. Warbey).

Had the Minister's attention been drawn to an article by Mr. Alsop in today's Guardian regarding the provision of nuclear secrets to France? Was this subject raised in his discussions with the Americans? Is it intended to provide these secrets to France as the price for Britain's joining the E.E.C.? If we are to do that, did American permission have to be obtained beforehand?

This matter was not raised in my discussions with Mr. Ball, which were purely about international economics. There is no question of the United Kingdom breaking any arrangement with the United States of America.

40.

asked the Lord Privy Seal whether, in the current negotiations with the European Economic Community, it is the policy of Her Majesty's Government to attempt to secure for Great Britain a permanent veto in the Council of Ministers

The Treaty of Rome provides for unanimous voting in the Council on some matters, even after the transitional period is over. As a full Member of the Community, we would enjoy the same right of veto as the other members.

Does my right hon. Friend agree with a veto for individual countries permanently in the Council on all issues and that, in the enlarged Community of ten countries, a veto for one small and one large country would seriously weaken the whole structure of the Common Market? As the Leader of the Opposition has recently advanced both these proposals, will my right hon. Friend say whether he would be helped in his negotiations if there were fewer such comments, apparently designed to wreck the Community, coming from those Who sit on the fence in these matters?

There are certain provisions laid down in the Treaty which require an unanimous vote. The remainder of the provisions are covered by the method of qualified weighted voting, and the question at issue, which will have to be discussed later in the negotiations, is the balance of the weighted voting. It is quite natural that it has got to change. I was not aware that the Leader of the Opposition was suggesting that it should remain exactly as balanced at the moment. I thought that he was referring to the general question of the progress we have made in these discussions.

Is the right hon. Gentleman aware that British public opinion will not accept exchanging Parliamentary democracy for bureaucratic rule in Europe?

That is a gross oversimplification of the provisions of the Treaty of Rome.

42.

asked the Lord Privy Seal whether in the current negotiations with the European Economic Community it is his policy to secure for all Commonwealth countries Associated Overseas Territories Status under Part IV of the Rome Treaty.

In my statement to the Six Governments on 10th October, 1961, I said that we should like to see the less developed members of the Commonwealth, and our dependent territories, given the opportunity, if they so wish, to enter into association with the Community on the same terms as those which will in future be available to the present associated overseas countries and territories.

Is my right hon. Friend aware that the Opposition, even, I think, the right hon. Gentleman the Leader of the Opposition, seem to be calling for this condition as an essential to our signing the Treaty of Rome? Will my right hon. Friend make it quite clear that this condition is unreasonable in view of the nature of the Community and the Treaty which they have signed?

Our position is that we have asked for the less developed countries of the Commonwealth to have the opportunity of association if they so wish. This does not apply to the developed countries of Canada, Australia and New Zealand. [HON. MEMBERS: "What happens there?'] We are making special arrangements of an alternative kind for those, which have been described in my statement and in the detailed statements that I put in the OFFICIAL REPORT.

Will the right hon. Gentleman make it clear to his hon. Friend that since last August we have used the phrase that it is inconceivable that the less developed countries, the British African territories and ex-British African territories, should receive worse treatment than is accorded to the French and Belgian territories under present arrangements? This was our position, has been all along, and still is.

That is the Government's position, that there should be no difference between the arrangements for association for all associated territories.

Can my right hon. Friend say whether he has inquired of the African territories whether they would be willing to accept these conditions?

I think that all the independent countries of the Commonwealth and the dependencies will wish to see the nature of the arrangements in their final form before they make a decision.

Can we take it that the answer to my hon. Friend's Question is "No"?

There is no question at this stage of asking countries for their views on this.

Egypt (Financial Agreement)

41.

asked the Lord Privy Seal whether, in his recent discussions with the Egyptian Minister of Economics and Finance, the question was raised of Egypt's continued failure to implement the agreement of 28th February, 1959, in relation to compensation for British subjects.

The United Arab Republic Government have fulfilled their obligations under Article IV of the Agreement of 28th February, 1959, which provided that they should pay a sum of £27½ million sterling as compensation to British subjects whose property had been Egyptianised or had suffered damage before the date of the Agreement as a result of Egyptian measures. The United Arab Republic Government have also duly paid £100,000 sterling to Her Majesty's Government as an interim payment under Article III (f) of the Agreement in respect of compensation due to British officials dismissed by the Egyptian Government in 1951.

There are, however, a number of outstanding questions other than that of compensation arising out of the Agreement, and it was made clear to the Egyptian Minister of Economics and Finance during his recent visit that Her Majesty's Government attach great importance to their early settlement.

I am grateful to my right hon. Friend for that answer. Can he hold out any hope, for the many British people who still have not received compensation, that some action will be taken on this matter by the Egyptian Government in the near future?

We must distinguish between payment of compensation for Egyptianisation, which has been made by the Egyptian Government in its payment of £27,500,000 sterling, now being distributed by the Commission under Orders in Council placed before the House, and the present difficulty, which is one of transfer of property existing in Egypt. Under the Financial Agreement, it was arranged that this should amount to £5,000, but it has been limited by agreement between ourselves to £1,000 owing to shortage of exchange. We are examining ways of dealing with this problem.

Angola

44.

asked the Lord Privy Seal what consideration he has given to the British Council of Churches' recent statement on Angola, a copy of which has been sent to him; and if, in view of the United Kingdom's ancient treaty with Portugal and of the repercussions in Commonwealth African territories of events in Angola, he will take action as called for by the United Nations' General Assembly's resolution of 30th January, which Her Majesty's Government supported, by initiating consultations with the Portuguese Government along the lines suggested in the statement, and thereby help to secure the early implementation of the right to self-determination of the Angolan people.

I have read the recent statement by the British Council of Churches on Angola. I can assure the hon. Gentleman that the Portuguese Government are well aware of our views in this matter.

But does the right hon. Gentleman mean by that reply that he is pressing the Portuguese Government on this matter? Does he recall that in this resolution, for which the British delegate voted, not only was the Portuguese Government's oppression in Angola deeply deprecated, but also member States were called on

"to use their influence to secure the compliance of Portugal "
with that resolution? Is he pressing positively?

My noble Friend has on a number of occasions discussed this with members of the Portuguese Government, and, in the case of the Portuguese Foreign Minister, very recently.

The right hon. Gentleman said that the Portuguese Government were in no doubt about our views on this matter. Will he say what Britain's views are? Has he made it plain to the Government of Portugal that we deeply deplore and repudiate the whole of that policy in Angola.

What sort of a position would Britain be in in resisting proposals from the United Nations Commission on Southern Rhodesia if at the same time we were trying to influence the opinions of a great and friendly ally, namely, Portugal, as to how she should conduct her affairs?

It is because we are in alliance with Portugal that we are able to exchange views about this matter. Portugal clearly understands the difference between our colonial policy and the policy which she pursues.

The right hon. Gentleman has not answered my quesion. Is he aware that although we deeply deplore the Government's attitude on Southern Rhodesia, no one on this side of the House has suggested that we are treating the people in Rhodesia as the Portuguese are treating the people in Angola. Will the hon. Gentleman make it very plain that despite the ancient alliance—and some of us feel that we pay a very high price for Catherine of Braganza—will the right hon. Gentleman make plain the complete horror that is felt in this country about Portuguese behaviour in Angola?

We have discussed this in the House on previous occasions and the Government have made their views about Portuguese policy in Angola perfectly plain.

Laos

45.

asked the Lord Privy Seal whether he will make a statement about the latest developments in Laos, and at the Laos Conference in Geneva.

There has been no change in the military situation since my statement in the House on 15th May. The Geneva Conference remains in being, but it can make no further progress until a Laotian delegation representing a Government of National Unity is present.

My noble Friend the Foreign Secretary saw Prince Souvanna Phouma on Saturday morning and thoroughly endorsed his efforts to secure a coalition government of a united Laos. Prince Souvanna Phouma is now on his way to Laos, where he hopes in the near future to have another meeting with the other two Princes and General Phoumi.

Has the Lord Privy Seal seen the article written from Laos last week by Angus Maude? Can he assure us that Prince Boun Oum, who has frustrated the formation of a Government of national unity for so long, is no longer receiving arms from the United States Central Intelligence Agency?

As I have stated before, I am not responsible for the operation of the Central Intelligence Agency of the United States. We have no responsibility for it and I cannot give information about anything which may be going on. What is true is that we know that the United States Government are using all the influence they can with Prince Boun Oum and General Phoumi to bring about a Government of national union in Laos, and the British Government have supported all these efforts.

Since what happens is determined by whether Prince Boun Oum receives arms or not, as has been made plain by The Times messages quoting diplomats in Laos in recent weeks, can the Government assure us that they have made representations to the United States Government that this supply of arms should stop?

The British Government have been in close touch with the United States Government in order to bring these three princes together. The fact is that General Phoumi's forces were routed at Nam Tha and obviously his military position has suffered in consequence.

While accepting that it is the desire of the British and American Governments to see the establishment of a genuinely neutral Government in Laos, would not the right hon. Gentleman agree that to achieve this a recalling of the Geneva Conference might be desirable? Is it not unsatisfactory that that Conference cannot apparently be recalled until there is first single real Laos representation there?

With respect, the Geneva Conference is still in being and those representing the delegations are there. As I told the House, it has completed its work and set out a possible agreement which only requires the signature of a United Government of Laos. The question is whether that Conference can play any part in restoring the cease-fire in Laos. I think that the situation at the moment is that there is no further military activity going on in Laos.

Is my right hon. Friend aware that we on this side of the House welcome the initiative of the Government over the last year in attempting to form a neutral Government in Laos?

If, as the right hon. Gentleman said, there is no change in the military situation in Laos, are we to understand that Thailand is not in danger of aggression from that quarter, and in those circumstances will the Government abandon this idea of sending forces there?

When I said that there was no change in the situation, I covered the period in which my right hon. Friend the Prime Minister announced the offer of Her Majesty's Government for part of the Royal Air Force to go to Thailand if the Thai Government so requested.

When, in answer to my right hon. Friend, the right hon. Gentleman referred to the situation in Geneva, is it not a fact that last January agreement was reached in Geneva on the formation of a neutralist Government, and that as part of that operation Prince Boun Oum and General Phoumi Nosavan agreed that the disputed portfolio should be placed at the disposal of Souvanna Phouma, and has not most of the trouble since then been due to the failure of Boun Oum and his colleagues to honour the agreement that was worked out at Geneva? Since it is American and British policy that the Geneva Conference decision be upheld, should not there now be even more pressure on those holding up the agreement in Laos to accept what was settled in Geneva?

The right hon. Gentleman is always asking me to apportion blame between the three different parties in Laos as to why a national Government has not been agreed upon. Both the right hon Gentleman and I know the difficulties in the formation of Governments of different kinds, and I do not wish to say that any one of the princes is in particular responsible for a hold-up in forming a Government. I have seen enough disagreement about who should hold portfolios in this Government of national union to know that it is impossible to apportion blame on to one side.

Would the right hon. Gentleman make it clear that the action taken by the United States Government does not in any way conflict with the responsibility of the Security Council to investigate, under Article 34, any situation which may lead to international friction?

Can the Lord Privy Seal confirm that during the last few days General Phoumi has been in Formosa in order to seek military support for the continuation of his civil war, and has secured an agreement with General Chiang Kai-shek that Nationalist Chinese forces still at present in Laos and Thailand shall be used on his side?

I have seen reports that General Phoumi has visited Formosa, but I have no knowledge of any agreement such as that which the hon. Member alleges to have been made.

Orders Of The Day

Finance Bill

Further considered in Committee. [ Progress, 17th Mayi>].

[Sir WILLIAM ANSTRUTHER-GRAY in the Chair.]

Clause 7—(Charge Of Income Tax For 1962–63)

Question proposed, That the Clause stand part of the Bill.

3.31 p.m.

We now come to the principal taxing Clause in the Bill, and it may give the Committee an opportunity of discussing the present level of direct taxation. It is on this Clause that the House of Commons keeps up the fiction that Income Tax is a temporary tax, renewable annually. As a matter of constitutional fact, I suppose there is no need for the House of Commons to repeal any legislation to abolish Income Tax; all it needs to do is to delete the Clause.

Our discussion on the Clause may give the Liberal Party—most of whom seem to have gone to the West Derbyshire byelection—the opportunity of renewing the pledge given by Gladstone nearly a hundred years ago, that, if returned to power, he would abolish Income Tax. If that were to happen there is no doubt that there would be a great deal of public rejoicing. Bonfires would doubtless be made of Pay-As-You-Earn coding notices, Income Tax return forms, awkward inquiries from inspectors of taxes, and all the other hated apparatus of the Income Tax system. But on the day after the night before, not only would all the Income Tax offices be closed but a great many hospitals, schools and police stations.

The last time Income Tax was abolished, in 1816, all assessment books and records were officially destroyed, and quite a lot of assessors were unofficially thrown into the Thames. Peel brought back Income Tax in 1842, and nobody has abolished it since. The Committee has an opportunity of doing it this afternoon, if it is so minded. Peel brought the tax back much against his principles—because they were Tory principles—and much against his inclination, but it had to be done, because it was quite impossible for the finances of the country to be conducted without a system of direct taxation; indeed, the Income Tax reintroduced in 1842 was for the purpose of reducing taxes on a wide range of consumer goods and food and of averting a somewhat stiff rise in regressive taxation. The balance between direct and indirect taxation has been subject to a good deal of economic discussion and political argument ever since.

What prompts me to make a few remarks on the Clause is the remark made by the Chancellor of the Exchequer last Wednesday. I was shocked to hear him, of all people, say:
"I think that all taxes are odious …"—[OFFICIAL REPORT, 16th May, 1962; Vol. 659. c. 1475.]
As the Chancellor has just come into the Chamber I had better repeat what I have just said, namely, that I was very shocked to hear him say, last Wednesday, that he thought that all taxes were odious. The right hon. and learned Gentleman cannot be happy in his work.

I noticed that as he said that he turned to his hon. Friends below the Gangway in the hope of getting some murmurs of approval, but as the debate was about the tax on sweets the Chancellor's rhetoric fell rather flat, because that was one tax, at all events, that in the opinion of hon. Members opposite was not odious. In fact, they welcomed it.

On occasions such as this it should be said that taxation is not as unpopular, still less as odious, as the Chancellor makes out. I know that some people think that their sacred rights are being infringed by a standard rate of Income Tax of 7s. 9d. in the £ to pay for the education of their children and the rebuilding of our cities, and are not in the slightest bit disturbed when they have to pay a tax of 300 per cent. on the marked-up price of some goods they buy in the shops, but the mass of the people realise and understand that with taxes we are buying civilisation. The only issues are how much civilisation we shall buy and how we shall distribute its cost; how much the State should do and how much should be left to the citizen to do for himself—and who should pay what. Those are the politics of the matter, and they divide the two sides of the Committee.

Hon. Members on this side have always leaned heavily towards direct taxation as the most visible and fairest method of taxation. We do not go as far as the hon. Member for the Isle of Ely (Sir H. Legge-Bourke), who recently said that he was in favour of abolishing all indirect taxation and requiring everyone to pay something, however small, by way of direct taxes. We must admit that the total revenue to be raised by means of taxation is too heavy to be supported entirely by direct taxation. Nevertheless, we believe that there are some tendencies in Government thinking and Tory policy which should be watched and checked.

First, we must look with great caution upon the Government's going into Europe as a pretext for widening the scope and increasing the yield of taxes on goods and services. We must also watch the tendency to use flat-rate social service payments and even to exploit graduated contributions, in place of progressive taxation.

Thirdly—and I hesitate to mention this, but it is coming, as sure as day follows night—we must watch the practice of the Conservative Government of reducing the standard rate of Income Tax on the eve of a General Election. They did it in 1955; they did it in 1959, and we shall see what they do before the next General Election. Our electoral strategy was obviously wrong in 1951, because we put up the standard rate and were scarcely rewarded for it.

This Clause defines the part which Income Tax shall play in providing the needful revenue. The standard rate of tax for 1962–63 is to be renewed at 7s. 9d. in the £ and the rates of Surtax for 1962–63 are to be decided later. The current rates of Surtax were fixed in last year's Finance Act when the total yield from Surtax was cut by 40 per cent. That was last year's contribution to the lowering of direct taxation this year on individuals; and, in my judgment, the fact that Profits Tax was raised to make good the loss of revenue is immaterial.

It is desirable to look for a moment at the sort of income which now pays the effective rate of tax of 7s. 9d. in the £. I think that the effective rate of tax on every £ of income is the real test of the burden of the tax—how much out of every £ of income does the taxpayer pay? I am not suggesting for a moment that the marginal rate of tax is not important. It most certainly is. But the burden of tax, the full weight of tax, is tested by the effective rate; and many people who grumble about the tax at 7s. 9d. in the £ pay nothing like that rate of tax on their income as a whole, or even on any part of it.

Even where the top slice of a person's income bears tax at the standard rate, we must remember that the earned income relief of two-ninths of the earned income up to about £4,000 a year is first deducted, and one-ninth earned income relief is deducted from incomes between £4,000 and almost £10,000 a year before any tax is levied. The earned income relief applies not only to Income Tax, but now is carried into Surtax, as there is an additional relief on top. For the year 1962–63 no one pays the effective rate of tax, on wholly earned incomes, including Surtax, of more than 7s. 9d. in the £ unless his income exceeds £9,000 a year. That is for a single man.

A married man with two children under 11 years of age can have £10,000 a year earned income before he pays an effective rate of tax of more than 7s. 9d. in the £. Last year's Finance Act reduced the effective rate of tax on these large earned incomes by between 2s. 4d. and 2s. 8d. in every £ of their income. That was a very substantial relief. Even on an earned income of £30,000 a year there was, in last year's Finance Act, a reduction in the effective rate of tax of 1s. in the £. I stress that I am, of course, talking about the effective rate, the amount paid out on every £ of income.

Now let us look at the marginal rate of tax where it occurs at 7s. 9d. in the £, that is to say, where there is some income taxed at 7s. 9d, in the £ after allowing for earned income relief. No one pays tax at 7s. 9d. on any income at all unless he is paying at least £84 a year in tax. So everyone who pays less than £84 a year in tax is not paying at the standard rate at all, but at a reduced rate on the top slice of 6s. 3d.; on the next band at 4s. 3d. and on the lower band at 1s. 9d. Even then, he pays this rate of tax only on 15s. 6d. out of every £ of his income because of the operation of earned income relief.

This means, roughly, that a single man earning up to £12 a week, and a married man earning up to £15 a week, pays no tax at all at the 7s. 9d. rate. The total tax on these incomes may well be too high. I am not at the moment arguing that point. What I am trying to do, and what I think it necessary to do, is to dispel some of the mythology surrounding the standard rate of tax of 7s. 9d. in the £.

I wish to turn now to another aspect of this Clause and to look at the standard rate of tax in relation to our approach to Europe. The right hon. and learned Gentleman the Chancellor of the Exchequer, in making proposals to alter the structure of the Purchase Tax, referred to the desirability of doing so in view of our approach to Europe. I quoted an Article from the Treaty of Rome which obliged member countries to consider the harmonisation of indirect taxation. I wish to ask the Chancellor, or whoever may be replying to the debate on behalf of the Government, to say a little more if possible on this matter, because one of the reasons for Surtax reductions last year was that we in this country were taxing the earnings of executives, scientists, technicians, salesmen, and others doing valuable work at a much higher rate than were our contemporaries.

3.45 p.m.

I have never been satisfied about the relevance of that comparison, but the Chancellor made a good deal of it in the debate. The picture before the Surtax cuts was of a single man on £5,000 a year paying much the same total tax in the United Kingdom as in France and West Germany, though a good deal less than in Holland. For a family man the incidence of direct taxation on earnings was more severe by comparison with most European countries, especially at the top.

The Chancellor evidently thought last year that this discrepancy should be adjusted and it was on this that he made proposals for drastic cuts in Surtax rates. Does the right hon. and learned Gentleman regard it as equally relevant to make the same comparison and adjustment lower down the scale? If so, he would have to increase Income Tax on the middle range of incomes where it is lower than in any of the countries of the Six, except France.

We on this side of the Committee would find it impossible to support further cuts in taxation on higher incomes, the raising of taxation on middle incomes and the wide extension of taxes on goods and services, all as part of the price of going into Europe. I think that as the Chancellor has referred to tax changes on our approach to Europe he should be invited to carry that survey further.

Company taxation appears to be higher in Common Market countries than in the United Kingdom, though our higher taxation on dividends paid to individuals makes the net yield of dividend income in this country far below that enjoyed in other Common Market countries with the exception of France. Whereas Holland, France and Italy appear to penalise the distribution of profits, West Germany penalises the retention of profits. The outcome of the Chancellor's present consideration of a new composite rate of company taxation to replace the standard rate of Income Tax and Profits Tax will be interesting to watch.

I do not wish to detain the Committee much longer, so I propose to conclude with a few reflections on general attitudes towards income taxation. I think that I am justified in entering a protest against the unrelenting efforts of hon. Gentlemen opposite to make direct taxation disreputable and indirect taxes on consumer goods and eatables respectable. In our view, the truth is the other way round.

A high level of redistributive taxation has undoubtedly brought some evils and that I do not deny. But it has brought social and political stability in this country, which, without such a system of taxation, no one could hope to achieve. France, where direct taxation is the lowest of all the European Economic Community countries, has, in my mind, suffered grievously politically for the very reason that that country has not had an effective or efficient system of progressive taxation.

Is the hon. Gentleman trying to say to the Committee that, in his view, the whole elaborate apparatus of the Welfare State is now supported by progressive taxation on incomes above £2,000 a year, or a figure of that sort?

No. I am not saying anything more in this connection than the words I am using, which is that an efficient system of progressive taxation is an indispensable condition of a stable economy and of a stable political system.

I believe that most profoundly, and the noble Lord will bear in mind that all the emerging territories in the world today are copying our system of direct taxation and are borrowing our experts to assist them to do it. They know that they cannot sustain the expenditure which is necessary in a modern State on social as well as economic and industrial purposes on indirect taxation alone. Therefore, I think I am quite entitled to draw the inference from what has happened in France in recent years that, had that country had a system of direct taxation which brought more social contentment, it would not have gone through the political agonies and uncertainties which it has had to undergo.

I say that the Chancellor should not say, even in fun—if it was fun—and not even as a rhetorical comment, that all taxes are odious. Hon. Gentlemen opposite should not talk of our Income Tax and Surtax system as if it was sapping the energy and initiative of the nation's breadwinners. That is a charge which has been made on a number of occasions and for which there is no support whatever on the researches which have been undertaken. The taxes in this Clause are an indispensable part, and the main part, of the fiscal system of a modern democratic State, and, without them, we should have social unrest and popular uprising.

Hon. Gentlemen opposite should bear in mind that the alternative to a satisfactory system of progressive taxation is dispossession and the confiscation of wealth. That has happened in other countries, and it is detestable that hon. Gentlemen opposite lend support to the natural desires of the people for more social expenditure, and that then the Chancellor should say that all taxes to pay for them are odious. What is odious is for hon. Members apposite to say in the same breath that the standard rate of Income Tax is too high and the Purchase Tax on clothing is too low.

I should like to make one or two comments before we allow this Clause to pass, because I think that most of it will be without controversy. It is a privilege to say a few words on Income Tax following the hon. Member for Sowerby (Mr. Houghton), and I do not disagree with a great deal of what he said.

I accept that a system of direct taxation, rising fairly steeply on higher incomes, is an essential part of our economic and social structure. I accept the justice of that, as I think most of us on this side of the Committee do. The argument is about how far and at what level does it cease to be fair and become positively unfair. I accept without argument the hon. Gentleman's thesis that, on balance, the Tory Party believes in lower taxation and the Socialist Party believes in higher taxation. This has been a principle of politics in this matter for many years, and I see no reason to argue it now.

When one talks about taxation, I think that one ought to challenge the use of the word progressive", which always comes from the other side of the Committee. "Progressive" is an adjective which has been cornered by certain interests in this country to mean almost anything they want it to mean, and it sounds good. Hon. Members opposite talk about progressive taxation. Let us all be quite clear that what they mean is higher taxation. [HON. MEMBERS: "No."] Yes.

This really is nonsense. If the hon. Gentleman is to proceed on that principle, he should get it right. It depends whom we tax.

I entirely accept that, but, with respect to the hon. and learned Member for Kettering (Mr. Mitchison), it is not nonsense at all. If the hon. and learned Gentleman will allow me to finish this brief part of my remarks, I will tell him that I fully accept that the party opposite mean whom we tax. Progressive taxation is higher taxation on the people who do not vote for them. [HON. MEMBERS: "No."] We are all perfectly clear on that. The basic fact remains that direct taxation is a tax on work and indirect taxation is a tax on spending, and, on balance, it seems to me that if we are all concerned to have a more dynamic, expanding economy, the present taxation on work should be slightly reduced.

The plea that I would like tomake——

The hon. Gentleman has just said that Income Tax is a tax on work and that other forms of taxation are taxes on spending, but is not the National Insurance contribution a tax on work? Is it not merely levied in an unfair ratio according to the size of the income?

With great respect, I accept what the hon. Lady said. I agree that the National Insurance Contribution is a tax on work, but it is a different one to the one we are discussing here.

I should like to come now to the main point I wish to make, and here I am at one with the hon. Member for Sowerby, who talked about the mythology of the standard rate and the fact that practically nobody pays the standard rate. I have no doubt that all of us in this Committee, whose job it is to study these things, realise that the standard rate is merely one signpost in a whole series of signposts. It is not even the most important one. The lower rates of taxation—the 4s. 3d. and the 1s. 9d. rates at the moment—do not necessarily depend on the standard rate at all. This is only one rate on this scale.

I hope that my right hon. and learned Friend will press on with this work, to which he has dedicated himself, of reforming and simplifying our tax system. I wish that we could get away from having this Clause in its present form each year, merely mentioning one figure, which is, in fact, misleading, and bears no real relevance to the problems of the vast majority of taxpayers, both below and above it. I hope that either the Chancellor or the Financial Secretary to the Treasury, if he is to reply to the debate, will assure us that this is still very much in the forefront of the Treasury's mind. It is also related to absorbing the Income Tax and Surtax structures into one, because the present division between these two things is completely artificial.

There is not, in any kind of reality, a magic line of £2,000 a year which makes one a totally different kind of animal. This artificial division causes misunderstanding in the public mind, as the hon. Member for Sowerby said. It confuses them and builds up a mythology.

I hope that in future years we can have this Clause in a more intelligble form, even if it is necessary to set out all the rates. I realise that they vary, and that one has to take account of the number of children, earned income relief, and so on, but, nevertheless, the standard rate is a fiction. If we can have the rates set out in the Finance Bill and in the economic White Paper every year, showing what people really pay at various levels of income, instead of these mythical animals Surtax and Income Tax, which do not relate to anybody's income, it would simplify our discussions and may even help to make the problems of taxation more intelligible for the general public.

4.0 p.m.

I presume that this discussion has some relation to what we are doing so to even out tax contributions that our people will gradually rise to a higher standard of life; and that, where we have to raise the rates of taxation, we shall do so fairly evenly over all sections of the community. This present period, eighteen years after a great war, is similar to the period around 1938, some years after another great war. In both periods the country has been in a somewhat settled position, but there are some special points about standard taxation in the two periods that ought to be examined.

The standard rate of tax in 1938 was 5s. 6d. in the £, and the average earnings of the ordinary married working man amounted to about £3 10s. a week. On those earnings that married man paid no tax at all—and I shall refer throughout my speech to married men. Therefore, the difference in taxation between the man then paying the standard rate and the ordinary worker was a difference of 5s. 6d. in the £.

Today, the ordinary married worker earns £15 11s. 6d. a week on the average, but what is his taxation position as compared with 1938? It not just a question of the average worker today just paying some tax; in the latter stage of his taxation he is reaching into the 7s. 9d. in the £ rate. A mighty change has certainly taken place since 1938, when the ordinary married worker who paid no tax then now pays as much as 7s. 9d. in the £ on part of his income.

We are in a period of peace, and we are gradually getting back to a position similar to that of 1938, but have we been dealing exactly fairly and reasonably in our taxation of the worker as compared with that of the man in the higher income groups? I think that the whole tendency has been the other way. Over the whole period of which I speak, taxation has changed in a way that has put a greater burden on the masses of the people as compared with the burden that has been placed on those in the bigger income groups.

The standard rate, which was 5s. 6d. in the £ in 1938, is now 7s. 9d. in the £. That means an increase of 2s. 3d. in the £ on the man in the high income groups since 1938, but has the average worker's taxation on earnings been increased by just the same? It has not. On some part of his earnings the average married worker now pays 7s. 9d. in the £ in his tax range but the average taxation on all his actual £s taxed is 5s. 3d. in the £—

Can the hon. Member tell me the level of wages on which this average of 5s. 3d. in the £ is being paid? I am a little puzzled.

The average wage of the married worker is about £810 a year, or £15 11s. 6d. a week. On part of his earnings he gets into the 7s. 9d. rate, but the average amount of tax he pays on his taxed poundage is 5s. 3d. in the £. That means that where he previously paid nothing on what he earned he now pays on part an average of 5s. 3d. in the £. There is no funny business in this; it is an actual fact.

Let us take the worker who earns more than the average. The average in 1938 was about £180, and the man getting above the average got, say, £220. It is admitted that wages have risen by about four and a half times since 1938. The married worker then earning £220 paid no tax either. If we multiply that £220 by 4½, we get a figure for today of £990, which is a comparatively big wage. Out of this his £220 cost of living in 1938 would he £660, plus extra insurance of £34.

As I have shown, whereas the higher paid worker in this category—the one with £220— paid no tax whatever before the war he is now paying 5s. 11d. on his taxed income. It obviously seems most unfair that while this man's rate of tax should have been increased from nothing to 5s. 3d. or 5s. 11d., a man in the higher salary scale should have had his tax increased from 5s. 6d. to 7s. 9d. —an increase of only 2s. 3d. in the £.

It is logical now to consider the man who is earning £5,000 a year. As a result of the Chancellor's recent action, he receives a straightforward gift of £490 whereas, had his rate of tax been raised in proportion to the lower-paid workers, he would actually be paying well over an additional £552. [HON. MEMBERS: "What?"] I must correct that. I am only too willing to be corrected when I make an error. I do not wish to make a fool of myself, so I shall explain what I mean. The man about whom I am speaking gets an advantage out of the taxation applying to the standard rate not having risen so high of £552. But he also gets a gift of £490 through the recent Surtax arrangements.

This shows that the £5,000 a year man is getting a big advantage compared with workers generally. Is it not time that we had more agitation, not merely from my hon. Friends, but from hon. Gentlemen opposite and people generally for a more equitable distribution of this burden? Since the ordinary worker has had this tremendous increase placed on him compared with what he paid in pre-war days, is it not right that the burden should be split equally, especially regarding the wealthier sections of the population?

It is clear that the biggest burden of Income Tax has been placed on the wage earners of the nation. How we shall amend this position is not an easy question to answer, but the whole structure needs to be changed so that when additional finance must be found the burden of finding it is distributed equitably. I have been attempting to add weight to the remarks made by my hon. Friend the Member for Sowerby (Mr. Houghton), who made an excellent speech. As we continue to discuss the Clause, and when we get to other Clauses, the position I have been describing will be further brought home to hon. Members.

4.15 p.m.

The hon. Member for Sowerby (Mr. Houghton) expressed strong disapproval of the Chancellor's dislike of taxation. I suppose that the hon. Member might admit a slight bias, because I understand before he came here his earnings largely depended on his very valuable service to the tax gatherers.

However, I believe that the monetary weapon and indirect taxation are absolutely essential to the regulating of the economy and it was the omission by the Opposition of the first weapon which brought them into difficulties in 1950 and 1951. But I agree that of all the weapons the most effective single one is Income Tax. I am sure that if Income Tax is put up by 6d. or 1s. nothing does more to check spending. Equally, if it is put down, nothing encourages us more to spend more—when it is necessary to expand the economy. I would not have liked to have seen my right hon. and learned Friend lower Income Tax on this occasion because we are not in a condition when we want to increase spending, but I would like him to try to make substantial reductions—not necessarily next year, but over the course of years—in direct taxation for two reasons.

First, because, like the Bank Rate, it is a more valuable weapon when there is more in hand. When the Bank Rate is pushed up to 7 per cent. it is more difficult to use it effectively. When Income Tax is near the maximum it is obviously very difficult to bring it into effective use. For that reason, I would like to see it at a lower level. In fact, I believe that we should be more prepared to see it move both up and down according to the circumstances.

Secondly, I would like to see—not here and now, but over the course of years—a reduction in direct taxation, because, contrary to the views of the hon. Member for Sowerby, a bigger proportion than formerly now comes from direct taxation. I agree with my hon. Friend the Member for Somerset, North (Mr. Leather) that we should tax consumption rather than production. We surely want to make the cake of national wealth as big as possible rather than bother too much about how we are to distribute it. The first is surely the way to raise the standard of living.

Hon. Gentlemen opposite continually urge that there should be a switch to direct taxation, but I wonder whether they have looked at the figures. I would refer the hon. Member to the Treasury Bulletin for April, 1960, in which it is shown that, in 1948, 35 per cent. of the revenue came from Income Tax. Today, it is 43 per cent. Total capital taxes—Income Tax, Surtax, death duties, and so on—provided 52 per cent. in 1948 and today, in 1962, provide 55 per cent. I do not give the Government good marks for that. They have, I think, been moving in the wrong direction and I hope they will redirect their efforts.

The hon. Member for Sowerby made a surprising remark about Surtax, especially surprising coming from someone whose views are always carefully listened to and who is so much respected. He said that the fact that Profits Tax was increased last year by about the same amount as Surtax on earned incomes was reduced was quite irrelevant. I cannot understand that view. After all, those with an investment income paid exactly the same rate of Surtax and had smaller incomes because their dividends must have been somewhat smaller.

The point of this argument is quite simple, that most people, including the Stock Exchange, take the view that, in the long run, some proportion of Profits Tax is passed on to the consumer.

If Profits Tax is higher then dividends must tend to be lower. Therefore, to some extent at any rate, the investment income man must suffer. If the Chancellor had made a reduction in Surtax over the whole field I agree that he would have been vulnerable to criticism from hon. Gentlemen opposite. The could have said that he had made an unfair concession. Whether or not it would have been unfair is, of course, a matter of opinion but, as I say, he would have been vulnerable to that criticism. But since anyone whose income comes entirely from investments pays no less Surtax he cannot be vulnerable to that criticism. The only criticism to which he might be vulnerable is that he made a wrong judgment, that he thought that a reduction in Surtax on unearned incomes would increase incentive and thereby increase the national wealth generally.

That is extremely misleading. The Financial Secretary told us a year ago that out of the £83 million reduction in Surtax last year £18 million was in respect of unearned income.

He said that it was an act of social justice.

I do not see how it could be reasonable to penalise the man with earned income because he had some investment income, too. It cannot be a crime to have saved some money.

All I am saying is that the Chancellor made no reduction in Surtax for those whose incomes came entirely from investments. If he had been trying to give a sop to Surtax payers, obviously that is what he would have done. He did it, rightly or wrongly—I think rightly—because he believed that it would increase enterprise and endeavour. Surely even the right hon. Member for Battersea, North (Mr. Jay) would agree that if the Chancellor was right in that judgment and if the cake of national wealth was expanded it must have been a good thing.

It would have been possible, because one can do almost anything with Income Tax and Surtax, to give a reduction in such a way that one only got a reduction in virtue of one's earned income; but the Chancellor decided to give it in such a way that the more unearned income one had the bigger the tax concession one got.

I have always found the Income Tax laws very complicated and I will not go into details as to how this could be done. All I am saying—and this cannot be contradicted—is that the man with an investment income only got no reduction at all, and I cannot see why a man should be penalised on his investment income because he had saved. Whether the Chancellor was right or wrong, it is not a question of fairness. It is a question entirely as to whether his judgment was right or wrong that it will in time increase the national wealth.

I believe I am right in saying that in this country, before the last Budget, if a man was earning £5,000 a year and, by extra effort, enterprise, and perhaps by taking risks, he pushed his income up by £1,000 a year he got only about half of what he would have got in respect of the extra amount if he had been in America or on the Continent. That would seem to me to be a reasonable basis for assuming that a reduction in Surtax on earned incomes would increase the national wealth, and that is what we on this side of the Committee have in mind.

The hon. Member for Somerset, North (Mr. Leather) objected to us on this side of the Committee describing Income Tax as progressive. He complained that this word "progressive" had been much abused. He also gave us a rather partisan definition of the word, saying that by progressive taxation we meant higher taxation.

The hon. Gentleman should know perfectly well that that is a very inadequate definition of a word which has come to be accepted widely as meaning taxation which is related to ability to pay. That is the real definition of progressive taxation. It means that if income rises and the ability to pay rises pro rata, a man's share of tax payable rises also, but that, equally, if income is low and the ability to pay tax is low, then tax is reduced.

We on this side of the Committee stand very firmly by the view that even though, as my hon. Friend the Member for Sowerby (Mr. Houghton) pointed out, there must always be scope for some form of indirect taxation, if we are to have an equitable sharing of the national burdens vie should make progressive taxation in this sense the mainstay of our taxation system.

It would be quite wrong to say that all forms of direct taxation are progressive taxation. That was the meaning of my intervention in the hon. Gentleman's speech. Income Tax is broadly progressive, but National Insurance contributions, which are another form of direct taxation, are not. It is true that Income Tax can be administered in such a way as to make it less progressive. We could do as successive Conservative Chancellors have done and always relate tax reliefs in such a way that the maximum relief is given at the top and the smallest relief at the bottom. This is a process which has been going on during the past ten years under Conservative Governments.

That is why we say that the whole tenor of Conservative Budgets has been regressive, particularly as at the same time that these Income Tax reliefs have been given in such an unfair way direct taxation of the wrong kind, through the National Insurance contributions, has been steadily rising. We have found over the past ten years that the burden of taxation carried in the form of the National Insurance contribution has more than doubled under Conservative Governments. Yet this is certainly not a form of progressive taxation because, as the hon. Member will be the first to admit, the insurance contribution is a flat-rate payment levied regardless of the size of the wage. So here we have under Conservative Governments direct taxation which is overwhelmingly regressive in nature.

Yet what is the National Insurance contribution if it is not a tax on work? It is outstandingly such because it is paid overwhelmingly by the employed person simply because he works. Therefore, that distinction of the hon. Gentleman's that we ought to be sensibly lightening tax an work and increasing it on spending falls to the ground in view of the National Insurance contribution.

I am not objecting to anything. I might, in fact, on another occasion go a long way with the hon. Lady in agreeing that our National Insurance system is full of lunacies. But, with respect, any argument on how we assess National Insurance is utterly irrelevant to what we are arguing about on the Finance Bill.

No, not at all. We have been talking about the distribution of the tax burden. What I am saying is that under successive Conservative Chancellors we have had a steady movement away from the principle of putting the burden where there is the greatest ability to pay. We are moving towards the flat-rate principle—shifting the burden of taxation wherever possible on to the flat-rate principle in respect of both direct and indirect taxation.

This does not apply only in the field of the National Insurance contributions. Throughout the whole of Government taxation we are finding an attempt by Conservative Chancellors to reduce the amount which falls to be met by the Exchequer contributions and the pushing of the burden on to the individual. The graduated pension scheme is another example of this system, where we know that the graduated pension contributor is not getting his money's worth for his contribution, on a commercial basis, but is paying a forced levy to the Exchequer which is directly designed to meet part of the cost of the existing old-age pension scheme and, therefore, reduce the Exchequer contribution which has to be met by Income Tax, among other forms of taxation.

4.30 p.m.

What we fear is that we are only at the beginning of this process, on which Conservative Governments have had to feel their way carefully and fearfully towards their long-term goal so as to disguise from the people of the country just what a shift is taking place in the incidence of taxation and to wrap it up for electoral purposes. Their desire to move in this direction is clear, and excuses are being searched for by Conservative Chancellors to enable them to carry the process further.

There is the shift from progressive taxation even in the tax on work, the National Insurance contribution, and in other forms of what the hon. Member for Somerset, North dismissed contemptuously as taxes on spending. I should not say that he contemptuously dismissed taxes on spending, but rather that he seemed to imply that spending as such is rather an iniquitous activity and it is justifiable to tax it.

The hon. Gentleman said that it is less excusable to tax work than to tax spending and that there was something anti-social in spending compared with work, and, therefore, it was pro-social to tax spending rather than to tax work.

What we must never forget in this Committee is that some spending is essential to life. If a person does not keep alive, he cannot work. What we fear is that the growing movement will continue towards the taxing of forms of spending that are vital to maintain not only working morale, but the working capacity of the people.

Another recent example is the tax on sickness which the Government have imposed. Expenditure on prescription charges is a form of spending. If someone buys a bottle of medicine, he is spending, but spending to get himself well enough to go back to work. This Government, in order to reduce progressive taxation, have levied a flat-rate charge on spending on medicines.

We had another example in our discussions on Purchase Tax last week. There are certain essentials which people must buy so that they can go to work. For instance, an industrial worker must buy overalls, but the Government have doubled the tax on industrial overalls. This is all part of the move towards a uniform rate of Purchase Tax which will increase the tax on essentials. Of course, there will also be a reduction in the tax on luxuries, but, overall, the Treasury will have more in its coffers with which to reduce progressive taxation, reducing it most at the top and least at the bottom.

My hon. Friend the Member for Sowerby was quite right to express our alarm at this move. Our entry into the Common Market will give another excuse for encouraging the process. One of the by-products of going into the Common Market on the present terms of the Treaty of Rome is that we shall reduce our subsidies to British agriculture which help to keep down the price of food, saving the Exchequer money which it can then, if it cares, use to reduce progressive taxation. In exchange, the consumers of this country will have to pay heavy import levies on foodstuffs at present coming in duty-free. This will be a tax on food and a tax on spending. But is it spending which ought to be taxed?

The hon. Member for Somerset, North, draws a quite artificial distinction in suggesting that a tax on work is bad and a tax on spending is good. We must select and pick out what will, overall, lead to the maximum social justice and working efficiency in this country.

The hon. Lady should not distort to that extent what I have said. I made no such statement. If she had listened carefully to what I said, she would have known very well that I said nothing of the kind. I specifically said that I accepted that, of course, there must be a large measure of direct and of indirect taxation, and we were merely talking about marginal values. She is putting words into my mouth for the sheer joy of demolishing an argument which I never advanced. What she says is quite meaningless.

I am prepared to stand by the record in HANSARD tomorrow. I listened very carefully to the hon. Gentleman's speech. Indeed, it was his remarks which stimulated me out of my wonted silence to make a speech.

The hon. Gentleman was talking about a marginal balance between direct and indirect taxation. It is the marginal balance which we are very worried about in discussing this Clause, because the marginal balance is being tipped consistently and persistently by Conservative Governments away from progressive forms of taxation —this is what the hon. Gentleman showed that he did not begin to understand—towards this new type of taxation which increases the incidence the wrong way, even though it may appear that some tax reductions are being given.

With specious arguments, the hon. Gentleman and his hon. Friends may try to pull the wool over the eyes of the electorate. I have no doubt they will have a jolly good shot at it, particularly in the next pre-election Budget. However, underneath all the propaganda there lies the inescapable fact that the incidence of taxation in this country now is becoming increasingly regressive. It is falling increasingly on the heads of those who, under a progressive system of taxation, ought to be the first to receive relief.

We on this side of the Committee register once again the fact that we are aware of what the Government are up to. We oppose them bitterly in this trend, and we shall firmly oppose any consequences of the Common Market negotiations which commit us to further moves towards an unfair incidence of taxation. We shall always stand by the principle of levying taxes to the utmost degree possible strictly in accordance with ability to pay.

The hon. Lady the Member for Blackburn (Mrs. Castle) must take a grip on herself. Lately, she has been making madly reactionary speeches, redolent of the days of British Socialism of the 1930s, the 1920s, and even the 1910s. She is on a parallel with that ardent radical Sir William Harcourt, who said, "We are all Socialists now", and produced some progressive taxation in his time designed to curb differences between rich and poor on a very large scale. Of course, it had to be done in those days. Sir William Harcourt was thinking of the Poor Law, the workhouses and all the other contrivances which had been produced by radicals in the past to deal with the needs of the rising masses in that fierce period of technological advance and change. The hon. Lady has never come away from it. She is still in that mood now, having forgotten nothing and having learned nothing.

There are no votes in this sort of situation now. The hon. Member for Sowerby (Mr. Houghton) talked about the social unrest and popular uprising which would ensue in the country if we departed radically from the present system of taxation and went on to a flat-rate basis. The reason why my right hon. Friends on this side, during the past ten years, have been slowly working towards a flat-rate system of taxation is that they realise that the country is quite prepared to see the change made, and that, for all the shouts——

No—and that, for all the shouts which have been coming from the Socialists, steeped in black reaction as they are, the country has forgotten it all and there is nothing to be said for them.

In the Budget debate, I asked for a reduction of Government expenditure of up to £1,000 million, and, therefore, feel justified in asking, although I do not expect to get it, for a very substantial decrease in direct taxation precisely because if we got into a situation in which we could have a reduction in taxation the Socialists, if they were in power, would make it even more progressive on Income Tax than it is now and would reduce indirect taxation to little or nothing.

My right hon. and learned Friend, being of a very different kidney, I hope —I am not quite sure about it—will do the very opposite. I should like to extract from my hon. Friend the Financial Secretary, who is, I think, to reply to this debate, the promise—a conditional promise if he likes—that when taxation can come down a start will be made on Income Tax and Surtax.

The hon. Member for Sowerby—I am sorry that he has left the Chamber—seemed to think that progressive taxation is what upholds the whole of our society or makes it morally correct as far as finances go. I have done a few sums in my head, having heard this debate and not being prepared for it with documents from outside. About £350 million a year comes from progressive taxation and the Welfare State is upheld by a sum ten times that amount —about £3,500 million. In these days, the Welfare State and all we most admire and our general standard of living are upheld by the normal taxes of the people and not by the so-called very important social element of progressive taxation.

The sooner the Socialist Party begins to realise that we have now walked into a different world, the better. We are not in the world of Sir William Harcourt where the only means of distributing money to the poor was to tax the wealthy. The Welfare State itself and everything that we enjoy come from the taxes of the people, and only one-tenth of it, if that, comes from so-called progressive taxation.

When the noble Lord said that we were moving towards a fiat rate of taxation under the Government, did he mean a flat rate of Purchase Tax, or did he mean that the Government, in his opinion, are also moving towards a flat rate of Income Tax?

I hope that they are moving towards a flat rate of Income Tax. I think that there should be a flat rate for all taxes. [Laughter.] That is the point that I am trying to make. The days are gone when we needed to have so-called progressive taxation to do social justice. Why do not hon. Members opposite realise that? They think that they can roar with laughter and go to their constituencies and score point after point against us on this issue of progressive taxation. It does not win them a single trick, and I will give one example to show why.

Is the noble Lord aware that I presented to the House not many weeks ago a petition signed by 810,000 people, mainly old age pensioners, bitterly objecting to the levy of National Health Service prescription charges and expressing great social anger and great social unrest about this further move towards the sort of system which he wants?

I am not talking about prescription charges. I am talking on this Clause and dealing with the speech of the hon. Member for Sowerby about progressive taxation. The petition was not presented by the hon. Lady's constituents in regret of the failure of the Government to introduce even more progressive scales for Surtax and Income Tax than there are now. If they had been, her remark would have been relevant. As it is, it is not relevant.

I should like to give the Committee one example of the many which we all surely have as to why this is no longer true. In my constituency, during the last election, I found that people were interested not in meetings, but in cups of tea in their houses. Day after day I went to council houses to be received by people and given cups of tea. Not day after day but on at least two occasions I found the council house completely transformed. The centre wall had been taken out, the lower storey had a beam across, there was a kitchen at one side, a screen with flowers and a living room on the other side—something that one would expect to see at the Council of Industrial Design as a recent example of modern art.

The tea things were brought out on a silver tray—a silver teapot, silver milk jug and a silver sugar bowl—and tea was served. In the corner of the room was a baby grand piano as well as a television set, a wireless and various other things of that kind. When I said, Thank you very much for tea; I must go to the next place now," they said, "We are very sorry that you cannot stop for cocktails."

The sooner the hon. Lady the Member for Blackburn and people living in the soap-box days of Socialism in the 1920s enter the modern council house and experience things of that kind the better.

4.45 p.m.

I think that the future marital prospects of the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke), on which all of us on this side congratulate him, have shifted even further to the right than they were some years ago. It is hard to see what is the implication of his story about council houses. I suppose that the other side of the coin is that if one went to "Castle Hinchingbrooke", or whatever the stately home may be, they would not be able to afford tea, let alone have a radio or other minor luxuries like that.

If the hon. Gentleman went there now, he would find the place derelict.

I was simply trying to understate the case. We now see that the noble Lord's argument related to the impoverishment of the English upper and wealthier classes. All this talk about Mr. Clore, who, according to the Evening Standard, has made £34 million in the last ten years, is apparently mythical. Nevertheless, the noble Lord, as usual, has made a serious point with which one should try to deal. His point was that the distribution of wealth has become so much more equal than it was in the days of Sir William Harcourt and that old ideas about progressive taxation have become irrelevant. There is, of course, no evidence for this whatsoever.

It is perfectly true that certain people —and I agree that they probably include high-minded members of the aristocracy—who do not avoid death duties and pay all their taxes in a legal and loyal manner have become relatively much poorer than comparable people of fifty years ago. It is not true of the great bulk of the City financiers. It is not true of the bulk of property developers over the last ten years. Everybody knows that not only Mr. Clore but a great number of such people have made fortunes through property speculation equivalent to those which could have been made in the Edwardian or late Victorian era. The fortune which Mr. Clore has made in the last ten years is roughly equivalent to the fortune which Sir Thomas Lipton would have made, and did make, in Edwardian days.

If one takes businessmen in the City generally, it is not the case, as the noble Lord suggests, that equality has gone so far, as in his case, that they have had to sell their houses, sack the butler and the maids and can scarcely afford a cup of tea on a silver tray. This is only true of a very small proportion of the wealthier classes. If one takes them as a whole, it certainly is not true. The reason why it is not true is directly relevant to the Clause. It is that an enormous amount of tax avoidance goes on.

Supposing that the noble Lord's implication were correct, that everybody paid the rates of tax which are laid down in the Finance Bill, his conclusion would be correct—that we lived in an egalitarian society today and that his own standard of living was scarcely different from that of the average council house tenant. Of course, this is not the case, in spite of the noble Lord's joke about a derelict castle.

We all know—and we might as well face it—that the gap between the standard of living of the wealthy 1 per cent. of the population and the council house tenants is still enormous. The prime reason why it is enormous is that we have a system of taxation which has two grave disadvantages. First, it is very heavily biased in favour of property and against income. Secondly, it can be extremely easily avoided.

There is an enormous difference between two individuals both earning £10,000 a year but one with £100,000 of property and the other with no property. The man with £100,000 of property has far more room for manœuvre. He can cease working for six months if he wishes and his range of choice between jobs and between work and leisure is much greater. He can organise his life with a freedom which is not open to the person who has the equivalent income, but has no property.

This extreme difference between having capital and not having it is scarcely reflected in the British taxation system. It is reflected in the tiny differential against unearned income, but even allowing for this very small differential, there is a heavy bias in the taxation system against the man whose income is solely derived from work and in favour of the man whose income is largely derived from property.

The only logical way to put this right would be to have an annual property tax, which I hope the next Labour Government will introduce. Although my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) has, I regret, some rather reactionary views on taxation, nevertheless I hope that when we have a Labour Government we shall attempt to cancel out this bias in favour of the property owner by having a small annual property tax, which it seems to me is fully justified by considerations of logic.

The second point about the taxation system is that so large a part of the alleged tax burden is easily avoidable. Death duties are a good example. I have no idea what arrangements the noble Lord or anybody else makes about death duties, but we know that one can pay no tax at all by making gifts inter vivos more than five years before death and that the great majority of very wealthy people with large amounts of property are not paying the heavy death duties which it is alleged that they are paying.

No doubt a small minority are, perhaps because they retain an attractive old aristocratic attitude towards one's duties, as it were, about paying taxation, or else because they live in so remote a region of the Highlands that they have never heard of the possibility of tax avoidance, or else they loathe their children, or else they are run over by a bus without knowing beforehand that it is to happen to them and before they have made the appropriate arrangements.

But, apart from this minority, we know that the majority of wealthy people are not paying what they ought to pay under our death duties system. They are simply giving the money away—and it is not only death duties which can be either avoided or evaded in this way. It is very easy, by all kinds of methods which are quite familiar, to avoid the nominal burden of taxation, which appears so heavy. If the noble Lord were right in supposing that people pay Income Tax and Surtax at 17s. in the £, or whatever the figure is, we should have the kind of egalitarian society which he thinks we have, but the fact is that they are not paying these rates.

One can list a number of loopholes in the tax system quite simply. I can list ten straight off. There is the seven-year convenant, which is an obvious method, and the setting up of one-man companies, which is another obvious method. There is the whole range of dividend stripping types of procedure, with which the Finance Bill deals year and after year.

As a consequence, the nominal rates of taxation, which appear to be so heavy in this country, are nothing like as heavy as they seem. One piece of evidence which one can take to destroy this belief, which was the underlying theme of the noble Lord's speech—that we are a desperately heavily taxed country—is the comparison between our figures and those on the Continent. There is a well-known Conservative story that we are the most heavily taxed country in the world, suffering under an exceptionally crippling burden of taxation, but if we look at the figures of the total burden of taxation in this country it seems rather low when compared with that in other countries.

The total amount taken in taxation—national, local and National Insurance contributions—is 29 per cent. of the national income. In Germany, that great free-enterprise country so much lauded on the benches opposite, the proportion taken is 34 per cent. In Austria, the proportion is 33 per cent. and in France it is 32 per cent. In fact, we are a very lightly taxed nation when we look at the figures, and the idea that we are suffering under a crippling burden of taxation without parallel anywhere else in the world is simply a Conservative myth built up by endless speeches over the last ten years. By international standards, on the whole we are a lightly taxed nation.

It is only at the lower levels that taxation is higher in Germany than it is here. At the higher levels it is much higher here.

No. The hon. Member made his point about Surtax in his speech. The discussion on the Surtax concession showed that there was one income bracket, let us call it the lower executive bracket, at which taxation was higher in this country than in most other countries, and this was the Chancellor's justification for his Surtax measure. But taking the whole of the higher income tax brackets, and not just the £3,000 to £6,000 bracket which was where Britain was more heavily taxed, it is not the case that Britain is uniquely heavily taxed. In any case, the point which I make is that the possibilities within those brackets of avoiding tax are so numerous and so considerable that even the nominal tax burdens have very little meaning.

There is one point which I should like to take up, because I think that the Financial Secretary will refer to it in his reply. He will give figures of the ratio of direct to indirect taxation. If the figures of direct taxation include a figure for Profits Tax, then in my view these are largely meaningless. This point was raised by the hon. Member for Scarborough and Whitby (Sir A. Spearman), and we ought to try to get some agreement about it. It is the view of most economists, which carries little conviction in the House where, on the whole, economists are reasonably disliked, and also the view of the great city commentators and the Stock Exchange that in the long run an increase in Profits Tax is passed on to the consumer in higher prices.

When the Chancellor increased Profits Tax last year by whatever percentage it was, there was no fall in share values as a consequence, because it was generally assumed in the City and by commentators that in the long run it would be passed to the consumer under conditions of full employment. Admittedly, this would not happen in the middle of a depression, but under full employment Profits Tax, in the end, is passed on and simply amounts to a turnover or sales tax on the consumer. Therefore, to include Profits Tax in the figures for direct taxation in my view is extremely misleading. Profits Tax ought to be counted as indirect taxation equivalent to a general sales or turnover tax on the consumer.

Finally, I should like to express a general view about direct and indirect taxation. I do not agree with many of my hon. Friends in what they have said today and said last week about taxation; I believe that any Government which wants to improve the public sector and the social services, as I very much want to do, will have to rely on indirect taxation to a considerable degree. Here I agree with the noble Lord: if one relies more heavily on indirect taxation one will make the whole tax system very much more regressive. Nobody on these benches wants to do that.

But, personally, I am convinced, subject to any Labour Party view of the levels which social expenditure should reach, that this will require an increase in indirect taxation over that which we have today. The only way out of the dilemma is to start by making the taxation system more progressive. For example, we could have a gift tax to stop the payment of death duties as gifts inter vivos; a genuine capital gains tax instead of the pseudo tax in the Budget; and a tightening of the tax system at the top end of the scale, which would make it more progressive.

Having done that, I believe that we on these benches ought to take a more flexible attitude towards certain types of indirect taxation than we have taken in the past, because I believe that without some very high-yielding indirect taxation we shall not get the revenue which we need to create the kind of social sector which we ought to have in this country. But a prior condition of doing this is a progressiveness of the taxation system in which at the moment there is so much evasion and avoidance at the top end of the scale.

The hon. Gentleman the Member for Grimsby (Mr. Crosland) complained about tax evasion and then, at the end of his speech, suggested a form of tax on gifts inter vivos. I can conceive of no tax so capable of evasion as a tax on gifts between two persons during their lifetimes, a tax on gifts between one person and another.

I hope that in his remarks about evasion he was not carrying them so far as to suggest that there is any greater reluctance in this country to paying taxes than in some other countries and that evasion is not found, for example, in France. I can hardly conceive that this country is the worst in that respect. I should have thought that throughout the post-war era our Inland Revenue has been as effective as any tax-raising system in the world, both in checking the incomes of people and in collecting an immense amount of tax from them.

5.0 p.m.

On the other side of the Committee there have been complaints and suggestions that point to a great divergence of view about the relative importance of indirect and direct taxation. Of course, if one listened only to a debate like that we have had today one would imagine the divergence of view between the two sides to be considerable, even tremendous, but really, our view on this side of the Committee is not so dissimilar from that on the other side. I agree with my hon. Friend the Member for Somerset, North (Mr. Leather) that we do not dissent from the view of the Opposition or of the hon. Member for Sowerby (Mr. Houghton) that it is desirable that a considerable proportion of our tax requirements should be levied by a progressive and direct system. That is the view, I think, of the majority on these benches. I can appreciate that my noble Friend the Member for Dorset, South (Viscount Hinchingbrooke) has a somewhat special point of view, but I doubt whether it is the majority view on these benches. We take the view, in the majority, that a large part of our taxation system should be direct and progressive, but the hon. Member for Sowerby, in his very interesting and admirable speech, implied that in so doing most of our expenditure should be met in that way, that it would be easy for this country, for example, to step up progressive direct taxation and reduce indirect taxation without any ill effects upon our economy.

Other speakers on the other side of the Committee complained that so many lower-wage earners today are paying direct taxation as compared with prewar days. I should have thought that there was a direct conflict between those two points of view. The fact is, of course, that our improved standard of living has drawn more wage earners into the tax paying class. I should have thought that extremely desirable. I should like to see more and more people at the lower end of the wage-earning and salary-earning classes of this country having to pay Income Tax and having to pay more, for this would indicate that in most cases they would be earning higher incomes.

The hon. Member for Sowerby in his remarks thought that we should meet more of our commitments through direct taxation, and I was rather pleased when the hon. Member for Grimsby presented the matter in a somewhat different light. He candidly said that our social services —most of them—had in them the seeds of their own growth which required an extension of the tax raising system. He saw the increased requirement for indirect as well as direct taxation.

It is the major advantage of direct taxation that it is certain. It is certain in amount, it is certain in incidence, and it is fairly graded to the ability of a person to pay it. However, it has the very obvious disadvantage that it does in many cases penalise extra effort not merely by executives but by wage earners. Some of the loudest complainants at my interviews are those who scratch their heads and say, "If I do overtime, why should I pay tax on it?" I do not know whether other hon. Members on either side have had that experience, but there are a large number of those people today. The hon. Gentleman the Member for Wallsend (Mr. McKay) gave the figure of £15 or thereabouts as the average earnings received, but there are a lot of earners who earn considerably more, and the more they earn the more tax they are required to pay and they are just as ready to complain and just as reluctant to pay as others who have paid Income Tax for years.

That is the weakness of stepping up the rates. I can assure the hon. Member for Sowerby that there is not that wonderful enthusiasm for tax paying which he described at one stage of his speech. He extolled the virtues of tax paying. But the State is not always provident in its spending, and there is the contrary view of the nineteenth century liberal economists, that as much as possible of the money of the nation should fructify in the pockets of the people. I think that this is just as capable of strong argument as the one the hon. Member put forward, and I would say that the State is often more improvident in its spending than the individual or the company or the organisation, and I should have thought it would be desirable in any modern economy that we should not wish to increase taxation of that kind.

Our taxation of the wage earner and the salary earner by the direct method is very considerable, and as my hon. Friend the Member for Scarborough and Whitby (Sir A. Spearman) pointed out, the proportion which it bears to the total tax revenue has increased, not diminished. I sincerely hope that in future we shall meet our increasing commitments mot by extending the narrow field which the hon. Member described but in possibly enlarging the field in which there is a conscious choice. I think it is a good thing, if I am not a smoker, that I do not pay that kind of tax, and that if I do not indulge in alcoholic beverages I do not need to pay the duties on them. But, of course, if it is just a question of direct taxation, I pay it willy-nilly, and it is a severe disincentive to me and to my fellow countrymen that I have to pay this tax whatever I do if I earn a certain amount. It is surely a great advantage of most forms of indirect taxation that I have this choice, that if I do not spend my savings in an improvident way I can invest them for the further benefit of myself and the community at large.

There are not the broad and violent differences of view which some hon. Members have attempted to describe. I should have thought the difference a difference of emphasis, and a legitimate difference of emphasis, which is not surprising when one realises the extent of the taxes which are collected in various forms in this country today.

Of course, I agree with the hon. Member for Barry (Mr. Gower) and, indeed, other hon. Members who have said that we shall continue to have to have a fairly high level of indirect taxation. As a matter of fact, I think that a good deal of this absolute distinction which is drawn between direct and indirect taxation misses the point, because really what we ought to do is to look at each category of tax to see how the spread of taxation is arranged within that category, because all direct taxation, obviously, does not fall on the wealthy people, and all indirect taxation, on the other hand, obviously does not fall on the poorer class of people.

The reason why we need a high level of direct and indirect taxation is, of course, a very simple one, which I think the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke), among others, on the other side of the Committee, just does not accept, and that is that Government expenditure, under any Government, is always certainly bound to increase. We are living in the kind of society in which, and the developments in our society are such, that is becoming almost inevitable. That is happening not only in Britain but in every other advanced industrialised country in the world.

It is certainly possible to keep the rates of increase down, though we on this side of the Committee can think of many aspects of Government policy on which we would wish the Government to spend more. That is also equally true, I think, of all hon. Members on the other side of the Committee, because, when they talk, for example, about the Government spending more money on roads, economically speaking that is exactly the same as spending more capital expenditure on education, and it does require ultimately additional taxation in exactly the same way.

The difference really between the two sides is perhaps a difference in degree, and also a difference in that we would choose to spend money on things which people on the other side of the Committee consider to be less important and they in some cases would choose to spend money on things which we on this side would consider less important. But Government expenditure in any case is bound to go up.

Therefore, we are bound to have a high level of taxation. I think that that is really the fundamental thing which on both sides we ought all to accept and then we can get down to the argument of how we should distribute the burden of taxation.

Would not the hon. Member agree that a higher level of Government expenditure, which I accept, does not necessarily entail a higher level of taxation in an economy in which there is an expansion of national wealth, such as we have had?

Certainly, but if we had had the kind of expansion of the economy we ought to have had over the last four or five years we should have found the problem of how to raise the additional taxation very much simpler than we are finding it at present. Obviously, the amount of taxation the Government have to raise can go up without rates of taxation going up. The fact nevertheless remains that that expenditure is likely to increase and, therefore, the amount of money which the Government take in taxation in one way or another is likely to increase rather than to diminish, and the real argument is how we should spread the burden of taxation.

I agree very much with most of what my hon. Friend the Member for Grimsby (Mr. Crosland) said about the spread of taxation, but perhaps I may take up one point about the question of Profits Tax. It is certainly true that, as far as possible, Profits Tax is passed on to the consumer. Obviously, industry tends to do that. What applies to Profits Tax on companies applies equally to Income Tax. There is no economic reason why we should make the distinction between Profits Tax and Income Tax.

It is not a simple problem. I do not think that an increase in Profits Tax is naturally and automatically passed on to the consumer. Obviously, a good deal depends on the economic situation. If we have an expanding economy where demand s buoyant, where prices can go up and demand remain bouyant, then it is easier for it to be passed on than it would be in circumstances where there was a deflationary or semi-deflationary situation.

The real point I want to make is that as well as the distinction between direct and indirect taxation, it is worth while making the distinction between personal and corporate taxation, not only from the economic point of view but also from the point of view of social justice. There obviously is a tremendous amount of difference between Profits Tax which can be passed on to the consumer and an increase in Income Tax which cannot. It cannot be passed on in the same way that taxation on companies can be passed on.

I was glad that my hon. Friend took up the point made by the hon. Member for Scarborough and Whitby (Sir A. Spearman) about equating the Profits Tax increase, on the one hand, with Surtax decrease, on the other. To add one additional point—absolutely from fact and not from theory—dividends did not go down after the Profits Tax increase, and there is no sign at all that that increase makes the slightest difference to the rate of dividend distribution. From the shareholder's point of view, in every way it is the rate of dividend distribution which counts from the point of view of current income and also from the point of view of capital gain, because it is that distribution more than anything else which causes shares to appreciate on the Stock Exchange.

The hon. Member for Scarborough and Whitby raised another point and made a frank admission which, so far, has not been made by any other hon. Member opposite. He said that in making the Surtax concessions last year the Chancellor had misjudged the situation to the extent that he had imagined that these concessions would amount to a considerable incentive but that that had not happened.

I said nothing of the sort. I said that my right hon. and learned Friend the Chancellor was open to criticism on whether he had made a misjudgment. I tried to show that he had made the right judgment. It was, naturally, on the question of incentives that he could be criticised and not on the fairness of tax distribution.

The right hon. and learned Gentleman can be criticised on the incentives, and I should like to criticise him now. This was, of course, the basic argument used by the Government last year, that Surtax concessions were absolutely necessary in order to give to those in our middle and upper management the kind of stimulus which their opposite numbers in the Common Market countries and elsewhere were receiving through their taxation systems and that this would indirectly give a stimulus to the whole economy. That has not happened.

I think that it was my right hon. Friend the Member for Battersea, North (Mr. Jay) who pointed out the other day that, if we were to take the Surtax concessions and what happened to the economy as direct cause and effect, the conclusion would be that the Surtax concessions were disincentives rather than incentives. I would not go as far as that, but there was a good deal of talk last year about the Surtax concessions giving some peculiar incentive which could not be given in any other way in our taxation system. The hon. Member for Scarborough and Whitby was also wrong about the effectiveness as far as unearned incomes were concerned. It is true that a totally unearned income got no concession at all, but a man with £1,000 earned income and £2,000 unearned income received a benefit through the Surtax concessions. He was in no different position from the man with £1,000 earned income and nothing else as far as incentive was concerned, yet, in the former case, the concession was given and in the latter case there was no concession at all.

5.15 p.m.

I hope that what has happened over the last year or so has exploded the idea that there are some peculiar incentives which must be given as an absolutely indispensable pre-condition to stimulus to the whole economy. I do not believe that that is so. Obviously, incentives count a good deal, but that kind of good relationship between incentive, on the one hand, and stimulus to the economy, on the other, does not bear serious examination at all.

If the Government were concerned with giving real incentives they would alter the whole taxation system. They ought to make the cover of the taxation system as comprehensive as they possibly can. The ordinary wage-earner who works overtime and complains to the hon. Member for Barry (Mr. Gower) about the additional Income Tax which he has to pay on his overtime earnings is disturbed and annoyed not because of that, but because he knows that so many other people with very considerable incomes are able to avoid paying their fair share of taxation. That is the real thing that annoys him. It is not so much the additional taxation which he is called upon to pay, though, obviously, no one likes paying additional taxation, but the feeling, which is really endemic throughout the community, that there are very considerable numbers of people who do not pay their fair share of taxation.

Could it not be that this resentment, which I fully accept, is not entirely or purely related to the fact that someone gets a much higher income but to the fact that his mate, who does his overtime work for someone down the road, pays not tax on it?

That certainly happens, but I know very few people who resent the fact that the odd-job man makes a hit of tax-free income on the side. On the other hand, I find that very large numbers of people resent those with very large incomes, more particularly with large sums of capital at their disposal, who are able to enjoy these very high incomes without paying what the vast majority of people consider to be fair rates of tax. That is why there has been such tremendous disappointment with the Chancellor's proposals on the capital gains tax.

Obviously, the tax is not a fully fledged capital gains tax at all. It is obviously something which is so wide open to avoidance that we are really only introducing another category of taxation which has exactly the same fundamental faults as has our Estate Duty system at the moment. It has, apparently, high and even punitive rates and yet, in practice, the yield is really quite small because the opportunities for avoidance are so great.

Has not the reaction been quite different? Is it not a fact that responsible commentators and journals have said that the Chancellor's proposals are much more far-reaching than they had imagined?

It all depends on what one means by "responsible commentators and journals". If what is meant are the Economist, the Financial Times, and other newspapers, then I simply beg to differ in that description as far as this taxation is concerned. I am not talking about journalists, but about people in the country as a whole. The hon. Gentleman really must not confuse financial journalism and public opinion, because they are really two quite different things.

There is considerable resentment about tax avoidance, because the ordinary man's knowledge not of the technicalities of it but of its extent and the facility with which people can manipulate it is growing all the time. It is a hypocritical situation, apart from any-think else, to have this high rate of taxation on the one hand and these wide-open facilities for avoidance on the other. If I had to choose, I would choose to have a lower rate which is effective rather than a high rate which is ineffective. Quite apart from the hypocrisy of the situation, it means that the more honest taxpayer is paying some amount in lieu of the taxpayer who is not so scrupulous about paying his fair share and is willing to do everything he possibly can to avoid paying that share.

Another comment which I should like to make, directly related to Income Tax, is a criticism of a tendency during the past few years in the matter of personal allowances and reduced rate relief. Quite apart from the general consideration, the actual working out of taxation liability on particular classes of the community is terribly important. The Chancellor has been able to get considerable rises in taxation revenue from Income Tax over the last few years by the simple device of not increasing personal allowances to take account of the increase in the cost of living. If we compare personal allowances today with what they were ten years ago and then compare them in real money terms we find that they are worth a good deal less today.

The same is true of the reduced rate relief. A point which is not often noticed is that the reduced rate relief ought also to be increased as the cost of living goes up and the value of money goes down. If we compare the situation today with 1952, to take only one example, on the first £400 of taxable income, taking account of the reduced rate relief operating in 1952 and in 1962, the amount of taxation reduction is only £3, yet we know that £400 in 1962 is worth considerably less than it was in 1952. By this simple device of not increasing personal allowances to make up for falls in the value of money and doing the same with the reduced rate relief, the Chancellor is winning considerable sums of money from among the lower wage earners.

This is a point which we shall be coming to in later discussions of the Bill. It is extremely important from the point of view of the equitable distribution of income taxation. It is also another reason why we have the kind of resentment which has already been mentioned in the debate. The ordinary man at about the average wage who does a bit of overtime should not have to pay such a high marginal tax at that level of income that he feels considerable resentment about it.

The fact that many such men do feel resentment is symptomatic of the Government's failure to bring these basic allowances, which apply to everyone, up to date in accordance with the value of money today and indeed in accordance with the level of wage rates today. We shall be able to go into these questions in more detail later, but it is a fundamental criticism of the Clause and of the Bill as a whole that the Government have failed to do this and that ordinary people are becoming more and more disgusted with a situation in which they feel that they are paying far more than their due and fair share of the taxation burden.

I have found this a most interesting discussion. We are considering a Clause which maintains the present rate of Income Tax in a Budget which makes some considerable imposition by way of indirect taxation and further maintains both some recent increases in indirect taxation and the opportunity in the Chancellor's hands to add by administrative Order to those increases in the coming year. We are discussing the Clause in the light of a Budget which leans very heavily in this Bill in favour of increases of indirect taxation as against any dealings at all in direct taxation. The one relief Clause, which we shall come to later, is very small by comparison with what is put on by way of indirect taxation.

One asks oneself the reasons for this. There seem to be two, which I hope the Financial Secretary will deal with if he replies to the debate. One is that the Government and the Conservative Party are doing what they have done regularly at recent elections, that is postponing any remission of direct taxation to just before the election. There was a drop in the rates of Income Tax for the 1955 election and another drop for the 1959 election. When I look at the Clause I conclude that, whatever else it means or does not mean, it means that the Government do not intend to have an election in the coming year. So much is fairly clear.

Whether that is the Government's only motive is another question. The only other possible motive is the one which was put very clearly by my hon. Friend the Member for Sowerby (Mr. Houghton) in his remarkably interesting, eloquent and able opening speech. He pointed out what most of us know generally, and gave chapter and verse for it, that among other comparable countries we are a country of direct taxation rather than of indirect taxation, and that generally we have leaned in the past, and still lean, on direct taxation as our principal instrument.

It is quite clear from what my hon. Friend said, and from what one sees in the terms of the Treaty of Rome, that there will be considerable pressure, both in the terms of the Treaty itself and in the negotiations which one supposes will precede our entry, if we do enter, the Common Market, to make us equalise our system to something more like that which is prevalent in the other European countries concerned. Therefore, presumably, there is pressure, as far as it goes, to urge upon us to reduce direct taxation if we can and certainly to increase indirect taxation. I should like to know whether that has had any part in shaping the Finance Bill and the Budget statement which preceded it. It is something which the Chancellor, or whoever replies on behalf of the Treasury, ought to say quite clearly and definitely to the Committee and, through us, to the country.

I turn now to the general question, which I shall take shortly, whether there ought to be a reduction or an increase in the rate of direct tax at the moment. I agree with all of my hon. Friends who have said that we cannot rely entirely on direct taxation. Undoubtedly we must have indirect taxation too. I think there can be no doubt about that in the foreseeable future. I cannot visualise a Labour Chancellor or any other Chancellor repealing all the indirect taxes and trying to find their yield in some fantastic increase in direct taxation.

5.30 p.m.

But that is not really the question we are considering. We are considering something rather different. Here is a Bill which makes considerable increases in indirect taxation and makes no change in the Income Tax rates. Quite apart from anything else, what criticism can properly be made, and should be made, of that line of approach to the financial problem of today? I will say one thing at once. Hon. Members seem to me to speak as if the yield of a tax was determined solely by the figure at which the tax is placed, whereas it depends, particularly in the case of Income Tax, on the expansion or failure to expand of the country.

In recent months we have had a conspicuous failure to expand in general at a time when all the pressure from the Government was towards expansion. It is not merely a question of months; it goes back over years. I know that there are slight signs of an improvement now. But the yield of direct taxation, even more perhaps than that of indirect taxation, depends on our success in promoting the expanding economy for which we on this side of the Committee have been constantly pressing one Conservative Chancellor after another. We hope that we have found a convert in the right hon. and learned Gentleman, but, whatever he says about it, some of his recent actions do not seem to support his complete and sincere conversion.

Coming to the more general question, it seems to me that those of my hon. Friends and other hon. Members who have said how important it was—my hon. Friend the Member for Glasgow, Craigton (Mr. Millan) said this—to get at the effective taxable capacity of people who were paying direct taxes are absolutely right. I do not think one can regard changes in the rate of Income Tax or the refusal of changes in the rate of Income Tax without a passing wish —we shall come to this matter in more detail later—that the base of taxation should be broadened without too much regard to what in modern society proves to be exceedingly artificial distinctions between capital and income. I am not saying that there is not a real distinction in fact, but many of us, and, I think, most people in the country, would regard a man who was making capital gains under modern conditions as getting something very like an income out of it and yet escaping taxation. That is the most obvious way of broadening taxation at the moment.

The system is not altogether satisfactory not only from that point of view. We are not talking at the moment about the effective rate. The effective rate is just about 2s. 6d. in the £. Anyone who is interested in this will find it dealt with in the last Report of the Commissioners of Inland Revenue, Cmnd. 1598. What we are talking about is a standard rate which is, of course, of fundamental importance in one sense in that it is the rate which governs any number of reliefs and taxation itself. It is perhaps an instrument rather than the last word in taxation. The effective rate is what actually matters to the people concerned.

Looking at the way in which direct taxation falls. I still find myself much shocked by two things. Both arise from the same Report of the Commissioners of Inland Revenue. One arises from the table given there. This table occurs year after year. It can be found on page 45 of the last Report. It shows a number of individuals paying tax which varies comparatively little from 1951–52 to 1960–61. But during that time the number entirely relieved from taxation by allowances has been more than halved while the number chargeable to tax has suffered a considerable increase.

It is very easy to say that this is the result of having a prosperous community or the result of inflation, whichever way one likes to look at it, but the fact remains that in present conditions the exemptions from taxation, which constitute a very important side of the progressive element in it, are becoming less and less effective with every year. Therefore, to that extent direct taxation is by no means as progressive as I think it ought to be.

The second thing which shocks me when I look through the Report is the extraordinarily low level at which people are made to pay direct taxes now. One hon. Member said that everybody ought to pay direct taxes. There are very few people who get out of it. If we can take two single people with equal earnings and find that they are actually paying Income Tax though their joint income is only £400 a year, I feel that one is driven to the conclusion that there is a good deal yet to be done to make direct taxation more progressive.

The conclusion to all this, in my opinion, is that rather than seek changes in the rate of Income Tax, we should follow the precept so eloquently put to us by the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke) and not look for votes before a General Election by reducing the standard rate of Income Tax. The process results in much greater benefit to the substantial taxpayer than to the impoverished taxpayers to whom I have just referred. Instead, we should look to broadening the basis of taxation and revising our views about the effective difference between capital and income for this purpose on the one hand and, on the other 'hand, to the reliefs and exemptions from Income Tax which are so conspicuously omitted from this Finance Bill.

Therefore, I come to the conclusion that I 'have certainly no wish to put the standard rate up this year, nor have I any wish now or in the immediate future to bring the standard rate down. What I would far rather do is to broaden the basis on which Income Tax is levied and make all the concessions possible at the bottom of the scale, particularly to people who are earning such very small amounts under modern conditions as those appearing as taxpayers in the table to which I have referred.

I agree that the amounts paid are not large, but one has constantly to remember in taxation matters, commonplace though it may be, that it is the small taxpayers paying small amounts who may well suffer the greatest practical hardship in the payment of taxation. My conclusion, therefore, is that I, for one, would not divide against the Clause.

We have had a very interesting debate in the sense that I hope we may at least have persuaded the editor of the Guardian that we do not spend our entire time in Committee on the Finance Bill talking about tea, coffee, sugar and pool betting.

There is one thing that I slightly regretted this afternoon. The last time we had a debate of any length on the subject dealt with in this Clause, we had with us in full voice my hon. Friend the Member for Kidderminster (Mr Nabarro) who has been absent this afternoon. I shall try to answer the speeches which have been made and the very large number of points that have been raised during the debate.

The hon. Member for Sowerby (Mr. Houghton) took my right hon. and learned Friend the Chancellor of the Exchequer rather vigorously to task for his remark that all taxes are odious, and suggested that that presumably meant that the Chancellor had a strong bias against the whole of the public sector of the economy. As the hon. Gentleman knows, the proportion of the national income going to the public sector has been rising in recent years, and although it is the Government's belief that this proportion must be kept in some kind of check in order to leave resources available for other forms of economic activity, I do not think my right hon. and learned Friend has ever denied in any of his speeches that there are certain aspects of public expenditure, if not others, which ought to rise. One thing which would certainly be odious would be if ever we had a Chancellor who took the line that all income rightly belonged to the State except that which the Chancellor allowed us to have. That would be an odious attitude to take.

There was one other point in the speech of the hon. Member for Sowerby that I should like to take up. I think that he slightly misunderstood one argument about Surtax. Surely the point is not just what tax someone earning £3,000 a year is paying, but how much extra earnings he can keep. That is just as important. I made the point last year that if a man earned an extra £1,000, he could, as a result of my right hon. and learned Friend's proposals, keep not £539 but £699. That was slightly more generous than in Germany but considerably less generous than in the United States. I consider that, when spreading the weight of taxation, we must always bear in mind not just the tax that people pay on a particular income, but the extra amount of earnings that they will be allowed to keep as a result of extra effort.

My hon. Friend the Member for Somerset, North (Mr. Leather) said that he wished that Income Tax could be set out differently. I can assure my hon. Friend that if he has any ideas about this and would like to discuss them with the Economic Secretary or myself, we should be very interested to hear what he has to say.

5.45 p.m.

My hon. Friend the Member for Scarborough and Whitby (Sir A. Spearman) raised two or three points to which I should like to reply. I agree with him about the effectiveness of Income Tax as a weapon. On the other hand, I think that he will agree that it is not a weapon that can be brought into play very quickly. I recall what the hon. Member for Grimsby (Mr. Crosland) said about that in his speech on the Finance Bill last year. One of the very strong reasons for having an indirect tax regulator is that it can affect the level of demand quickly. But I agree with my hon. Friend that there is much to be said for the level of the standard rate being one at which we can put the standard rate up on occasions as well as down. This is a very strong argument for not having a standard rate at too high a level all the time.

My hon. Friend raised a point about dividends and got into some controversy on the effects of Profits Tax. I must say the same as the hon. Member for Glasgow, Craigton (Mr. Millan), that it is going too far to say as yet that two rises in Profits Tax from 10 per cent. to 15 per cent. over two years will exert no effect at all on share prices and dividends in the longer run. I was interested in the hon. Member for Grimsby's conviction that Profits Tax tends to be passed on. A good deal of rather conflicting evidence has ben printed about this. I am not quite sure that it is respectable to quote Mr. Kaldor on Income Tax in his book "An Expenditure Tax", in which he had contrary evidence of this kind which was quite interesting. But I do not think that we should dogmatise too much on the subject of what is the effect of Profits Tax.

Mr. Kaldor in his book takes very strongly the view I was expressing—almost dogmatically so. I was stating his views and I hope that I am not being misrepresented.

I apologise. My recollection was the other way. I accept what the hon. Gentleman says.

My hon. Friend the Member for Scarborough and Whitby referred to Surtax relief and mixed incomes. On this point, I think that my right hon. and learned Friend the Chancellor was quite certainly right. If a man has £4,000 a year earned income and an investment income of £100 a year, could it really be right to exempt that man's earned income completely from tax but to tax the £100 a year investment income at the rate of 25 per cent.? I cannot see how that can possibly be sensible from the point of view of encouraging saving in the economy. It would be possible to argue against my right hon. Friend's proposal as a whole, but to suggest that we should treat mixed incomes in a different way cannot possibly he helpful to saving.

The hon. Member for Blackburn (Mrs. Castle) said some hard things about the Government's policy and that our whole system of direct taxation was overwhelmingly regressive and that we were having a steady movement away from progressive taxation, and this applied particularly to the financing of health service expenditure.

I do not agree with the hon. Lady that our present system of taxation is moving very rapidly in a regressive direction. We had before the war a very steeply progressive rate of Surtax in this country. The top rate of Surtax before the war left a man with 5s. in the £ on all income above £30,000 but we find that today, after my right hon. and learned Friend's proposals, the top rate of Surtax leaves a man with only 2s. 3d. in the £ on all income above £20,000. It can, therefore, be demonstrated that our direct taxation is a great deal more progressive than it was before the war.

The hon. Lady is also quite wrong about the finances of the National Health Service. If we look over the last three or four years, gross expenditure on the Health Service has risen by £160 million approximately from £714 million in 1959–60 to £877 million which is the estimated figure for the current year, the hon. Lady will find that the total health expenditure has gone up by £163 million and that the total contribution to that expenditure from the stamp and from the charges has gone up by only £68 million. In fact the proportion of Health Service expenditure financed from the general proceeds of taxation has been advancing more rapidly than the proportion of finance from the health stamp and other charges.

The hon. Gentleman will realise that I was talking about the last ten years of Conservative Government and not about comparisons before the war, because the whole effect of the Labour Government's taxation policy was to make our taxation more progressive. There has been a reversal of that process in the last ten years.

The hon. Lady must think harder about this. To say that seventeen years after the war we should have rates of direct taxation just as high as in the first five or six years after the war seems an extraordinary thing to say. We had in 1951 when Income Tax was put up by the Labour Government a very severe emergency. If we look at the system today, we have a very much more steeply progressive system than before the war, but I am glad to say that seventeen years after the war it is possible to have a standard rate of tax lower than it was a few years after the war. I should have thought that would be welcomed by the hon. Lady.

What is not welcome is that the Government have more than doubled the poll tax of the National Insurance contribution.

Although the National Insurance contribution has been raised, as have the prescription charges and other health charges, the proportion of the total expenditure financed from direct taxation has gone up and not down. No one could possibly say that today the direct taxpayer is not making a full contribution to the finances of the social services.

I think that the hon. Gentleman would agree, judging from what he said at the time the poll tax was introduced, that the extra shilling on the National Health charges was a tax and, for this purpose, a direct tax of the most regressive character because it falls equally on everyone irrespective of earnings.

What the hon. and learned Gentleman says is perfectly true. On the other hand, the fact remains that at a time when the gross Health Service expenditure has risen by £163 million the total amount received from the stamp, or the poll tax, if he likes to call it that, which I agree is a form of tax, from prescription charges and other forms of charges, has gone up by only £68 million. If one looks at these figures, there is no doubt that the gross Health Service expenditure has been rising a good deal faster than the share of it which it is financed by the stamp and the charges.

My noble Friend the Member for Dorset, South (Viscount Hinchingbrooke) asked, in effect, whether the Government still put a high priority on reducing direct taxation. Certainly they do. But I say to him—and here I am sympathetic to much of what was said by the hon. Member for Craigton—that, when considering priorities for tax reductions, one has to think of priorities within a particular kind of taxation. I should not like to say anything beyond this about the priority which the Government will adopt, when economic circumstances permit it, in reducing the standard rate or in increasing direct tax allowances. Obviously, I cannot anticipate any future Budget statement on this point. But my right hon. and learned Friend places high priority on reductions in the general field of direct taxation as circumstances permit.

The hon. Member for Grimsby, in an interesting speech, talked about the wide gap in the standard of living. I do not quarrel in general about this, but would he not agree that, whereas in the old days it was common to think of the standard of living in the image of a pyramid, today, in our modern society, as is the case with a number of societies in the western world, we are moving into something more like a diamond? The gap is taking on a rather different shape from what it had in years gone by.

The hon. Member had a lot to say about taxes in favour of property and against income. I hope that I am not scoring unfair points when I say that one could use part of his case as an argument in favour of the Surtax concession made by my right hon. and learned Friend last year. Certainly, that concession in itself will have done something to lessen the bias against income.

I wish to make two points about the ratio of direct to indirect taxation. First, I wish to explain the difference in the figures which I used in the Budget debate and some which the hon. Member for Cardiff, South-East (Mr. Callaghan) has quoted. I quoted the figures for the proportions of total Government revenue collected from direct taxation as 50·8 per cent. in 1951 and 53 per cent. today. These figures are from the totals which include, as direct taxes, only the Income Tax, Surtax and the Profits Tax, and, as indirect taxes on expenditure, all Customs and Excise duties, motor vehicle duties and stamp duties. The figures I quoted excluded altogether death duties, which are taxes on capital.

The hon. Member quoted from Table 2 (b) of the Board's 104th Annual Report, which shows the proportions of total Government revenue collected by the Inland Revenue Department, and, of course, the Inland Revenue total includes both death duties and stamp duties. That explains the discrepancy between us.

But in view of what the hon. Member for Grimsby said about Profits Tax, and as we are specifically debating Income Tax, perhaps I may quote Income Tax and Surtax as proportions of total tax revenue. For 1951–52, a year in which Income Tax was put up, the proportion of tax revenue taken by Income Tax and Surtax was 43·3 per cent. In 1960–61 it was 45·7 per cent. and in 1961–62 it was up to 46·2 per cent. In this financial year, it will be 45·2 per cent.

It is lower in this financial year because of the regulator which was imposed last year, and, as the hon. and learned Member for Kettering (Mr. Mitchison) said, because of the consolidation of much of that revenue in the Budget. The fact remains, however, that as a proportion of tax revenue, Income Tax and Surtax between them take a bigger proportion today—not a smaller one—than in 1951–52. Equally, they take a slightly smaller proportion than last year.

I was interested in what the hon, Member for Craigton said about indirect taxation and how, in his view, any Government pledged to high social expenditure would have to rely upon it to a high degree. That is true. It is also true because one must, in any Government pledged to high social expenditure, have sufficient fiscal powers to regulate the economy pretty quickly as well. In dealing with personal allowances, I have already stated that the Government realise the importance, as economic circumstances permit, of considering the whole range of direct taxation.

I want to revert to the point that the percentage of taxation taken by Income Tax and Surtax has gone up. Will he explain that? Is not the reason the one I have mentioned —that the personal allowances have not gone up in balance with the falls in the value of the £? Is not that the reason why he is able to quote these figures to us?

That may be true, and it was natural that the prospective increase in yield on direct taxation was particularly high last year. It was very nearly £400 million. That reflects, to some extent, the fact mentioned by the hon. Gentleman, but it also reflects the fact, as my right hon. and learned Friend has often reminded us, that personal incomes on the Whole rose 9½ per cent. in one financial year and there was a general rise in salaries in the 1960–61 period. I merely make this point to show that it is false and unfair to suggest that under the Conservative Government Income Tax and Surtax have not been playing their full part in financing public expenditure.

The hon. and learned Member for Kettering asked me to anticipate not only my right hon. and learned Friend's Budget Statement but the date of the General Election. I must ask to have notice of that. But I want to reply right away to one point on which there should be no misunderstanding. Do not let anyone think that if we succeed in our negotiations with the European Economic Community, other people are going to dictate to us our standard rate of Income Tax. I am sorry that the hon. and learned Gentleman should have given any encouragement to that school of thought, because there is no truth in that suggestion.

What my right hon. and learned Friend indicated in his Budget speech was that, in considering the general structure of indirect taxation, we needed to consider the crowning aim of making the British economy competitive. That is quite different from suggesting that other people are going to dictate our rates of Income Tax.

Is not the hon. Gentleman aware of the position in the Community? At this moment, a committee is studying the harmonisation of taxation, starting with indirect taxation, later moving to direct taxation. Are not the member Governments of the Community seeking to have equivalent taxation burdens throughout each country, with taxes of a similar type, so as to equalise competition?

I have no doubt that, whether we join the Community or not, the member nations will have every incentive to discover one another's taxation practices, which is a good thing, and that what are plainly discriminatory aspects will have to be considered carefully. But that is another matter quite different from suggesting that we are going to be dictated to about our rates of direct taxation.

A number of hon. Members, including my hon. Friend the Member for Scarborough and Whitby, suggested that if we have growth in the economy these problems of taxation might be very greatly mitigated. But if the growth and the increased production were simply a matter of employing more people for longer hours, putting a greater strain on our resources, it might well be that we should have to have not laxer Budgets but more severe ones. But if the growth were to mean getting more value out of a given volume of labour and materials, then, under those conditions, the burden of taxation could be reduced.

That is another way of saying that it is in the interests of the whole community and not just of one section that we should get as much value as we can out of a given level of economic resources. The hon. and learned Member for Kettering talked about poorer people, and a number of hon. Members have referred to those least well off and their tax problems. But let us not forget the other side of the coin—that this taxation finances a vast volume of social expenditure of special benefit to the poorest in our society. I have already talked about health expenditure. Exactly the same is true about expenditure on education. In 1951–52, we were spending a total of little more than £400 million a year on education. In 1960–61, the figure was £945 million and it has risen steadily since then.

This expenditure is of special importance to a number of lower-paid taxpayers. [HON. MEMBERS: "Why?"] Certainly. Agricultural workers, who are among the lower-paid workers in the community, find the development of county secondary education something of very special importance to them. In considering this high level of taxation, let us never forget that those who are lower-paid workers, quite apart from the taxes they pay, gain a disproportionate benefit from the expenditure which this taxation is designed to support.

I think that I have answered at any rate the greater number of the points which have been raised in the debate, and I hope that the Committee may now be ready to pass this Clause and proceed to the next.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Clause 8—(Increase Of Reliefs For Small Incomes)

6.0 p.m.

I beg to move, in page 9, line 37, after "incomes)", to insert:

"the limitation by age shall no longer have effect, save in relation to claimants to whom the next following subsection applies; and accordingly, save in relation to those claimants, the said section thirteen shall have effect with the omission from subsection (1) thereof of the words "if he proves that at any time within the year of assessment either he or his wife living with him was of the age of sixty-five years or upwards "and, in paragraph (a) of that subsection, of the word "also" and (at the end of the paragraph) the word "and", and of paragraph (b); and with the substitution in sub-paragraph (i) of the said paragraph (a) of the words "the year of assessment" for the words "that year".
(3) This subsection applies to claimants not entitled to relief under the last foregoing subsection; and in relation to those claimants, in the said section thirteen of the Finance Act, 1957".

With this Amendment we are discussing that in page 10, line 3, at the end to insert:

(3) Subsection (3) (which relates to pay as you earn arrangements) of the said section thirteen of the Finance Act, 1957, is hereby repealed.

These Amendments have a simple purpose—to increase the number of people at the bottom end of the income scale who do not pay tax. Their purpose is that any single person earning less than 5 guineas a week, roughly, and a married person without dependants and earning less than £8 10s. a week, shall not pay Income Tax. That seems to be a proposition which should command the support of the whole Committee. I cannot believe that anyone would seriously argue that a married couple earning less than £8 10s. a week have any sort of margin with which to pay Income Tax, as well as the increasing amount of indirect taxation which they are now called upon to pay.

I have worked out roughly what I think they pay now. As far as I can make out, a single person earning 5 guineas a week pays roughly £8 5s. a year Income Tax and a married couple earning £8 15s. about £14 a year Income Tax, just over 5s. a week. These people should be exempt and the Committee ought to make provision for their exemption. It would be ridiculous to argue that the state of the country is such that we cannot afford to do that.

I acknowledge that the Clause to which this is an Amendment increases the amount of the exemption for people on small incomes. I am very grateful that the Government have moved in this direction, a direction which was pressed on the Government from this side of the Committee last year and rebutted with ferocity, in so far as he is capable of ferocity, by the Financial Secretary. In arguments which will no doubt be repeated in this debate and which I therefore do not propose to repeat, he told us that it was not possible for this exemption to be made. The Government have now found it possible although the total amount of relief in relation to the total of the Budget is tiny. The increase of the exemption limits will cost £1½ million in a full financial year and the age exemption £2½ million, so that the relief which the Government are giving to old people who come within these extended limits, and for which every person whose total income is lower than £400 a year will be grateful, is £4 million.

My proposition is simple and I need not spend much time on it. It is simply that every single person earning 5 guineas a week and every married couple earning less than £8 10s. a week should not pay Income Tax. In considering the composition of these groups, the Committee ought to weigh the fact that, according to the Annual Report of the Commissioners of Inland Revenue, many of these people have dependants. It may be argued that single persons earning up to 5 guineas a week are probably young adolescents who would spend the money on lipstick or "pop" records and so on, but that is far from the truth.

Table 70 of the Annual Report of the Commissioners of Inland Revenue for last year—I cannot make the exact comparison, but it is close enough as tables go—shows that there are more than ½ million single people who are earning £10 a week or less and who have children or dependants. I cannot go lower than that, but that points the problem. There are 700,000 married couples at the level of £9 to £10 a week who have children or dependants. That is a substantial figure.

I am ready to accept, and no doubt the Financial Secretary will say, that those people do not pay Income Tax because the child allowances relieve them from it, but married couples without children where the wife is not working are suffering considerably from the present burden of taxation. My hon. and learned Friend the Member for Kettering (Mr. Mitchison) referred to Table 32 of the Commissioners' Report. I ask hon. Members whether they think it right that over the last ten years we should have increased the number of taxpayers at the bottom end of the scale.

I believe it to be profoundly wrong and unnecessary. The noble Lord the Member for Dorset, South (Viscount Hinchingbrooke) said that he wished that we would get away from this argument and that there were no votes in it. I do not know whether there are votes in it, but coming from such a stern moralist as the noble Lord I am surprised that that should be regarded as a criterion. The simple truth is that this is a gross injustice to the people whom I want to be exempted from the payment of Income Tax.

There is nothing sacrosanct in the figures which I am about to give, but at least there is a pattern of consistency about the exemptions which we have had previously. In the immediate postwar period, in 1945 for example, out of 19½ million taxpayers more than 4 million were free from tax, the people at the bottom end of the scale. In 1951, the figure was 4·4 million, still more than 4 million. The number had risen in the days of the Labour Government but had diminished because of the Korean War, but there were still more than 4 million people in the time of the Korean War who were at the bottom end of the scale and who were exempt from Income Tax because their incomes were regarded as too low.

For the first four or five years of the Conservative Government, nothing was done about this and the figure remained fairly stationary at about 4 million, slightly more or slightly fewer according to the margin of taxation. But, as with so many other things in this country's fiscal arrangement—and it becomes only too clear when one takes the ten year period as a whole, a period during which the Government have done a great deal of harm to the poorest people in this community—since hon. Members opposite were returned in 1955 has been the period when the number of people at the bottom end of the income scale who have been exempted from Income Tax has steadily diminished. The figure of more than 4 million in the immediate post-war years represented about a quarter of the total taxpayers—the figure varied between 20 and 25 per cent.—but today the figure is less than 10 per cent. This country is so poor that we can afford to exempt only 10 per cent. of the people at the bottom end of the scale. According to the last Annual Report of the Commissioners, of a total of 21 million taxpayers, only 1·9 million were exempt from tax, the lowest figure I have been able to find in the records since the war.

It may be said that this is because people are getting wealthier, their incomes are rising, and we should rejoice at the fact that they are now brought upon to pay tax, because it means that their incomes have increased. So has their expenditure. Both have increased, and the simple truth is that whereas we kept a pretty steady ratio and the bottom 20 to 25 per cent. of the population did not pay income Tax, since 1956 the figure has dwindled until now we can afford to exempt less than 10 per cent. of the population, and this is wrong.

I have become a little tired of some of the discussion this afternoon. We have been treating Income Tax as though it were a regulator purely and simply to keep the economy on an even keel, and something to be used to make sure that there is the maximum growth. That has its value, and I am the last to deny that it should be used in that way, but Income Tax has another major purpose, which is to redistribute wealth and to ensure that people's capacity to pay is the measure of what they contribute to the revenue needed by the Chancellor. It is in this respect that the Government have fouled the Income Tax system over the last few years.

The Financial Secretary thinks that he is making, a good point when he says that the direct tax payer is paying his proper proportion of the total social service contribution. May be he is. What I complain about, and I hope that this side of the Committee will concentrate on this, is the fact that over the last seven years the Government have altered the ratio within that total, and that the people at the bottom are paying more while the people at the top are paying less. That is why I said to the Financial Secretary earlier that he ought to be prepared to say now, in answer to the noble Lord the Member for Dorset, South, not that he will reduce the standard rate of Income Tax, but that the Government will exempt the people at the bottom end of the income scale and increase the personal allowances. This was the case made by my hon. Friend the Member for Glasgow, Craigton (Mr. Millan).

When I consider the way in which the Government have hoodwinked the people of this country over the last seven years, I am not surprised that these people are now in revolt because they instinctively feel What has happened even though they do not understand it. Let us consider the way in which relief has been provided. Just before 1959, at a cost of about £230 million, Income Tax was reduced by 9d. in the £. In 1957–58 the relief in earned income to Surtax payers amounts to £24 million. There was, I agree, an increase in child allowance for parents who had children over 11 years of age.

If hon. Gentlemen opposite want to understand what is happening to their fortunes, they should realise that people are beginning to understand that the burden of taxation and the nature of reliefs have over the last few years been spread in such a way that if a person earns over £2,000 a year he does well out of it but if he earns less than £15 a week he does not. Some people defend this distinction. I say that it is wrong and shall continue to say so, even though some of my hon. Friends regard this is reactionary.

I believe in a direct system of taxation. I believe that such a system should be related to capacity to pay and to the ability of people to bear the burdens placed on them. The Government have deliberately twisted the fiscal system of this country during the last few years to ensure that those at the bottom of the scale pay more and those at the top pay less. That is why I want the Committee to decide whether we should ask a single person earning less than £5 5s. a week or a married couple earning less than £8 10s. a week to pay Income Tax.

I think that I have made the case for these Amendments. My hon. and learned Friend the Member for Kettering (Mr. Mitchison) drafted these Amendments with considerable ingenuity, because he has managed to graft on to something dealing with people over 65 an Amendment dealing with people under 65. I am extremely grateful to my hon. Friend. There is a social justification for this Amendment. There is a great deal of real poverty in the country today. There are a lot of people who earn good wages but who are still thoughtful of the problem that exists. We do not all visit council houses in which the tenants serve cups of tea on silver trays and ask us to stay for cocktails, which apparently is what happens when the noble Lord goes canvassing, I have been into many council houses, as I am sure hon. Members on both sides of the Committee have, which are sparsely furnished, especially if there are children in the family. My objection to what the Government are doing is that they are increasing taxation on necessities such as furniture and carpets. The price of these articles is being increased, and the Government are altering the burden of taxtion so that the poorer people are not even exempted from this increased indirect taxation.

6.15 p.m.

Something pretty sinister is happening. I choose that word sinister and I mean it. It is sinister in this sense, that a number of hon. Gentlemen opposite, those who probe into these things, want to reduce the rate of direct taxation as much as they can. They say that the thing to do is to tax spending and not earings because to tax earnings is a disincentive whereas if spending is taxed it is left to the individual to decide whether he will in fact pay any tax.

That argument is rubbish when applied to the necessities of life. There is no doubt that the Government are moving towards greater inequities in incomes between those at the bottom and top of the scale. This Amendment is an attempt to resist that movement by the other side of the Committee and by the Chancellor, and to exempt those who are less able to afford this increased direct taxation, which in days gone by they were not required to pay. It was not until we became a so-called affluent society and were told that we had never had it so good that those whose need was greatest and whose incomes were the lowest were called on to pay this direct taxation.

As my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) has rightly said, this taxation is causing great concern amongst the poorer section of the community who are unable to afford this tax and consider it to be extremely unjust. Nevertheless, if that injustice stopped there one could understand it, but it seems to be growing.

My hon. Friend referred to the inequity between people in the bottom and top income groups. On 14th June last year there was a heated discussion on this problem. My hon. Friend the Member for Sowerby (Mr. Houghton) gave one or two clear examples of how this question affected people. I admit that the Government have made some slight improvement in the position, but we want them to go considerably further. That is why we have tabled this Amendment.

I am concerned particularly about the effect that Clause 8 will have on old-age pensioners. We talk about giving something to Surtax payers, and to one or two other categories of people, but the Government have failed to give any real help to old-age pensioners. A short time ago the position of people who reached the age of retirement this year was brought to my notice more forcibly than ever. An old man of 65 ceased work and got his retirement pension, but he discovered that, later on, when he had to make returns of his Income Tax he was brought within the limits of taxation. Surely it is a grave injustice that we should call upon such people to pay Income Tax. This man started his working life at the age of 12 and worked for fifty years in the pits. Then, when he retired after all those laborious years, he found not only that he had paid for his pension, but that it was subject to Income Tax. Surely, this country, with its increased prosperity that we boast about from time to time, can afford to exempt such people.

I re-echo what my hon. Friend the Member for Cardiff, South-East said. It is about time that we exempted every woman over the age of 60 and every man over 65 from paying Income Tax. We have sufficient money in the till to do that. When we last debated this matter we extracted from the Economic Secretary the fact that it would cost about £3¼ million to exempt these people. Since that time there has been some improvement in our economy—although I know it has slumped a little recently—and we ought to be able to stop asking these people to suffer to this extent. Surely we can lift our minds in the right direction and say to them, "You have served the country. You have served your day and generation. You are travelling towards the western shore of life. We can give you help by the way." If we did that we should be giving them some reward for the services that they have rendered.

I am amazed that the Government have not made a concession in this direction. We are asking only for a little. We are like Lazarus sitting at the table of the rich man. We are thankful for any crumbs that may fall. This section of our people has been ignored in the past, and greater inequalities in taxation are beginning to reveal themselves. I support the Amendment, as I have done on previous occasions, and I hope that the Government will increase the exemption limit.

I support the Amendment. I wish that I could speak with the same passion as did my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan), because I feel it, but am reluctant to give way to that kind of thing in the Committee, since it is apt to be misunderstood. My hon. Friend did justice to the case in the language he used.

Last week, whenever an hon. Member on this side of the Committee mentioned Surtax he received a waspish reply from the Treasury Bench. Government spokesmen asked, "Do you believe in levying Surtax on £700 a year?" By that I understood them to mean that they think that £2,000 a year now will provide about the same necessities of life that £700 a year did before the war. I do not intend to quarrel with that estimate; it seems to accord with the facts of life as revealed to me by my housekeeper.

Earlier, my hon. Friend the Member for Wallsend (Mr. McKay) made comparisons between the average wage of wage earners before the war and the average wage today. He seemed to think that money wages had advanced about four times in the period between then and now, and therefore that if we take the man now earning £15 a week—which my hon. Friend gave as the present average wage—we should regard it as comparable with a wage of about £3 15s. or £4 a week before the war.

My hon. Friend the Member for Cardiff, South-East will realise that I am trying to proceed on what appeared to be accepted by the House. I have my doubts whether the problem does not become greater the lower one goes in the income group. Before the war no one would try to defend an argument for bringing into the Income Tax group weekly wage earners with two or three children to support. That is my reason for supporting the Amendment. When people are told that they have never had it so good some woman—more plucky than a man—mentions how much it used to cost to run a family before the war and what is costs now. Such housewives do not find that the present standards have improved for them.

Replying to the last Amendment the Financial Secertary said, "Think of the social services that people get now. They get improved education, especially in villages." I am very glad that they do. I strove hard to get a better standard of education for them, and there is still much to be done before we can rest content on that score. All these things create a living standard that I would have hoped would be generally welcomed. They make a call on the financial resources of the family to an extent that was unknown before the war.

I want to see a rise in the real standard of living of wage earners and also of small salary earners. In these days the small salary earners often find that their costs are constantly increasing. Season ticket rates are raised; those who are too proud to live in a council house, and are buying a house, find that the mortgage interest rates continue to rise, and then there is a by-election in Orpington, and everybody says, "Of course, that is a mere protest." I hope that the Committee will recognise the justice of the claims put forward by my hon. Friend, merely that on the facts as we know them the lower wage earners and lower salary earners have become to a far greater extent than others, upon whom we should not waste so much sympathy, the victims of inflation and the difficulties that confront people who are faced with a rising standard of life.

I hope that the Government will be able to accept the Amendment, for I am certain that it is an attempt to obtain social justice, the necessity of which ought to be recognised.

6.30 p.m.

I am sure that those hon. Members who watched the hon. Member for Cardiff, South-East (Mr. Callaghan) listening, not absolutely patiently, to the discussion on the previous Clause, were glad that he was able to make the speech which he did on this Amendment. I know that strong feelings exist on this subject, and I do not want to say anything which would be jarring to the Committee. But after listening to the hon. Member for Cardiff, South-East, I was for a moment, reminded of the first remark ever made in this Chamber by my right hon. Friend the Member for Woodford (Sir W. Churchill). In an answer to Mr. Lloyd George, as he then was, my right hon. Friend said, The right hon. Gentleman, instead of making his violent speech without moving his moderate Amendment, might have done better to move his moderate Amendment without make his violent speech."

It is not true to say that those earning £15 a week or below come off really badly under our present tax system. There was a letter in The Times this morning about the matter. If one looks at the table published in answer to a Written Question on 7th May, one will find that the hon. Gentleman's argument is not borne out. I will quote but one figure to the Committee. Let us take the case of a man who is earning £1,000 a year today. Ten years ago he would have been earning £767 a year, and, therefore, I will refer to a person earn- ing £1,000 a year today as earning roughly £15 a week—£780 a year—in 1951–52. It is a fact, in acordance with the table given in answer to a Written Question by the right hon. Member for Middlesbrough, East (Mr. Bottomley), that that man who was paying 11s. of his income in tax in 1951–52, is paying a little less than 10s. today. So, with respect, one must not exaggerate that point.

I do not agree with that comparison. I absolutely disagree with the whole thing. What is the point of saying that a man with £1,000 a year today would have been earning £767—or whatever the figure was—ten years ago? I am not making that point. The point I am making is that if a person had £1,000 ten years ago he was paying less tax then than he would be paying now. and we cannot get away from that proposition.

If the hon. Gentleman turns to columns 15 and 16 of the OFFICIAL REPORT of 7th May, he will find that he is not right. The reason is the decision of the present Home Secretary in 1952 to increase the unearned income fraction from one-fifth to two-ninths Which made a very big difference.

If I may now go on—

May I now come to the Amendments? Their object has been clearly explained to the Committee.

As the law now stands, the age exemption, originally introduced in 1957 by the present Minister of Aviation—I looked round then, because this is a point upon which my hon. Friend the Member for Tynemouth (Dame Irene Ward) feels strongly—grants exemption from Income Tax to single persons of 65 or over in all cases where the total income does not exceed £275, and to a married couple where either husband or wife is 65 or over, if their joint income does not exceed £440.

The proposal in Clause 8 of the Bill is that these figures should be raised to £300 for single persons and £480 for married couples. The first Opposition Amendment—I join in the congratulations to the hon. and learned Member for Kettering (Mr. Mitchison) in the drafting of these Amendments—is designed to make a similar exemption available up to the old pre-Budget limits for those who did not possess the age qualification. Hon. Members may feel that the style of drafting is just a shade obscure, but it is certainly ingenious and there is no doubt about what the Amendment is designed to do.

I think that the hon. and learned Member for Kettering may have nodded a little in relation to the second Amendment, which is intended to be consequential. In practice, I do not believe that it would have any effect.

The cost of this proposal, as drafted, would be £3½ million in 1962–63 and £4½ million in a full year. We have been told, perfectly fairly, that in the view of hon. Members opposite an increase in tax allowances generally is overdue. Later, if it is selected, we may be discussing a new Clause designed to increase both the basic single and married personal allowances. I should welcome a debate on that subject. I think it important from the point of view of the tax structure generally. But this afternoon we are dealing with the more limited, though certainly important, point of whether or not we should have a special tax relief in favour of small incomes as such.

Quite apart from the question of cost —I do not want to rest my argument purely, or even mainly, on considerations of cost—I believe that there are a number of arguments against a special tax relief in favour of small incomes as such. Even if my right hon. and learned Friend the Chancellor of the Exchequer had £4½ million to give away, I do not consider that this proposal deserves the degree of priority which the hon. Member for Cardiff, South-East accorded to it.

In the first place, the ordinary reliefs applicable generally to all taxpayers already have the effect of imposing only a relatively small liability on the smallest incomes. As the Committee knows, the first slice of assessable income goes free of tax in accordance with the general scheme of personal allowances. Then there are a number of reduced rates which affect quite considerable bands of income. While I know that it is sincerely felt by some hon. Members—perhaps they are not entirely on one side of the Committee—that the reduced rate bands of income need revising, it is the fact that from both points of view the position of taxpayers with small incomes was improved considerably since 1951.

The single person's allowance has risen during this period from £110 to £140; the married person's allowance has risen from £190 to £240; the earned income fraction has risen from one-fifth to two-ninths—with respect, I think this the most important change—and the child allowance from a flat allowance of £70 to a sliding figure of £100 for a child up to 11; £125 for children from 11 to 16 and £150 over 16.

Just now, I did the hon. Gentleman an injustice. If he compares the adjustment with 1951–52, there is something in his argument although people are still worse off, taking into account the National Insurance contribution. But the point I am making, and the one I made in my speech, and the one to which I should like the hon. Gentleman to address himself now, is, what has happened since 1956–57, since when a great deal of personal tax has been given away, running into hundreds of millions, and practically nothing in personal allowances and exemptions?

While I am on my feet, may I ask the hon. Gentleman what he thinks—if the Chancellor had £4 million to give away—would take higher priority than the exempting of married couples earning less than £8 a week? The hon. Gentleman said that he did not necessarily think that, had the Chancellor £4 million to play with, it should he used in that way. What does he think would take higher priority than exempting from tax people who earn less than £8 a week?

I will answer that question at the end of my remarks. But my short answer is this. I think that, as economic circumstances permit, we certainly should look carefully at the whole question of both age and personal allowances and at reduced rates, and make a number of concessions. But allowances for small incomes as such, in the way suggested by the hon. Gentleman, are not, I believe, the right way to help those taxpayers who need help. I shall develop some figures to show that that is so. Where general tax allowances are concerned it is much better to do something worth while as and when economic circumstances permit. I am not convinced that a case is made out for quite a new kind of tax allowance, or a small income exemption, for those who are not retired as the hon. Gentleman is proposing.

I am sorry to interrupt the Financial Secretary again. But what does he mean by a new kind of tax allowance? We have had an exemption limit before; indeed, in some senses, we have it now. The Royal Commission was in favour of an exemption limit. We had it before the war. There is nothing revolutionary about this.

Without being discourteous, may I say to the hon. Gentle man that I shall explain why I think that our present age exemption limit is quite a different matter from an exemption limit for small incomes as such.

To continue from where I was, comparing the present situation with the situation ten years ago, we have to remember that the reduced rates affecting poorer taxpayers have changed also. In 1951, the reduced rates were 3s. on the first £50 of taxable income; 5s. 6d. on the next £200 and then the standard rate of 9s. 6d. Today, the situation is that the taxpayer pays 1s. 9d. on the first £60 of taxable income; 4s. 3d. on the next £150; 6s. 3d. on the next £150 and then a standard rate of 7s. 9d. Surely the right way to help those below retirement age with small incomes is, as I say, to look as economic circumstances permit at the general system of tax allowances, and also at the reduced rates, rather than by introducing a specal relief in favour of small incomes as such.

That leads me to my second point, and here I will answer the question which has just been put to me by the hon. Gentleman. The special reliefs which have already been introduced for small incomes are designed to deal with what are demonstrably rather special categories. The age exemption, which the hon. Gentleman quite fairly mentioned, which we are raising in this Clause, was meant to help elderly people living on the smallest incomes of all, since it is precisely because they are elderly that they are likely to find difficulty in supplementing their income. It is obvious that a man on retirement who is living on a small income is likely to find it harder to supplement his income than somebody who is not of retirement age.

Again, the small income relief, which we are also extending by this Clause, is not an exemption at all. The decision to tax investment income at the lowest levels at the same effective rate as earnings of a similar amount is based on the view, which I think is a perfectly fair view, that there is little difference in taxable capacity between earned income and investment income at the lowest income levels of all.

The purpose of this small income relief is not to grant any exemption, as is proposed in the Amendment, but to give fair tax treatment to those who, for one reason or another, have to retire from work prematurely and live on a very small income derived from investments. There is a perfectly good case for the reliefs and exemptions that we have introduced in this field, without necessarily thinking that it would be a good thing to have special tax relief in favour of small incomes as such.

My third and most important objection to this Amendment is that, as the hon. Gentleman himself indicated when moving it, its benefits would be spread in a very unsatisfactory way. It is quite true that single taxpayers with incomes between £180 and £275 a year would cease to be liable for tax amounting to a maximum of £8 4s. a year, and childless married couples with incomes of between £309 and £440 would gain up to £27 12s. a year. That is quite true, but, as the hon. Gentleman has indicated, the benefit to married couples with children would be negligible where earned income is concerned. Because of the earned income relief of two-ninths, the minimum personal allowances due to a married man with one child under eleven would be sufficient to prevent any liability arising in respect of earnings up to £438 a year.

I am sure that the hon. Member for Sowerby will have done the sum, because I know how quick he is at these calculations. He will agree that two-ninths of £438 is about £98. The difference between £438 and £98 would just be covered by the married person's allowance of £240 and the child allowance of £100, so that an exemption for incomes of £440 or less would be of negligible advantage to a man in this class—a married man with one child under 11—whose income was earned.

Of course, if the child was over 11, so as to attract the higher child allowance of £125, or if he had two or more children, he would quite certainly be exempt on earnings up to a higher amount than £440. Therefore, this Amendment is open to the very serious criticism that it largely concentrates its benefits on single persons and childless married couples and does very little indeed, and in most cases nothing at all, to help the family man.

If the hon. Gentleman does not like this way of doing what we seek to achieve, is he willing to do it in some other way, perhaps on the Report stage of the Bill?

I want to make the Government's position absolutely clear. My right hon. and learned Friend the Chancellor does not consider that it would be a good idea to have special tax relief in favour of small incomes as such. We already have the small income relief and the age exemption, and we do not believe in a special tax relief for small incomes, whether in the case of retirement or not.

Do the Government believe that it would be a good idea to relieve small incomes, by whatever method they could do it?

My point, and I repeat it for the benefit of the right hon. Member for Battersea, North (Mr. Jay), is that the right way to deal with this matter is to look at the general system of tax allowances and to reduce the rates as and when economic circumstances permit. I have indicated already, in reply to my hon. Friend the Member for Dorset, South (Viscount Hinchingbrooke), who did not look very pleased, that the Government certainly will have no dogmatic views in their minds. When the time comes when it is possible for direct taxation to be reduced, whether they should give greater priority to these tax allowances or the standard rate of tax is something that would have to be decided at the time, but I am sure that that is the right way to help those living on small incomes.

6.45 p.m.

May I make one further point? The criticism of the Amendment which I then made in reply to the hon. Member for Cardiff, South-East, is that it does not apply to age exemption, because when a married couple approach the age of 65 in nearly all cases their children are grown up. There would not normally be young children in the home at that age. There is the further point that this Amendment, ingeniously drafted as it certainly is, and I paid tribute to the hon. Gentleman in his absence, as did his hon. Friend, makes no provision for marginal relief.

No. The hon. Gentleman must wait. There is a point about that which he has missed.

It could not be sensible for a single person under 65 to be exempt from tax so long as his income did not exceed precisely £275, but liable for several pounds of tax if his income rose by only £1, and the same would be true of a married couple. It is important to remember that if the Amendment were amplified so as to provide for an appropriate measure of marginal relief for incomes just above the relevant limits, the cost would be a good deal higher than the £4½ million in a full year which I have already indicated to the Committee.

I could not, without further notice, give any estimate, but it would be quite substantially higher than the £4½ million which I have mentioned. I think that I heard the right hon. Member for Battersea, North saying sotto voce that it would double it.

It may not be very far from doubling it, when we consider the marginal and tapering provisions that would have to be made.

I have devoted some time to this Amendment and to explaining why I cannot advise the Committee to accept it. Of course, my right hon. and learned Friend realises the problems of taxpayers with small incomes, and I hope that it will not be too long before economic circumstances permit some further reductions in the general burden of direct taxation. As the Committee knows very well, my right hon. and learned Friend, when framing his Budget, concluded that at present he ought not to make additions to purchasing power, and the extension of the existing reliefs for small incomes went as far as he felt able to go.

In any case, I have given the Committee a number of reasons for concluding that this proposal does not, perhaps, merit a particularly high degree of priority, as hon. Members opposite have suggested. Even if the Amendment were so recast as to provide for marginal relief, at considerable additional cost, it would not give any worth-while relief to married couples with families, and, in many cases nothing at all. This point about single people and married people with families cannot be overlooked. A great many young people at the very start of their earnings are in fairly low-paid jobs, and I see no compelling reason why they should be given a higher priority for tax reductions than married couples with families.

In answer to the hon. Member for Ince (Mr. T. Brown), whom we are always pleased to welcome, and who raised the point about pensioners which has been raised again and again in Finance Bill debates, I must say the only fair basis for any tax system is that we should treat the taxpayers in accordance with their general economic circumstances. It is for that reason only that no Government have been able to accept the view which he put forward, though I know very well his sincerity and how strongly he feels about these matters.

Will the Financial Secretary explain this? He tells me that the economic situation of the country is such that the Government cannot afford to give the relief for which we ask in the Amendment. Why is it that the economic situation is such that it is possible to give the Surtax payers £83 million?

I will give two answers. First, as I have been saying to the Committee, I believe that this is not the right sort of relief for the House of Commons to give. The right thing to do, as I said just now, is to wait until economic circumstances permit some wider reductions in the general burden of direct taxation that would help particularly lower-paid taxpayers, perhaps by doing something about the tax allowances and the reduced rates.

We have dealt very often with the Surtax question. I hardly dare mention Profits Tax again, although from the revenue point of view it is a fact that the reductions in Surtax were just about balanced by an increase in Profits Tax.

In reply to the point which has been raised by the right hon. Member for South Shields (Mr. Ede), it is important to remember that we have to consider whether, in present conditions, it is right that those people earning between £2,000 and £5,000 a year should pay Surtax over and above what is a steeper and more progressive rate of Income Tax than they paid before the war.

The hon. Gentleman said that it would not be fair as between the single person and the couple with children to give relief in this way. There is no fairness in giving reliefs anywhere. When he increases, as he will before the General Election, the personal allowance to married couples, that increase will go to the Surtax payer as it will go to the person at the bottom of the income scale. It is the Surtax payer who will attract a greater proportion of the revenue than he ought to.

The hon. Gentleman talks about single people and, of course, there are many young single people who do not have liabilities; but, on the other hand, a large number of other single people have dependants for whom they may not be able to claim. There are also many young single people living in lodgings. If one is living in lodgings on 5 guineas a week there is not much margin for anything, let alone taxation. If we cannot be absolutely fair, as we cannot, in giving these allowances, for goodness' sake let us help the people who need help most, namely, people at the bottom of the income scale:

I am surprised to heat the hon. Gentleman say that he does not mind the idea of a tax relief which would help single people more than married people with families.

However, that is not a major consideration. I say this in all good faith. In past years we have heard hon. Members opposite say that there is scope for what has been called lateral redistribution between those with heavy family responsibilities and those without. I am surprised to hear the hon. Gentleman make that point.

With regard to his view that all changes in tax work out unfairly, it seems to me that the least unfair system must be one which says: we have a system of taxation which covers everybody, but in considering what special allowances and what special features there should be in our tax system we want to take into account the special circumstances of individual taxpayers. Judged by that test, there is a case for small income relief whereby up to a certain figure investment income is treated in the same way as earned income. There is certainly a case for age exemption which does not apply in respect of special tax relief for small incomes as such.

I apologise for intervening in the debate at this point. I came to the Chamber only a few minutes ago and missed the earlier part of the debate. I should like to raise an important point and perhaps my hon. Friends who will, no doubt, want to divide on the Amendment will excuse me if I raise two matters with the Financial Secretary.

I thought the hon. Gentleman was making an extraordinarily poor defence of the Government's position on this Amendment. Let us first consider the question of comparing the single person, or married couple without children, with the married couple with one child. It is extraordinary to reject one concession on the ground that it will give no benefit at all to people who are already in circumstances in which they pay no tax. If a married couple with one child pay no tax at all on £440, obviously any concession that one gave in any way could be countered by saying that one can go further up the scale and that there are couples with three, four, five and six children who do not pay tax and that therefore we are discriminating against them. Obviously, if people are paying no tax at all it is impossible to give them tax concessions. That being so, it is extraordinary that the Financial Secretary should use that as an argument for giving this concession.

The Financial Secretary's other point was that we would need marginal provisions. I had thought in my innocence that this Amendment would automatically cover marginal provisions, but if it does not that is a technicality compared with the acceptance of the principle. I should have thought that there was no difficulty at all in accepting the Amendment and inserting these marginal provisions which we already have in outline at a further stage of the Bill.

The Financial Secretary said that we must leave this matter until we come to the question of dealing with personal allowances as a whole. That is a perfectly legitimate argument, but it ought to be pointed out that any general increase in personal allowances is an extremely costly affair. If we were to increase ordinary personal allowances by, say, £10 a year it would probably cost £25 million a year or something like that. If we increased personal allowances by £20 all round, people would still pay tax, single persons at about £200, and married couples not at £300 but £320 or £330. These levels would still be too low. Therefore, it is not an answer to say that we must wait until we increase personal allowances.

Unless the Government suddenly become almost unbelievably generous we shall not within the foreseeable future be able to increase personal allowances to a level required to provide the kind of exemptions that we want to provide by this Amendment. This Amendment is therefore necessary. If we want to make some special arrangement for people on low incomes we can only do it by exemption limits. We cannot do it, except at enormous cost, simply by increasing personal allowances. Up till 1952 we had special exemption limits quite apart from personal allowances. All we are asking is that we shall go back to that system now.

If there is some dispute about the level at which this Amendment puts the exemption limit, the Government could put forward alternative proposals. We want the Government to accept the principle. Nothing that the Financial Secretary has said so far has come near to answering the case in principle that has been made out for this Amendment. I hope, therefore, that my hon. Friends will continue the argument so that we may hear from the Financial Secretary again. If not, I am sure we shall want to divide on the Amendment. In any case, I hope that we shall continue to press the point not only in debating this Finance Bill but on future occasions, because this matter certainly needs attention.

The Financial Secretary said that the cost would be comparatively small compared with a number of the other kind of concessions which we shall be discussing later in respect of personal allowances and so on. I wish the Government would look seriously at the question of accepting this proposal in principle, even if they cannot accept the Amendment.

7.0 p.m.

It is surprising that no hon. Member opposite has had anything to say about what is a major reform.

I do not know what they are waiting for, but it would have been interesting to hear from them on this Amendment.

One of the biggest obstacles to reform in fiscal and social security matters in the House is technical difficulty. We are always running into it. Hon. and right hon. Members opposite gleefully seize upon the technical difficulties and leave the substance alone. I think that it will be necessary one day to devise a way of moving Amendments to Bills before the House which do not get bogged down in technical difficulties and enable us to discuss the substance of the matter.

I am the last person to pretend that there are not technical difficulties in this Amendment. Of course, there are. We cannot reconstruct the Income Tax code and accommodate our reforms with symmetry and absolute equity all round. What we have to do in this Amendment is to focus our desire for tax exemption upon a certain group of people with low incomes. We want to get them out of Income Tax now, without, for the time being at least, consequential effect upon others in the Income Tax system. We fully acknowledge that there would have to be marginal relief. In the case of a married couple the marginal relief would run out at £489 a year, and in the case of a single person at £303 a year. So we can at least provide the answer to marginal relief.

The Financial Secretary asks the Committee to await a review of personal reliefs as a whole. Later in our debate, we shall come to personal reliefs as a whole. When we propose to increase personal reliefs for a single person by £10, for a married couple by £10, and the married woman's special earned income relief by £10, we shall be told that the total cost of this will be £82 million in a full year and that it is quite out of the question. For those small improvements in personal reliefs, amounting in the case of a single person, I think, to a tax relief of £3 17s. 6d. a year, we shall be told that the aggregate cost to the Exchequer is so great that modest improvements of that kind are outside the Chancellor's consideration this year. We shall probably be told that they are out of his consideration next year unless things change favourably in the meantime.

We have tried to escape the obvious problem of legislating for the whole of personal reliefs by concentrating on those at the bottom. The Financial Secretary said that we are not, even in concentrating on those at the bottom, giving adequate reliefs, or we are giving no relief at all, to a number of married couples with young children. When my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) intervened to say that many single persons are having a struggle to live in lodgings or in moving from one town to another, he is taxed with being in favour of relieving single persons from tax rather than married people with children. This is a distortion of what my hon. Friend said, and it is a distortion of the intention of the Amendment.

Those who are already relieved of tax by the personal allowances of married couples with children will not benefit from our Amendment. That is obvious. We hear repeatedly from the benches opposite, when this situation arises, that one cannot relieve from tax people who are not paying any. This applies here, However, what we can do is to relieve from paying tax those who are paying tax. That is what we want to do.

The main beneficiaries from out Amendment would be single persons, widows, married couples with one child or married couples without children. There are many young married couples today who are struggling to establish themselves in their homes. All the pressures are upon them, the pressure of the high price of houses, the high prices for rented accommodation, the high prices of furniture and household equipment. Young married couples are having a fairly rough time when they have to live on only £8 or £8 10s. a week.

Single persons, too, are being asked to move about and take jobs in different parts of the country. I have with me at this moment the list of transfers of Schedule E assessments in the Inland Revenue from London to Manchester in order to avoid bringing staff to London who cannot afford to live here when they come. This is necessary because of the strain upon the slender resources of young people when they leave home and are transferred away and have to go into lodgings or hostels and seek accommodation of some kind. I hope that hon. Members opposite will not run away with the idea that single persons and young married couples are not worthy of the consideration of the Committee when it comes to Income Tax.

We hear a great deal about the comparison between pre-war and post-war levels of taxation and incomes. In a mischievous moment, I asked, in 1960
"what would be the equivalent tax reliefs at present money values of the personal tax reliefs for 1938–39…"—[OFFICIAL REPORT, 17th May, 1960; Vol. 623, c. 101.]
I find that the equivalent relief for a single person today, based on the pre- war figure of £100, would be £281, and for a married couple the equivalent relief today would be £506. So if the reliefs today for single and married persons were to reflect the difference in the value of money, all single persons would be exempt under £281 a year and all married couples under £506 a year. This is disregarding the earned income relief in both cases. There is nothing outrageous in the suggestion that single persons up to £275 should be exempted and married couples up to £440 should exempted.

If we have to wait for the whole job to be done, this relief will, I fear, have to wait much longer than we on these benches wish. As my hon. Friend the Member for Cardiff, South-East pointed out, if all that is done is to increase the personal reliefs, desirable as that may be, not only will the overall cost be very great but the relief given will be carried right up the scale into the Surtax level. However, if the Chancellor wished to do something for the people with low incomes, he could, in reconstructing the reduced rate bands, take away in the higher incomes the benefit which he intended to concentrate on those at the bottom of the scale. But that is something which we in Opposition cannot do. That is why we have to concentrate on the simple expression of our desire to relieve these lower-paid people from tax altogether.

I am surprised that the cost is as low as it is. It can be accommodated even within an austerity Budget. The Chancellor is recognising this year what he denied last year, that is to say, for the incomes of old people a higher age exemption and for those on small incomes a higher small incomes relief. The Chancellor is accommodating the additional cost of the proposals in Clause 8 within his Budget this year. In our view, he could easily accommodate the very modest extra cost that this Amendment would entail. I believe, also, that this step and others which the Chancellor of the Exchequer could take would relieve the pressure on the wages front. Surely that is what he wants to do.

The other great point about reliefs from Income Tax is that they are the only tax-free wage increases which can be given. The Chancellor has the power to do that, and he can believe the pressure on the wages front by relieving people in the lower income bracket from tax—for instance, married couples, with up to £8 a week or thereabouts.

There is nothing in our Amendment which should occasion the Government any difficulty. It is modest in its intention and specific in its purpose. The overall cost would be almost negligible, and nothing but perversity can possibly stand in the way of its acceptance.

I should like to ask the Financial Secretary a question about marginal relief. I could not understand him when he refered to it. Subsection (1) provides for people under 65 with small incomes and subsection (2) provides for people over 65 with small incomes. I am well aware that in the first case the provision is only by way of a two-ninths deduction and that in the second case there is total exemption, but in both cases the marginal relief provided by the Sections in the 1952 and 1957 Acts is to go up to £550 in one case and up to at least £480 in the other case.

One answer to the Government's objection that there is no marginal relief in this Amendment is that it is unnecessary to provide it because the Government's Amendments to existing legislation provide it. If the Financial Secretary chooses to say that it will be provided in a different form, we should be only too pleased if he would show us the different form on Report. But the fact that its exists seems incontrovertible.

I did address hon. Members for a considerable time and I did not wish to inflict another speech on them, but may I say this in answer to the question of the hon. and learned

Division No. 194.]

AYES

[7.14 p.m.

Ainsley, WilliamBrockway, A. FennerDelargy, Hugh
Albu, AustenBroughton, Dr. A. D. D.Dodds, Norman
Allaun, Frank (Salford, E.)Brown, Rt. Hon. George (Belper)Driberg, Tom
Allen, Scholefield (Crewe)Brown, Thomas (Ince)Ede, Rt. Hon. C.
Awbery, StanButler, Herbert (Hackney, C.)Edelman, Maurice
Bellenger, Rt. Hon. F. J.Callaghan, JamesEdwards, Walter (Stepney)
Bence, CyrilCastle, Mrs. BarbaraEvans, Albert
Bennett, J. (Glasgow, Bridgeton)Collick, PercyFinch, Harold
Benson, Sir GeorgeCorbet, Mrs. FredaFitch, Alan
Blackburn, F.Cronin, JohnFoot, Dingle (Ipswich)
Blyton, WilliamCrosland, AnthonyFoot, Michael (Ebbw Vale)
Boardman, H.Crossman, R. H. S.Fraser, Thomas (Hamilton)
Bottomley, Rt. Hon. A. G.Cullen, Mrs. AliceGalpern, Sir Myer
Bowden, Rt. Hn. H. W.(Leics.S.W.)Darling, GeorgeGeorge, LadyMeganLloyd (Crmrthn)
Bowies, FrankDavies, G. Elfed (Rhondda, E.)Greenwood, Anthony
Boyden, JamesDavies, Harold (Leek)Gourlay, Harry

Member for Kettering (Mr. Mitchison) about marginal relief. Marginal relief was originally provided for by paragraph ( b) of Section 13 (1) of the Finance Act, 1957, and the hon. and learned Gentleman's second Amendment expressly directs that this paragraph shall be omitted from the alternative version. That is the difficulty.

If that is the only difficulty, its remedy is perfectly simple. The Financial Secretary has only to accept the first Amendment and to reject the second, and all will be well.

As I explained, that was not the only matter at issue. However, since I was asked a technical question about the drafting, I thought that it was only courteous to answer it.

Is it not a fact that, apart from the second Amendment, the first Amendment, in conjunction with the Government's two Amendments, allows for marginal relief, because the Government's Amendments have that effect?

What I said about the second Amendment was correct. I should like to examine the first Amendment more closely before giving a full reply. However, I do not wish to mislead the Committee in any way. I thought it right to raise the point about marginal relief, but, as I made clear, this is a straight difference of view between the two sides of the Committee about the way in which we should proceed in this matter.

Question put, That those words be there inserted:

The Committee divided: Ayes 144, Noes 219.

Griffiths, David (Rother Valley)MacDermot, NiallRoyle, Charles (Salford, West)
Griffiths, Rt. Hon. James (Llanelly)McKay, John (Wallsend)Shinwell, Rt. Hon. E.
Grimond, Rt. Hon. J.McLeavy, FrankSkeffington, Arthur
Hale, Leslie (Oldham, W.)Mallalieu, J.P.W. (Huddersfield, E.)Slater, Joseph (Sedgefield)
Hall, Rt. Hn. Glenvil (Colne Valley)Mason, RoySmith, Ellis (Stoke, S.)
Harper, JosephMayhew, ChristopherSorensen, R. W.
Hayman, F. H.Mellish, R. J.Soskice, Rt. Hon. Sir Frank
Henderson, Rt.Hn.Arthur(RwlyRegis)Millan, BruceSpriggs, Leslie
Herbison, Miss MargaretMitchison, G. R.Stewart, Michael (Fulham)
Hill, J. (Midlothian)Moody, A. S.Stones, William
Holman, PercyMoyle, ArthurStrachey, Rt. Hon. John
Holt, ArthurMulley, FrederickStross, Dr.Barnett (Stoke-on-Trent, C.)
Houghton, DouglasNoel-Baker, Rt. Hn. Phillp (Derby,S.)Taylor, Bernard (Mansfield)
Howell, Denis (Small Heath)Oliver, G. H.Thomas, Iorwerth (Rhondda, W.)
Hughes, Cledwyn (Anglesey)Oram, A. E.Thorpe, Jeremy
Hughes, Hector (Aberdeen, N.)Padley, W. E.Tomney, Frank
Hunter, A. E.Parker, JohnWade, Donald
Hynd, John (Attercliffe)Pavitt, LaurenceWainwright, Edwin
Irving, Sydney (Dartford)Pearson, Arthur (Pontypridd)Weitzman, David
Jay, Rt. Hon. DouglasPeart, FrederickWells, Percy (Faversham)
Jones, Dan (Burnley)Pentland, NormanWells, William (Walsall, N.)
Jones, Jack (Rotherham)Popplewell, ErnestWilkins, W. A.
Jones, J. Idwal (Wrexham)Prentice, R. E.Willey, Frederick
Jones, T. W. (Merioneth)Price, J. T. (Westhoughton)Williams, D. J. (Neath)
Key, Rt. Hon. C. W.Pursey, Cmdr. HarryWilliams, LI. (Abertillery)
King, Dr. HoraceRandall, HarryWillis, E. G. (Edinburgh, E.)
Lawson, GeorgeRhodes, H.Winterbottom, R. E.
Ledger, RonRoberts, Albert (Normanton)Woof, Robert
Lee, Frederick (Newton)Roberts, Goronwy (Caernarvon)Wyatt, Woodrow
Lee, Miss Jennie (Cannock)Robertson, John (Paisley)Yates, Victor (Ladywood)
Lever, L. M. (Ardwick)Robinson, Kenneth (St. Pancras, N.)
Lewis, Arthur (West Ham, N.)Rogers, G. H. R. (Kensington, N.)

TELLERS FOR THE AYES:

Mabon, Dr. J. DicksonRoss, WilliamMr. Charles A. Howell and
Mr. Grey.

NOES

Agnew, Sir PeterCraddock, Sir BeresfordHollingworth, John
Aitken, W. T.Critchley, JulianHornby, R. P.
Arbuthnot, JohnCunningham, KnoxHornsby Smith, Rt. Hon. Dame P.
Atkins, HumphreyCurran, CharlesHoward, Hon. G. R. (St. Ives)
Balniel, LordCurrie, G. B. H.Howard, John (Southampton, Test)
Barber, AnthonyDalkeith, Earl ofHughes Hallett, Vice-Admiral John
Barlow, Sir Johnd'Avigdor-Goldsmld, Sir HenryHughes-Young, Michael
Barter, JohnDeedes, W. F.Iremonger, T. L.
Baxter, Sir Beverley (Southgate)de Ferranti, BasilJames, David
Beamish, Col. Sir TuftonDonaldson, Cmdr. C. E. M.Jenkins, Robert (Dulwich)
Bell, RonaldDoughty, CharlesJennings, J. C.
Bennett, F. M. ((Torquay)Drayson, G. B.Johnson, Dr. Donald (Carlisle)
Berkeley, Humphrydu Cann, EdwardJohnson, Eric (Blackley)
Bevins, Rt. Hon. ReginaldEden, JohnKerans, Cdr. J. S.
Bidgood, John C.Elliot, Capt. Walter (Carshalton)Kirk, Peter
Biffen, JohnElliott, R.W.(Nwcastle-upon-Tyne,N.)Langford-Holt, Sir John
Biggs-Davison, JohnEmery, PeterLeather, E. H. C.
Bishop, F. P.Emmet, Hon. Mrs. EvelynLewis, Kenneth (Rutland)
Black, Sir CyrilErrington, Sir EricLilley, F. J. P.
Bossom, CliveFarey-Jones, F. W.Lindsay, Sir Martin
Bourne-Arton, A.Finlay, GraemeLloyd, Rt. Hn. Geoffrey (Sut'nC'dfield)
Box, DonaldFletcher-Cooke, CharlesLloyd, Rt. Hon. Selwyn (Wirral)
Boyd-Carpenter, Rt. Hon. JohnFraser, Hn. Hugh (Stafford & Stone)Loveys, Walter H.
Boyle, Sir EdwardFraser, Ian (Plymouth, Sutton)Lucas-Tooth, Sir Hugh
Brooke, Rt. Hon. HenryGibson-Watt, DavidMcAdden, Stephen
Brown, Alan (Tottenham)Gilmour, Sir JohnMcLaren, Martin
Browne, Percy (Torrington)Glyn, Dr. Alan (Clapham)McLean, Neil (Inverness)
Bryan, PaulGoodhart, PhilipMacleod, Rt. Hn. Iain (Enfleld, W.)
Buck, AntonyGoodhew, VictorMacmillan, Maurice (Halifax)
Bullard, DenysGower, RaymondMacpherson, Niall (Dumfries)
Bullus, Wing Commander ErieGrant, Rt. Hon. WilliamMaddan, Martin
Burden, F. A.Grant-Ferris, Wg. Cdr. R.Maltland, Sir John
Butcher, Sir HerbertGreen, AlanManningham-Buller, Rt. Hn. Sir R.
Campbell, Sir David (Belfast, S.)Gresham Cooke, R,Markham, Major Sir Frank
Campbell, Gordon (Moray & Nairn)Gurden, HaroldMarlowe, Anthony
Carr, Robert (Mitcham)Hamilton, Michael (Wellingborough)Marples, Rt. Hon. Ernest
Cary, Sir RobertHarris, Reader (Heston)Marshall, Douglas
Clark, Henry (Antrim, N.)Harrison, Brian (Maldon)Marten, Neil
Clark, William (Nottingham, S.)Harrison, Col. Sir Harwood (Eye)Mathew, Robert (Honiton)
Clarke, Brig. Terence(Portsmth, W.)Hastings, StephenMawby, Ray
Cleaver, LeonardHay, JohnMaxwell-Hyslop, R. J.
Cole, NormanHeald, Rt. Hon. Sir LionelMaydon, Lt.-Cmdr. S. L. C.
Cooke, RobertHenderson, John (Cathcart)Mott-Radclyffe, Sir Charles
Cooper-Key, Sir NeillHill, J. E. B. (S. Norfolk)Neave, Airey
Cordeaux, Lt.-Col. J. K.Hirst, GeoffreyNicholson, Sir Godfrey
Corfield, F. V.Hobson, Sir JohnNoble, Michael
Costain, A. P.Hocking, Philip N.Nugent, Rt. Hon. Sir Richard
Coulson, MichaelHolland, PhilipOakshott, Sir Hendrie

Orr-Ewing, C. IanRidsdale, JulianTaylor, Frank (M'ch'st'r,Moss Side)
Osborne, Sir Cyril (Louth)Roberts, Sir Peter (Heeley)Taylor, W. J. (Bradford, N.)
Page, Graham (Crosby)Robertson, Sir D. (C'thn's & S'th'Id)Teeling, Sir William
Pannell, Norman (Kirkdale)Rodgers, John (Sevenoaks)Temple, John M.
Partridge, E.Roots, WilliamThomas, Leslie (Canterbury)
Pearson, Frank (Clitheroe)Ropner, Col. Sir LeonardThompson, Kenneth (Walton)
Peel, JohnRoyle, Anthony (Richmond, Surrey)Thornton-Kemsley, Sir Colin
Percival, IanRussell, RonaldTouche, Rt. Hon. Sir Gordon
Peyton, JohnScott-Hopkins, JamesTurner, Colin
Pickthorn, Sir KennethSharpies, Richardvan Straubenzee, W. R.
Pike, Miss MervynShaw, M.Wakefield, Sir Wavell
Pilkington, Sir RichardShepherd, WilliamWalder, David
Pitt, Miss EdithSkeet, T. H. H.Walker, Peter
Price, David (Eastleigh)Smith, Dudley (Br'ntfd A Chiswick)Walker-Smith, Rt. Hon. Sir Derek
Prior, J. M. L.Smithers, PeterWilliams, Dudley (Exeter)
Profumo, Bt. Hon. JohnSmyth, Brig. Sir John (Norwood)Williams, Paul (Sunderland, S.)
Proudfoot, WilfredSpearman, Sir AlexanderWills, Sir Gerald (Bridgwater)
Pym, FrancisSpeir, RupertWilson, Geoffrey (Truro)
Quennell, Miss J. M.Stanley, Hon. RichardWise, A. R.
Ramsden, JamesStevens, GeoffreyWolrige-Gordon, Patrick
Rawlinson, PeterStottdart-Scott, Col. Sir MalcolmWood, Rt. Hon. Richard
Redmayne, Rt. Hon. MartinStorey, Sir SamuelWoodhouse, C. M.
Rees, HughStudholme, Sir HenryWorsley, Marcus
Rees-Davies, W. R.Summers, Sir Spencer
Renton, DavidTalbot, John E.

TELLERS FOR THE NOES:

Ridley, Hon. NicholsTapsell, PeterMr. Chichester-Clark and
Mr. Batsford.

Question proposed, That the Clause stand part of the Bill.

Even though hon. Members opposite appear to be interested only in a capital gains and not in relief for small incomes, I want to ask the Financial Secretary one or two further questions before we part with this Clause. Apart from all the intricacies we went into on the Amendments which we have just discussed, how does he justify the present position by which all other small incomes are exempt from the reliefs now being given? The Financial Secretary argued at one point that Income Tax payers with small incomes paid only very small amounts in Income Tax anyway and, therefore, seemed to think that there was not a great case. I should have thought that that largely made the case for granting a bigger concession.

If it is true, as I believe it is, that we are raising very small amounts of revenue from a very large number of people, is there not a strong ground for believing that these small amounts of revenue do not justify the administrative effort and all the complexities of raising them? According to the latest Inland Revenue Report, and the Financial Secretary may be able to confirm it, there are about 16 million or 17 million Income Tax payers about 5 million of whom at the lower end of the scale probably do not yield more than about £50 million of a total Income Tax revenue of about £2,000 million. If anything like that is true, I should have thought that there was a strong administrative and practical case for omitting altogether a large number of very small taxpayers at very little cost to the revenue and that the Financial Secretary was strengthening the case against which he was arguing.

How can the present situation be defended if one compares it with the lower exemption limits for Income Tax before the war? In 1938, the effective exemption limit from tax for a single person or married couple—it was the same in those days—was about £3 a week. In terms of prices, that would be about £9 a week today. To reach the situation of before the war, we would have to exempt all incomes of £9 a week and downwards, whereas the exemption limit for a single man is about £3 15s.

This is an extraordinary change of tax and is a revolutionary pushing down of the level of tax to large numbers of people who, before the war, would not pay Income Tax. There may be a case for some such change, but it is a drastic change. If it was not right before the war to impose Income Tax on people earning less than £3 a week, it cannot be right now to impose it on people earning less than £4 a week. How can the Financial Secretary possibly justify that situation?

The right hon. Member for Battersea, North (Mr. Jay) has asked two questions which both raise in a different way the same question—whether we should have a tax relief for everybody with small incomes as such. His last question—whether I thought that tax allowances in some form or another should be such as to give the same real limit of exemption today as we had' before the war—goes beyond the strict limits of the Clause. However, he asked me another question which I should like to answer in some detail, as it was perfectly fair.

The hon. Gentleman asked whether, if we carried the principle in the Clause rather further, it would not produce valuable administrative savings and whether our present tax system was rather wasteful from the point of view of administration. I have looked into the idea that an extension of the relief in the Clause could effect an administrative saving by eliminating from the P.A.Y.E. machine many taxpayers who now contribute a few shillings a week.

Tax is automatically deducted under P.A.Y.E. Unless the employee is given a code number which, in conjunction with the tax tables, shows that his pay does not exceed the allowances and reliefs due to him. For technical reasons, the tax tables could not be made to incorporate an exemption of the sort which the right hon. Gentleman and his colleagues have in mind. It would have to be arranged for by an indication in the code number book stating the deduction, and technically the adjustment of code numbers for this purpose would be a very hit-or-miss affair and the work would have to proceed on the basis of estimates of the pay likely to be obtained, which would often prove not very accurate. There would be a considerable number of cases where adjustment for repayment or the subsequent recovery of tax under-deducted proved to be necessary after the end of the year. From the administrative point of view I asked for this to be examined, because, like the right hon. Gentleman, I thought it was a point very likely to be raised.

7.30 p.m.

Does this really mean, then, that there is no more administrative effort involved in collecting tax from 16 million people, or whatever it is, who pay it now, than there was when less than half that number paid it before the war? It is very difficult to believe.

What I am saying is that where the form of income relief as such is of the sort we have been discussing this evening, this would not be a saver from the administrative point of view.

I think that nobody disapproves the purpose of the Clause, which is what we are meant to discuss, and nothing else, in this debate. We have discussed fully whether the principle of the Clause should be extended to cover a rather wider ambit, but I think that perhaps the time is coming when the Committee may feel that we can approve the Clause, which, at any rate so far as it goes, does put what the whole Committee wishes to see on the Statute Book.

I am sorry that I missed some the earlier part of the discussion on the Amendment, but I rise now because I am tired of hearing always from the Chancellor of the Exchequer and the Financial Secretary and others on the Treasury Bench, when any proposal is made to give tax relief to certain groups, particularly those I would call the under-privileged groups, that there is some technical reason why it cannot be done. It is a most extraordinary thing that in the eleven years I have been a member of this Committee there have always been no technical difficulties in imposing taxation but tremendous difficulties in giving deserving people relief. Quite honestly, I am just tired of hearing it. It does seem to me quite absurd that what is technically possible in one direction is technically impossible in the other.

Anyone knows from just moving around the country that a single person, a young man or woman, paying lax on just under £4 a week, with Purchase Tax imposed on everything he or she buys——

Order. I am sorry to interrupt the hon. Member, especially as I have only just come into the Chair, but apparently the Committee has been discussing this aspect of the matter previously, on the Amendment which was moved. I hope, therefore, that if the hon. Member is going on to speak on this Question, That the Clause stand part of the Bill, he will discuss something we did not discuss on the Amendment.

Well, I am trying to elicit from the Financial Secretary the reason why he says this relief cannot be given. That is what I want to know. He just says that technically he cannot give the relief to a particular group of taxpayers. The Financial Secretary said this himself——

I gather that that was exactly what was discussed on the Amendment. We cannot go over all that again, and I hope that if the hon. Member wishes to continue his speech he will have something else to say on this Question, That the Clause stand part of the Bill.

On a point of order. This is a Clause which, after all, gives relief to certain types of small incomes. I should have thought that it would be in order for my hon. Friend—if I may submit this to you, Mr. Williams—as it was for the Financial Secretary, to argue whether or not this is desirable, and what administrative difficulties are or are not involved in doing it.

Further to that point of order. We have already taken that question on the Amendment which we were discussing, whether there should be a small incomes relief as such and whether the Clause should have a wider ambit, and when replying to the right hon. Gentleman the Member for Battersea, North (Mr. Jay) just now I deliberately refused to go into detail on that subject. I answered the right hon. Gentleman's point about administration because there, I thought, he was asking something different, namely, how the Clause would work out administratively, as it now stands, whether it was wasteful or not administratively. It seemed to me that the hon. Member for Dunbartonshire, East (Mr. Bence)—and he and I have known each other too long for me to want to score a point over him—was discussing what we were discussing on the Amendment.

I think I am on the ball. I think I am right, and if the hon. Member for Dunbartonshire, East (Mr. Bence) wishes to speak he must leave the point he was on.

I rose to speak because I heard again that here there is an administrative difficulty, and it is that with which I am dealing. I want to elicit why this is administratively difficult. That is the question I am dealing with.

Possibly if I had been in the Chair earlier it might have been easier to have shown the hon. Member what I have in mind, but I think the Minister is quite right. I think he stretched a point of order in replying to a certain point made by the right hon. Gentleman the Member for Battersea, North (Mr. Jay). I do not think we ought to consider that argument any further.

I would submit this to you, Mr. Williams, that on the Amendment we have already discussed the proposal to extend this particular relief in one particular way, but that what my hon. Friend is suggesting is that it is also possible to extend it in other ways, not necessarily the one we have discussed already. I do not think my hon. Friend was necessarily concerned with only the special form of relief we discussed on the Amendment.

That may be, but that was not what the hon. Member was doing. Therefore, I must bring him back to the Question, That the Clause stand part of the Bill. I hope that my Ruling will be accepted.

I accept your Ruling, Mr. Williams, and I will confine myself to the Clause, which limits relief to those over 65 years of age and grants marginal relief to certain income groups on the formula stated in the Clause. I suppose that I should be out of order again if I were to say that I do not think the Clause goes far enough in that it does not give relief in wide enough directions, and so in view of your Ruling, and the fact that, apparently, the Financial Secretary answered the question about administrative difficulty—although I did not think he did—I think it is just as well that I resume my seat.

I know that the Financial Secretary is anxious to get on, but I hope he will not mind if I dwell for a moment on his own inglorious past. In the speech I made on Second Reading of the Bill I did promise him that I would tease him on the speech he made last year on the very reliefs which are given in this Clause.

This Clause does two things. It raises the exemption for a single person over 65 from £275 to £ 300 and it raises the exemption for a married couple, one of whom is over 65, from £ 440 to £ 480. That is exactly the proposal which we made to the Committee last year. We gave it very high priority indeed, and urged upon the Chancellor and the Financial Secretary that hardship would be caused to retirement pensioners, who were then getting a somewhat higher retirement pension, if the age exemption were not raised above the previous limits.

That is the first thing. The second thing which the Clause does is to raise the limit of small incomes relief from £300 to £400. Small incomes relief, as the hon. Gentleman explained a few moments ago, does not exempt anybody from tax and it has no age limit, but what it does do is to give the benefit of earned income relief to investment income where the total income from all sources does not exceed the prescribed limit, now £300, proposed in the Clause to be £400.

What we proposed last year was a much more modest increase in the small incomes relief limit. We proposed to raise it from £300 to £325. Now, in this Clause, it is proposed to raise it to £400, or £75 higher than we proposed last year. I think that the Financial Secretary will agree that we on this side of the Committee are entitled to feel resentful that the modest improvements in these reliefs which we sought last year were rejected by him on 14th June, 1961, and this year he comes along full of smiles and graces and says, "This is what we propose to do."

The urgency behind the matter last year was the improvement in the retirement pensions. It so happened that many retirement pensioners who had the benefit of total exemption under the old retirement pension scales and on the old exemption limits were brought above the exemption limits by the increase in retirement pension. A number of people found themselves going from a total exemption to a tax payment of 3s. or 4s. a week. A case was cited in the course of that debate where a married couple went from total exemption to a tax of 5s. 7½d. a week as a result of an increase in retirement pension of 12s. 6d. a week for a married couple. This is marginal taxation with a vengeance.

I do not know whether I ought to torture the Financial Secretary with quotations from his speech of 14th June, 1961. He is a most able and affable defender of the Chancellor's faith. He has defended more lost causes in the course of debates on Finance Bills than perhaps any other Treasury Minister, but it is difficult to keep one's patience when one reads what the hon. Gentleman was saying last year against the very increases which he is proposing to make this year.

Last year, the hon. Gentleman saw no reason why a higher retirement pension should not bring many of these old people within the tax bracket. I quote from a sentence of his on that occasion when, referring to the increase in retirement pensions, he said:
"… it is not unjust that those who are at the margin for tax reliefs should benefit less from special tax treatment as a result of the increase in their pensions."
He said again:
"My right hon. and learned Friend thought that it would not in any way be inconsistent with this purpose if an increase in income carried with it a small increased tax liability."
He was talking about increased pensions each time.

I have another quotation from the hon. Gentleman. He said:
"… I think that there is a strong case for not discriminating further in favour of old people in a year when my right hon. and learned Friend has found it impossible, for economic reasons, to give any general remissions of direct taxation or to make any changes otherwise in our system of tax allowances."
When it came to our small incomes relief proposal, modest as it was, the hon Gentleman, first, criticised it on the ground that it would not benefit anyone below £300 a year and would not benefit anybody receiving more than £325 a year. He went on to say:
"Secondly, we should remember that many of those whom it would help would not be old people, but young people in the early stages of their earning career who have, in addition to their earnings, a small amount of investment income. I cannot see that they have any special claim to tax relief."— [OFFICIAL REPORT, 14th June, 1961; Vol. 642, c. 587-9.]
And here it is on a plate. What is the difference between last year and this in the context of these two proposals in the Clause?

7.45 p.m.

The Financial Secretary ought to give a good case now for not repaying these people the tax that was levied upon them last year by his refusal to accept our proposals, and from which they have suffered ever since. A great many people have lost some pounds during last year out of their very meagre increase in retirement pension. I do not think that the Financial Secretary can pass from the Clause without a word of explanation of this extraordinary somersault. Of course we welcome it. All I am complaining about is that it is a year late. It should have been done last year. I do not like to use an unnecessarily strong term, but these retirement pensioners with very modest incomes are given the benefit of an increase in pensions and then are robbed of the full advantages of that increase by the stubbornness of the Chancellor and the Financial Secretary in declining to accede to these proposals last year.

I remember so well that we on this side of the Committee thought, "Here are two things which surely the Chancellor will do. The Chancellor probably could not have foreseen before his Budget statement that the increase in retirement pensions would have this effect for the purposes of tax. When we give him examples of what has occurred, surely we cannot have a Chancellor who will not be moved to make small concessions to meet this difficulty." I remember, also, that we put these two proposals at the top of our list of new Clauses. So anxious were we to keep them at the top of the list so that they could be discussed before any other concessions were looked at that my hon. and learned Friend the Member for Kettering (Mr. Mitchison) stayed near the Table, in a great state of agitation, waiting for the conclusion of the debate on Second Reading to pop these two new Clauses on the Table the moment the debate ended. Then this is what happened.

The Financial Secretary must be quite ashamed of all this. He is not a "stooge". He is not just a gramophone record. He always gives the impression that he believes what he says. We credit him with great sincerity as well as great ability and I was shocked when I heard his speech twelve months ago. We are delighted that the Chancellor has felt able to do it this year, but what was there about the economic situation— and I will not mention Surtax— and about the condition of the Finance Bill last year that prevented these concessions being made then and how different are they today that they enable these concessions to be made?

Am I rubbing it in too much? [HON. MEMBERS: "No."] I think that the Financial Secretary deserves every word of this. He made the speech. He cannot pass it off. He could have chosen his own words, but when the Chancellor said, "Do the dirty job" the hon. Gentleman entered into it with gusto and enthusiasm and produced all the arguments. He said that many of these people were not old people, but young people at the beginning of their careers, and he could not see that they had any claim to tax relief. But here we are now with an exemption limit not of £325, but of £400. It is very welcome, but it is a very strange situation indeed.

Perhaps the Economic Secretary will get up and make the excuses for the Financial Secretary. The Leader of the House is here, and he may decide that the Government's reputation for integrity is now so much impugned that he should get up and defend the Chancellor of the Exchequer. But what has the Financial Secretary to say? What excuse has he to give for his astonishing and reprehensible behaviour last year? I leave it at that.

I should not like the Clause to pass without my making a personal reply to the questions which have been asked by the hon. Member for Sowerby (Mr. Houghton). I very vividly remember the debate last year, not least because we had one of the "love-hate" sessions with my hon. Friend the Member for Tynemouth (Dame Ward).

I am not quite sure, but I think I was almost the only hon. Member in the Committee between 11 p.m. and 11.15 that evening to listen to the speech of the hon. Member. That is evidenced by the fact that only 92 hon. Members opposite voted on the important Clause. The situation was, I think— it does occasionally happen at night when we have already had several days dealing with the Finance Bill— that hon. Members were occupied primarily with the question of how soon the Division was to be.

However, the hon. Gentleman's speech received close attention from me, and I am glad to think that he listened to my speech, because I am sure that he was the only hon. Member in the Committee who did. I am also very glad that one year later the Government have shown signs that at least one of their members listened to the speech of the hon. Gentleman. Further, I am glad to think that the hon. Member still remembers my speech.

I have one perfectly general question to put to the Financial Secretary. We have heard a good deal about marginal relief and the like in connection with the Amendment that we have just disposed of.

Looking at the legislation that we are seeking to amend under the Clause, and at the result of the amendments sought to be made, what strikes me is that there is a very sharp line indeed between the treatment of people who are under 65 and have small incomes and the treatment of people who are over 65 and have small incomes. That extends to the definition of "small incomes", which is different in two cases, and also to the question of whether they are single or married affecting the amount of relief and, lastly, to the amount of the relief itself. Looking simply at the Clause without referring to the two Finance Acts quoted, one would say that there must be some close similarity. In fact, the 1952 Act, providing for people under 65, gives only very limited relief of tax on two-ninths of the income, while after 65 there is full exemption.

Does the hon. Gentleman regard the present state of affairs in that respect as satisfactory? It seems to me that the difference between the type of relief, the amount of relief and the limits of relief before and after the age of 65 is the result of the way things have grown. It is not really a satisfactory arrangement at all. We have discussed and rejected an Amendment which would have gone some way, within a limited field, to meet the difficulty. However, I am not dealing with that. I am on the broad question of whether the Government have any views about this matter. They must have some views. After all, they have taken the opportunity of amending the two Sections in question. Are they satisfied on the point that the two kinds of relief before and after the age of 65 are so different as to be quite incongruous and to fit with difficulty and unfairly into the tax system?

I appreciate that when one is dealing with old people there is the difficulty that one has to draw the line at some point, and for a number of obvious reasons connected with other legislation, 65 is undoubtedly the point at which to draw it. But I do not look at the taxation question in quite the same way. It seems to me that when deciding what relief to give, although one may have to have a sharp line of demarcation at which to make a change, it ought to be one's endeavour in this sort of case to make the change as small and as gradual as possible. So far as I can see, in this case there is no attempt to make the change gradual. It is undoubtedly a very sharp change for the reasons I have given.

Do the Government regard that as satisfactory, or are they in process of considering some more equitable system of relief as between the two groups of persons? I do not want to be misunderstood about this. I entirely agree that persons over 65 should have full exemption, but I would see any change made by increasing the exemption for small incomes of persons under 65. Equally, I have no objection to the fact that the Government propose to make these increases in amount. I have no objection to their being quite substantial increases.

But what puzzles me is whether in doing this, and in limiting it to these changes, the Government have forsworn or merely postponed what seems to me to be inevitable— the tidying up of this part of the tax system. I do not want to repeat what many of my hon. Friends have said and what I think has been admitted by the silence on this point on the other side of the Committee, but it is monstrous that in a prosperous country people with such small incomes as we are concerned with in this kind of case should have to pay tax at all.

I should have thought that any reasonable Government would strain every effort it could and face every administrative difficulty— that is, leave no stone unturned and no avenue unexplored, as the advertisements in the Tube used to make perfectly clear— in order to get a bit of sense into these arrangements. They conspicuously lack it at present, and they lack it because of the way this legislation has grown up and because no Government have had the courage to face the really human problem involved in this kind of legislation, the difficulties of passing from one age to another and the question of whether for very small incomes there ought to be any difference on account of age.

8.0 p.m.

Having listened to this battle between the Conservative Front Bench and the Opposition Front Bench, I felt that I might address one or two remarks on the subject. I am, of course, delighted that my right hon. and learned Friend has at last done something. I do not think he has done a very great deal, but I am always thankful for small mercies. That is one of the things I have learnt since I came into the House of Commons.

I noticed that it was suggested from the other side of the Committee that between last year and this year same softening up of the Chancellor and the Financial Secretary might have been done by some of us on this side of the Committee. I agree with what has just been said. But it has been extremely difficult to get the Chancellor down to looking at the problem which is involved for people who live on small fixed incomes.

I have not the experience or the knowledge which the hon. Member for Sowerby (Mr. Houghton) always brings to these debates— I am always fascinated to hear what he has to say— but I think he would be quite interested if I were to ask the Financial Secretary to produce all the correspondence which he has received from me during the course of twelve months on some of these questions. Then the hon. Gentleman might have a little more information.

I do not in the least mind what was said last year as long as some progress is made this year. As I have said, I am thankful for small mercies. All I would say to the Financial Secretary is that I do not think he can have been particularly inspired by listening to the speeches criticising what he said last year. It is stupid to bring up all the arguments used in the past; they can always be brought up in the present and the future.

But it would be a good thing if the Financial Secretary took heed of what has been said, and then perhaps next year we might get some first-class concessions and have the whole question of taxation for people living on small fixed incomes brought into line with what I believe are the general views and desires of the country. We have discussed the line drawn at 65. I see no reason why we should not go downwards— to 60, 55 or even 50. But there never is any opportunity in this place for a proper human discussion of the whole problem.

Though, as I say, I very much support what the Chancellor has done in the Budget, I do not in the least mind how embarrassed the Financial Secretary may be at having his speech of last year quoted against him by the Opposition, and I hope that my hon. Friend will learn and inwardly digest so that we do not have to have a repetition next year. I look forward very much to having not only crumbs next year but a whole big loaf or cake.

I am grateful for the remarks of the hon. and learned Member for Kettering (Mr. Mitchison). I have already spoken twice on this Clause. Therefore, I will reply very briefly to the hon. and learned Gentleman, who asked me about the marginal arrangements particularly with regard to the small income relief.

The situation is that at present the marginal relief is given for incomes just over £300 provided that, if it is to his advantage, the taxpayer's liability shall be taken as equal to the sum of two amounts: first— this sounds rather like an Amendment drafted by the hon. and learned Gentleman, if I may say so— the tax that he would pay with the benefit of the small income relief then due if his income were exactly £300; and, secondly, two-fifths— 8s. in the £— of the amount by which his actual income exceeds £300.

In principle, this method of determining marginal reliefs will be retained for the current financial year, 1962–63, with the substitution of £400 for £300. But the fraction of two-fifths used in the second part of this formula will have to be adjusted a little. It would be tedious for the Committee if I went into full details now of what we propose to do, but we have noted the point which the hon. and learned Gentleman properly raised. I have no reason to think that, with a slight alteration, we shall not be able to manage the problem perfectly well.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Clause 9—(Charge To Income Taxand Profits Tax)

I beg to move, in page 10, line 20, to leave out from "accrue" to the end of line 20 and to insert:

  • (a) from discounts chargeable under Case III of Schedule D;
  • (b) on a disposal of assets such that the part of the proceeds of such disposal are or are treated as income by virtue of some other provision of the Income Tax Acts.
  • This is the first of a number of Amendments to Clause 9 and I do not wish to anticipate the comments that will be made later. The philosophy behind Case VII is that certain gains which have hitherto escaped the Revenue's net should be caught for Income Tax and Surtax.

    I am not a fisherman myself, but I understand that it is one thing to catch a fish with one hook, but that a fish with two hooks in its mouth is described as foully caught. That is the case, or could be the case, under the present language used in subsection (1) which begins by stating:
    "Without prejudice to any other provision the Income Tax Acts directing income tax to he charged under Schedule D, … "
    Therefore, there is no suggestion that the rights under Schedule D are being modified by this Clause. The Clause details the transaction of those who can be caught, in the words:
    "… not being gains which accrue as profits of a trade, profession, vocation, office or employment."
    This seems a long and detailed phrase which would cover most normal forms of income. I am advised, however, that it does not cover all forms of income and that there is the danger of certain transactions being foul hooked, or taxed twice, if the Bill were allowed to go through in its present form.

    I notice that Amendments have been put down from both sides of the Committee on this Clause and that even the most savage one is not suggesting that transactions should be caught doubly. I think that there is general agreement in the Committee that double taxation is not in mind. I should like to give the Economic Secretary an example of three kinds of transaction, which are perfectly legal, and which are already caught by Schedule D but which do not in fact gain benefit from the exemption that is mentioned in line 20 of the Clause:
    "Profits of a trade, profession, vocation, office or employment."
    The first of these is the Treasury bill. It suits individuals and institutions to purchase Treasury bills at a discount. The discount on a Treasury bill is itself taxable. It seems, however, that this wording does not really cover the Treasury bill.

    The second example is rather more sophisticated. It relates to Section 318 of the Income Tax Act, 1952, which charges capital sums received from the sale of patent rights in so far as they exceed the prices paid for the rights. It is a very sophisticated example, but this is again something which if the Clause were allowed to stand as it is would be caught for double taxation.

    Finally, I would remind my hon. Friend of a Clause over which we had very long debates two years ago. I refer to the Finance Act, 1960, Section 21 (11) which taxes the proceeds of sales of shares of certain property companies in cases where
    "… apart from this section the consideration would not be a receipt of an income…"
    The words which I have just quoted charge a case in which disposal of shares produces a gain within the Case VII charge.

    I am a child in the affairs of the House of Commons and I have a very short experience of Finance Bills, but I know that it is not the lot of a back bench Member to frame an Amendment which, however laudable, will be acceptable to Government draftsmen in the form in which it is presented. I am putting my Amendment forward to give my hon. Friend an opportunity of stating categorically that double taxation is excluded from the Government's intention in this matter, and to ask him to give me an undertaking that he will look into the points that I have raised with a view to an alteration that would meet the case and thus make it unnecessary for me to detain the Committee any further.

    I am grateful to my hon. Friend the Member for Walsall, South (Sir H. d'AvigdorGoldsmid) for giving me an opportunity to clear up what, on the face of it, appears to be a somewhat odd situation. As he has said, his Amendment proposes that there should be excluded frim the new Case VII the types of transaction which are set out in the Amendment. There are a number of cases in which a gain already chargeable under Schedule D would fall within Case VII if the realisation took place within the relevant period— that is to say, either six months or three years.

    One example is that of a profit made by an investment holding company on the realisation of an asset acquired from an associated company with a business of dealing in investment. Any such profit, whenever it is realised, is already chargeable under Case VI of Schedule D, under the provisions of Section 25 of the Finance Act, 1960. But I want to assure him that it is a recognised principle, which has been established in the courts, that, in the case of certain types of income which are assessable under Schedule D, the Inland Revenue has the choice of assessing under different cases of that Schedule.

    I give the categorical assurance that there is no question whatever of assessing the same income more than once— that is to say, under different cases. The charging provisions of Case VII have been framed on the footing that this same general principle will apply in certain instances where a gain might be held to be chargeable under other cases under the existing law.

    The Amendment refers specifically to discounts chargeable under Case III of Schedule D, and it is the intention of the Inland Revenue to continue charging these discounts under Case III and not under the new Case VII. The Committee will therefore, I hope, see that this Amendment is not needed to prevent a double charge to tax on the same amount of profits.

    On the other hand, I should add, in view of what my hon. Friend said, that the incorporation of his Amendment in the Bill could cause difficulties in certain cases because it would mean that, where the Income Tax Acts imposed a charge to tax under, for example, Case VI of Schedule D, a Case VII assessment would be invalid. If the Committee wish me to go into details on this point, I will do so to explain why it is in the general interest that the Inland Revenue should have the choice between two cases in certain instances. But I can assure my hon. Friend, on the main point he raised, that there is no question of a double charge arising as the Clause stands, although I agree that that might be the impression of someone who did not know the decisions of the courts on this matter. With that assurance, I hope that my hon. Friend will not press his Amendment.

    8.15 p.m.

    I rise only to ask the Economic Secretary to give us the additional explanation which he thought would be tedious. I assure him that I do not share his opinion. I think that this is a difficult matter. I have found the provisions of the whole of this tax quite complicated— inevitably so, I think. But I am very anxious that the rights of the taxpayer should, so far as possible, depend on what is said in the Bill rather than on any practice or concession by the Inland Revenue. It is better, particularly in a tax of this kind, that we in this Committee should know that the Inland Revenue cannot go beyond what is in the Bill, for if it is left as a matter of discretion or anything of that sort we have no countervailing assurance.

    I want to ask one question. This Amendment, I agree, deals, first, specifically with discounts, and Case III, of course, covers a very great deal besides discounts. Does what the Economic Secretary has just said apply to discounts only, or does it apply to other periodical payments or payments by way of interest of the types to which the hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) referred? What is the substantial difference between the second part of the Amendment and the words in the Bill?

    I speak without the profound know-ledge which I think only a Treasury Minister or a skilled banker can have of these matters, but I am puzzled as to why general words such as "excluding Income Tax arising out of a calling'' — if I may use such a sweeping word— would not cover this case. I should have thought that discounts must have been profits of that kind, or be taken into account in estimating them. I do not quite understand what the point is. I believe that the further cases the Economic Secretary has in mind would serve to illustrate.

    Will the Economic Secretary also turn his attention to the point about discounts raised more specifically by the hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid)? The Economic Secretary said, quite separately from the point raised by my hon. and learned Friend the Member for Kettering (Mr. Mitchison), that, with discounts, it is the intention of the Government that there shall be these two alternatives— and we understand that that is a principle which applies to other matters which he is to explain— and that the Inland Revenue will select one and continue to assess under Case III as opposed to assessing under the alternative Case VII where that would be appropriate.

    Why is it necessary, under new legislation, when we are starting off clean, to bring in these alternatives while, at the same time, saying that one of them will not be exercised, but that assessment will continue to be under Case III? What is the validity of the Economic Secretary's statement that the Inland Revenue will assess under Case III? This is not a personal question reflecting on him, but to what extent will that bind either the taxpayers or the courts?

    I understand, from what my hon. Friend the Economic Secretary has said, that this tax, being chargeable under Schedule D, will not be chargeable twice under the same Schedule. The latter part of the Amendment does not deal with Schedule D specifically, however, but with the disposal of assets such as might be chargeable under another part of the Income Tax Acts. A letting of property for more than twenty-one years is a disposal. What is the position with regard to rent? Does one value the lease and calculate it on the capital sum of the lease? If one does that, is rent to be chargeable under a different part of the Income Tax Acts as well?

    I can see that, under Schedule D, there would not be a double charge, but if some of the gain is chargeable under some other part of the Income Tax Acts, as the rents would be, then I do not think that it is clear, in Clause 9 (1), as drafted, that the taxpayer will quite definitely not be caught twice.

    The hon. and learned Member for Kettering (Mr. Mitchison) asked me two questions. The first concerned paragraph (a) in my hon. Friend's Amendment. Of course it is clear from the Amendment, in respect of Case III and paragraph (a), that he is dealing only with the case on discounts. On the other hand, there is something in the hon. and learned Gentleman's point that paragraph (b) of the Amendment would probably embrace what is already in paragraph (a)— in other words, it would cover discounts under Case III of Schedule D.

    The hon. and learned Gentleman asked me how it was that the words in paragraph (b) are wider, as he assumed they were, than the words already in Clause 9 (1), and this point was also mentioned by my hon. Friend the Member for Crosby (Mr. Graham Page). The reason is that the words in Clause 9 (1) immediately before the proviso relate only to the
    "profits of a trade, profession, vocation office or employment "
    — in other words, only to Cases I and II of Schedule D, whereas the words of the Amendment go wider and deal with any income which may be chargeable to tax, although it may be outside Cases I and II. Therefore it goes wider than the reservation made in the Bill.

    The hon. Member for Gloucester (Mr. Diamond) referred to the fact that the Revenue selects only one charge— in other words, it charges under only one case. He asked me what validity my assurance had when I said that it was the intention of the Revenue in respect of discounts to charge only under Case III and not under the new Case VII. He is right in his implication that what I say in Committee certainly does not bind the courts in any decision which they make, although I have no doubt that under successive Governments, unless the matter were brought before the Committee and the House again, the Revenue would act in accordance with that assurance which I have given.

    I think that I have covered all the points raised in the debate, but if there are any others I shall be happy to deal with them.

    I am sorry to go on with this, but I am not happy about it. Let us take the discounts. It seems to me that although in some cases discounts would be incidental and, therefore, would fall to be assessed under Case III, there would be other cases in which they would arise out of a trade. The trade, I suppose, would be that of a merchant banker or discount house, and therefore they would be excluded. Is it intended that there should be any difference in their treatment in the one case from the other?

    I hope that the hon. Member will bear in mind, as I repeat, that I have not his experience in these matters, but let me take one other case, that of a company. I have seen notices of such companies in the newspapers— companies whose business it is to buy landed property and re-sell. They do not merely hold it as a casual investment; it is part of their business to re-sell. What will happen in that case? Supposing a company re-sells a house within the three years which the Government allow and another house at the end of that period: is one transaction to be treated in one way and the other to be treated in the other way? Or how will it be dealt with? Will the Minister be good enough to deal with this, remembering that if house transactions are to be dealt with as taxable profits of a trade, then there are questions of management expenses which may not arise in the instance of the Government's present Case VII.

    The Economic Secretary has made it clear that paragraph (a) in the Amendment is satisfactorily drafted. It is well drafted; it means what the hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) intended it to be and what the rest of us took it to mean. It says that discounts chargeable under Case III of Schedule D shall not also be chargeable under Case VII. The Economic Secretary said, "We are not accepting the Amendment because we do not want them taxed under Case VII; we want them taxed under Case III". That is precisely what the Amendment proposes. Would he make it simple for the simple souls in the Chamber and explain why he is adopting this very ambivalent attitude?

    An important question of principle arises here, because although the Economic Secretary has given us a categorical assurance about discounts under Case III, as he has said, paragraph (b) of the Amendment goes very much wider and goes beyond Schedule D altogether. I should like an answer to what I thought was the very important point raised by the hon. Member for Crosby (Mr. Graham Page), who gave the example of a lease for more than 21 years which could quite properly be caught under this new Case VII. Does that— obviously it must— have some bearing on other Income Tax requirements on the rent and the rest? For example, how would a lease of over 21 years be assessed under Case VII and to what extent does that assessment under Case VII have any bearing in the tax year or future years on the rents or other income coming from the lease?

    No doubt there are those with knowledge of property and financial matters who could think of other instances in which it could well be that some transaction was properly caught under Case VII but in which there would be some element of injustice if, as a result of being caught under Case VII, the liability under another part of Schedule D, or indeed any other Schedule, was not extinguished. On the other hand, the principle stated by the Economic Secretary is well established— that you do not pay tax twice; but in this calculation there might well be an instance in which such a double taxation arises.

    In particular, I should like the hon. Member's answer to the points raised by the hon. Member for Crosby about how one treats a lease both in regard to Case VII and in regard to tax commitments flowing from it under any of the other Schedules of the Act.

    I do not think that tinder this Amendment I can deal with the question of how the profit on the disposal of a lease is to be computed. The hon. Member for Sheffield, Park (Mr. Mulley) might look at Clause 11, where he will see in subsection (3) a reference to the consideration which is to be taken into account. That provision is elaborated in the Ninth Schedule, but that does not arise under this Clause, I understand, and——

    The second part arises under the Amendment, because the words in paragraph (b) are the disposal of assets

    "such that the part of the proceeds of such disposal are or are treated as income by virtue of some other provision of the Income Tax Acts".
    We want to be clear that there will not be any possibility of tax being charged, by virtue of the same transaction, in two parts of the Income Tax Acts. I submit that the Amendment is very wide indeed.

    Certainly it is quite possible. I do not know about the specific case raised by my hon. Friend the Member for Crosby, but there are eases, as I thought I made clear at the outset. in which tax can be charged under two different provisions of the Income Tax Acts. In that case it is open to the Inland Revenue to choose under which case it proposes to levy the charge, and I gave an assurance that of course the Revenue would, and could according to the law, I think, charge only under one case.

    8.30 p.m.

    The hon. Member for Gloucester (Mr. Diamond) asked why, if it is the intention of the Inland Revenue in the case of discounts to make the charge under Case III and not under Case VII, even though they might come within the scope of Case VII, we should not incor porate a provision to that effect in the Bill? There are a number of instances where tax liability arises under different Cases. This is only one. If we had to deal with the particular case of discounts, I would have thought that it would probably be desirable to put in the whole list of instances where tax might be charged under Case VII and also under some other Case. I cannot think that that would be the wish of the Committee, because if we were to do that there is no doubt that it would in certain instances prejudice the work of the Inland Revenue.

    I do not know whether the hon. and learned Member for Kettering (Mr. Mitchison) still wants me to give a concrete example of where it would obviously be to the advantage of the Inland Revenue and to taxpayers generally for the Inland Revenue to have at least the opportunity of exercising this opinion as between two Cases. A moment ago when the hon. and learned Gentleman last spoke he asked about two specific types of case where I think he said a company was trading in discounts, and another case where the business of the company was to buy and sell property. In both cases, by virtue of the fact that the taxpayer would be engaged in a trade, he would be excluded altogether from the charge under Case VII as a result of the concluding words in subsection (1) immediately before the proviso. Therefore, there could be no possible question of a choice arising to the Inland Revenue. He would be assessed under Case I of Schedule D, and the Revenue would not have the option of assessing him under Case VII.

    There is one point with which my hon. Friend has not dealt. If the Revenue is to have a choice such as he described, is there a possibility that in one case it may be earned income and in another case unearned income? It is unearned income so far as this charge is concerned, but it may be that the Revenue could choose this as against earned income. I will not ask my hon. Friend to reply at once because I cannot give a specific case, but from what my hon. Friend said it seems that there may be cases in which the taxpayer would be deprived of his earned income allowance.

    I wonder whether the Economic Secretary would convey a message to his right hon. and learned Friend? On his appointment as Chancellor of the Exchequer the right hon. and learned Gentleman said that his main desire was to simplify the Tax Acts, and certainly one aspect of them. Would the hon. Gentleman be good enough to convey to his right hon. and learned Friend that in carrying out this principle of simplifying the Tax Acts, where we are starting with a new tax we are deliberately providing that there shall be confusion in everybody's mind because the tax will be collectable and chargeable both under the existing provisions, under Case III, and under the new provisions under Case VII?

    I fail to see the force of the hon. Gentleman's argument that this is merely one example of a bad state of affairs; that he has many further examples which he could give of a bad state of affairs. I fail to see why this is regarded as a good cause for us incorporating a bad state of affairs. Surely when we are providing a new case we should endeavour to simplify matters?

    I dare say that this is not something on which the hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) feels so strongly that he wishes to divide the Committee, but if he does I will support him. We all want to see the Tax Acts well and simply drawn, and I would he far happier if the Economic Secretary would give further consideration to this to see whether he can accept at all events in principle that part of the Amendment which denies the choice available to the Revenue in a circumstance in which the hon. Gentleman assures the Committee it will never want the choice of them. It is a ridiculous state of affairs to start with a new section in this way.

    I should like to correct the hon. Member for Gloucester (Mr. Diamond) on what I said about the position of discounts. It was not the intention of the Revenue to charge discounts. I thought I made it clear that if because the Revenue had the power or might have the power in law in certain circumstances to charge them under Case VII as an alternative to Case III, it decided to do that, the House would be informed; but that is not the intention of the Revenue at the present time.

    My hon. Friend the Member for Crosby (Mr. Graham Page) referred to the possibility of the Revenue having a choice between Case VII which gives rise to a charge to tax in respect of unearned income and a charge to tax under some other Case which might qualify for earned income relief. I have taken advice on the matter, and I understand it is unlikely that this difficulty will arise, but in view of the specific question put to me by my hon. Friend I will look into this further.

    Perhaps I might sum up what I said some considerable time ago. I give my hon. Friend the Member for Walsall, South the assurance for which he asked, that there will be no question of double taxation.

    I find myself largely in agreement with almost everything that has been said, except what was said by my hon. Friend the Economic Secretary, and the temptation to divide the Committee is a real one. At the same time, however, I think that it is making a mockery of our proceedings to do so on a point of abstract detail. I do not, however, propose to withdraw the Amendment, because I still think that in this new system of taxation we are introducing an element of doubt, which is contrary to all the principles for which I came here. I therefore have no intention of withdrawing the Amendment.

    Amendment negatived.

    I beg to move, in page 10, line 27, to leave out subsection (2) and to insert:

    (2) In respect of tax chargeable by virtue of this section there shall be allowed relief, called "lapse of time relief", in accordance with the provisions of the Schedule (Charge on gains from acquisition and disposal: lapse of time relief) to this Act.

    I suggest that with this Amendment we should take the Amendments in page 10, line 29, to leave out "three" and to insert "two"; in line 29, to leave out "three" and to insert "ten"; in line 31, to leave out "six months" and to insert "five years "; and the proposed new Schedules:

    Charge On Gains From Acquisition Anddisposal: Lapse Of Time Relief

    1. In this schedule the word "year" means a period of twelve calendar months and also includes an incomplete year immediately before disposal.

    2. The gain accruing from the acquisition and disposal of a chargeable asset, being gain taxable under section nine of this Act, is divided by four times the number of years between acquisition and disposal; and the quotient so obtained is hereinafter called a "taxable unit".

    3. A number (hereinafter called "the taxing number") is computed by reference to the period between the acquisition and the disposal of the chargeable asset, that is to say, by adding—

  • (a) in the case of a chargeable asset consisting of land,
  • (i) the number four for each of the first three years after acquisition,
  • (ii) the number three for each of the fourth and fifth years after acquisition,
  • (iii) the number two for each year after acquisition from and including the sixth year to and including the tenth year,
  • (iv) the number one for each year after the said tenth year, or
  • (b) in the case of any other chargeable asset,
  • (i) the number four for the first year after acquisition,
  • (ii) the number three for the second year after acquisition,
  • (iii) the number two for each of the third, fourth and fifth years after acquisition,
  • (iv) the number one for each year after the said fifth year.
  • 4. The tax chargeable in respect of the said gain shall be the tax on the taxing number of taxable units and the relief (in the Act called "lapse of time relief") shall be the difference between the tax so chargeable and the tax which would have been chargeable on the gain if this schedule had not been enacted.

    And

    Charge On Gains From Acquisition And Disposal: Lapse Of Time Relief

    1.In this schedule the word "year" means a period of twelve calendar months and also includes an incomplete year immediately before disposal.

    2.A percentage of any gain accruing from the acquisition and disposal of a chargeable asset, being gains taxable under section nine of this Act, shall be disregarded for all the purposes of Chapter II of this Act other than the furnishing of information; and the percentage so disregarded is in that Chapter called "lapse of time relief".

    3.The percentages to be so disregarded shall be those set out in the following Table: —

    TABLE
    Years between acquisition and disposalPercentage where the disposal is of landPercentage in any other case
    1NilNil
    2Nil12½
    3Nil25
    4530
    51035
    61540
    72045
    82550
    9and103055
    11to134060
    14to164562½
    17to205065
    21to255567½
    26to306070
    31to406572½
    41to1007075
    over 10075

    Yes, Mr. Williams.

    This is an Amendment that, although short, is of considerable substance. It leaves out subsection (2) and inserts:
    "In respect of tax chargeable by virtue of this section there shall be allowed relief, called 'lapse of time relief ', in accordance with the provisions of the Schedule (Charge on gains from acquisition and disposal: lapse of time relief) to this Act."
    We therefore propose to leave out the limitation of time, which, in the view of the Government, converts what might be a capital gains tax into an effective speculative gains tax— to use their own language. We propose to have no time limit, but to have, instead, a gradual diminution of the charge, varying inversely with the length of time between acquisition and disposal.

    I will deal with the two Schedules quite quickly. They are much the same in effect, but they are not quite identical. Our problem arose from the fact that we wanted to tax a gain which falls due at the end of a definite period, as nearly as we could with the effect of making tax chargeable at the full rate for a term of years, then at three-quarters of the rate. then at half the rate and then at one-quarter of the rate. That is what the first of the two Schedules does. It looks a little complicated, and I must admit that the second of the Schedules, which is an alternative, was put in because a number of my hon. Friends said that the first was choctaw— or whatever other word might be used. To me, it seems quite clear, as it does to my hon. Friend the Member for Sowerby (Mr. Houghton). We regard it as much simpler than many things in the Bill or in existing Income Tax legislation.

    Put summarily, it amounts to this: we take the amount and divide it by four. We then go to paragraph 3 of the first of the Schedules, where we put the number four into the multiple, which is the full rate, then the number three into the multiple, which is the three-quarters rate, then the number two into the multiple, which is the half rate, and then the number one, which is the one-quarter rate. In that way we apply, as nearly as may be, to a gain falling in in a lump sum at the end of the period, the sort of treatment that would be given in respect of the tax at the full rate, then at three-quarters rate, then at half rate and then at one-quarter rate. That is being done to a lump sum of money, and it is, therefore, irrespective of changes in the level of the standard rate during the period in question.

    If hon. Members like to work it out they will find that it is quite simple. At the end of the time it gets closer and closer to 25 per cent. without ever actually reaching it. Taxing 25 per cent. is not the same as the American tax of 25 per cent. What we are doing here is to levy not a tax of 25 per cent. but a tax on 25 per cent.— a much smaller figure.

    The second of the Schedules moves in the same way, but the figures have been equalised to avoid complicated numbers, and they go in multiples of five and two-and-a-half, and finally reach a relief amounting to three-quarters, or a tax of one quarter.

    I hope that I have made reasonably clear what is actually a slightly difficult thing to do. I can assure the Committee that the Schedules are intended to provide a tapering relief, varying in the case of land and other assets just as the Government's proposals vary, and, in effect, providing for a period of three years at full tax, which is the Government's period in respect of land, and one year instead of six months in respect of other assets. Then, since the land has had a longer period, the rise in relief is a little sharper than the rise in relief in respect of stocks and shares. We get two curves or series which are intended to produce a proper tapering result. I should be the last person to insist that this was necessarily the right form of giving a relief. The Schedules are intended only to show that it is quite easy to give this kind of relief, depending on the length of time between acquisition and disposal.

    8.45 p.m.

    I now turn to the substantive question that we have to consider, whether we wish to keep the Government's time limits. I still think that the simplest answer was contained in an article in the Evening Standard on the day on which the time limits appeared. The article suggested, "There is not much trouble to be anticipated from this tax. If you are dealing in stocks and shares, you have to wait for six months and a day, and no trouble will happen to you anyhow. But if you are so impatient that you cannot wait till then, here are three ways to avoid the tax. The first two are illegal, but you are unlikely to be discovered. The third one is legal."

    I am not concerned with the merits of the methods of evasion suggested. They related largely to dealings in the Channel Islands, or the Isle of Man, or something like that. It does not much matter whether they happened to be thoroughly effective or not. But there is no doubt that a short-term kind of tax of this kind is almost certainly easy to avoid and certainly easy to get out of by waiting until the end of the short term— and the end is very short indeed. Therefore, as the Government were at pains to tell us, it is very carefully to be distinguished from a proper capital gains tax.

    From our point of view the only point is that though, no doubt, one would have to go through all the voluminous provisions of this part of the Bill and the very complicated Ninth Schedule in some detail, it appears that, broadly speaking, a great deal of the machinery suitable for a speculative gains tax is also suitable for a proper capital gains tax. Therefore, the arguments which have been put forward so frequently about the impossibility of doing it seem to have lost some of their validity.

    I have long suspected that there was not much behind them but prejudice, and here is a scheme, put forward by the Government. It will be said, "But you yourself have just been saying how easy it is to get round them." My answer is," That is as may be. But it is very much harder to get round a tax without time limits than to get round a tax which has these comparatively short time limits."

    Later, we shall see how many holes the Government have left of which they are aware at the moment, or of which hon. Members opposite are aware, and stop them so far as we can. But I have no doubt whatever that the Government tax, as proposed, is open to a certain amount of criticism. All I can say is that any criticism which may be directed against us for impracticability falls against the Government with 'greater force because what they are proposing to do is something which is a great deal more difficult.

    Therefore, I reject a great many of the arguments advanced, for instance, in the Report of the Royal Commission about the difficulty, the administrative difficulty — we are always told that— the general difficulty, every kind of difficulty, of producing a tax. Here it is. It may not fit exactly, I am not sure that it does; but it certainly shows that something of the sort can be done.

    Now I come to the point of substance about this. It appals me that people go on so long objecting to a capital gains tax. I cannot see what is the difficulty about it, I mean the philosophical or the national difficulty. We who go about London or other parts of the country know of money being spent which could not be accounted for by what has been received by way of salaries and the like. We know that it comes very largely— surely this is a matter of common knowledge to hon. Members on both sides of the Committee — from people who have made gains by buying something or other and selling it at a profit, and not necessarily within six months or three years. Very often, they hold these things for a long time. What is happening is that, with the gradual change in our affairs going back over many centuries, the value of money is actually tending to fall and the value of assets of one kind or another has been tending to rise.

    The man who gets his income from some kind of stocks and shares or from the rent of land and the like is using the advantage of his possessions in one way, but, if he sells them, he is equally using it in another way. If he chooses to have a thousand shares, and, instead of choosing the kind of shares which pay high dividends, deliberately chooses a share with a very much lower one, but with prospects of increasing in value, he can get his effective income by selling off ten shares in one year and ten in another until he acquires what he wants to live on at the standard of life he chooses.

    If we take a perfectly innocent case, we all know that leaflets issued by any Government, newspaper articles, and so on, point out what an advantage it may be in certain circumstances to do this with National Savings Certificates. There is a very great deal to be said for buying a parcel of them and selling off five or ten certificates at a time as required. Of course, they are not subject to Income Tax anyhow, but is there any substantial difference between the man who buys a bond and gets interest on it and the man who buys a parcel of National Savings Certificates, which are bound to go up in value, and takes the advantage of that accretion by selling off packets from time to time?

    Exactly the same thing may be done with stocks and shares, and in the case of land there could be the same kind of thing, but in a more complicated form. I suggest— and it was suggested by the minority Report of the Royal Commission on the Taxation of Profits and Income— that the distinction between income and capital for taxation purposes breaks down at this point. I simply appeal to the common sense of hon. Members about it. Is there any real difference? Take the case of people who nowadays are liable for a very high rate of taxation, and who, quite deliberately, put their money into something that is not affected by this particular Government tax, let us say, the pictures of the French Impressionist school. They buy a highly marketable Renoir, which, I understand, is the best thing to do. Whether he is the right artist to select or not, I leave to other hon. Members to decide. They do it deliberately, in order to sell at a profit in a few years' time. There is an element of gambling in it, of course, but in the long run they will make something out of it.

    This is going on not merely over a short period, but decade after decade. It has been going on in this country ever since the Industrial Revolution, and, I believe, before it, and there has been a constant accretion in capital value which has benefited some members of the community to a very large extent indeed. London's ground landlords have not done too badly on the whole, and those who bought shares in a successful insurance company a little time ago have found that those shares are a good deal more valuable now than when they first bought them.

    All we are saying is that here we are hunting round for taxable capacity. I am not talking about morals, but simply about taxable capacity. We are driven, as we saw on the last Clause, to get a few shillings or a pound or two out of people with very small incomes indeed. We are told that we cannot afford to do any more for them at present. We are driven equally in the same way to be very careful and calculating about reliefs that are given to a whole number of special cases. We are obliged to keep the standard level of Income Tax at a rather high figure and only to lower it just before General Elections.

    With all this we never really reconsider what leaps to the eye— the fact that property, by and large, is going up in value, has been doing so for a very long time and looks certain to go on doing so. If that is not a taxable capacity, if it is not right to tax people who benefit from those accretions, what is the sense of our system of taxation? What kind of moral or philosophical consideration debars us from doing just this?

    I looked, as other hon. Members have done, at the Report of the Royal Commission on the Taxation of Profits and Income. I am not in the least convinced by any of the arguments that were put forward by the majority in that case and I never have been convinced. I have the feeling, looking at it, that they could not get out of the trammels and shackles of a form of taxation that was introduced for income only, and very strictly for income only, under rather peculiar conditions in the middle of the Napoleonic Wars by William Pitt for temporary purposes. It is about time that we reconsidered the matter, and this Amendment seeks to do so.

    I turn to one other point. It is absurd to say that this is impracticable when other countries do it. It does not always involve a revolution. The United States of America, to take one obvious instance, has been doing it for some time and is still doing it. I am not concerned with the details of the system. I am not even concerned with the extent to which the U.S.A. found difficulties in working it. The fact is that a great and civilised and very wealthy nation thinks it the right thing to do and goes on doing it. Surely that is a conclusive answer.

    There remains the question of set-off of losses. I think that history, so far as we have seen it, and so far as we can judge of how it is likely to develop, shows us that there is a rise, that if we allow set-offs of losses we shall no doubt reduce the tax in any given year but that in the long run we shall do what we are seeking to do and we shall get for the community a taxation share— I am not talking of anything else— of profits accruing from year to year.

    What we are really seeking to do is to tax not any individual or particular case, but the whole flood of increase in the value of property which we have seen flowing— with an ebb occasionally, but still flowing one way— in the direction of increase for decades now. I appeal to hon. Members not to allow themselves to be governed by political prejudices which they may have, not to think that there is anything immoral in seeking taxable capacity where common sense would lead us to expect to find it, not to believe that they are upsetting the universe and provoking a revolution or accomplishing the final death of a perishing Tory Party by accepting this Amendment, but just for once to clear their heads of all that and to imagine that they were starting with a clean slate but with the world around them as it is.

    Could anybody in his senses refuse to tax capital gains in this country? Could they do so in justice, in equity to other taxpayers who have no chance of making these capital gains and see Mr. A and Mr. B getting away with it while they are merely Schedule E payers on their weekly salaries and can no more make taxable gains than they can climb to the moon? Surely, if there is any social justice in the matter we ought to do it.

    I return to the main point. This is obvious taxable capacity which it is right, which it is socially just, and which it is most expedient in fairness to other taxpayers to tax. We ask for it to be taxed and not used as an excuse for the rather short-sighted and, we believe, wholly unworkable measure which the Government have introduced. I say that it is unworkable because it is so easy, having regard to the limit of time which we are now considering, to wait for six months and a day or three years and a day.

    9.0 p.m.

    I do not suppose that my remarks will be acceptable to either side of the Committee. I shall put the point of view of the victim of the tax. In this combined debate, we are discussing two things which are perhaps a little inconsistent. We are discussing the shortening of the relevant period for the tax from three years to two and we are discussing a considerable extension of it to a period which, on my reading of the Schedules, seems to be 100 years. How anyone, even in the Inland Revenue, will keep his papers for that time I fail to understand. Solicitors and accountants will probably have changed four or five times during that period. However, apparently, one must treat it as a serious proposition because that is the way it appears on the Notice Paper.

    In our discussion, we come up against the words "speculator" and "speculative". I suggest that we should consider what the meaning of these words is. The word "speculator" is derived from the Latin word "speculum", or mirror. A man looks in the mirror not for the sake of admiring his awn visage but to get the angle of reflection which a mirror gives him of a situation which cannot be seen with the naked eye. In other words, a speculator is a man who bases his judgment and conduct in some matter on a view of the future which he alone can see in his speculum, or mirror. According to what he sees he forms his judgment of what he will do.

    Latterly, the word has acquired a pejorative significance. It has become without honour to make a profit in one's own country, and if that profit is made in the handling of real estate then the dishonour, apparently, is six times as great.

    The matter is put before us as though this were a new case of Income Tax, Case VII, but it is, in fact, nothing of the sort. This is not a tax on income as such in the traditional view of English tax law. Income Tax is an annual impost on annual receipts. Hitherto, no Government have sought to impose as Income Tax a tax on something which, from the start, they have confessed is not income.

    The Chancellor has said that he proposes to tax money not received as income but treated by the recipients as income. In his Budget speech he said:
    "While the main function of any system of taxation must be to bring in revenue, it must also be designed to produce a feeling of broad equity of treatment between taxpayers. At present, it is pretty widely felt to be inequitable that those who supplement their incomes by speculative gains should escape tax "—
    not Income Tax, but "tax"—
    "on those gains.… I tell the Committee frankly that it is on this account and not mainly for yield that I put forward this proposal."— [OFFICIAL REPORT, 9th April, 1962; Vol. 657, c. 979.]
    On that footing we have to face the tax as it is today. In other words, my right hon. and learned Friend is trying to tax as income something which is not income. He continued:
    "For interests in land the charge will apply if the period from acquisition to disposal is three years or less.… This difference in period conforms to the reality of the situation. 'Short term' in relation to land is something quite different from 'short term' in relation to stocks and shares."— [OFFICIAL REPORT, 9th April, 1962; Vol. 657, c. 980–1.]
    I do not think that I would quarrel with that statement. It is obvious that, if six months is a reasonable period for stocks and shares, the average property transaction undertaken as speculation would take longer. But it would not take as long a period as three years

    As an example of one of the things which will happen if the three-year limit is adhered to, let me give a simple case which has happened in my practice on many occasions. A man buys a house let to a tenant under the rent restriction Acts. For two years he receives the rent on which he is taxed under Schedule A, and if it is in excess of the Schedule A assessment he will pay under Schedule D as well. At the end of two years, the tenant, being moved to another part of the country, gives him notice to quit. At present, he will probably sell the house because there will be a difference between the investment price at which he purchased and the new price at which he can sell.

    What will he do? He will keep the House empty for a while because it is far better to drop the income, and thereby drop the Income Tax, than to pay the tax on the realisation. Is that a good thing? Plainly not. In every social sense— I have heard a great deal about social justice this afternoon and I shall examine that presently— that house should be brought into use, whether let or sold, at once. But is it possible that it will be under the threat of a tax of this kind? In the purview of a sale and purchase of this type, it is the time when the asset is acquired which matters. The profit is in contemplation when the asset is acquired, not when it is sold. The man who buys his stocks for a six months' holding is contemplating a profit from the moment that he begins the operation. At six months and a day, as the hon. and learned Member for Kettering (Mr. Mitchison) said. he can take his profit and under the Government scheme is exempt from tax. Would it not be far better to shorten the range of the tax in order to avoid social damage of this sort? Of course, if the tax is lengthened, as the Amendment suggests, that is an attack on investment as such. Plainly that is not Government policy.

    Why is that an attack on investment as such any more than it is an attack on weekly wages if they are taxed?

    I do not follow the connection between weekly wages and what we are discussing.

    Let me make myself clear. The hon. Gentleman said that this was an attack on investment as such. Why is it an attack on investment as such by taxing any more than it is an attack on wages as such by taxing?

    Because hitherto it has not been the Government's policy to attack investment as such. A tax on the realisation of the profits of an investment designed to last over 100 years is plainly an attack on investment as such.

    It was not long after this speech was made by the Chancellor that the usual commentary and explanation were issued. As right hon. and hon. Gentlemen opposite may not have heard about this, I will read the commentary issued by the Conservative Party Central Office in order that their appreciation of our attitude to the tax may be better understood. It is entitled, "Spreading the Tax Burden". It reads:
    "While ruling out substantial tax reductions this year, the Chancellor has improved our tax system by widening the base and spreading the burden more fairly between different individuals and also between the different things we buy."
    Spreading the burden is the feature. Yet we are told that it is not imposed to raise revenue; it is imposed only, one might say, for social justice. How can the burden be spread if nothing is to be raised from the tax to help to spread the burden?

    The quotation continues:
    "It has been widely felt to be unfair that people who make quick speculative profits "—
    three years, of course, is only the day before yesterday—
    "which are really in the nature of income— not really investing at all— should go tax free. The Budget makes these speculative gains taxable in the same way as any other income."
    That is not true, because any other income attracts earned income relief whereas this does not. The quotation continues:
    "This is a major reform. The Socialists and Liberals say it does not go far enough. To tax all capital gains, however, might discourage genuine saving and investment and so slow down economic growth."
    Which of these pictures is the right picture? Are we expecting to get so much money from this tax that everybody will rush to bring their transactions within its ambit in order that we may spread the tax burden over other people, or is this just petty surrender to the agitation which the Opposition have engendered— a petty surrender to the Chancellor's commitment in July when, in order to get help from the Opposition for the pay pause, which has been consistently denied, he made this tentative offer which he has felt bound, in honour, to put on the Statute Book? This tax is a tax on investment and will not be productive, because people will adjust their affairs to avoid it, and they will even adjust their affairs to avoid the tax in the form which the Opposition propose.

    This attempt to square the Opposition on the pay pause policy has failed, as all attempts at appeasement deserve to fail. For a temporary benefit which the Government have not in any case achieved, the commercial and professional community must suffer still more Inland Revenue acquisition and act as unpaid spies for the Revenue. There is one reason surely for the lack of support for the Government, who seem to delight in injuring their own supporters, for nearly all the persons affected by this tax in the normal way will be Government supporters.

    How readily the Socialists accept the principle of the tax which the Government are seeking to introduce in this Clause and how they want to amend it to make it rougher and tougher. I say to them in conclusion, let us have no more talk of social justice. The spring of justice in this place is by no means as pure as that in the Strand, and when it goes through the muddy waters of expediency, as this tax is doing, it will have no value either as a solution to the public feeling which is alleged to exist or in any fiscal interests of the country.

    9.15 p.m.

    I wonder whether I should be in order, and if it would be for the convenience of the Committee, if I were to move the Amendments in my name and the names of some of my hon. Friends, in page 10, lines 29 and 31?

    It would not be in accordance with practice for the hon. Member to move them now, but it is in order to discuss them, as was explained, I think, when the Amendment which is now before the Committee was called.

    I apologise that I did not hear that explained, Sir William.

    I was interested in what was said by the hon. Member for Brierley Hill (Mr. Talbot). He thought that many Members on this side felt there was something wrong about making a profit. I do not think that most hon. Members on this side think that wrong. What we say is that it is wrong not to tax profits, which is a different thing altogether. I was delighted with the honesty of the way the hon. Member put his case, and he put his case from the Tory point of view with a vengeance. It is enlightening to see the exact, typical Tory view on this matter.

    Along with my hon. Friends, I am not necessarily against the official Opposition Amendment which my hon. and learned Friend the Member for Kettering (Mr. Mitchison) has moved, but we do feel that it is a rather complicated way of dealing with this matter. After all, we are rather keen to simplify taxation today, and not further to complicate it; many people find taxation difficult enough already to understand. Moreover, as the hon. Member for Brierley Hill said, over a hundred years the value of money can change. With my hon. Friends, I feel that a far simpler way of dealing with this question of taxing capital gains would be better.

    That is why we have put down the Amendments I have just referred to, asking the Committee to alter the periods as set out in the Clause. I do not want to take up the time of the Committee by going into all the details and arguments. My hon. and learned Friend the Member for Kettering has done that already, and, no doubt, many other hon. Members can do it better than I, but I would just say that the period of three years is really not long enough for agricultural land or any other kind of land, and that six months is not long enough for shares or "any other case". We, suggest five years instead of six months. Those shorter periods certainly keep those concerned and the property inside the realm of speculation, and we should like to get outside the realm of speculation altogether. That is why we feel that a longer period is absolutely necessary and that we should make the time for land up to ten years. That would definitely take the matter out of speculation altogether.

    Nobody will buy agricultural land, for instance, and sell it inside three years. I am sure that nobody interested in buying land for agricultural purposes will sell it in three years, so that that proposal for three years is ridiculous. I think that ten years is really a more likely period to take the matter out of speculation. As for land for building and that sort of development, it is obvious that by the time one has developed the land and got the buildings up and sold it, the three years will be over and one can take one's profit and get it free. We feel that that land should have a ten-year limit as well.

    Indeed, one would think, on reading the Bill and the Government's proposals, that they were simply a sop. I think that the hon. Member for Brierley Hill was probably right in a way. These proposals are a sop, arranged so that the liability to tax can be got over. Ultimately, there will be little return from the tax as proposed. There is not much hardship involved in paying the tax as here proposed, with all the expenses allowed, and so on. As I said earlier to the hon. Member for Brierley Hill, we should like to see tax on the profits made.

    As to the other cases, which mainly concern stocks and shares, I would commend hon. Members to read an article written by the Chairman of the Stock Exchange just about the time when this suggestion was first made. He said that what the Stock Exchange wanted was investors and not speculators. We want to see people invest their money if they so wish. They are not investing it if they are allowed to take the profit at the end of six months.

    I appreciate the point of view which my hon. Friend is putting forward, but I cannot get clear in my mind what purpose there is in investing money through the Stock Exchange other than to obtain a profit, whether it be in six months, three years, or any other period of time. If one supports the system I cannot see how one can object to anybody exploiting the system in that way.

    My hon. Friend obviously has not invested large sums of money. One invests money and one receives a dividend in return, but one can speculate in stocks and shares and obtain an increased value. The speculator is the man who buys stocks and shares to obtain a rise in value over short periods, and the investor is the man who wants a dividend on his money over a long period. I hope that that is clear to my hon. Friend.

    If the period in this case is only six months, it leaves it wide open to speculation. We see no reason why the period should not be five years. The reasons I have given are the main reasons for our suggesting a period of ten years for land and five years for stocks and shares. This suggestion, we believe, simplifies matters and does not go into the complicated situation which the Amendment moved officially by the Opposition Front Bench would involve.

    As the only objection is that the "official" Amendment, as my hon. Friend calls it, is complicated, may I ask why he is such a half-hearted revolutionary in company with his hon. Friend the Member for Ashfield (Mr. Warbey)? Why does my hon. Friend want to stop at five years? If it is worth taxing, let it be taxed whenever it is realised.

    There are changes in the value of money over a period of years. We thought that periods of ten years for land and five years for stocks and shares would be reasonable and simple. Over a hundred there could be a fantastic change in the value of money. A proposal covering a period of time would be unfair to all concerned.

    What is to prevent my hon. Friend, without a wishy-washy Amendment of the kind that my hon. Friend has in mind, supporting a proposition that the whole amount should be taxed at a decreasing figure? I am sorry to see that the red flag is at half-mast tonight.

    I see nothing wishy-washy in an Amendment which makes two categorical statements about periods of ten and five years.

    I am sorry to be intervening in what appears to be a private squabble on the Opposition benches. I think that we have all enjoyed it and have been much enlightened. The purpose of my intervention is, first, to thank the hon. and learned Member for Kettering (Mr. Mitchison) for having been so kind as to put down a special crib in his revised addendum, because the original was not quite as translucid as perhaps it was meant to be. I thought that I detected in it the fine Italian hand of the hon. Member for Sowerby (Mr. Houghton).

    What is the force of the Amendments which have been put forward with great vigour and eloquence from the benches opposite? The force of them is to freeze the situation as it exists today. It is to discourage any owner of property of any sort from taking any action whatsoever to improve his situation. It seems to me that it is really a case of trying to legislate for moral reasons. Moral reasons feature in all sorts of debates, but I do not think they ought to come too much into Finance Bill debates.

    One sees the morality of the argument, and it is very strong. There are rich people and poor people, and more poor people than rich people; therefore, it is right that the rich people should give up more of what they have in order to make the poor better off. That is straight commonsense, and we see it.

    But the Amendment is not designed to achieve that object. Indeed, it will produce exactly the opposite result. If, by some strange stroke, the Amendment is adopted, people who own land will do nothing at all with it. Thanks to the guidance which we have been given, they will know that the best thing is for them to do nothing with their land, for seventy-five years according to the Amendment of the hon. and learned Gentleman, or they will be liable for a special tax on what they have done.

    Let us remember that by terms of the Bill which we have not yet reached the mere act of granting a lease of twenty-one years is itself a disposal. What the hon. and learned Gentleman's Amendment is arguing is that people who grant leases should be taxed on the granting of the lease although they will be paying tax on the rent as well.

    The effect of this will be that the innate conservatism of the British character will be reinforced, and capital will become completely immovable. People will not bother to develop or take a dynamic view of things. A dynamic view is required here. In other debates we are always being urged to take a more dynamic view of things. Yet when we take a dynamic view we are presented with an Amendment like this, which is simply intended completely to freeze the situation. Is there any sense in it at all?

    No doubt that will be seen.

    I think the logic of what I have said is clear. The Town and Country Planning Act, 1947, stopped any desire for development of the country and was one of the reasons why we were so slow in developing. One of the reasons for our present shortages is that we were so slow and did not take the opportunity that existed then because every owner of land was advised by legislation that it would be much better for him to stay quiet than initiate any action. That is exactly what the Amendment seeks to do, and I propose to vote against it.

    Is there not a considerable difference? The development charge was intended to cover 100 per cent. of the accrual of value. It is a matter for argument now whether that was or was not going too far. But this is simply a case of Income Tax on accrued gains, and it is the Government who propose that Income Tax should be levied on the full amount at the beginning. We have deliberately taken care to whittle down that Income Tax with the lapse of time.

    I suggest to the hon. Gentleman that the Amendment will not have the terrible effects that he supposes, because people will not have anywhere else to go. They have got to deal with the land. They will all be dealing with it in the same way. They will get a considerable profit out of it, just as people at present get profits assessable to Income Tax. The fact that Income Tax will be levied does not deter them from chasing the profits. Why should this proposal?

    On the argument that I have heard from the hon. and learned Gentleman, there is, and tends to be, a natural increment of staying still. That is an argument which the hon. and learned Gentleman developed in his speech. Any sensible person should realise that if he does anything in the first eight years in the time that he holds the property— that is a long time, covering two or three Parliaments— the only relief that he will be granted from Income Tax or Surtax in respect of this proposal will be 25 per cent. A person will take that as a strong argument to sit tight and not initiate any activity; and if people do not initiate activity, very much less activity takes place. It all comes back to what I said earlier, that the object of the Amendment is to freeze the distribution of wealth in its present way, and if the hon. and learned Gentleman thinks that that is satisfactory, I do not.

    9.30 p.m.

    The hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) obviously takes a poorer view of the moral principles of the working people of this country than we do on this side of the Committee. He assumes that the only motive that moves people to invest their savings is to get an earned income in the form of rent, interest or profit and, in addition, a further unearned income by way of capital gain. He assumes that that is the only driving force which compels people who have the money at the moment to invest it in productive activities.

    The truth, of course, is that we need a new definition of "investment". Hon. Members opposite are continually using the word to refer to something which is not investment at all. I would have thought that if investment had any meaning it meant that someone saves a part of his income and uses the money to provide capital for some new form of productive activity. I would have thought that was a reasonable definition. What we are talking about is not investment in that sense at all.

    We are talking about people who engage in the buying or selling of shares or the buying or selling of land, which has nothing whatever to do with the encouragement of any form of productive activity. When Mr. A buys a block of shares on the Stock Exchange for £1,000 he adds nothing to the productive activities of this country. He makes no contribution. When he sells those shares he makes no contribution and the buyer of the shares makes no contribution. It is only when new capital is raised for the purchase of plant and equipment, the engaging of labour and so on in order to carry out some new economic development that the individual makes any contribution that can be distinguished by the name of investment. It does not surprise me that in these days people who put their weekly bets on football pools are described as investors. Now that the word has become used in that wide sense that form of investment is just as much a contribution to the wealth of the community as the form of investment with which we are dealing.

    My hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) tried to have a little fun at the expense of my hon. Friend the Member for Enfield, East (Mr. Mackie) who spoke to these two Amendments. I think that it is very agreeable that hon. Members on this side of the Committee should be able to talk as though they were the Government. It is a very good thing. It is a very healthy sign indeed that we should have so much confidence in the development of politics that we should already be able to talk as though we had the power to determine what will happen with regard to taxation.

    I believe that that situation is coming very soon indeed and that then my hon. Friend the Member for Cardiff, South-East and my other right hon. and hon. Friends and I will be able to join in working out the most effective means of ensuring that this community wealth which is being taken away from the community at the present time in the form of untaxed capital gains is returned to the community for its proper disposal.

    Unfortunately, at the moment we still have to deal with a Tory Government, and therefore we have to travel by different roads to achieve the same end. I will make a bargain with my hon. Friend the Member for Cardiff, South-East. If he will vote for our Amendment, we will vote for his. Indeed, I will go even further. I will offer to vote for his Amendment in any case.

    We on this side of the Committee are agreed on our objective, which is a simple one. It is to convert this speculative gains tax proposed by the Government— which the Chancellor himself has admitted is unlikely to produce any substantial yield— into a tax which will realise what appeared to be the original intention of the Government. Whatever words the Chancellor may use now, the original impression given to us was that at long last, and after many years of discussion and hesitation, the Government had realised that social justice required that capital gain should be taxed. By these Amendments, we seek to ensure that that objective is reached.

    The hon. Member for Brierley Hill (Mr. Talbot) has told us how the Government proposals will be evaded— how, by a little skilful adjustment, a person who engages in this form of money-making will be able to go on making money without having to suffer taxation on it. Indeed, he is not the only one who has told of how this can be evaded. A person who does this kind of thing explained— anonymously, for obvious reasons— how it would be done in an interview in the Observer on the 15th April. He was asked how the Chancellor's speculative gains tax would affect him and he replied
    "Not very much. You see, although you get some very eccentric speculators— people, for example, who buy £10; 000 shares with only £1; 000 in the bank and hope like mad that the wretched things will go up within the account (sheer madness, I think)— most of us are not fools.
    If I buy a share today, and a lot of other speculators buy the same share, we're going to put the price up. Let's say we're coming up to our six months and that we're still holding on. The jobbers will be short of stock and they'll be putting up their prices still further to try to get someone to sell. Well, with any luck at all, we'll be over the six months and selling with as good a profit as we had any right to expect."
    That is how they are to do it.

    We are proposing that there should be an attempt to have a really effective tax on capital gains. As my hon. and learned Friend the Member for Kettering (Mr. Mitchison) has already pointed out, the most important capital gains and those which have the most serious effect on the community are not made in the short term. They are part of a long-term process. This kind of thing has been going on in this country for many years and is the main process by which we have created a state of affairs in which the majority of private wealth is concentrated in the hands of a tiny fraction of the community.

    According to recent calculations, 45 per cent. of the private wealth of this country is owned by 2 per cent. of the population. Does anybody regard that as a healthy state of affairs?

    Apparently somebody does. I would have thought that there were few who thought it right that 45 per cent. of the wealth of the country should be owned by 2 per cent. of the population.

    My hon. Friend made that quite clear and went on to ask whether any part of the population accepted that. The answer is yes— that 2 per cent.

    I suppose that there will be some hon. Members opposite who belong to the 2 per cent, and even if they do not belong to it individually they represent those interests in the House of Commons and would not be here if they did not, because it is precisely that 2 per cent. of the population which makes the biggest contribution to the funds of the Tory Party.

    This process of concentration in the hands of a few individuals has been accelerated during the past few years. It has been accelerated by the present Government and by deliberate Government policy. It has been accelerated by the encouragement by the Government of higher interest rates. One effect of that policy is that everybody is encouraged to expect a higher return on his capital however it is invested. If one finds that 2½ per cent. in the Post Office is no longer a reasonable return on one's savings——

    Order. I am sorry to interrupt the hon. Member, but interest rates seem a little remote from these Amendments.

    I was merely trying to indicate how the situation had arisen in which there has been a large increase in non-taxable capital gains in recent years and how that process is likely to continue. That provides a reason for having this tax extended over a longer period. I was trying to show that this process has been encouraged by the Government as a result of which we can almost pinpoint the period when we had a sudden new intensification of this process of capital gains. It came after the increase in interest rates leading to this new expectation of a higher return on capital, so that people now automatically expect not only to get a 6 per cent. return in interest on their investment, but another 6 per cent. in the form of capital gains. This has become the normal expectation of people who invest their money.

    Secondly, the Government have encouraged it by the introduction of the Rent Act.

    9.45 p.m.

    Is the hon. Gentleman aware that if people demand a higher yield on their shares this results in share prices going down during that period? Last year during the period of high Bank Rates share values in this country dropped by £ 700 million.

    It is true that share values dropped during a period when profits were falling off. We know that under our present economy, as guided by this beneficent Government, it is not possible for business to be working at top speed all the time and making high profits all the time. There must be periods when profits fall off, and, therefore, we automatically have a time when share values fall.

    Does this make any difference to my hon. Friend's argument? Even if share values drop by £ 700 million, it is quite easy to make short-term capital gains by going bear on the shares and buying them back at lower prices later.

    My hon. Friend knows more about these things than I do. His comments merely strengthen my case for lengthening the period to which the tax should be applied, because, although there may be short runs up and down in the kind of economy that we have, it is in the long run that there is this steady process of capital gains.

    This has been one of the main reasons why we have seen the development of investment trusts. They are now openly advertising to the public not to secure a steady return on capital, but to secure capital gains. For example, in the Observer of 15th April an advertisement by First Provincial Reserves Unit Trust, headed, "1953 to 1962—£ 100 to £ 300", said:
    "Investment in high class ordinary British shares has proved its merits over the last decade, and is exemplified in the record of First Provincial Reserves Unit Trust which has risen from 4/6d. per Unit on 13th April, 1953 to 14/— today."
    The next heading was "1962 onwards …?" and the public were invited to contribute to this investment trust to make capital gains, not to secure a yield on shares. That is the paint which is stressed nowadays.

    This is the new atmosphere, the new psychological outlook, which has been induced in the wealthier sections of the community. The opinion held is that all someone has to do is to sit back and wait for his money to grow. How can we expect to have a dynamic economy which will compete with the economies of other countries when the wealthier people, those who should be the entrepreneur, are able to sit back and occasionally ring up their brokers to obtain an increase in their personal wealth? That is the atmosphere that prevails at the moment and that, quite apart from the question of social justice, provides an argument for an effective tax on capital gains.

    By how much these gains have increased in recent years we do not know, because we have not sufficient statistics, but my estimate— based on what we know about the increase in the value of shares sold on the Stock Exchange and of the price of land, which has risen particularly rapidly in the last three years— is that in the years 1958-61 no less than £ 15,000 million was added to the private wealth of a comparatively small section of the community without the payment of one penny of tax. If that figure is excessive perhaps someone on the Treasury Bench will be able to give us more up-to-date and accurate information. That is the nearest estimate that I can make.

    When nurses and teachers, railway workers and miners, and so on, are told that they cannot have more than a 2 per cent. increase in their income it is fantastic that a small section of the community can, by skilful management, still obtain increases in the value of their shares by investing in bank shares, property shares or finance company shares— which are still rising in value and which have risen fourfold in the last three-and-a-half years—and can in fact gain a hundred times as much wealth in a few days as a worker can by working a whole year. That situation must be remedied. It will not be remedied by the Government's proposals. That is why we want to make this tax really work.

    The hon. Member for Ashfield (Mr. Warbey) gave us a very interesting dissertation on investment, how far it went, and what it means. He then said something which will be of great interest to innumerable people. He said, "We have even got to the stage where a poor man who invests Is. or 2s. a week in the football pools is considered an investor." Quite apart from the view of his party, does he personally take the view that if a person, instead of ringing up his brokers, buys a postal order and makes a large capital gain overnight on the football pools, he falls within the ambit of a capital gains tax or speculation tax?

    Let me put it another way. Let us suppose that a person invests 1s. and wins £ 175,000 tax-free on the football pools. Does the hon. Member take the view that that should be a capital gain, tax-free to that person, or that he should pay a capital gains tax, in fairness and equity to the rest of the community? That is what the people want to know, because there is a general feeling that the Labour Party is rather frightened about this. We want to know the answer. As the hon. Member has raised the question, he should have the courage to answer it.

    What I said was that they are taxed already. I think that is quite enough for the time being. But an individual who buys and sells land is not taxed when he buys it or when he sells it, except for Stamp Duty. I am asking that they should be taxed first.

    Order. There seems to be some doubt about which hon. Member has the Floor. Mr. Crowder.

    On a point of order, Sir William. The hon. Member for Ruislip— Norwood (Mr. Crowder) has now made two speeches and has been called a third time. May I have from you, Sir William, a Ruling on the matter? I appreciate that this is the Committee stage and that, therefore, hon. Members may speak more than once. But may we speak more than once simultaneously with someone else, or almost simultaneously?

    I appreciate the point raised by the hon. Member and I drew attention to that point a moment before. Mr. Crowder.

    The hon. Member has made two speeches already.

    Although I have the greatest respect for the sincerity and integrity of the hon. Member for Ashfield (Mr. Warbey), I 'thought it only right that we should be allowed to pursue the matter and to know what some hon. Members opposite think about this problem—

    Mr. Callaghan rose—

    The hon. Member for Ruislip— Northwood (Mr. Crowder) seems to be very free— having just arrived in the Chamber. I rise, Sir William, to ask whether we are discussing an Amendment in the name of hon. Members of the Opposition.

    In fact, it is not only one Amendment in the name of the Opposition which we are discussing, but also another two Amendments in the names of other hon. Members of the Opposition and a further Amendment in the name of the hon. Member for Brierley Hill (Mr. Talbot) so that Amendments from both sides of the Committee are being discussed. I appreciate the point raised by the hon. Gentleman, that there is a danger of the debate straying from the Question in the Amendments that we are discussing, and I hope that the hon. Member for Ruislip — Northwood (Mr. Crowder) will bear that in mind.

    Further to that point of order, Sir William. May I respectfully put it to you that this is a "red herring" which is being drawn across the Bill? Hon. Members opposite have no knowledge of the Amendments. They have neither a copy of the Bill nor of the Amendments before them. There is nothing in the Bill and nothing in the Amendments from either side of the Committee covering the point which the hon. Member for Ruislip— Northwood (Mr. Crowder) has attempted to raise three times. The Amendments go no further in the matter of securities or land that is charged than do the Government's proposals. We think that there is plenty of revenue to be derived from the Cottons and the Clores and the land speculators without riding off on this sort of rubbish.

    Hon. Members: Oh.

    Order. I have invited the hon. Member for Ruislip— Northwood to direct his remarks to the Amendments which we are discussing.

    I thought that it was the duty and the practice in this Chamber, when one followed another hon. Member, to take up with him certain aspects of his speech. When the point was made——

    Mr. Callaghan rose—

    No, I am not giving way to the hon. Member.

    When the point was made by the hon. Member for Ashfield (Mr. Warbey) there was no objection from hon. Members opposite, but now it is being taken up—

    On a point of order, Sir William. The hon. Member has referred to my speech. I suggest that I did my best to keep myself in order, and that the only chargeable assets to which I referred were those mentioned in the Bill, namely, shares, land and buildings.

    Let me say at once, Sir William, that I do not wish to intervene in the debate at any length. There are many other things to be discussed and, as the Committee has been good enough to allow me to make my point three times, I think that I may say without diffidence that we have won.

    10.0 p.m.

    I do not want to follow the hon. Member for Ruislip-Northwood (Mr. Crowder)— [HON. MEMBERS: "Of course not."] Wait for it— for fear of being out of order, but it is remarkable how, when hon. Gentlemen opposite are faced with a challenge to any of their vested interests, they scrabble around to try to find some avenue along which to proceed so that they can distract the attention of everybody from the issues that we are debating.

    Here, we are dealing with only two point— with capital gains, as distinct from short-term gains, on investments in land and on buildings on land. The hon. Member for Brierley Hill (Mr. Talbot), who spoke and who has now left the Chamber, ought to have declared his interest, because, as I understand, he has as great an interest in this question of capital gains on land as any hon. Member of this Committee.

    I see no reason why there should be any stultifying of the activity of people simply because they are subjected to tax. If it is true, as one hon. Member suggested, that if we impose a tax on capital gains, either on share speculators or land speculators, we shall stultify activity, then, in my view, that cuts across the whole of our taxation system. We have taxes at present, but the mere fact that we have taxes does not stultify activity. If the argument is to be that if we introduce a particular tax— and in this case the hon. Gentleman dealt with land— that will stultify activity in the use of land, I do not see the logic in that argument, unless we apply it equally to all other forms of industrial activity.

    This gets a little bit beyond the limit. It exposes entirely the moral attitude of the people whom the party opposite represent—if it is true, but I do not think it is true. When the engineer is asked to work overtime, in other words, to increase his activity, in the same way as the owner of land would increase his activity by using the land, there is no suggestion that the overtime worked should be outside the normal taxation provisions. What is the hon. Gentleman arguing? Is he saying that additional activity on the part of an industrial worker should be subjected to taxation, but that additional activity on the part of a person who owns land should not be subjected to taxation?

    There has been some argument by my hon. Friend the Member for Ashfield (Mr. Warbey) on the question of the yield of investments. So far as I can see, looking at the yields on capital invested in the last ten or twelve years, that has been a secondary consideration. The average yield on capital invested in normal industrial shares has, I believe— and perhaps some people more active on the Stock Exchange than I am myself could confirm this— been much less than the amount suggested in the case of giltedged securities, such as building societies.

    But the question of yield is and has been secondary to the amount that can be obtained on the basis of capital gains. This matter of capital gains has been a racket and everybody knows it. Even the Chancellor of the Exchequer has now come to the conclusion that he can no longer allow the speculation and the gains that have been made through speculation without at least making a gesture to public opinion.

    Here we have a situation which has been accepted in every sector of society as one of the biggest rackets in our civilised life. Even hon. Members opposite recognise that it affects their electoral fortunes, or misfortunes, almost as much as any issue. The Chancellor says that we cannot go so far as some revolutionary Governments can go; that we cannot, for instance, emulate the United States of America and apply a full capital gains tax because that would be too revolutionary, but we can have a short-term capital gains or speculation tax. In practice, the tax applies for six months, so that anyone who owns shares for six months and a day will escape completely the application of the tax.

    The Chancellor wants to create the impression that he is against the form of speculation that has been practised on the Stock Exchange for a long time. He says to the people, "Here I am, trying to create social justice", but, at the same time, he does not want to offend the people who support the party of which he is a member. When we were discussing this matter in our debate on the Budget I said that the only people who would be caught by this tax would be the amateurs. That is perfectly true. In its present form the only people who will be caught by this tax, whether in respect of land for three years or shares for six months, will be the amateurs. All the professionals, including those on the Front Bench and the back benches below the Gangway opposite, will get away scot-free.

    The Chancellor makes his gesture to public opinion and then safeguards these speculators against the possibility of being caught. He is a fake. The Chancellor's attitude is a fake. The whole issue is a fake. Unless the Amendment which has been moved by my hon. and learned Friend the Member for Kettering (Mr. Mitchison), or the Amendment in the name of my hon. Friend the Member for Ashfield (Mr. Warbey), is accepted, the people will be completely hoaxed and the position will be as it was before.

    The hon. Member for Gloucestershire, West (Mr. Loughlin) has said that he considers that the Chancellor is a fake. I cannot allow that to pass unchallenged. I am quite satisfied that my right hon. and learned Friend's proposals, within the term of six months which we are considering, and longer for land, will have the goad effect on the form of investment in the economy which it is meant to have. I assure the hon. Gentleman that, in my view, there is no fake about it. It will have a very beneficial effect on short-term fluctuations which, in my view, are not always good for our economy.

    The hon. Member for Ashfield (Mr. Warbey) was, I thought, misleading the Committee when, in discussing the amount of capital gains over a period of years, he said that the total was £15,000 million. I agree that if one adds up the values of securities over that period the total may come to some such figure, but the Committee must remember that these gains appear only when there is a sale. As I understood it, the argument was that, if all the land and securities were sold, that amount of wealth would accrue to a certain number of people. I assure the hon. Member for Ashfield that, if a mass selling of that kind were to take place, the wealth would disappear overnight because there would be no purchasers.

    In other words, the hon. Gentleman is saying that it is all quite artificial; the whole thing is just an inflated balloon which has no relation to real values?

    No. I was saying that the wealth does not accrue until some sale or transaction takes place. I am sure that the Committee was not misled, but I feel that it is quite misleading to suggest that there was any such accrual of wealth to anyone. It is only buying and selling which matters. I do not accept the figures which the hon. Gentleman gave. As he said, they were guesswork. Although, no doubt, a large figure can be shown on paper, it is misleading to suggest that there has been any such accrual of wealth in fact.

    I am satisfied that the period of time which the Government have proposed, and which the Amendments are designed to alter, is such that there will be a real effect on transactions of this kind. I believe that the tax will bring in some revenue to the Exchequer— I am not sure how much— and it will have the effect of damping down speculative short-term gains, which is a correct and beneficial thing to do.

    How many professional speculators would fail to hold their shares for six months and a day to escape the tax rather than get rid of them within the six months?

    I am not discussing the speculator who has money to invest. I am talking about the man who borrows money or who wants to carry over for a fortnight or so on somebody else's money and who tries to buy and sell on a margin. That is the problem which the Chancellor is trying to cover. I do not believe that the investments of what I call the six-months man will be very much affected. He does not invest in order to sell at the end of five months and five days or hold on a bit longer. He has to put up the money to do it. What we are trying to do is to stop the inflationary trend caused by speculative investors, the people who have not got the money but who do it on somebody else's credit.

    10.15 p.m.

    It is clear from what the hon. Member for Sheffield, Heeley (Sir P. Roberts) has said that, like the Chancellor of the Exchequer, he does not think that the purpose of the Clause is to produce revenue. He thinks that the beneficial purpose of the Clause is to damp down undesirable short-term speculation.

    Be that as it may, what we are discussing is whether the Clause as drawn is likely to produce any revenue. The hon. Gentleman says, quite clearly, that it will not because the man who has to borrow the money for short-term speculation will not borrow it, because it would not be worth his while. The man who invests for about six months will hold his investment for six months plus, because he would not have to repay the lender of the money. It seems that the hon. Gentleman agrees with me. There is no dispute about this.

    The Amendment is most valuable because it highlights the difference in the philosophical outlook of the two sides of the Committee. We are discussing not the problem of how a particular tax should be collected or assesed, but the philosophical attitude to whether there should or should not be gains of a capital nature brought into the Inland Revenue tax net.

    Let us consider the philosophy of hon. Members opposite, because I do not think that it has been entirely accurately stated in some speeches. In my view, it is not the case that the Government are admitting the principle of a capital gains tax, however short-term the capital gains may be. What they are saying, quite rightly, is that under our existing tax system if a person enters into a transaction with a view to making a profit he should pay tax on that profit. If he enters into a transaction involving investment, stocks and shares or anything of that kind with a view to making a profit, that is a taxable transaction and he is taxed on the profit under the existing law.

    The hon. Member for Brierley Hill (Mr. Talbot), who let many oats out of many bags, let a very important cat out of a bag when he claimed that the person who bought and sold should not be taxed on his sale because he was contemplating a profit at the time that he bought and, therefore, is already taxable.

    The Inland Revenue is faced with this difficulty: how can it tell what is in a man's mind? How can it tell whether a man invests with a view to making a profit, or with a view to investment pure and simple? It therefore says, "We have had a lot of trouble with this. There have been many borderline oases. We shall make the position clear. Anyone who sells within six months will, from now, be deemed to have had in his mind at the time that he entered into the transaction the desire to make a profit and, therefore, is clearly taxable." The present position is not clear. There is the possibility of argument, with the Inland Revenue saying, "You had this in your mind" and the taxpayer saying, "No, I did not."

    All that the Government are doing is closing a possible loop-hole in the existing tax legislation, and it would be wrong to say that they are accepting in any sense the philosophy of a capital gains tax, however short-term the gains. That is on one side of the Chamber. Let me say what is on our side of the Chamber. We believe that where money is coming in, from whatever source, increasing one's capacity to spend, there is an appropriate medium for taxation.

    Mr. W. R. Rees-Davies (Isle of Thanet) rose—

    I will give way in a moment to the hon. Gentleman, because I am in no hurry to go home, but I hope that he will allow me to explain the philosophy a little further so that he need not anticipate some points which I make. I shall not run away from anything, I hope.

    I was saying that that is the case for extending the base of taxation. I am saying that where money accrues, no matter whether it is salary or investment income or investment profits, that is an appropriate medium for taxation, because there is more money for one's pocket and more money to spend. It is, therefore, appropriate that it should con- tribute to the general welfare which is provided out of general taxation.

    There are four solid criteria under which it can easily be demonstrated that the Government are mistaken in refusing to accept our view on capital gains. Let me go through them one by one. The first is that people are willing to pay, and this is a relevant criterion in dealing with taxation. If hon. Members opposite disagree with this, they are mistaken. Let us take the man who invests and, no matter what kind of investment it is, finds on the realisation of his investment that he has made a profit. Never mind the circumstances. I am not using any phrases such as "rackets".

    I am making it clear that there is a transaction in which one gets more out of it than one has put into it— and never mind the circumstance in which it arises. It may have been done for speculation, or it may have been done, for example, by the trustees of the miners' funds as a wise investment. The fact remains that at the end of the day there is a larger sum than at the start of the day.

    The man who invests, and then finds that more money is coming out of the investment than he put in, is in a frame of mind at that point in time to say, "I put in £100, I drew out £150 and I have a surplus of £50. I do not mind in the slightest if the Government take a portion of that and use it for the general tax fund and, I hope, reduce Income Tax accordingly. Why should I be assessed at high rates of Income Tax on the sweat of my brow and not pay when I have a turn up for the book which cost me very little effort?" I have used a phrase which I would not normally use in Parliamentary language. I say, for the first criterion, that this is money which the taxpayer would be willing to pay— and anybody who tries to collect tax knows that that is a relevant criterion.

    May I intervene at this point, because it is a very important matter of philosophy between the two sides of the Committee. Is the view which the hon. Member is expressing the view of the majority of hon. Members on his side of the Committee— that whether it be pools, whether it be gaming, whether it be pictures, whether it be antiques, [whether it 'be personalty, or whether it be realty, it is his opinion that a capital gains tax ought to cover the real gain— I wish that the hon. Member for Gloucestershire, West (Mr. Loughlin) would not talk to the hon. Member for Gloucester (Mr. Diamond) in the middle of a question which I am trying to put to him. I have waited a long time for his attention. I have had to listen to twenty dreary minutes of the hon. Member, which I did with great patience and without intervention.

    On a point of order. The hon. Member for the Isle of Thanet (Mr. Rees-Davies) was not in the Chamber when your predecessor in the Chair, Sir Robert, said the point he is now seeking to raise was irrelevant because it was outside the purpose both of the Government's proposals and of the Opposition Amendment. It is becoming a rather tedious waste of time when hon. Members opposite who have not been in the Chamber come in one after another, pop up to make a point, and, like the hon. Member for Ruislip-Northwood (Mr. Crowder), push off again. We have not seen that hon. Member since he raised it. This sort of thing is intolerable.

    The hon. Member for Gloucester (Mr. Diamond), who has the Floor. gave way, and I think that the hon. Member for the Isle of Thanet (Mr. Rees-Davies) was asking a question. I must confess I have found it of great length, and I was wondering when it was coming to an end, but as the point arose out of the speech of the hon. Member who has the Floor I think that it is in order. I should like to say that when an hon. Member gives way it really is an abuse of custom if an hon. Member who wishes to ask him a question takes too much time over asking the question.

    I had two interventions in the course of trying to put my short question, Sir Robert, and the hon. Member for Cardiff, South-East (Mr. Callaghan) made his intervention solely to try to put me off my stride by what he knew was not a point of order at all— and nor is it.

    I listened to the point of order, too, and I did not rule it out as a point of order. The hon. Member for the Isle of Thanet should withdrawn that remark as a reflection on the Chair.

    I will withdraw any remark which may be out of order. Perhaps we may get now to the real point of the debate which a great many hon. Members on this side would like to come to, and that is, where does the Labour Party stand in relation to a capital gains tax? Do hon. Members opposite want a full-blooded capital gains tax or do they not— on everything, or nothing? Let us have a straight answer.

    I had got the hon. Member's question and there was no need for him to go into details. The straight answer, so far as I am concerned — and I am speaking from below the Gangway— is that I want a full-blooded capital gains tax. As to the machinery — because the hon. Member was asking a detailed question as to the machinery — if he had been good enough to wait till I had explained the philosophy of the thing he would have found that I am only too glad to come to the machinery on any detailed point— antiques, pictures, jewellery. It has all been thought of, and I have answers on all of them, if hon. Members are interested.

    I was on the first criterion. The Government are widely mistaken in not having a capital gains tax such as is generally accepted in many civilised countries with institutions comparable to our own. The second criterion is that of public opinion. This is where the use of the phrase "racket" comes in. It is obvious that the public as a whole regard the capital gains tax with a malevolent eye, because they escape taxation — [Interruption.] The hon. Member for Exeter (Mr. Dudley Williams) must think that it is a Friday afternoon. He thinks that he is here to shout from his seat about other Members' Bills.

    I shall be courteous and give way as many times as hon. Members want, but I do not propose to give way to anybody who accuses me of dishonesty. I do not know what the bawling by ignorant Members on the other side of the Committee— who have not even bothered to come in to listen to the debate— is about. I have already given way, while I am trying to set out four relevant criteria on which the philosophy of a capital gains tax ought to be accepted.

    If the hon. Member will be good enough to listen to this, I shall then be very interested in dealing with as many detailed points as hon. Members care to address to me. I have considered all of them— all I can imagine hon. Members are likely to ask me. I shall be glad to answer any one of them on the detailed questions of machinery, but they are detailed questions of machinery and not relevant to the general philosophic question: should there or should there not be a tax on capital gains?

    The second point I want to put in terms of the philosophical approach, the second criterion, is on the question of what is the public attitude to capital gains at the moment. I say that the public attitude is poisoned and that unrest and dissatisfaction are caused because these capital gains, which are available by and large only to those with money, are seen to be drawn by one section of the community only, and escape taxation. If these were to be taxed there would be a good deal of lessening of the heat.

    The hon. Member for Brierley Hill spoke about supporters. He is quite wrong, unless he is talking about those who write out cheques. Those who write out cheques to the Conservative Party will not like our Amendment, but I tell the hon. Member that those who support the Conservative Party generally by their votes, as opposed to their cheques, are quite prepared to accept the general justice of the proposition that people who make capital gains should pay tax on them just as much as, if not more than those people who earn money by the sweat of their brow, sometimes in dirty jobs or in responsible ones in the professions or wherever it may be, pay tax.

    As for the second criterion, there is very good reason for accepting a capital gains tax such as is widely practised elsewhere in the world. The third criterion with regard to this tax, which we seek to widen enormously, is on the ground of complexity. The Income Tax Acts are complicated enough already without our deliberately endeavouring to increase their complexity. We have here not an ordinary capital gains tax such as other countries have. We have a kind of capital gains tax machinery and then we have to cut it in half and say it will catch only certain transactions. And the complexity of making it catch those transactions and leave out others is such that we have provisions much more complex than would be the case if we had a straightforward capital gains tax which would catch all capital gains no matter when they accrued, no matter what the nature of the transaction, and no matter how long the time between buying and selling.

    Finally, in terms of avoidance, everybody who drafts a tax Act wants to see that the loopholes are not broad and wide enough for everybody to escape through them. This is a piece of machinery where the holes are so great that one can see nothing but holes. One cannot see the texture itself. Everybody recognises that the Government's proposal will produce no revenue at all. As has been admitted from the benches opposite, for the ordinary man who deals within six months or so, it cannot possibly make any difference in ninety-nine cases out of a hundred whether he holds out for six months and a day as opposed to six months. It is ridiculous that a tax should be drawn on this basis. And anybody who sets his mind to it, will have the same answer on the three-year basis.

    This proposal merely blazes the road for tax avoidance. It marks the ground and says," This area is taxable. Do not step here. Keep off the grass." If it tells a man where he must not step, it means that he knows exactly where he can step. Because of all these criteria there is a complete difference in philosophical approach between the two sides of the Committee. We on this side of the Committee are right in saying that there is a good case for taxing capital gains. We are right in saying that the public would accept it. We are right in saying that the public would not resent so much what is going on if there were a tax on capital gains. We are right in saying that this would free it from some of its complexities. We are right in saying that this would avoid some of the machinery for tax avoidance which exists here.

    For all these reasons— I will come back to any detailed question that any hon. Member now wants to ask me— I think that the Amendment moved by my hon. and learned Friend the Member for Kettering (Mr. Mitchison) which sets out the philosophical difference more acutely than that of my hon. Friend the Member for Enfield, East (Mr. Mackie), should be accepted and that we should press it as strongly as we can.

    I beg to move,

    That the Chairman do report Progress and ask leave to sit again.

    We have made good progress today, although not as much as the Government would like in terms of business completed. But I move the Motion on the ground that the batch of Amendments and new Clause that we are on represent probably the meat of the Bill.

    This is obviously a very contentious matter; not that anyone would shrink from that, but it will obviously take us a very long time. My proposal to the Government is that if such a Motion is acceptable, we should now adjourn and make a fresh start again tomorrow and try to break the back of this matter, as I think we shall do, then. That is because, as I say, this group represents the real meat of the Bill, and it would be a pity to try to curtail the debate when perhaps by spending more time on this we may be able to spend less time on other more important matters.

    The hon. Member for Cardiff, South-East (Mr. Callaghan) puts me in some slight difficulty because of an ambiguity. He said that this group of Amendments would take a long time. A moment later he said that he was desirous of making reasonable progress. I hope that the two remarks really can be reconciled. The Government have no desire to ask the Committee to sit very late tonight. I observed that there were two or three other hon. Members who wished to speak.

    I also bear in mind what the hon. Gentleman said at the conclusion of our first day's proceedings, that it was the desire of the Opposition to deal with the Bill in a sensible, constructive and positive way, and, I take it, to make reasonable progress. It would be a pity if we fell badly behindhand by continuing this group of Amendments, important as they are, indefinitely. If I have put the right interpretation on the hon. Member's words, I should be prepared to advise the Committee to accept the Motion.

    There is no stratagem in this at all. I myself believe that if we contain ourselves within the normal Parliamentary day as far as we can we make good progress. It is within that circumference that I am endeavouring to work as far as possible. It will not be universally possible, but I think it is now, and I believe that we should be able to make quite substantial progress tomorrow. After this group of Amendments comes a group which I think the Committee will agree is of much lesser importance. It is purely on that basis that I move the Motion.

    It is not for me to say which are the important and which the unimportant Amendments, but I agree that there is a good deal to be said for concluding the debate on this group of Amendments tomorrow at a reasonable hour. On that understanding, I for my part would advise the Committee to accept the Motion.

    Question put and agreed to.

    Committee report Progress; to sit again Tomorrow.

    BUSINESS OF THE HOUSE

    Proceedings of the Committee of Ways and Means exempted, at this day's Sitting, from the provisions of Standing Order No. 1 (Sittings of the House).— [Mr. H. Brooke.]

    Ways And Means

    Considered in Committee

    [Sir ROBERT GRIMSTON in the Chair]

    Income Tax And Profits Tax (Penalties And Assessments)

    Motion made and Question proposed,

    That it is expedient to make further provision as to the operation of Part III of the Finance Act, 1960, with reference to happenings before the commencement of that Act — [Sir E. Boyle.]

    We ought to have an explanation from the Government of what this is about.

    10.41 p.m.

    With pleasure. The Motion provides authority for the inclusion in Committee on the Finance Bill of a new Clause to ensure that Part III of the Finance Act, 1960— the Income Tax and Profits Tax Penalty Code— has the effect intended when the legislation was enacted in 1960.

    The need for this further legislation, which was dealt with at some length by my right hon. and learned Friend the Attorney-General at the end of the Second Reading debate on the Bill, was shown by a decision of the Queen's Bench Divisional Court on 18th April, 1962, in the case of the Queen v. the Commissioners for General Purposes of Income Tax for the Wallington Division.

    This Motion simply seeks to enable us to take this matter during the Committee stage.

    Question put and agreed to.

    Resolution to be reported.

    Report to be received Tomorrow;

    Committee to sit again Tomorrow.

    Motor Cars (Headlights)

    Motion made, and Question proposed, That this House do now adjourn— [Mr. J. E. B Hill.]

    10.42 p.m.

    I raise 'the question of whether or not motorists should be obliged to drive with headlights dipped under all circumstances when their vehicles are on the move and not only with sidelights on. That is not to suggest that they should not drive with the headlights full on on suitable occasions. I ask my hon. Friend the Parliamentary Secretary to the Ministry of Transport whether the Minister proposes to use his powers under Clause 13 of the Road Traffic Bill, which would enable him to make regulations regarding the use of headlamps. I also draw his attention to Rule 50 of the Highway Code, which, in my view, requires strengthening. It reads:

    "Use dipped headlights at nights in built-up areas unless street lighting is good."
    One of the most difficult social problems today, and one which we must face, is that of road casualties. They amount to the staggering total of 343,000 injured and 7,000 killed in one year. Motoring is no longer a question of pleasure but a calculated risk. That is what has to be faced by a motorist every time he takes his car out.

    It is true that the number of accidents per year has slightly decreased, but the figures are so serious that if there were a war— and I hope that there will never be one again— and at the end of twelve months 7,000 men had been killed and 343,000 wounded, there might well be a change of Government and certainly a political crisis in this House.

    Perhaps the most tragic casualties are those of the elderly. A survey of the accidents in Birmingham during 1961 revealed that 88 pedestrians were killed and 1,496 injured and of those numbers there were 44 fatal and 444 injury accidents during the hours of darkness. Of those 44 fatal accidents, 24 concerned vehicles driving with only their sidelights on. I do not possess the figures of the injury casualties occurring because of vehicles driving only on their sidelights, but if this percentage of 54 can be applied to them it might be as many as 250 injuries. I remind the House that the figures which I have given are for Birmingham only. How much more tragic they would be if I could give them for the country as a whole!

    The casualties in my constituency have been particularly tragic. In February alone, no fewer than four people were killed, two during the hours of darkness. One unfortunate old gentleman of 82 was killed at the junction of Sheldon Heath and Este Roads. Another particularly tragic case occurred on the Coventry Road, outside the Sheldon Cinema. Here, a young girl of 14 was knocked down and killed while on a crossing and her companion, aged 15, was injured. The driver concerned, unfortunately, did not have his headlights on. In December, again on the Coventry Road, a gentleman of 71 was injured at Gilbertstone Avenue and an elderly lady of 62 was knocked down at Lyndon Road.

    From the report which the Chief Constable of Birmingham issues from time to time and which I have just received dealing with casualties for April, I find that there has been yet another casualty in my division, late at night, when a car ran straight into a heavy lorry and when the car driver was killed. These accidents occurred during the hours of darkness when headlights could have been used with advantage.

    The Coventry Road has a terrible story of tragedy to tell. There has been a death or an injury or bad damage on every single day for the last two years. I would not like to give the House the impression that this is the only spot in my constituency which has a bad accident record. In Yardley we seem to have more than our fair share of tragedy and unhappiness. Other months and other roads in my constituency are involved.

    The point which I wish to stress is that these accidents, not only to pedestrians but to all other forms of road user, are due in many cases to the driver having only his sidelights on. I do not rely on statistical evidence alone. I have had letters from coroners supporting the case which I am putting forward and these gentlemen have made their views known in their public statements.

    In a case concerning one of my constituents aged 65 and resident in Kemps Road, Kitts Green, who was unfortunately killed, the City Coroner is reported as saying:
    "In view of mounting road casualties, a law might profitably be passed requiring people to drive or, dipped headlights."
    This view is not taken in Birmingham alone. The City of Bradford Coroner, dealing with a case in which flashing headlights had been one of he causes of the death said:
    "I think a motorist is entitled to drive on dipped headlights."
    In West Bromwich, not far from our city, a coroner said:
    "You might think that the recent Birmingham experiment of driving on dipped headlights might have helped in this matter. It might have enabled one of the drivers at least to see the men and give the pedestrians a chance to see the cars."
    The coroner deals with about 198 fatal cases a year, and of those which occurred during the hours of darkness one of the reasons put forward by motorists is that the pedestrian was crossing on a dark spot between lamps or trees or buildings, and invariably he says these tragic words, "I did not see the deceased until I was a few yards from him and then he was right in front of me".

    The coroner's conclusion, with which I agree, is that the sidelights of motor cars get lost in the other lighting and the pedestrian does not notice the motorist, and that if he does lie cannot judge the speed of the vehicle or its distance from him.

    That brings me to the kernel of my proposal, to see and to be seen. What I am asking the Minister to do is to make it obligatory for all vehicles to be driven with dipped headlights during the hours of darkness. The reasons for this are as follows. First, it is just as important that a motorist should be seen as he approaches as it is that he can see anybody or anything in his way. The presence of a vehicle using dipped headlights, particularly to those who are aged, infirm, deaf, or perhaps have faulty eyesight— but not by any means to them exclusively— would immediately imply that a vehicle was moving. The display of sidelights only would indicate that the vehicle was parked. The fact that there are two lights approaching renders the judgment of distance easier for both another driver and for pedestrians, and if it is in a brightly illuminated shopping area the vehicles recognition is more sure. It would also help people in the country. Many times when I have tried to pass a car in the country I have seen two pinpoints of light in front of me and not been able to judge where the car was or the speed at which it was travelling.

    Secondly, the driver would get better illumination of the road and would be able to pick out obstacles in the roadway or on the footpath. It should be remembered that reflectors must be fitted to bicycles and to the backs of lorries or other commercial vehicles, and these reflectors can be seen about five times further away if headlights are used rather than if only sidelights are used.

    Thirdly, the motorist would have better vision of any length of kerb and so see cyclists or parked cars. He would also be able to see better in the darker shadows between the pools of light and therefore it would be easier for him to see any pedestrian who was crossing the road, or who came out from between parked vehicles.

    Fourthly, he could give adequate warning of approach at corners and crossroads.

    It has been suggested that these proposals should apply only to those areas where the lighting is bad. It would be dangerous to leave it to the motorist alone to decide what was good lighting, and there is the additional difficulty that the dangerous moment is when a driver is coming out of a well lit area into a badly lit one. This is the moment when the motorist should have his whole attention focused on the road and not have it distracted by trying to fiddle with the switches in his car.

    The objections to this suggestion are that dipped headlights cause dazzle, and that using them in well lit areas is unsatisfactory because street lighting is designed to show up a dark image on a bright background, whereas the headlights of a car are designed to show up a bright image on a dark background, and therefore the one type of lighting goes contrary to the other.

    With regard to the first point, properly adjusted headlights will not cause dazzle. It is becoming more and more essential in modern conditions for a car to be roadworthy. In fact we all accept that a car should be properly maintained. The brakes, steering and tyres are among the essentials which should be tested regularly. Lighting equipment should on no account be left out from this scrutiny. No only should the lights go on; they should be adjusted so that they do not cause dazzle or glare. If they are properly adjusted they will not cause dazzle or glare. Any temporary embarrassment that the motorist may say he suffers if a car is coming over the crest of a hill or round a corner is not serious enough to jeopardise the lives of pedestrians— especially old folk, whose perception may be impaired because of their age, and children, who are sometimes not so wise or experienced as their elders.

    As for the second objection, which is a technical one, the Parliamentary Secretary for Science has written to me to say that there is good reason to believe that dipped headlights could with advantage be used more frequently than is generally the practice in the country at present. I know that research is continuing on this matter, but I ask my hon. Friend to encourage the Minister for Science to take an energetic and urgent interest in this question forthwith and expedite a solution to this aspect of the problem. Important though research is, however, it is not so urgent as it is to ensure that drivers in badly lighted areas use their headlights. Another point made is that batteries may not stand it, but I think that the normal battery being used by a normal car under normal conditions can well stand any strain of this kind being put upon it.

    I draw my hon. Friend's attention to the report to the Lord Mayor from the Chief Constable of Birmingham on the results of the dipped headlights campaign that we have held. For two weeks motorists were asked voluntarily to drive with their headlights dipped, and there was an excellent response. The police state that about 50 per cent. of the motorists agreed to co-operate in this way. During that fortnight accidents were reduced by 27 per cent. and they might well have been reduced more had not six casualties occurred in one in cident which involved a stolen car. Even at the last count, made after the week had finished, 22 per cent. of drivers were still driving in this way, and it was noticeable how, during the whole campaign objections by motorists about oncoming lights gradually diminished, and at the end they were hardly noticed at all.

    In some areas there was as much as 68 per cent. or even 72 per cent. Co-operation, and subsequent research has shown that over 60 per cent. of the drivers, 67 per cent. of the cyclists and 80 per cent. of the pedestrians were in favour of this procedure. We are grateful for the help that Birmingham University gave us in obtaining the information. The success of this experiment was such that the Lord Mayor's committee has unanimously agreed that a further and longer trial should be held over a period of six months— because the period of two weeks was not considered quite long enough, in that it did not give the variety of weather conditions which is essential to get a proper and representative result.

    I therefore ask my hon. Friend to take the utmost interest in this experiment, and to collaborate with his right hon. and noble Friend the Minister for Science in partaking constructively in this longer venture to ensure that the right information is obtained and then studied. I ask my hon. Friend to consider what is happening in other countries. In the United States— that great motoring country— it is obligatory to drive with headlights on. In the most brilliantly lighted city in the world— New York— headlights are compulsory, although an experiment was made at one period to see whether it would be advisable to go back to the old form of lighting.

    I wonder whether the House remembers what was perhaps the blackest day in British road history— 4th December, 1951. A parade of Royal Marine Cadets from the Gillingham area was marching to a boxing tournament when a bus, driven with only its sidelights on, on its normal route, crashed into them, killing 23 of these splendid young lads, aged between 10 and 13. At the subsequent trial of the driver it was said:
    "All he needed to do was to put his headlights on and the collision would never have occurred. The remedy was at his fingertips "
    That is true of every motorist today. Among all the hazards that face him, those of not being able to see in time and of not being seen are two of the worst. He has his remedy at his fingertips. He should put on his headlights. I urge the Minister to use his powers under the road traffic legislation to make this a statutory requirement. If the evidence of 80 million out of 125 million motorists in the world who use their headlights dipped is not sufficient to convince him, I ask him to take a great interest in the Birmingham experiment which has proved such a success and Which was welcomed by the majority of well informed motorists. I can assure my hon. Friend that what Birmingham thinks today the rest of the country will think tomorrow.

    11.1 p.m.

    I should like to congratulate my hon. Friend the Member for Birmingham, Yardley (Mr. Cleaver) on drawing attention to this new conception of road safety in Birmingham. I should like also to congratulate Birmingham and our Lord Mayor on bringing the headlight campaign to the notice of the public.

    It would be wrong of me to be completely on the side of my hon. Friend. I agree that we should do everything to ensure that road accidents are kept to a minimum, but I am not sure that legislation will provide the right answer. I have a vision of half-a-dozen corporation buses following one another round the square in the centre of Birmingham with their headlights dipped, looking like a lot of fairy lights. I think that this is a matter which should be left to the discretion of individual motorists and I hope, therefore, that my hon. Friend the Parliamentary Secretary, when referring this matter to the Minister, will consider the matter seriously before any legislation is proposed.

    The Birmingham experiment was immensely valuable, but the fact is that during the fortnight when it took place we did not experience the normal weather conditions that one normally associates with a large industrial city at that time of the year. I was glad to hear from my hon. Friend that we are to have an elongated or extended experiment in the near future, a six months scheme. I beg my hon. Friend not to follow automatically what has been done by others. We are capable of learning from our own mistakes and making up our own minds about the merits of any scheme, irrespective of public opinion polls and reports which were produced for the Lord Mayor or anybody else. I think that we require a longer period of analysis before legislation on this matter is put on the Statute Book.

    11.4 p.m.

    From the number of Questions which he has put from time to time, the House will recall the interest which my hon. Friend the Member for Birmingham, Yardley (Mr. Cleaver) has taken in the subject of driving with dipped headlights. He was too modest tonight in failing to remind the House of his own great activity to ensure that the experiment at Birmingham was undertaken. May I say on behalf of my right hon. Friend the Minister that we are grateful to my hon. Friend for his interest and activity in this matter.

    The experiment at Birmingham has been of great interest, although I agree with my hon. Friend the Member for Birmingham, All Saints (Mr. Hailing-worth) that the period of a fortnight was a little short to enable final and conclusive results to be ascertained. I welcome the knowledge that a longer experiment is being considered. So far as it rests within my power, I can tell my hon. Friend the Member for Yardley that we shall watch with the greatest interest the carrying out of that further experiment and will give whatever assistance lies within our power as a Ministry.

    It is important to remember that the recent Birmingham experiment, which lasted from 12th to 25th March, applied to all the streets in the city and was not confined to those which were brightly or not brightly lighted. The Lord Mayor and the police were active in this, and I think that one should also mention that Messrs. Joseph Lucas Ltd., whose name is very well known in this connection, were good enough to bear the cost of a check of headlamps for all motorists free for a period before the experiment began.

    My hon. Friend has mentioned the results of the experiment, so I will not go over those again, but I will come to the point that he raised about the powers that my right hon. Friend is seeking from Parliament under Clause 13 of the Road Traffic Bill. The present position, as I think the House knows, is that not only is it not obligatory to drive in this country after dark with headlamps; it is not, in fact, obligatory to have headlights at all. The Highway Code, however, as my hon. Friend the Member for Yardley said, does refer to the desirability of using dipped headlights at night if one is driving in a built-up area except where the street lighting is good. As my hon. Friend put it, it is essential that a motorist should be able to see where he is going and equally essential that he should be seen by pedestrians. Unfortunately, as we know, far too many drivers when driving after dark, whether in the countryside or in the towns, use only their sidelights.

    The hon. Member used the word "sidelights" and his two hon. Friends did the same. Is it not true that manufacturers refer to them as parking lights? In fact, therefore, they drive on their parking lights.

    The terms are, I understand, interchangeable. I believe there are certain other expressions which are used from time to time. However, I am delighted to have the intervention of yet another Birmingham Member in this brief debate.

    I was saying that too many drivers use only sidelights, or parking lights, when they drive after dark, and this seems, from all the information I have ever got, to be largely due to a mistaken impression that if one drives with one's headlights one is, in fact, running down one's battery. This, I am advised by the technical experts of our Ministry, is not accurate. Provided, as my hon. Friend said, the car is properly maintained the drain on the battery at any normal speed should be negligible or nothing at all. Therefore, I hope that hon. Members and those who record what we say here will do what they can to remind the public as a whole of the desirability of driving with dipped headlights in dark streets where the street lighting is not good.

    Where people do drive with dipped headlights, I am afraid that they frequently find that other motorists have an equally bad habit of flashing their own headlights in some sign of protest at the fact that another driver is coming towards them with his headlights on. This can be not only an unpleasant but an extremely dangerous practice. I hope no responsible motorist will be guilty of it. Of course, dazzle is often given as the excuse or reason for a motorist taking that sort of retaliatory action. Dazzle is a very important issue in this matter. As my hon. Friend said, dazzle can cause many accidents, but we have discovered that it is perfectly feasible to avoid dazzle with the modern type of motorcar provided the headlights are properly adjusted. It is easy for headlights to get out of adjustment. I am told that so small an error as one degree in the headlight beam can cause dazzle.

    There are several things which are now being done which will help to avoid dazzle. There is, for instance, the vehicle testing scheme which is confined to brakes, lights and steering, and, as the House knows, we are bringing down gradually the age limit in respect of vehicles which must be subjected to the testing scheme. Secondly, the greater use of the sealed beam type of headlight — almost a commonplace on our roads now— is helping considerably to avoid dazzle. Thirdly, I believe that the development of the double headlight on motorcars will give us effective assistance in this problem.

    The Road Research Laboratory recently undertook some measurements of glare from approaching traffic on two trunk roads and compared the results it obtained with those obtained from a similar series of tests in 1955. In that year, it was found that 63 per cent. of the approaching vehicles had what I will call a glare intensity greater than an acceptable maximum; whereas by 1961 the proportion had fallen to only 21 per cent.

    These are encouraging figures because they show that the problem of dazzle is largely being met and overcome by better developments in vehicle lighting design by manufacturers and also, of course, by greater attention paid by motorists to the proper maintenance of the equipment on their cars.

    I must be careful not to offend against the rule regarding anticipation when speaking of Clause 13 of the Road Traffic Bill, but I can say that the powers sought by the Minister of Transport will enable him not only to prescribe technical requirements for headlamps but also to make regulations governing the use of headlamps in various circumstances. For example, Clause 13 would enable him to deal with another very bad practice, the practice of commercial vehicle drivers driving on the open road with only their sidelights on plus one spotlight low down on the lefthand side of the vehicle near to the vehicle. This is an extremely dangerous practice because, often, one of the sidelights will go out and other drivers do not then realise that they are approaching a very large commercial vehicle. We could deal with that under Clause 13.

    Also, as my hon. Friend has urged us to do, Clause 13 would give the Minister power to deal with the problem of driving with dipped headlights on urban roads. I have to tell my hon. Friend that we shall have to look into the matter over a slightly longer period of time than he would like. Any regulations of this kind which we should make must be considered in detail because very many technical and other complicated matters are involved.

    Question having been proposed after Ten o'clock and the debate having continued for half an hour, Mr. SPEAKER adjourned the House, without Question put, pursuant to 'the Standing Order.

    Adjourned at thirteen minutes past Eleven o'clock.