asked the Chancellor of the Exchequer what representations he has received from the National Council for Civil Liberties on the case of Mr. Ken Bourne, a shop steward whose Income Tex file at the local Inland Revenue office contained a newspaper cutting relating to his activities in connection with an industrial dispute; and if he will circulate in HANSARD his reply thereto.

I will circulate in the OFFICIAL REPORT the text of a letter which I received from this body and of the reply sent on my behalf.

Why is this dubious procedure necessary at all? Is it not possible to obtain all the necessary particulars of a man's income from the employer's return or, if a man is involved in a strike and draws strike pay over a prolonged period, possibly from the union concerned? Or does the Inland Revenue not trust this particular employer or the union?

There is nothing dubious about this procedure. As I explained to the hon. Gentleman when he raised the question some months ago, it is the duty of the Inland Revenue to be aware of matters which may affect an individual's tax liability.

asked the Chancellor of the Exchequer what procedure is followed in deciding whether a press report is relevant to an individual taxpayer's Income Tax liability, and that cuttings of such reports should, accordingly, be included in his file; whether such cuttings are collected systematically or at random; and what steps are taken to check the accuracy of the reports and to ensure that, if a correction is published subsequently, this also is included in the file or the original cutting destroyed.

There is no set procedure; it is a matter of applying common sense.

In that case, can we assume that the cuttings are collected at random and that no attempt is made to check their accuracy?

The hon. Gentleman can make no such assumption. As I have explained in reply to his previous Question, this is a perfectly commonsense variation on the duty of officers of the Inland Revenue to inform themselves of matters which may affect an individual's tax liability or may enable returns in respect of him to be checked.

Since the right hon. Gentleman seems to imply that the cuttings are not collected at random, can we take it that they are collected systematically, and if so how—by means of enormous subscriptions to a press cutting agency, or what?

They are collected by the individual officer in the course of his duties, neither at random nor systematically.

In view of the unsatisfactory nature of the reply, I give notice that I will raise the matter on the Adjournment.

asked the Chancellor of the Exchequer whether he is aware that the abolition of all national bank holidays and the substitution for them of agreed local holiday arrangements between employers and trade unions would be a factor in limiting the increase in road deaths at times of public holidays; and if he will open negotiations with both sides of industry with a view to such arrangements.

I would refer the hon. Member to the reply which my right hon. Friend the Prime Minister gave in response to a similar Question on 2nd June.

I appreciate the Prime Minister's desire to ensure that people have communal holidays, but would not my hon. Friend convey to his right hon. Friend the fact that the peak loads on the roads are causing a serious number of accidents, and is he satisfied that in these circumstances people enjoy the best benefits of the seaside when they arrive there? Would he not agree that the best way to make our nation most efficient is to avoid peak loads? Would not this procedure help to avoid peak loads?

As my right hon. Friend explained, quite a part of the peak load problem is due to the adding of the August and, to some extent, Whitsun bank holidays to the normal holiday period. In my right hon. Friend's Answer he explained about the experiment which is to be carried out next year, but I will certainly convey my hon. Friend's suggestion to him.

Would my hon. Friend also consider that bank holidays were introduced when holidays were few and far between and that we have now really got past that stage, and that there is absolutely no doubt that the crowding of roads has a direct ratio to accidents and, therefore, there is a strong case for spreading holidays throughout a longer period?

These are among the considerations which will be taken into account when the experiment and its results are considered.

asked the Chancellor of the Exchequer what estimate he has made of the percentage tax that would have to be imposed on all transactions in building land, to yield on average, £100 million in a full year.

I am afraid not, Sir, as the facts on which such an estimate would have to be founded are not available.

If my right hon. Friend does not even know that, would he not agree that it makes it even more difficult to assess the effects of a Labour land commission? How could we possibly guess by how much the price of land would go up for a given yield from such a source?

I agree with my hon. Friend. While this makes it clear that it would be difficult to give a precise assessment of the project to which he refers, it makes it abundantly clear that it would be wholly disastrous.

Instead of applying his dialectical skill to destroying these propositions, would it not be more appropriate in a Minister of the Crown to devote his attention to methods of getting rid of what is regarded on all sides as a growing public scandal?

These propositions require no dialectical skill to destroy. They come to pieces on their own.

asked the Chancellor of the Exchequer if he will make it a condition of his grant to the Arts Council for the next financial year that they conduct a survey of those who obtain seats at Covent Garden.

No, Sir.

Would my hon. Friend agree that; there are a considerable number of probably ill-informed criticisms going around about this matter? Would he not further agree that it would be better to bring the matter out into the open by having this inquiry or publishing some analysis of how the seats are allocated so that the good name of the theatre can be cleared?

My hon. Friend is right. There is a belief that Covent Garden seats are allocated unfairly, but I am assured that this is not so. The box office system is designed to make seats available to the public as widely as possible. One of the difficulties is that the most popular performances are not performed very often and, therefore, the demand far exceeds the supply.

If the Question is intended to include the allocation of complimentary seats, is the hon. Gentleman aware that there is some support for the general proposition that this needs looking into? Is he aware that it is unfair to provincial attenders at Covent Garden who never seem to be able to get seats on first nights, and that a casual scrutiny of gossip columns in the popular daily Press, including such masterpieces as "Jennifer's Diary," would seem to suggest that there is a rather common factor of people who attend first nights?

The only priority booking is given to holders of subscription vouchers, which any member of the public is entitled to buy, and that gives a limited degree of priority of consideration. There are also premium stalls or boxes which can be bought regularly for every or every other performance. These not unnaturally carry with them the burden that one has to pay for the less popular performances as well as for the more popular. For the rest, I think that the box office system operates as fairly as possible. The full first night list is of very limited proportions, being confined to about 134 seats in all.

In view of what my hon. Friend has said, could he publish some statement as to how the system is worked so that we can all be clear and so that the name of the opera can be cleared over this matter?

I think that the sort of inquiry which my hon. Friend originally suggested would be more expensive to carry out than the probable results would justify, but I will ask the Arts Council to request Covent Garden to prepare a factual note about how the box office system operates, and I will then make copies available to my hon. Friend and to other hon. Members in the Library.

Is the Economic Secretary aware that, until recently, there was some ground for criticism in view of the fact that students were getting preferential treatment and obtaining a fairly large number of tickets which they themselves did not use but sold to their own advantage, and that this has now been stopped? Is he further aware that what appears from the Question is quite evident, namely, that we need further patronage for opera and another opera house? There is really not enough for the people who would like to see opera at its best.

I am aware of the considerations which the hon. Gentleman mentions, and I am happy to confirm that such abuses as there were have been put right. I think that the difficulty about the demand for opera is that it is very uneven. It is the star performances which attract a very heavy demand. With some of the other performances there is not quite the same difficulty in getting seats. I would suspect that the demand, though limited, is extremely intense, and it is the intensity which has caused some of the ill-feeling, because from the point of view of the customers the only successful box office policy is one which enables each individual to get the seat he requires when he requires it.

asked the Chancellor of the Exchequer what has been the percentage increase in the level of prices each year since 1951; and what estimate he has made of what proportion of the increase in Government expenditure as laid down in Cmnd. 2235 may be accounted for by an increase of the level of prices.

On the first part of the Question, it depends on what prices the hon. Member has in mind. There are several published price indices, and they have not all moved in the same way. On the second part of the Question, none of the increase in Government expenditure shown in Command Paper No. 2235 is attributable to price increases because, as is explained in paragraphs 5 and 11 of the White Paper, the calculations are at constant prices.

Do we take it from the right hon. Gentleman that the assumption is that there will be no increase in price in the next three years, and if that is so, why is it that in the £360 million there is no provision for increased pensions?

There is no such assumption as the hon. Member seeks to read into my Answer or into the White Paper. It is the normal, and, I think, helpful, practice, in order that comparisons shall have reality, to express documents of this kind in constant prices without making any assumption necessarily as to the course of prices over the period covered.

The right hon. Gentleman has stalled the question by saying that there is a difficulty in providing the statistics. If there had been a fall in prices over the period mentioned instead of a dramatic rise, would the right hon. Gentleman be standing at the Dispatch Box putting forward a statistical excuse for not giving information which the House is entitled to have?

I am not saying that there is any defect in the materials that I have. If there be a defect, then, with all due respect, it is in the Question.

asked the Chancellor of the Exchequer what proportion of the increased revenue required to finance the increased public expenditure set out in Public Expenditure 1963–64 and 1967–68, Command Paper No. 2235, will be raised by borrowing

This is a matter to be decided in the context of the Budget for each year in question, and the hon. Gentleman will not expect me to anticipate my right hon. Friend's next three Budget statements.

It was on the conviction that the right hon. Gentleman and his right hon. and hon. Friends would not be presenting future Budgets that I put down this Question to ascertain whether there was any provision for increasing taxation or for extra borrowings. It is on that that I would like an answer.

It is a question for each Budget and for the judgment of the Chancellor of the Exchequer to decide, in the light both of the level of public expenditure and the demand on the economy, what proportion of that total expenditure should be met out of taxation and what proportion out of borrowing.

As the increase in expenditure is to be at the rate of 4·1 per cent. per annum for four years in succession, can the right hon. Gentleman tell us whether there has been any period in the lifetime of this Government since 1951 when they have managed to sustain a growth rate of 4·1 per cent. per annum for four successive years? If not, how does he propose that it should be financed by a Labour Government?

The hon. Gentleman has put the snag in the tail of that supplementary question. What is possible and will be achieved under the Conservatives would plainly be impossible under a Socialist Administration.

Commander Kerans. Question No. 10.

With respect, Mr. Speaker, we had seven supplementary questions about Covent Garden.

Order. We are not making very good progress.

On a point of order.

Order. In so far as we spread ourselves about Covent Garden, I accept the blame.

On a point of order. In view of the unsatisfactory nature of the reply to both my Questions, I beg to give notice that I shall seek to raise this matter on the Adjournment at the earliest opportunity.

asked the Chancellor of the Exchequer if he will state the three Departments with the highest percentage of day release for juveniles under 18 years of age and the three lowest, giving the proportion of those under 18 years of age given day release in each of these Departments.

All the boys and girls under 18 at the Home Office, three of the Scottish Departments and the Department of Education and Science attend day release classes. The three Departments where the fewest proportionately of young people under 18 attend these classes are the Army Department and the Air Department of the Ministry of Defence and the Treasury, for which the figures are, respectively, 642 out of 942 eligible, or 69 per cent., 367 out of 512 or 71 per cent., and 24 out of 58 or 41·4 per cent. These figures relate to non-industrial staff only.

Is the right hon. Gentleman aware that the situation in relation to industrial staff at the Army Department is still worse? In view of the obligations the Government are laying on industry and the encouragement they are giving to it to facilitate day release, will not the right hon. Gentleman get his right hon. Friends to do something about the Army Department? Does not he consider it ridiculous that, whereas some Government Departments have had 100 per cent. day release, there is a relatively much lower percentage in the Army Department?

We are very much concerned about this. In many Departments attendance by those under 16 is compulsory; it is, however, voluntary between the ages of 16 and 18. In the Treasury the training officer sees all young officers in these age groups and draws their attention to the importance of the day release scheme. I think the hon. Member will agree that to carry pressure or compulsion too far in a matter of this sort might well be self-defeating.

asked the Chancellor of the Exchequer how many female clerks between the ages of 15 and 18 years are employed by his Department; and how many are granted day release.

There are ten female clerks between the ages of 15 and 18 employed in the Treasury eligible for day release. All are encouraged to take advantage of these facilities. Five are attending classes and one will begin in September. Two have attended classes but recently stopped doing so.

How does the Minister reconcile his statement of principle with the answer given to my hon. Friend the Member for Bishop Auckland (Mr. Boyden) that if at the Treasury pressure of compulsion is carried too far it will be self-defeating, when in fact there is compulsory day release at the Home Office?

We are dealing with somewhat different staffs, and we must use our judgment in respect of them. As I said in reply to the hon. Member for Bishop Auckland (Mr. Boyden), we apply compulsion up to the age of 16.

asked the Chancellor of the Exchequer if he will revise temporarily the superannuation and salary arrangements for retired Government employees, such as teachers and some categories of local authority employees, where there are serious shortages of trained staff, so that adequate financial rewards can be made to such people if they resume employment, full or part time, in those occupations where shortages of staff are persistent.

No, Sir. I have no proposals for changes in the present arrangements which seem to me to provide reasonable remuneration.

Does not the right hon. Gentleman realise that the position as regards superannuated teachers is ridiculous? A teacher who retires on a low salary and goes back to teaching is not allowed to earn as much salary as a teacher on a much higher pension. Can he not at least correct this anomaly in view of the serious shortage of teachers and the desire of the Secretary of State for Education and Science to keep more superannuated teachers in schools?

The general principle is that a public servant who retires and who is re-employed again should not, while re-employed, draw a total income—salary and pension together—more than he was drawing immediately prior to retirement at the end of his career. On the whole, I think that this is a sound principle, and the House will remember that re-employment has an effect in improving the ultimate pension.

Is my right hon. Friend aware that the suggestion in the Question implies a very sensible and practical way of dealing with some very serious shortages? Will he not allow a general principle to interfere with anything that can be done, for example, to find the additional teachers so desperately needed?

I do not think I can go as far as that. The general principle is of considerable importance. But I very much sympathise with the desire to deal with the problem, which in certain areas is acute.

Does not the right hon. Gentleman realise that, if a teacher who has earned his pension in his own profession returns to work in any other profession, he can draw the pension which he is refused the right to draw if he returns to the teaching profession, which needs teachers? Does he think that that is just?

I know few, if any, private employers who will pay a pension to a person while continuing to employ him.

In view of the unsatisfactory nature of the reply, I beg to give notice that I shall seek to raise this matter on the Adjournment at the earliest opportunity.

asked the Chancellor of the Exchequer (1) what is the cost in terms of money and man-hours per annum in keeping a Customs officer supervising and asking questions of travellers leaving this country by means of trains for the Continent from Victoria Station;

As export and currency controls remain necessary, selective examination of outgoing passengers continues at all exit points, including Victoria Station and London Airport. No officers are kept at Victoria solely on account of these duties, which include the clearance of Purchase Tax-free parcels, since they are undertaken by staff serving at the station for other Customs purposes.

As there is practically no Customs inspection in any part of Europe now, is it not rather old-fashioned to keep a Customs officer for outgoing passengers at Victoria Station? I have never been selected for Customs inspection on outgoing journeys at London Airport. [HON. MEMBERS: "You will be."] If such Customs checks are selective there, will my right hon. Friend introduce a selective practice at Victoria?

I am sorry that my hon. Friend feels neglected by the Customs. The difference in treatment he has noticed may derive from the fact that the selection at London Airport is by aircraft load rather than by individual passenger, whereas at Victoria selective-ness is as between passengers.

asked the Chancellor of the Exchequer to what extent it has been the policy of Her Majesty's Government to pay compensation when incomes which are exempt from tax by ancient Statute cease to be so exempt.

I know of no such case.

Has the right hon. Gentleman read the speech by the Financial Secretary in a debate on tax-free toll bridges on 10th June? Is the right hon. Gentleman aware that his hon. Friend implied that, if taxation is imposed on something which by ancient Statute is now tax-free, then compensation ought to be paid? If that is accepted as a principle by the Financial Secretary and not by the Government, then surely the Financial Secretary should have some plain speaking and education from the right hon. Gentleman. Can the right hon. Gentleman say whether, if that is to be a principle, he will apply it to sweets and pots and pans, all of which have had tax imposed on them whereas they were previously tax-free?

I think the hon. Gentleman misunderstood my Answer. What my hon. Friend the Financial Secretary said in his excellent speech—and I am happy to repeat it—is that, if the Government of the day enter into an agreement with a citizen to do something on particular terms, it is quite wrong for a subsequent Government to repudiate that agreement because it seems inconvenient.

Cannot the right hon. Gentleman accept as a principle that any Government at any time can repeal ancient Statutes, particularly when those ancient Statutes give tax-free bonuses—in many cases, to wealthy people?

One even more fundamental principle is that Governments keep their word.

asked the Chancellor of the Exchequer if he will make a statement on the results of his recent discussions with the chairmen of the nationalised industries on the question of reductions in their capital expenditure.

asked the Chancellor of the Exchequer to what extent he expects the nationalised industries in Scotland to reduce their capital investment programmes.

When my right hon. Friend and I saw the chairmen, we explained to them the prospect of a rising pressure of demand on our resources and on the building industry in particular and asked them to see what modifications could be made at the margin of their investment expenditure so that major programmes could continue to go ahead safely and economically. We made no specific requests for particular reductions, and in particular stressed the need to distinguish areas such as Scotland where unemployment is higher than elsewhere.

Is this part of the stop process which has got out of tune with the electoral timetable? Can the right hon. Gentleman say what specific proposals he has for excluding all the areas where there is currently high unemployment? If those areas are excluded, does that mean that the nationalised industries in other parts of the country will have to cut back more severely than would otherwise have been the case?

If the hon. Gentleman will study my Answer, he will see that his supplementary question is founded on the reverse of what I said, which was that it was the purpose of these discussions to avoid the possibility of stop and go by exercising a little reasonable flexibility, as recommended by the Plowden Committee.

As for the second part of his statement; it is common sense, and I think that it is understood by the chairmen, that, for example, it is more sensible at this time to go ahead with projects in areas where resources of labour are available rather than where they are scarce and where there is pressure on the building industry.

Is the right hon. Gentleman aware that, whatever substance there is in the Plan for Central Scotland, it is in the increased public expenditure which is being undertaken there? Is he aware that we were told by the Secretary of State for Industry and Trade that concentration was going on there at the expense of other parts of Scotland? Can we now take it that we are getting a flexible rephasing, which really means a cutting down on the promises of a year ago about public expenditure by the nationalised industries in that area?

My Answer means the precise opposite of that. There is a later Question about the figures of public expenditure in Scotland.

As the White Papers on both the North-East and Scotland last autumn promised that in the so-called growth areas these public investment programmes would go ahead on an expanding scale, can the right hon. Gentleman say categorically that this new decision does not in any way detract from those promises?

If the right hon. Gentleman studies the last sentence of my Answer, he will be completely reassured.

asked the Chancellor of the Exchequer whether he is aware that the cost of living has now risen to the highest level yet recorded; what was the reason for the latest rise; and on how many occasions since October, 1951, it has fallen below the highest figure recorded in that year.

Yes, Sir. The Retail Price Index has not, since October, 1951, fallen below the highest figure recorded in that year; but, since October, 1951, the rise has been progressively less rapid, being just over 2 per cent. for the year up to April, 1964. The recent rise of 1 per cent. was due to the increase in drink and tobacco duties.

Did the hon. Gentleman hear his right hon. Friend a moment ago say that Governments kept their promises? Can we know when the promises to "mend that hole in the purse", "make the £ worth something", "decrease the cost of living", "increase the purchasing value of the £", are to be implemented? Can we be assured that those promises will be implemented before the Government go out of office in October?

I am sure the hon. Gentleman is aware that the increase in prices over the period of the Tory Government is approximately something under 50 per cent. and that in money terms the increase in average earnings is something more than 100 per cent., the increase in pensions something more than 120 per cent., and that the purchasing power of average earnings has therefore gone up by about 35 per cent. and the purchasing power of pensions between 45 and 50 per cent. in the twelve years of Tory Government.

Would not my hon. Friend agree that between 1945 and 1951 prices rose much faster than incomes and that since 1951 incomes have risen much higher and faster than prices? Would he also say how the cost of living in this country compares with that of our overseas competitors, particularly in Europe?

Yes, Sir. During the 6¼ years of the Labour Administration, the average rise in prices was 6½ per cent. per year. In the first 6¼ years of Conservative Government, the average rise was 4½ per cent. per year. In the second 6¼ years of Conservative Government the average rise was 2½ per cent. a year. In the last year, food prices in this country have gone up by some 1 per cent. while prices in general and food prices in particular in France, Italy and Holland, for example, countries whose performances right hon. and hon. Gentlemen opposite have compared favourably with the economic performance of this country, have gone up five times as fast as in the United Kingdom. In Sweden, with the advantages of a long period of Labour Government, prices have risen nearly 10 times as fast as in the United Kingdom.

As he was not in the House at the time, I do not suppose the Economic Secretary remembers that the Conservative Government of 1951 were returned on the basis that they would stop inflation. Are we to take it from the complacent replies which we have just had that they have given up any thought of stopping inflation and that, provided average earnings exceed the cost of living, they are ready to tolerate inflation, irrespective of the damage which it does to pensioners and all those on fixed incomes?

The hon. Gentleman has ignored the fact that pensions have increased in value in real terms. Secondly, my right hon. Friend the Prime Minister and my right hon. Friend the Chancellor of the Exchequer have made it perfectly clear that the fight against inflation is a major part of the Government's policy. It is also clear that the prices of goods which are very largely produced by mass production methods, such as cars, television and radio sets, washing machines and household equipment, have been steady, but that prices have gone up where the cost of production includes a large labour cost element, which emphasises the importance of an incomes policy, as my right hon. Friend has so often stressed.

rose—

I am anxious to make progress.

asked the Chancellor of the Exchequer what are the terms upon which Mr. Joseph Hirshhorn has offered his art collection to Her Majesty's Government; what obstacles exist to its acceptance; and if he will make a statement.

I have had informal discussions with Mr. Hirshhorn about the possibility of his making his art collection available for permanent exhibition in London on the basis that he would transfer the collection to a foundation created for the purpose under English law and that Her Majesty's Government would provide a site and building and would meet the running costs of the foundation. Mr. Hirshhorn has not yet reached a decision on the matter.

Would the right hon. Gentleman agree that it is the view of all experts that this is a very distinguished collection which we would be very proud to have in this country? Will he assure the House that he will actively pursue the possibility of bringing it here and not simply wait until Mr. Hirshhorn may make alternative arrangements?

I agree that this is the finest collection of modern sculpture in private hands in the world and that there is also a very distinguished collection of modern American and European pictures. The decision, of course, is for Mr. Hirshhorn, for whom it is obviously a decision of great importance as this collection represents his life's work. However, I can assure the hon. Gentleman that we are very anxious that the collection should come here and we are endeavouring to meet a number of suggestions which Mr. Hirshhorn has made. The decision, of course, lies with him.

asked the Chancellor of the Exchequer how many chartered accountants are employed in his Department.

One, Sir.

Is the fact that only one chartered accountant is employed by the Government the reason why I cannot find out the cost of the military operations in the Aden Peninsula? Is the right hon. Gentleman aware that I put this question to the Minister of Defence, whose arithmetic is evidently not his strong point, and I got no reply? Surely there is one chartered accountant who can help the Government to work out the cost of what is happening around Aden?

I am glad that my mathematics have been more successful than those of my right hon. Friend's Department. If we wanted more such officers we would recruit them. I hope that the hon. Gentleman will not press us to inflate establishments unnecessarily.

Is it not possible that greater cross-fertilisation between administration and industry is desirable? My right hon. Friend may say that Government accounting is different from commercial accounting, but surely there is room for the one to learn from the other?

In general, I wholly agree with my hon. Friend, and he may recall that I made a statement in the House a week or two ago which, I think, marked a significant advance in this respect.

asked the Chancellor of the Exchequer what provision for possible future Income Tax reforms has been made in the plans for the use of computers by the Board of Inland Revenue.

No specific provision. But the hon. Member will be aware that these machines are very adaptable.

Does not the right hon. Gentleman think that it is pretty dead beat merely to computerise existing clerical procedures? Would not it be desirable to carry out a fundamental review of the many tax reforms which have been proposed to see what flexibility could be introduced into the system?

I am not sure that computers are the best method of achieving that end. These are used mainly for the great mass of P.A.Y.E. work, departmental statistics, and pay-rolling, but the Inland Revenue has a very good reputation for a progressive approach to the use of modern equipment.

asked the Chancellor of the Exchequer what progress has been made in devising a form of contractual savings scheme in consultation with the leaders of the National Savings Movement; and when he expects to announce the initiation of a practical scheme.

A detailed study is in hand. Progress is being made and my right hon. Friend hopes to make an announcement in due course.

Will the hon. Gentleman convey to his right hon. Friend the need to make a statement as early as possible? As personal savings appear to have reached a plateau, would not the hon. Gentleman agree that there is a need to expedite such a scheme? Secondly, will he say what he has in mind when he refers to a contractual savings scheme?

With regard to the second part of that question, I do not think that I can go any further at this moment. It is necessary to wait until we have some knowledge of the scheme. My right hon. Friend intends to make an announcement as soon as practicable, and I think that the hon. Gentleman realises that he need not ask me to persuade my right hon. Friend to take savings seriously.

asked the Chancellor of the Exchequer what is the value of the £ sterling measured in terms of January 1952; and what has been the decline in value in each of the last 12 years.

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

Does not a cursory glance at the figures show a further deterioration since 1952 in the value of the £? What confidence can small savers have in Government securities and in postwar credits?

The hon. Gentleman has reinforced the point which my right hon. Friend the Chancellor and, indeed, my right hon. Friend the Prime Minister have been making constantly about the need to combat inflation. As regards small savers, if the hon. Gentleman examines the figures of the increase in savings over past years he will find that, whatever he thinks, they have a certain confidence in the future of the country under a Conservative Government.

Surely the first part of this Question involves only one figure? Can we have that figure, and thus find out how successful the Government have been in "mending the hole in the purse"?

The Question asked for a whole table of figures. [HON. MEMBERS: "No."] The£ was worth 14s. 6d. in May 1964, compared with 20s. in January 1952.

Why does not my hon. Friend state what security people have who invested in Daltons? Why does not my hon. Friend tell hon. Gentlemen opposite that?

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

I think that it might be convenient for the House to discuss, at the same time, new Clause 6—Income Tax: increase of small income relief—and new Clause 9—Increase of personal relief for certain householders over 50 years of age.

I should call either or both of the other new Clauses for a Division if that were desired.

The purpose of the new Clause is to increase the limit of income at which age exemption can be claimed. The House will be familiar with this feature of our Income Tax code, which is of fairly long standing and which provides that where a single taxpayer has reached the age of 65, or where, in the case of a married couple, one of them has reached the age of 65, exemption from Income Tax is given if their income, be it single or joint, does not exceed a certain sum. The existing sums are £325 a year for a single taxpayer and £520 for a married couple.

The Clause increases those limits to £360 in the case of a single person and to £575 in the case of a married couple. The new Clause further makes provision for an addition to the range of marginal relief, in this case extending it from £75 to £130. The cost of these provisions would be £1¾ million in the current financial year and £3 million in a full year. The effect of the Clause, as we calculate it, would be to exempt from taxation about 120,000 taxpayers, and a further 185,000 taxpayers will benefit from the marginal reliefs to which I have referred.

The amount of gain for the individual taxpayer in the case of exemption from tax will become greater as his income approaches the maximum at which exemption will be granted. The nearer to the limit, the more he benefits. The maximum benefit in the case of a single person will be £15 15s. and in the case of a married couple £24 15s., at the point where their income is the equivalent of the new limit which the Clause prescribes.

In the case of marginal reliefs the amount by which people benefit will vary with individual circumstances, but it will be possible for people to benefit under the new provisions to some extent by marginal relief with an income of £424 a year for a single person and £704 a year for a married couple

That, briefly, is the purpose of the Clause. As far as administration is concerned, the Inland Revenue will review the field and pick up the cases of people who will benefit and automatically adjust their P.A.Y.E. coding. Taxpayers should receive notices of their new coding shortly after the Finance Bill becomes law, and they will receive any necessary repayment by means of coding adjustments immediately or shortly after that.

I would ask people who benefit not to write to their tax offices, because automatically the benefits will be applied through the machinery of the Inland Revenue, and after the distribution of notices of revised coding the Revenue will also insert notices in the local Press, in case any people have been overlooked, advising them that if they have not received new coding notices they should apply to their tax office. This form of administration has proved satisfactory in the past and it will enable this benefit to elderly taxpayers to become effective as rapidly as possible.

During the Committee stage there were discussions on this and similar proposals for tax reliefs. As my hon. Friend the Financial Secretary said at the time, I wanted to consider whether any changes could be made in this field this year. Before making up my mind I wanted to consider the discussions in Committee and the views put forward by both sides of the Committee. Looking at that discussion and at the current level of the age exemption provisions, it seemed to me that there was a case this year for making the changes which I have just outlined.

On both sides of the Committee we always wish to make improvements in this relief, but the limit is normally set by its relation to other tax reliefs, given to other taxpayers, including married couples. The figure which I have chosen of £575 for a married couple will be just slightly below the figure available to a married couple with one young child where the income is wholly earned.

I think, therefore, that the provision which I am suggesting in the new Clause keeps the tax code on personal allowances logical and consistent and retains a fair balance between various taxpayers. It will, at the same time, provide a very welcome easement to people who, as taxpayers, command the sympathy of both sides of the House. Those are the reasons for which I move the Clause, and these are the provisions which I propose for carrying them into effect.

The House warmly welcomes the proposals which the Chancellor has made to improve the conditions of age exemption. The right hon. Gentleman has noticed that since he put the new Clause down he has received strong reinforcement from this side of the House.

In case he changed his mind.

We gladly withdrew our new Clause, which we had discussed in Committee and which we were anxious to discuss again, to give the Chancellor an opportunity to say what his intentions were.

Frankly, it surprised me that he had delayed doing this until this late hour of our deliberations on the Bill He has given a rather lame excuse why he was prepared to do nothing earlier and why he has delayed action until now. He said that he was anxious to hear the views of both sides of the House and to inform his mind on whether this year he should carry the age exemptions still further.

But when I moved the new Clause to improve the age exemption in Committee on 9th June, the Financial Secretary, in in reply to the debate, presumably without conveying anything to his right hon. Friend, said:

"… my right hon. Friend is considering the question whether the differential is wide enough in this year. I cannot and shall not anticipate his decision, but there is one point that I should like to make …"—[OFFICIAL REPORT, 9th June, 1964; Vol. 117, c. 357.]

But if the Chancellor was delaying consideration until he had heard the views of both sides, why was he considering the question before he had heard any remarks at all? It seems a very strange situation for the Chancellor to be in.

4.0 p.m.

The proposal has now come from the Chancellor and a number of old people whose incomes would have been taxable again this year will have the advantage of a reduction or the extinction of the tax which they would have had to pay. Happily, the Chancellor has gone further this time than on previous occasions in improving this relief. In the new Clause which we put down in Committee, we followed the amounts by which age exemption had been improved on earlier occasions, which, we thought, would be the most we could persuade the Chancellor to accept when he himself had not made any proposal whatever. I raised this matter first in a speech on the Budget Resolutions. On 20th April last, I stressed that, in the view of my right hon. and hon. Friends, a further improvement of age exemption should appear in the Finance Bill. The Chancellor made no response to that, and there was nothing in the Bill when it was introduced. At the last stages of the Bill, however, we have his new Clause before us.

There is no doubt that the new amounts will widen the disparity between younger people and old people in the level of taxation, a point I referred to when I introduced our new Clause in Committee. We should not disguise the advantage which older people will have under the age exemption, but what we should say is that it is justified and will be acceptable to those who pay tax in the normal way. According to my figures, a younger married couple without young children will pay about £20 tax at the point at which older people will be completely exempt, and a single person under 65 will be paying about £11 10s. a year tax at the point when the single person over 65 will be completely exempt.

This disparity is justified on the ground that older people, generally speaking, suffer a reduction of income at this point in their lives and any taxation on an income already slashed by retirement is felt as a very heavy burden. Younger people, on the other hand, are generally on rising incomes and they are not in the position of those who have retired on half or less than half pay supplemented as may be by resources of their own.

On this side, we welcome the Chancellor's proposal and we welcome, also, the fact that he has broken away from the pattern of previous adjustments, which hitherto have never been more than £25 for a single person and £40 for a married couple. The improvement is now to be £35 for a single person and £55 for a married couple.

New Clause No. 6 is, to some extent, a stable companion of the age exemption and age relief provisions. We propose that a further advance in small income relief should be made this year. As the House knows, the small income relief does not provide any exemption limit similar to the age exemption. All it does is to extend the two-ninths relief to investment income of persons of any age whose total incomes are within the limit prescribed as "small", so that it gives, virtually, earned income relief on unearned income. At present, the limit of the concession is a total income of £450 a year, and we propose that it should be raised to £500.

The small income relief has never kept absolutely in step with changes made in comparable reliefs, still less with the age exemption. There have been differences in the pattern of change over the years, sometimes one standing still longer than another. Lest year, however, the Chancellor improved the small income relief limit from £400 to £450 at a time when he improved the age exemption and age relief. In our view, the problem of people with small incomes should be further relieved this year.

In terms of revenue, it is a very small matter. On the human side, however, it is most important to a number of people. Many of the people who are concerned with small income relief are widows, spinsters and others living on annuities, on the proceeds of legacies, and so forth. They are people who, for various reasons, are unable to take employment or can do so only to a small extent. They may be invalids or semi-invalids, people with disabilities of one kind or another. One has in mind also the woman who has kept house for an aged relative and who, on the eventual death of the relative, has been unable to enter any suitable employment, though being provided for on a modest scale by a legacy from the deceased relative.

We hope that the Chancellor will, even now, sympathetically consider an improvement of the income limit for small income relief. The improvement of £50 which we propose is small enough, and I emphasise again that the effect in terms of revenue must be small.

New Clause No. 9, in its present form, is a newcomer although it has appeared on the Notice Paper in a different form in years past. It raises a matter upon which I myself have felt quite keenly for quite a time. Some years ago, I persuaded the Trades Union Congress to include a proposal on these lines in its evidence to the Royal Commission on the Taxation of Profits and Income.

It proposes to distinguish between one single person and another in order to grant a higher personal allowance to the single person who is a householder—that is, an occupier of unfurnished accommodation or a tenant of furnished accommodation. By "single person," I mean any person to whom the single person's allowance applies. That covers widows, widowers, separated spouses who are assessed as single persons, divorced persons who are assessed as single persons—everyone who receives the single person's present allowance of £200 under the Income Tax code. This provision would apply to those who are householders or are tenants of furnished accommodation, subject to a stipulation of age, and the age of 50 is mentioned.

This Clause is an attempt to meet the special grievance of many people of mature years, both men and women, occupiers of unfurnished accommodation, householders maintaining a house in which they have probably lived all their lives—the parental home, may be—who feel that it is very wrong that the taxation system applies to them only the same personal allowance that it gives to younger people with smaller responsibilities, and who are relatively better off on the same amount of money because of their smaller commitments in life.

I do not pretend that this is a scientific way of dealing with the matter, and I know that I have some very powerful opinions against me on the general question of the place that personal allowances should occupy in a progressive system of taxation, but I must voice the grievance expressed to me over the years by many hundreds of people who feel that the present system is wrong in not providing for some differential between themselves and those who have lesser responsibilities.

The typical case one gets is that of the married man who, unhappily, loses his wife. He looks round the house—a lonely man, but with the same commitments as before—and says, "Now I am classified as a single man. Surely, that is not an adjustment of the burden of taxation to ability to pay?"

I know what the Royal Commission said on this question in its second Report—I have read it again and again. And I clearly understand that it is for the convenience of the administration to have a few simple personal allowances that can be easily applied to those who may receive them, but we have to bear in mind that in these matters we are applying the fundamental principle of any system of direct taxation, which is to attempt to adjust the burden to the shoulders that have to bear it. Although we cannot carry refinement too far, I believe that the existing system of personal allowances has many crudities about it which operate unfairly in a large number of individual cases. New Clause No. 9 is an attempt to deal with that position.

I recall that in the past objections to a proposal on these lines have been made on the ground of difficulty of administration. It has been asked, "Who is the occupier of an unfurnished accommodation?" "What is it?" "When is a person a tenant of furnished accommodation?" "How does one define it?" Due to the diligence of my hon. and learned friend the Member for Kettering (Mr. Mitchison), the new Clause contains cross references to provide the basis of definition of the status to qualify for this additional relief.

4.15 p.m.

The age point is comparatively simple. The additional relief proposed would be to give one half of the difference between the single person's allowance and the married man's personal allowance to taxpayers who qualify for the additional relief in this Clause. At the present time, the single person's allowance is £200 and the married man's personal allowance is £320. The additional relief would be one-half of the difference between those two amounts.

I hope that the House is now fully seized of the purpose of the new Clause; and that hon. Members will observe its moderation, and its attempt to solve a very real problem in the lives of many people. We cannot be satisfied with our system of direct taxation unles we are continually adjusting it within the scope of practical administration to meet circumstances in everyday life that we clearly realise, and which do excite the sympathy of all of us who come up against these individual cases in our constituency and other experience.

I leave the matter there. Because of the way it is put to the House I cannot formally move either of my new Clauses, but I trust that the House will mix with its congratulations to the Chancellor some concern with two sets of people whom the two proposed new Clauses would cover.

I have not the slightest idea how the Chancellor of the Exchequer has suddenly come forward with these new proposals. I only know that I am delighted that he has, and when I am delighted I do not try to penetrate very much further—I think that it is a waste of time. I have tried for years to find out how the brains of various Chancellors have worked, and that is hard work, because one never really arrives at a satisfactory conclusion. I only know that this particular concession is very welcome.

The whole idea of a special age relief for those on small fixed incomes started with my right hon. Friend who is now the Minister of Defence. I do not know that it has been recorded in the House, so I must say that he was at one time chairman of the Tory Reform Committee. I can tell my right hon. Friend the Chancellor—who, of course, was too young to be a member of that committee—that it made some very valuable suggestions which almost revolutionised the Tory Party. He should, therefore, always listen to those who were members of the Committee, as it has been very valuable to the Tory Party in the past.

I never like to forget old friends, so I am always delighted to say that the present Minister of Defence was really the first Chancellor who ever departed from the advice given by all those very distinguished and marvellous civil servants—who advise, but who live in a world of their own. It is a great thing to have a. Chancellor who does not always listen to them on matters like this.

I accept that in regard to the big overall matters the Chancellor and the civil servants have a duty to perform to the country, but in little matters like this—because it is a little matter, though very worthy—the Chancellor ought to listen to the backbenchers, who really know a great deal more about it than distinguished Chancellors or civil servants. I am delighted that my right hon. Friend has taken this line.

I have listened with great interest to what the hon. Member for Sowerby (Mr. Houghton) said about new Clause No. 6. I entirely agree with him. Neither the Opposition, when they were in power, nor the Tory Party, have ever concerned themselves about the small man and the small woman, because they have always: been so concerned with such matters as the overall balance of payments, which is very important. I am not one of those who think that they are not tremendously important. However, we want to do justice. I say with deep humility that those who are referred to in the hon. Gentleman's new Clause have never had the interest of Chancellors whether they have been Tory Chancellors or Labour Chancellors.

I suspect that the power behind this move, which, I hope, will be extended, is the new Prime Minister. I have never come across a Prime Minister who has been as easy to talk to and as understanding to talk to as the present Prime Minister. I am delighted that he is the Prime Minister, because I look forward to influencing a great deal in the future.

There is a great deal in all these matters which requires examination. My right hon. Friend the Member for Thirsk and Malton (Mr. Turton) played a large part when we made our speeches on this matter in Committee. I do not expect that the Chancellor will make another move forward and accept the new Clause of the hon. Member for Sowerby. However, my right hon. Friend the Chancellor should carefully consider what the hon. Member for Sowerby said, because, even though the hon. Gentleman belongs to the Opposition, he knows a good deal about all these things and has been a great help in bringing forward the rather small detailed matters which escape the Treasury's attention. I should like to thank the hon. Gentleman, because on many things he and I have co-operated. It is a pity that our co-operation has not had a greater effect on Chancellors.

I am no mathematician. I find it difficult to understand all these details, but I am grateful for the move which has been made today. I should have been much more pleased if my right hon. Friend had explained marginal relief a little more fully. I am not certain whether everyone has been uplifted to marginal relief or how this substantial extension will work. My right hon. Friend always assumes that everybody in the House knows exactly what it all means, but I say frankly that I do not know what it all means. I want to be assured that both men and women benefit and that we are something fairly helpful to those living on small fixed incomes.

It has taken a long time to get the House to be aware of small fixed incomes. I am delighted that we are moving into the era of studying the problems of those on small fixed incomes. There is a great deal about them that needs readjusting. I am sure that my right hon. Friend would like to rise and say that the cost of living has been held steady. I accept that it has been, up to a point, but it has not been kept steady in the things that matter to those on small fixed incomes.

I wish that my right hon. Friend would not say so much about washing machines and television sets. I wish he would talk about coal, gas and electricity, which are much more important to those on small fixed incomes. They will benefit from the reliefs in the new Clause. I could make a much better statement about small fixed incomes and the expenses their recipients have to meet than my right hon. Friend could by talking about washing machines, television sets and motor cars. I know that those things are very important, but they are important to those who can pay for them.

Those on small fixed incomes, who are affected by the Clause, must find more money for the increased cost of gas, coal, electricity, transport, rates and rents. I should like to see all those things taken out and the small fixed income problem related to them. It is possible to economise on certain things, but not on those things. It is very misleading to those on small fixed incomes when the Tory Party gets blown up, even though we have done so well, by saying that it has kept the cost of living steady. We have done so for those who have had increases in wages and salaries. We have not kept the cost of living steady for those living on small fixed incomes. I want my right hon. Friend to address himself to this point, which I regard as the most important thing in the Finance Bill at the moment, as we have got rid of all the other great things which affect the country.

I am always very happy when something is done. It takes a good deal of hard work to get action, but we have got action today. I thought that my hon. Friend the Financial Secretary did this very nicely in Committee. He is a very good speaker. He was followed today by the Chancellor. We still do not quite know how much has happened, but I hope that the House together—because this is very important—will get moving on small fixed incomes. I am glad that we have a Tory Chancellor, because, when we Tories say that we will do something we provide the money to meet the concessions, and that is equally important as making the concessions. I thank my right hon. Friend the Chancellor very much. I hope that he will go from strength to strength and do everything he can for those in whom so many of us are desperately interested.

I am not concerned about the committee to which the hon. Lady the Member for Tynemouth (Dame Irene Ward) referred, whose job it is, or was, to reform the Tory Party. I am sorry for that committee, because I imagine that it has a rather difficult task on hand. I have risen to address myself to the new Clause No. 9. No one on this side of the House would desire to detract in any way from the interest of the hon. Lady in the difficulties and needs of people who have been trying to exist on small fixed incomes. We welcome her support for the principle we seek to enunciate in our new Clause.

With all possible respect to my hon. Friend the Member for Sowerby (Mr. Houghton), I can claim to be the first back-bench Member to raise the specific case to which my hon. Friend referred. Five or six years ago I called the attention of the House to what I thought was an anomaly in the treatment for Income Tax purposes of the widower. I shall not weary the House with the details of the case I then cited. They are on record in HANSARD. Perhaps one reason why we have failed in our responsibilities to those people, both as a Government and back bench Members, is that it is only when one is brought face to face with the circumstances by someone who is obviously suffering under these difficulties that one realises that they exist.

The case I have in mind is that of the widower. I have in mind, more particularly, someone whose case was brought to my attention. He had not been married very long before his wife became physically incapacitated. She endeavoured to do some of her work in the home. She had to go to hospital on many occasions. Eventually, she died. The home has to continue. The house is on mortgage. There are two children, one aged 14, who must be looked after. The widower must continue with his employment. He is faced with the difficulty of trying to run the home, keeping the home clean by some means or other, and meeting all the expenses of the home, which are precisely the same now as they were when his wife was alive.

This widower can obtain no relief whatever. He is treated for tax purposes as a single man. When this widower went to the Revenue to ask whether there was any means by which he could be relieved of his tax responsibilities as a single man, and be taxed as a married man, he was told, "No, although you can go into lodgings, or, if you wish, stay where you are and employ a home help".

4.30 p.m.

It is worth noting that if he employs a woman as a housekeeper he can obtain tax relief, but no hon. Member will want me to explain why there are sometimes reasons for people not wanting to accept the help of a housekeeper as such. There are often valid reasons why a widower might not wish to employ a woman in this way, but prefer to have someone come in to look after the house on a day-to-day basis, in which case the widower gets no relief for the money paid to such an employee.

I do not want to argue this case at length. I explained it in detail to the House six or seven years ago, when I pointed to it as one of the hardest cases that had come to my knowledge since becoming a Member of Parliament. I recall telling the House that despite the tremendous physical disabilities suffered by this man's wife before she died, this man had fulfilled in every way his marital vows. He had cared for her to the best of his ability, had looked after her well-being and their home. He was a man of character—yet the moment he found himself a widower he was in difficulties about maintaining his home.

I need only add that the financial commitments of a widower are equal, often greater than, those when his wife is alive. From the time of her death he must employ someone to carry out the normal household work. I hope that, having aired this matter briefly again, the Chancellor will consider people who find themselves in this position and will again consider the suggestions made by my hon. Friend the Member for Sowerby and at some future date offer relief to the sort of case I have described. I appreciate the administrative difficulties in giving relief in this sort of case, but I do not believe that they would be insuperable.

I thought the hon. Gentleman the Member for Sowerby (Mr. Houghton) a little ungenerous in his criticism of the method my right hon. Friend the Chancellor has used to discuss this subject. It is important that the Committee stage of a Finance Bill should be used to suggest improvements to the tax provisions. Many of us have for years felt strongly on this question of tax relief for the old and I thought that my right hon. Friend was wise in leaving it for hon. Members on both sides to air their views on whether there should be improvements again this year.

We have gained a great deal by this provision, because the new Clause is a good deal more generous than that suggested in Committee by the hon. Member for Sowerby. I do not make any point in saying that we have now gained for the old people a good deal, particularly in marginal relief. The Clause put forward in Committee by the hon. Member for Sowerby did not mention marginal relief. I congratulate my right hon. Friend on the step he has taken in extending marginal relief from £75 to £130, because that means that the band of help has been extended considerably.

I hope that the Chancellor will not feel inhibited by what he has done in this and previous years. I hope that he will go further in his next Budget, if there has been any change in the intervening time; in other words, if there is a rise in the cost of living then that should be reason enough for him putting these age limits higher. Equally, if we get a 4 per cent. growth rate, that will be a good reason for the age exemption limits being raised.

What is extremely annoying for older people is that they should get increases in their pensions and then find, because of those increases, that they are brought within the sphere of Income Tax which they were not previously paying. This is the great widom of the present move, in conjunction with the Pensions (Increase) Act of last year, by which increases are provided to enable old people to pay less tax than before and have a higher income left.

The other Clauses we are discussing about age exemption limits are important. There is a good deal to be said for trying to help those in the small income groups, but I suggest that new Clause No. 9 would be extremely difficult to administer. I am sure that the hon. Member for Sowerby will agree that while there are hard cases, such as that described by the hon. Member for Bristol, South (Mr. Wilkins)—cases which excite our sympathy—to try to define "occupies furnished accommodation" and similar phrases might result in relief being given not necessarily to only hard cases. But I agree that this matter should be looked at again in an effort to find a fairer way of dealing with what is undoubtedly a difficult problem which some widowers must face.

We have had a relatively short debate on these three new Clauses, but the points involved were made with clarity and were so thoroughly discussed in Committee—apart from Clause No. 9, to which I shall refer—that I believe the House is now seized of the real considerations in each case.

I would like to say first, on behalf of my right hon. Friend, how much he has appreciated the reception given to his proposals on age exemption. I hope that I can reassure my hon. Friend the Member for Tynemouth (Dame Irene Ward) and my right hon. Friend the Member for Thirsk and Malton (Mr. Turton) that my right hon. Friend's proposals show that personal allowances are in a real sense considered year by year. I am sure that this is the right way to proceed; that they should be considered in the circumstances and context of each year. It is, therefore, proper that on this occasion my right hon. Friend should have listened and considered with care—added to his own consideration—the considerations advanced on both sides in Committee.

We had a fairly full discussion of new Clause No. 6 in Committee and I am sure that the hon. Member for Sowerby (Mr. Houghton) will not mind my saying that I did not think that he added in any way today to the arguments he advanced in favour of this proposition in Committee.

One cannot go on adding to a glimpse of the obvious.

In that case, perhaps the hon. Member will glimpse the obvious from this side of the House. It would be a welcome thing if he did, if he does not mind my saying so.

The hon. Gentleman made some attempt to link this with age exemption. I did not notice him try to push very hard the argument that every time one improves the age exemption limit one is automatically bound to improve this particular limit. Perhaps he was being wise, because although over a period of years the limits have moved more or less together, a degree of difference in the relationship has been kept between them. It would be difficult to make any automatic link between these two forms of relief. Indeed, small income relief, which is what we are talking about, was substantially improved in 1962 and 1963. The hon. Member for Sowerby is quite right in saying that the cost of new Clause No. 6 would be small. I have had the figures checked again and on the latest findings that I can give him it would cost about £500,000 in a full year and benefit about 100,000 people.

The reasons which I gave him for not accepting this proposal this year must remain valid. In any year changes in these allowances must be a matter of priority, and I am sure that he would agree that this must always apply. There are always priorities to be observed in any one year. Sometimes the Chancellor has nothing at all to give away, in which case the priority is to give nothing away, quite literally, in the interest of the whole economy. In other years, he can give something and it is a matter of priority where to give it.

The difficulty about this proposal is that, although the cost is small, a very high percentage of the benefit would not, in fact, go to those who are living wholly on small fixed investment incomes. A substantial number of young people, part of whose income is invested income, would benefit and this, I am sure, is not the result that my hon. Friend the Member for Tynemouth would desire. It would be benefiting the elastic income, so to speak, to quite a substantial extent.

The intention, certainly on this side of the House, is to give assistance, where possible, to the inelastic income of those who cannot adjust their incomes upwards when prices rise or when, as my right hon. Friend the Member for Thirsk and Malton said, the general standard of living in the country rises and they are not able to go up with it. I called this a capricious result in Committee, and it is because of this my right hon. Friend has not felt able to afford any priority to this relief this year. I cannot, therefore, advise the House to accept the new Clause.

I come to new Clause No. 9. Here it was very fairly said by both hon. Members opposite who spoke about it that this was not a scientifically based proposition. That would be near about the words which the hon. Member for Sowerby used. Of course, it is not. He went on to argue that this fact should not prevent a relief of this kind being given because it would undoubtedly give some help to a number of people who are hard cases and to whom particular misfortunes occur in the course of their lives, as for example, that given by the hon. Member for Bristol, South (Mr. Wilkins).

Again, the hon. Gentleman was perfectly fair. He said that the Royal Commission was against it, and it most certainly was, on the ground that it is very much better to try to keep to simple, readily definable classes of allowance. Once one gets away from that, one enters the whole jungle of anomalies, disparities and difficulties and probably injustices between one taxpayer and another, which, again, my right hon. Friend the Member for Thirsk and Malton suggested would be the case.

There does not seem to be, when one thinks about it, a real reason for putting a single person who is past the prescribed age, in this case 50, and who occupies a house or a flat, in a better position for Income Tax purposes than the younger single person who is a householder or a single person, of whatever age, who lives in an hotel or in lodgings.

4.45 p.m.

It is precisely such a breaching of equity in the principle of tax law that would follow if this kind of proposal were adopted. That is not to say that hon. Members on both sides of the House do not have the very greatest sympathy indeed with the hard cases that can be found, and, unfortunately, are found, such as those which have been quoted It is extremely rough for the man whose wife dies. This, of course, in itself is a far bigger misfortune than the Income Tax consequences that follow, and for which there is no foreseeable compensation in Income Tax terms which could be of any real help. He feels it particularly because his allowance is reduced to that of a single man.

But it has to be remembered that he got the higher marriage allowance in the first place not because he was a householder, but because it was for two persons, himself and his wife. That is what really gave them the higher marriage allowance. It is the only conceivable ground on which he could receive it. I agree that it is very bad luck when he reverts to the single person's allowance, but if he did not do so, all other single persons would instantly have a grievance, and it would be extremely difficult to resist the grievances which they would be bound to voice. I am, therefore, afraid that on the ground of principle I cannot advise the House to accept the new Clause No. 9. It goes flat against the present cannons of tax law, as I think the hon. Member for Sowerby would agree. He said that there was no reason why we should not change them from time to time. I agree about that, but a change in this case, we are quite certain, would create more anomalies, difficulties and injustices than it would remedy.

The second ground that I must give for refusing it this year is that although we have no precise estimate of the cost and it would be very difficult to estimate, it would certainly run into tens of millions of pounds. This would disrupt seriously the difficult matter of keeping this year's Budget in balance and, therefore, it is with regret that I must advise the House against accepting the Clause.

We have discussed two of these proposals in Committee as well as today and I am sure that the House will forgive me if I deal with them very shortly. Concerning new Clause No. 7, we all wish, as the hon. Lady the Member for Tyne-mouth (Dame Irene Ward) expressed in such charming sentiments, to thank the Chancellor for the decision that he finally has made. I could perhaps go into it a little more and say that I was impressed by the main argument which the Chancellor used in favour of this step and which is, of course, that he said that it would keep the tax code logical and consistent, or, as I would say, keep the various personal allowances in some reasonable relationship or parity one with the other.

But this argument, being a permanent argument, can have nothing whatever to do with the bringing forward of this new Clause. One felt, as the hon. Lady felt, that the question which remains to be answered, and which no one attempted to answer, is why the Chancellor did not bring it forward earlier—why did he leave it to the last minute? It would be a very brave man indeed who would attempt to offer to the hon. Lady any guidance on a political matter of any kind, because the hon. Lady is so experienced in these matters, but I have been brought up to believe that in politics it matters not so much what one does as when one does it.

Perhaps, therefore, if one looked around very carefully, one might find an occasion that either has presented itself, or is likely to present itself in the near future, which might give us some guidance why the Chancellor is bringing this Clause forward at this last minute when the reasons for it have been obvious the whole time and which were very relevant in Committee, and indeed, in the Budget itself. Perhaps we can leave it at that and say to you, Mr. Deputy-Speaker, that as we have added our names to the new Clause we would wish, when the Question is put, to voice our support strongly in favour of it.

I turn now to new Clause No. 6, entitled "Income Tax: increase of small income relief." This is a very small item in terms of the Budget—a matter of £500,000. Such a sum would help 100,000 people. I should have thought that that was not a very expensive way of helping a large class of people whom we would wish to help. The argument of the Financial Secretary that by adopting this new Clause we should also help some people whom we did not necessarily wish to help is not very powerful.

It arises in many allowances and in many parts of the Income Tax structure. It has affected this allowance throughout its history. It has virtually always been the case, except when other personal allowances have been in a particular relationship to it, that it has helped those whom we wanted to help and, to a certain and variable extent, those whom we did not want to help as much. Therefore, I cannot regard that argument as very strong.

I am still of the opinion that this is a new Clause which could well have been accepted. The arguments for it have been made time and again. They are very sound arguments. The cost would be small and the number of people affected would be large. Therefore, when you put the Question on that new Clause, Mr. Deputy-Speaker, we shall wish to divide the House.

Finally, I deal with the last new Clause, which is a new idea. We are aware, of course, that the Royal Commission reported against this proposal, but we are helped by the fact that it stated clearly what its arguments were. It rested its case almost exclusively on administrative grounds. That is a very good guide and help to us, but it does not determine our attitude in this place completely. There are other matters, such as matters of human sympathy and hardship. No one who listened to the speech of my hon. Friend the Member for Bristol, South (Mr. Wilkins) could have failed to be affected by the sincerity of his approach and the knowledge that here was a case, one of many—we can all think of similar cases—which called precisely for this kind of treatment and help.

With deference, the Financial Secretary did not take the matter a great deal further by saying that there would be difficulty and inconsistency if a married man, on losing his wife and becoming a widower, were not treated immediately as a single person. He is right in saying that a single person, when he marries, gets the allowance as a married man for having to support his wife. But the thing which normally goes with that is an establishment. The couple do not normally continue to live separately. When a married man loses his wife he is compelled to continue to keep his house for the time being and sometimes for a considerable time. In the case envisaged by my hon. Friend the Member for Bristol, South, that situation is likely to go on for some considerable time.

That is why the new Clause is drawn in this form. The physical facts continue as they were during the marriage. The expenses involved are the same. The expenses are appropriate to a married establishment and not a single establishment. It is for these reasons that we think that there is a solid case in favour of the new Clause, and we shall seek to divide the House on it when you put the Question, Mr. Deputy-Speaker.

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

With this new Clause it will be possible to discuss on the Question, "That the Clause be read a Second time" the first two Opposition Amendments in the name of the hon. Member for Cardiff, South-East (Mr. Callaghan) and the Amendment to the second Opposition Amendment in the name of the hon. Member for Hudders-field, West (Mr. Wade) and also the third Amendment in line 86, with a division if required on the second Amendment in line 86.

I apologise for the complexity of this new Clause, but it is necessary to carry out its objective and to ensure that we do not go beyond what we have in mind. In fact, in proposing it, I am doing no more than meeting the points made on both sides of the Committee during the earlier discussion of what was Clause 19 but is now Clause 20 of the Bill in its present form. I will propose later that Clause 20 should be negatived and that this new Clause should take its place.

This proposal is of a very much more limited purpose than the original Clause 19. I can safely say, I think, that the Amendments which you, Mr. Deputy-Speaker, said that we could discuss with it, although relevant to the Clause in its original form, are not relevant to the Clause in its new form because the possible dangers which hon. Members had in mind cannot arise under the new Clause.

May I explain as briefly as I can the purpose of the new Clause by reference to what was intended by the original Clause 19? That Clause was drafted with two purposes in mind: first, to deal with the taxation of the surpluses of mutual trading companies; and, secondly, to deal with a possible form of tax avoidance which had become more likely as a result of recent court decisions. The new Clause does not do anything on the first point. We drop the first point and concentrate solely on the second point, which is the anti-avoidance provision.

I think that the House will be aware that there is quite a long history to the question of the taxation of mutual trading companies. Under an Act of 1933 it was thought that their profits—or surpluses—had become taxable. A subsequent judgment of the House of Lords in 1946 declared that Parliament had—I think the word was—misfired. In 1955 the Royal Commission recommended that surpluses derived from the trading operations of mutual corporations or mutual associations should be subject to tax.

The original Clause 19 was designed to carry that out for two reasons: first, as I say, because the Royal Commission had recommended it; and, secondly, because it was necessary to deal with a new form of tax avoidance, the possibility of which had been shown by a House of Lords judgment in 1963.

I was impressed by the arguments put forward in Committee on both sides against the general proposition that the surpluses deriving from mutual trading operations should be made taxable. I have therefore proposed this new Clause and my Amendment to delete Clause 20. There will be no question under this new provision of taxing the surpluses of mutual trading associations—or whatever the correct phrase is. I am confining my attention to the situation arising when mutual trading bodies go into liquidation and make a distribution from their surpluses. Here there is the possibility of tax avoidance, which has been opened up by the recent House of Lords decision.

The position roughly is this. In the case of a trader, for example, insuring himself with a mutual insurance agency, the premium that he pays would be a trading expense and therefore he would be able to set it off against his receipts for tax purposes and get a tax allowance in respect of it. If subsequently he received a repayment out of the surplus of the mutual insurance company, that payment in the normal way of business would be a trading receipt, and he would have to pay tax on it. Therefore, the thing would balance up, because he would have in effect to pay back the tax relief which he had formerly had in respect of an excessively high premium.

5.0 p.m.

In normal circumstances one gets relief when one pays, and one gets taxed when one has a distribution out of surplus. This was all right until a decision in the House of Lords in 1963 about a case under the Workmen's Compensation Act where it was held that if the distribution of a surplus was made on liquidation it would be a capital payment and therefore not liable to tax. This, therefore, opens the possibility of organising a mutual insurance corporation and paying to it unjustifiably high premiums which would be deductible for tax purposes as an expense of business. Then the surplus on liquidation of the company could be distributed free of tax to the original payers. That would be clearly a form of avoidance the possibility of which was opened up by the 1963 judgment.

I am therefore confining what I propose solely to this particular problem. The Clause deals only with circumstances in which there is a payment out of a trading surplus accumulated by a body carrying on mutual business. Ordinary capital distribution is not affected, and there is no effect where there has been accumulation out of surpluses which have already borne tax.

This Cause, in an inevitably complicated fashion, provides simply that where there is a mutual trading body and people pay sums to this body which are allowed as deductible expenses of the business, and subsequently the body goes into liquidation and the surpluses are distributed to the members, those surpluses should be liable to tax as they would have been if they had been distributed before the liquidation of the mutual body corporate.

I have done my best to explain this complicated Clause. We have accepted the clearly expressed view of both sides of the Committee, as it then was, and we are not attempting to tax in any way a surplus which arises in the course of ordinary trade. We seek only to stop up a loophole which could lead to tax avoidance.

The Chancellor of the Exchequer has made it perfectly clear that he has changed considerably the scope of the Clause which is now Clause 20 and which he proposes to remove by a later Amendment. As I see it, what the right hon. Gentleman has done is to deal with the type of abuse to which he referred which arises on the liquidation or dissolution of a society or company and in cases analogous to that. The abuse may arise in that excessive premiums may be paid—and a case was mentioned in the 1955 Final Report of the Royal Commission—and, those excessive premiums not having been fully expended in losses, the resulting surplus may be made artificially large and grow and grow and the society may be dissolved and its assets distributed and a similar body set up shortly afterwards.

It is obvious that there has been for many years a form of avoidance to which the Royal Commission drew attention in 1955 and which is in 1964 a target for the attention of the Government. It is quite true that the position has been elucidated by successive decisions of the courts, but there is no doubt about the nature of the fundamental abuse and that this Clause is intended to deal with it. The Clause does not deal at all with the question, which might have been dealt with by the earlier Clause, of a trading surplus arising in the hands of the society or company from year to year, although that too was considered in the 1955 Report. As to that, I do not regard it as our business in Opposition, particularly owing to the somewhat ambiguous character of the earlier Clause to which attention was directed from both sides, to drive the Chancellor to do at the moment more than he wishes to do. He is dealing with tax avoidance, and in that we are prepared to support him.

The resulting position will be that the premiums or contributions will be paid and in the normal course of things will constitute trade expenses deductible by the payer. It seems to me that there may be differences—and this is perhaps rather in the form of the former Clause than the present one—between various cases in which the payer gets his money's worth back, more or less. In some cases, because this is often mutual insurance, there will be compensation for a loss which I would have doubted to be an income receipt. If, for instance, the mutual association consisted of shipowners—and there are a great many such cases in which they pay premiums to meet contingency losses not covered by an ordinary insurance policy—I doubt whether those losses are anything from which tax can be deducted, because they receive indemnity for the losses.

I do not think that that question actually arises in connection with the abuse at which the Chancellor is aiming. We know that he is not going as far as he originally intended to do. On this side of the House we must reserve our position with regard to what the Chancellor had originally in the Clause, which was open to formal objection and which he has now left out, and we must agree with him that in general the Clause is satisfactory.

This is, however, a most complicated Clause and with humility and respect I must agree that the right hon. Gentleman is perfectly right to spare us a detailed exposition of it. I hope that I have understood, more or less, what it is about, but a great many people affected by it will also find it complicated. In these circumstances I wonder whether in the case of people who found difficulty about the former Clause it should not be made abundantly clear that they are not covered by this Clause.

I admit at once that the Chancellor has gone a long way to do this by the addition of subsection (10), which excepts a trade carried on by any registered industrial and provident society. This goes a long way, and it may be the whole way, towards meeting many cases and it was inserted presumably because it was necessary, as I think it was. At the very least it was a highly reasonable precaution to take.

I wonder whether the Chancellor would consider going a little further I have three types of bodies in mind. The first are the co-operative bodies, and again I recognise that this question will arise only on the distribution of a surplus at the end of the day and not in connection with a surplus gained year by year in current mutual trading. Cooperative societies include, of course, both the ordinary retail societies and the agricultural co-operatives which are in general very similar. I know that they are registered industrial and provident societies, but I do not quite see the objection to naming them specifically.

Then, it is said that the Clause is not to include

"a trade carried on by any registered industrial and provident society".

The Government's original case was that those bodies did not carry on a trade. That is a matter that we argued in Committee, and there is some inconsistency between the line taken then by the Government and subsection (10). I think that the new Clause is right. This is, however, a difficult field and it is extremely difficult to be clear what we are or are not doing. Those responsible for the Finance Act, 1933, found it to their cost. That misfired and the results of their misfire now appear as Section 444 of the 1952 Act. That got there when the Act was codified. It is the Section under which the cooperatives, for example, have always been dealt with. It has something about them in the side note and it is, as it were, their special Section. It includes other bodies, too.

I gather that it is not intended to put more tax in any form on the co-operative societies. The Chancellor worried me a little. When he said that those societies did not trade, that was all right, but when he says, as he does in the new Clause, that it does not apply to any trade carried on by them, I wondered what would happen at the end of the day when they were dissolved. In most cases, they would be bound to have a surplus. Will the Clause have any effect on that or will it not? The surplus will be an accumulation which, under Section 444, has been taxed as it came in year after year. In the particular case of the co-operative societies, it cannot be very much else. That is the first case which I put to the Chancellor.

The second one is the question of the clubs. Those with which I am concerned are the Working Men's Club and Institute Union Ltd. clubs, together with the Conservative clubs, since we on this side are pre-eminently fair-minded and we see no great distinction other than political allegiance between the clubs concerned Indeed, there is no political allegiance in the case of the working men's club. We should have no objection whatever to the inclusion of the Liberal clubs. I am sorry to have to confess that I did not even know that there was such a body as the National Union of Liberal Clubs. I have an excuse, because I looked at the relevant passage about this in Halsbury, which included all the bodies I have named and one or two others, but whoever prepared the passage fell into my error of not being aware of this body's existence. There it is, however—or I assume that it is—and, clearly, it should be treated in the same way. They are the bodies with which I am concerned.

I add one other case. The British Legion has clubs all over the place. I do not know much about the form they take. I remember that an unfortunate Member of this House once had to be indemnified by special Statute for auditing the accounts of one of the branches because there were rather obscure legal provisions about this. One does not know whether they are satisfactorily covered. I expect that they are.

Reverting to the other clubs, is it clear that the title "registered industrial and provident society" includes all of them? I have tried to ascertain, but have been unable to do so, whether any of them are registered as anything else. In some cases, I am not sure that they are not. I do not know whether the Chancellor or another Treasury Minister has information about it. I do not see how one of them can be a friendly society. It remains the fact, however, that these bodies think that they are, probably because as an industrial and provident society they have to go to the Chief Registrar of Friendly Societies. There are, therefore, doubts about the status of all these bodies. Although I have no doubt that it is intended to exclude them, I should like to know whether the Chancellor takes objection to mentioning them specifically.

5.15 p.m.

Our three Amendments are slightly different in scope. The first Amendment would prevent additional taxation in the case of any body now dealt with under Section 444 of the 1952 Act. That would clearly include the co-operative societies. It would include other bodies, too.

The second Amendment is clumsy and curious, but, at least, it has the benefit of mentioning the bodies particularly concerned. It arises in this way. When any of these bodies has to register its rules or an alteration in them, it applies to the Chief Registrar of Friendly Societies and is charged a fee. In certain cases, however, where the application comes through some sponsoring body, including all the bodies mentioned in the Amendment, except the Liberal clubs—I do not know about them—they get a reduced fee. It is, therefore, a way of indicating the kind of body that is intended to be excepted. Moreover, it may be clumsy but, at least, it makes clear to the people concerned that they are excepted irrespective of the form which, say, a British Legion club or a particular working men's club or similar body may take.

I therefore suggest that the Chancellor could do no harm by making it clear in those cases and that acceptance of the Amendment would help a number of bodies who have been worried not only by the obscurity, which is now admitted, of the original Clause, but also by the fact that it has all been taken away and a new Clause, equally unintelligible, has been put in its place. It is so much better when we do not intend to damage people in a case like that simply to tell them so and to indicate the types of bodies concerned.

The last of the three Amendments, which I mention only in case the Chancellor prefers it, is more limited, because it simply refers to the working men's clubs and nothing else. It therefore does not cover as wide a field.

Those are the considerations which I put before the Chancellor on the Amendments. I hope that he may see his way to accept one or more of them, but I imagine that whoever drafted the new Clause, or all those concerned in drafting it, must now be so pleased and proud of the result that they probably would regard any addition to it as a piece of amateur impertinence. They should, however, remember that they are dealing with people who are not particularly good at the law in these matters—indeed, it is sadly complicated—and who have been really worried, not only by the Clause, but by the form in which changes have been brought forward.

In Committee, I had the honour and pleasure of moving an Amendment to what was then Clause 19 of the Bill on behalf of a number of clubs. I declared a specific interest because I happened to be chairman of an organisation, a company limited by guarantee under the Companies Acts, known as the Association of Conservative Clubs Ltd.

The Amendment sought to remove doubts which existed in the minds of a large number of club people of all shades of political opinion, social status and all the rest throughout the country. The fear was that as the Clause was then presented there might be some broader interpretation of the words "mutual business" or "mutual trading", but I think that most of us here accepted that a social club as a club does not trade in the accepted meaning of "trade" for purposes of being liable for the payment of Income Tax. There was a doubt, however, and the more explanations that were given the more the doubt prevailed.

I for one was very glad to accept the very generous undertaking given by my hon. Friend the Financial Secretary that he would look at all the arguments presented in the discussion in Committee—in which the hon. and learned Member for Kettering (Mr. Mitchison) took a very full and free part—and would bring the matter before the House again at this stage. I readily accept the revised version—in fact, one might call it the completely new version—of what is now Clause 20, to the extent that I think it is abundantly clear that this revised Clause could never relate to the social or political club in relation to any allegations of trading activities.

Indeed, the Clause itself never arises year by year in relation to such an organisation, and even on the widest and wildest interpretation it would apply only on the winding up of such an association or club. To that extent, therefore, I would say to my right hon. Friend the Chancellor of the Exchequer, "Thank you very much indeed."

I listened with interest, if I may say so and as I always do, to what the hon. and learned Member for Kettering had to say and I would hope that my right hon. Friend the Chancellor would not give heed to the plea made by the hon. and learned Gentleman, particularly with regard to his second Amendment, because I think that it would add to the confusion of interpretation as to whether or not a club might or might not be liable for tax.

There are several grounds on which I say that, but I think that one of them is abundantly clear from the words used in the Amendment itself. The Amendment is rather loosely drawn. It is unfortunate that Transport House did not send a message a few hundred yards away to 32, Smith Square, in order to get the correct title of the Association of Conservative Clubs, but perhaps Transport House was being besieged at the time when the message should have gone.

I am much obliged to the hon. Gentleman. I am afraid it is not in Halsbury.

Be that as it may, I do not know where Halsbury creeps into the Association of Conservative Clubs.

Likewise, I think there is a fundamental error in the Amendment, because it requires exception to be made for clubs or industrial provident societies the rules of which have been approved through a number of defined bodies including the

"Working Men's Club and Institute Union Ltd., Association of Conservative Clubs and the British Legion".

Not all clubs, however, have their rules approved through those bodies. Certainly the organisation for which I speak does not ask for strict regimentation—all in or all out. Clubs are free and autonomous. Many clubs are not members of the Association and it would, therefore, be wrong to limit them in this way.

The hon. and learned Member referred to the clubs of the British Legion. There are a large number of ex-Service men's clubs in the country which are not, in fact, formed through the British Legion. If I may speak personally on that point, I know of one club which at this moment is being formed in my constituency and which for reasons of its own does not wish to be formed through the British Legion. Therefore, I think that there would be an answer of limitation on a cover of that type which might at some time give rise to doubt if this Amendment were to be accepted.

The hon. and learned Member referred to the different types of clubs. Many clubs are registered under the Friendly Societies Act for the reason that they do better for themselves. Many are formed under the operation of the Companies Acts, clubs limited by guarantee. They would be excluded from this Amendment. Recognising the good intentions which are, perhaps, behind the Amendment, it would seem to me to add doubt and difficulty to a Clause which will probably have to be explained by lawyers in other places in the future and would give rise to additional doubt if this Amendment were added. Therefore, I hope that if the Amendment is moved it will not be pressed and that in replying to the debate my right hon. Friend the Chancellor or my hon. Friend the Financial Secretary will make it abundantly clear again that social clubs are specifically not included in the provisions of this new Clause.

While I yield to nobody in my sympathy with the hopes and fears of social clubs, I hope that the House will forgive me for recalling to it that what this new Clause does is something of a rather greater order of magnitude than that. Having in Committee spoken with some fervour about what I regarded as the imperfections of Clause 19, as it then was, it only remains for me briefly, but very warmly, to thank and congratulate my right hon. Friend the Chancellor on having personally looked at this matter again with his usual care and attention and on having dropped one of the few main principles of Clause 20, as it now is, of the Bill.

There is no doubt that the new Clause is a quite monumental and difficult one, and I do not suppose that any hon. Member has really felt confident that he could appraise it himself without taking legal advice.

I am advised and reassured that those of my constituents who were worried about the original Clause in so far as it purported to make taxable trading surpluses of mutual insurance societies are completely reassured that the new Clause does no more than cover what we had all recognised, my constituents not least, was the perfectly desirable business of stopping a particularly dangerous kind of tax evasion.

The hon. and learned Member for Kettering (Mr. Mitchison) was, I thought, perhaps a little dubious in his acceptance of the principle that this should be tried.

No.

The hon. and learned Gentleman was a little dubious. He said that he reserved his position about his future attitude on the question of the taxation of surpluses of mutual insurance societies.

I should have thought that this part of the intention of the original Clause would have died unlamented by anybody except a few purists at the Inland Revenue nostalgic for the halcyon days between 1933 and 1946 and earnestly wishing to follow the Royal Commission's recommendation, right or wrong.

Perhaps the hon. and learned Member for Kettering might with profit refer to the words of the learned law Lord, Lord Macmillan, in the judgment on the Ayrshire case which I cited in Committee, because I think the words are worth returning to again and again. Lord Macmillan—this was when the Ayrshire case in terms of the intention of the 1933 Finance Act had misfired—said that the failure of the Legislature

"… is perhaps less regrettable than it might have been, for the subsection has not the meritorious object of preventing evasion of taxation, but the less laudable design of subjecting to tax as profit what the law has consistently and emphatically declared not to be profit."

While the hon. and learned Member may reserve his position, I hope that he and the Labour Party and anybody else who may once again be tempted to revert to the deplorable fiasco of the attempt to subject to tax the surpluses of mutual societies will take those words to heart.

Once again, I say that I am extremely grateful to my right hon. Friend and the Financial Secretary for the very great care they have taken in clearing up this matter. They could not have taken more trouble about it, and I and my constituents and many others are extremely grateful to them.

Some harsh words were said about the original Clause in Committee, and as the author of some of the words I rise now merely to acknowledge that the Government have made what can only be described as an ample response to the criticisms. The drafting of the old Clause received a great many criticisms. Complex though the new drafting provisions are, they seem very much more straightforward, more precise and in many ways very much simpler than those of the old Clause.

As to the substance of the new Clause, the main difficulty, as I understand it, facing the Chancellor and the Treasury has been the principle that distributions in liquidation are capital, and it would seem that the new Clause has steered round that principle with considerable and scrupulous care.

There are only two small points to which I would refer. The first concerns subsection (2) of the new Clause. At the moment I find it difficult to see what the purpose of the new subsection (2) is. It provides that the person who is to be charged under subsection (3), the person making the transfer or surrender, shall be deemed to have received consideration equal to the value of the right transferred. I can see that that is aimed at a collusive transfer or surrender by which the person receiving payment for the right receives money which is less than the real right. I can see that on a surrender back to the body corporate it might to some extent go to swell the power of the body corporate to make distributions which would not be caught, but I cannot see that subsection (2) has any great effect where a transfer is concerned. Indeed, it might lead to an ability in the Treasury to recoup itself in respect of the same amount of tax twice over, because the person who made the transfer will be deemed to have received consideration equal to the value of the right, and to that extent he would be a recipient under subsection (3), and the transferee would, as far as I can see, also be a recipient in respect of the same right under subsection (3), and so tax might be claimed or charged twice over from two people in respect of the same amount. But there may be reasons which I do not understand for subsection (2), and I raise this matter only for elucidation.

The other point relates to clubs, cooperative societies and the British Legion. I ask my right hon. Friend not to accede to the Amendments because it seems to me that the position at the moment is clear, and, as has been said, confusion would be introduced if definitions exempting bodies which are already exempt were introduced. In this connection, subsection (3), which is the only charging subsection in the new Clause, does not create a charge unless there has been a deduction allowed for Income Tax. That must rule out any question of retail co-operative societies being caught. I should have thought that it ruled out any clubs. So far as I understand the operations of the British Legion, of which I am a member, I do not think that any payments made to it are paid under deduction of Income Tax, and that would seem to me to be an added reason for saying that in no circumstances could those bodies be caught by this Clause.

With those comments, I welcome the Clause, and thank my right hon. Friend for its introduction.

If I may speak again by leave of the House, I am glad to note that the House generally prefers the provision in its new form to the Clause which I originally introduced in the Finance Bill.

If I may reply to one or two of the points made, I do not share the fear of my hon. and learned Friend the Member for Liverpool, Garston (Mr. Bingham) about the position under subsection (2), which is designed to cover any attempt at tax wangle in the case of a transfer, and to ensure that no benefit is made on the side. It provides that the original recipient will be taxed at the true value.