HC Deb 03 July 1962 vol 662 cc423-46
Mr. Mitchison

I beg to move, in page 7, line 32, to leave out or of five per cent.

Mr. Deputy-Speaker (Sir William Anstruther-Gray)

The House may debate at the same time the following Amendment in the name of the hon. and learned Member for Kettering (Mr. Mitchison) and the names of other hon. Gentlemen, in page 7, line 33, at end insert for any reference to a rate of five per cent. a reference to a rate of nil, and".

Mr. Mitchison

That would be convenient, Mr. Deputy Speaker. The effect of that Amendment would be not merely to prevent the increase of the 5 per cent. Purchase Tax to 12½ per cent.—the figure suggested by the Government—but to remove the 5 per cent. altogether.

I will not take up the time of the House at this hour, for the matter is simple. The 5 per cent. Purchase Tax on household necessities, furniture, and so on, and also on what I may call clothing necessities, was imposed by the present Home Secretary when he was Chancellor of the Exchequer.

It was introduced because at the time there was supposed to be one of those crises which appear to be inherent in any Tory Government, and I have never heard any defence of it on the most obvious social grounds. It is really scandalous that people should be made to pay Purchase Tax on the pots and pans which they use in their ordinary domestic lives. It is not only scandalous, but utterly ridiculous that we get a Finance Bill such as this one which at the same time as it increases the tax on ordinary boots and shoes, which are made in my constituency, reduces the tax on motor cars.

What on earth are we coming to, and what is the philosophy of the right hon. and learned Gentleman the Chancellor of the Exchequer when he proceeds to do that? The only reason given for this remarkable anti-social manoeuvre appears to be that it has something or other to do with the Common Market. If it has not got that reason, it appears to have no reason whatever. The alternative is that the right hon. and learned Gentleman likes playing the concertina, and a concertina effect is being produced by shutting up both ends of the Purchase Tax, or by enlarging it. This was seriously put forward as the real reason for the change in the tax.

What is the sense of this? Is there any reason whatever, unless some urgent national necessity calls for it, to keep any longer a 5 per cent. tax on these necessary, and I was going to say humble, articles of furniture and clothing? I resent this particularly, and if I repeat myself I have the excuse that it involves the livelihood and the continued prosperity of quite a large number of people. I resent this particularly because certainly the boot and shoe trade, and I believe others of the trades affected, are at the moment in no particularly happy condition. They will no doubt be rescued by "Neddy," but while that is happening they may get into quite a lot of trouble, and to choose a moment when these trades are in considerable difficulties and on the brink of serious unemployment, even if they have not reached it, seems to be absolutely mad.

I do not know the reason for the suggested increase. I can find none. I have heard none. I can imagine none. I can see every reason for reducing to nil the tax on these articles, and that is what these Amendments propose. If we are told that we cannot afford it, I come back to the one inevitable and invariable answer to that sort of argument, that this is the year in which £83 million are being allowed to Surtax payers. If the Government choose this year to increase the tax on boots, shoes, ordinary clothing and household goods, they demonstrate beyond any possibility of mistake what kind of Government they are, and the sort of motives which induce the Tory Party to propose changes of this sort.

Mr. Millan

I support my hon. and learned Friend the Member for Kettering (Mr. Mitchison), because this is an extremely important Amendment. My hon. and learned Friend said that he found considerable difficulty in understanding what the Government were doing. I think that we are entitled to an explanation from the Chancellor of the Exchequer of the Government's intentions about the future of Purchase Tax.

The adjustments which have been made in the Finance Bill this year can hardly be taken by themselves as a sort of tidying up arrangement, which I think is the kind of impression which the Government have been giving, but they can be taken as the first step towards introducing some sort of general sales taxation. I do not intend to go into the details of that aspect of the matter this evening, but it is obviously extremely important that we should be given some idea of what the Government think about this.

It is important to put a value on what the Government have done in raising the 5 per cent. rate to 10 per cent., and it is remarkable that this aspect of their Purchase Tax adjustments has received comparatively little attention. Not many people seem to appreciate just how much revenue is actually involved.

10.45 p.m.

According to the Report of the Commissioners of Customs and Excise for the year ended 31st March, 1961, the amount of net receipts of Purchase Tax taken from goods chargeable at the 5 per cent. rate was £63 million. It follows, therefore, that if that category of goods will in future be charged at 10 per cent., an additional £63 million worth of taxation will be placed on these essential goods. It is for this reason that my hon. Friends have tabled the Amendments. According to the same report, the sort of goods in this category are garments, headgear, footwear, gloves, handkerchiefs, scarves, and most domestic and office furniture.

Certain items of garden furniture might be called luxuries and certainly office furniture does not enter into the cost of living, although I would have thought that this aspect would have appealed to hon. Gentlemen opposite who would not lightly wish to impose additional taxation on industry and commerce. But excluding office and some garden furniture, it is obvious that all the other articles covered in the 5 per cent. category are essential items.

It means that the Government are imposing an additional burden of taxa- tion to the tune of about £63 million a year on essential goods and, as I have said, it is remarkable that their proposal to increase it to 10 per cent. has attracted so little attention, except, presumably, in constituencies like that of my hon. and learned Friend the Member for Kettering where a local industry is involved. My hon. Friends object to this additional burden being placed on essential goods. We objected when these important consumer items were brought within the scope of Purchase Tax, and we shall continue to object. It is in this spirit that the Amendments were tabled, for they are designed to either leave the rate of Purchase Tax at 5 per cent., to reduce it to nil or to make it one half of 1 per cent. We hope that the Government will move in the direction we propose and not the opposite way.

Mr. Barber

The taxation of clothing and furniture is a matter which rightly concerns all hon. Members, and although we have had only a limited number of speeches from hon. Gentlemen opposite tonight, this matter was touched on by a good many of my hon. Friends when we considered it in Committee.

The two Amendments go to the very root of my right hon. and learned Friend's Budget because they would result in a loss to the Exchequer greater than would have resulted from any other Amendment which I can recall having been seriously put forward since the Budget was introduced. The cost of accepting it would be no less than £136 million in a full year.

The issues involved in the Amendments were considered at length during the four days' debate we had on the Budget. They were referred to many times on Second Reading and then we fully debated the matter in Committee. No one who has sat through our previous debates would accuse me of not dealing thoroughly with the various aspects raised. When I looked at HANSARD to make sure that my remarks this evening would at least be consistent with what I said previously, I saw that my observations lasted for more than nine columns of the OFFICIAL REPORT. I am sure the House would not wish me to go over all the details again this evening.

I think that what I have to do—I think this is most appropriate on Report —is to remind the House briefly what I consider to be the broad considerations which should be borne in mind. The hon. and learned Member for Kettering (Mr. Mitchison) mentioned the structure of Purchase Tax. Nobody will deny that there has been widespread criticism from many quarters of the disparity between the highest and the lowest rates. I will not weary the House by referring to what the position has been over the past few years. Suffice it to say that we have, as a result of successive changes, now reduced the dispartity to that between 45 per cent. at the top and 10 per cent. at the bottom. It is still a large gap, but it is far re- moved from a flat rate, which some other countries seem to favour.

I ask the House to consider the matter from another angle. Last year expenditure on clothing and furniture amounted to more than £1,800 million. Yet it produced only £63 million in tax. On the other hand, £180 million of ex- penditure on radios, television sets and similar items produced more than £44 million of tax. Considered in the con- text of the general form and structure of Purchase Tax, therefore, I believe that the proposals for clothing and furniture are reasonable.

The next point to be considered is the state of the industries concerned. Within a particular industry some sections will be faring better than others. For example, manufacturers of the cheaper furniture, I understand, have not been doing nearly so well as manufacturers of better quality furniture. That is perhaps a sign of the times. But it really cannot be said that, considered overall, the industries with which these Amendments are concerned are doing badly. When I spoke during the Committee stage I gave the actual figures from the index of industrial production. I will not read them now, but perhaps I may be allowed to comment that I believe there is no better guide than that, and that the figures amply support the conclusion that I drew.

The next point that my right hon. and learned Friend obviously had very much in mind when he was considering these proposals was their effect on retail prices. When I last spoke on this aspect I gave the Committee the best estimate possible of the increase in retail prices which would be attributable to the increase in Purchase Tax. Some hon. Members thought my estimate was of doubtful value. But perhaps I may say that whether I was right or whether they were right, surely a tax at 10 per cent. of the wholesale value is not unreasonable, and taken in conjunction with the reductions in Purchase Tax, it really cannot be said to involve any hardship. After all, as my right hon. and learned Friend pointed out in the Budget debate, a newly-married couple now pay less Purchase Tax on such articles as carpets, floor coverings, refrigerators, washing machines, cutlery, hardware and television sets, and one has to take into account all the changes and not consider merely one item.

Finally, it is not possible to consider the proposal in these Amendments in isolation from the totality of the Budget proposals. I remind the House that the cost of the Amendments would be £136 million a year. To be perfectly frank, when I first saw the Amendments and was told what they would cost, I could not believe that the Opposition were serious, except on one hypothesis—that they had finally abandoned all pretence of a policy designed to tackle inflation.

The hon. and learned Member for Kettering says "What about the Surtax?" First, as my right hon. and learned Friend has pointed out on innumerable occasions, that was paid for largely by the increase in Profits Tax of 2½ per cent. That change in Surtax did no more than bring our rates into line with our competitors such as West Germany.

Finally, I would say this, as the hon. Member for Sowerby (Mr. Houghton) is here. I asked him about the policy of the Labour Party about Surtax. This is what he said in reply to me—and he was, after all, in charge of his side in the debate at the time: I am not here to say what the Labour Party will do, when it becomes the Government, on Surtax or anything else."—[0mmt. REPORT, 16th May, 1962: Vol. 659, c. 1441.] We still have not heard from any Member on the Opposition Front Bench just what their proposals for Surtax are, and I do think it would be invaluable if we were to do so.

Mr. Mitchison

If the hon. Gentleman wants to hear, can I assure him the one thing we shall not do is mulct the house- wife and the ordinary man in order to finance concessions to Surtax payers?

Mr. Nabarro

It is no good at all asking Labour spokesmen what is going to happen. The person who should be asked is the right hon. Gentleman the Member for Orkney and Shetland (Mr. Grimond), sitting there in a luxurious tuxedo of Purchase Tax of 10 per cent. instead of 5 per cent. and heartily supporting the Tory Party's policy.

Mr. Barber

In the context of this de- bate I believe the proposal to increase the lower rates of Purchase Tax from 51 per cent. to 10 per cent. is reasonable, and I believed that to adopt the professed objective of the Labour Party at a cost of £136 million a year would be the height of irresponsibility and I must therefore ask the House to reject this Amendment.

Mr. A. V. Hilton (Norfolk, South- West)

We on this side of the House and, I am sure, the workers all over the country will be very disappointed at the reply we have just listened to.

Mr. Nabarro

Not in Kidderminster.

Mr. Hilton

I did say on this side of the House and the workers in the country. In my own constituency most of the workers are on the lower scale of wages, and they will be greatly disappointed at the Economic Secretary's reply.

He said there had been very few speeches made from this side in support of this Amendment. The reason is that we were hoping that he would give us some ray of hope, because, after all, Purchase Tax on clothing and furniture is a tax on absolute essentials. They are essential in every working-class home. The hon. Gentleman mentioned that some newly weds would benefit by purchasing such things as refrigerators and carpets. It is the exception rather than the rule for newly-weds in my constituency, people from the farms, to start off with either refrigerators or carpets. Often they have to wait a long time—{Interruption.] It is all very well for hon. Members opposite to treat this matter as a joke.

Mr. Nabarro

It was a joke.

Mr. Hilton

We have an expert on carpets from Kidderminster —

Mr. Nabarro

What I said had nothing to do with carpets. What 1 said was that the first thing newly-weds must buy is not a refrigerator: it is a bed.

Mr. Hilton

Well, that is the point I was trying to make, and the Purchase Tax on beds is what I am complaining about.

Beds are essential for newly-weds; they cannot do without them, but they have to do without carpets and refrigerators.

11.0 p.m.

The Economic Secretary spoke of the concern of manufacturers of furniture because sales are not as high as they ought to be. This is not surprising to me because of the low wages paid in many areas, for the workers are unable to pay present prices for furniture and other essentials. If the Purchase Tax on clothing and furniture were reduced, there would be a considerable increase in sales. Many people in the countryside on the lower rungs of the wages ladder are being prevented by Purchase Tax from buying the necessities of life.

The Chancellor is present. I had hoped that he would consider this proposal sympathetically. Although we have some things which can be regarded as luxuries, my hon. Friends and I would not object to an increase in Purchase Tax on some of them as long as it were reduced on the essentials which the ordinary worker, and the old-age pensioner and other pensioners, need. They must replace worn-out clothing and furniture. I hope that the Government will 'have second thoughts and will give careful consideration to the proposal.

Question put,That the words "or of five per cent." stand part of the Bill:—

The House divided:Ayes 185, Noes 122.

Division No. 234.] AYES [10.28 p.m.
Abse, Leo Butler, Mrs. Joyce (Wood Green) Edelman, Maurice
Ainsley, William Callaghan, James Edwards, Rt. Hon. Ness (Caerphllly)
Albu, Austen Cliffs, Michael Evans, Albert
Allaun, Frank (Salford, E.) Craddock, George (Bradford, S.) Femyhough, E.
Allen, Scholefleld (Crewe) Cronln, John Fitch, Alan
Awbery, Stan Croaland, Anthony Fletcher, Eric
Baxter, William (Stirlingshire, W.) Cullen, Mrs. Alice Foot, Dingle (Ipswich)
Bence, Cyril Dalyell, Tam Foot, Michael (Ebbw Vale)
Bennett, J. (Glasgow, Brldgeton) Davies, G. Elfed (Rhondda, E.) Forman, J. C.
Blackburn, F. Davles, Ifor (Cower) Fraser, Thomas (Hamilton)
Blyton, William Deer, George Calpern, Sir Myer
Bowden, Rt. Hn. H. W.(Lelcs, s.W.) Delargy, Hugh Ginsburg, David
Boyden, James Dempsey, James Gordon Walker, Rt. Hon. P. C.
Braddock, Mrs. E. M. Diamond, John Greenwood, Anthony
Bray, Dr. Jeremy Dodds, Norman Griffiths, W. (Exchange)
Broughton, Dr. A. D. D. Donnelly, Desmond Hale, Leslie (Oldham, W.)
Brown, Rt. Hon. George (Belper) Dugdale, Rt. Hon. John Hall, Rt. Hn. Glenvli (Colne Valley)
Hamilton, William (Wait Flfe) McKay, John (Wallsend) Rodgere, W. T. (Stockton)
Hannan, William Mackie, John (Enfield, East) Rogers, G. H. R.(Kensington, N.)
Harper, Joseph MacMillan, Malcolm (Western Isles) Ross, William
Hayman, F. H. MacPherson, Malcolm (Stirllng) Short, Edward
Henderson, Rt. Hn. Arthur(Rwly Regis) Mallalleu, E. L. (Brigg) Silverman, Julius (Aston)
Herblson, Miss Margaret Mallalleu, J.P.W. (Hudderslield, E.) Skeffington, Arthur
Hilton, A. V. Manuel, Archie Slater, Mrs. Harriet (Stoke, N.)
Holman, Percy Mapp, Charles Slater, Joseph (Sedgefield)
Houghton, Douglas Mason, Roy Small, William
Howell, Denla (Small Heath) Mayhew, Christopher Smith, Ellis (Stoke, S)
Hoy, James H. Mendelson, J. J. Spriggs, Leslie
Hunter, A. E. Millan, Bruce Stewart, Michael (Fulham)
Irvine, A. J. (Edge Hill) Milne, Edward Stones, William
Irving, Sydney (Dartford) Mitchison, G. R. Swingler, Stephen
Janner, Sir Barnett Morris, John Taverne, D.
Jeger, George Mulley, Frederick Taylor, Bernard (Mansfield)
Jenkins, Roy (Stechford) Neal, Harold Thompson, Dr. Alan (Dunfermline)
Johnson, Carol (Lewlsham, S.) Noel-Baker, Francis (Swindon) Timmons, John
Jones, Dan (Burnley) Noel-Baker, Rt. Hn. Philip(Derby, S.) Tomney, Frank
Jones, Elwyn (West Ham, S.) Oliver, G. H. Warbey, William
Jones, jack (Rotherham) Owen, Will Watklns, Tudor
Jones, J. Idwal (Wrexham) Padley, W. E. Weitzman, David
Jones, T. W. (Merioneth) Pannell, Charles (Leeds, W.) Wells, William (Walsall, N.)
Kelley, Richard Pargiter, G. A. Wilklns, W. A.
Lawson, George Pavitt, Laurence Williams, Li. (Abertillery)
Ledger, Ron Pearson, Arthur (Pontypridd) Williams, W. R. (Openshaw)
Lee, Frederick (Newton) Pentland, Norman Willis, E. G. (Edinburgh, E.)
Lee, Miss Jennie (Cannock) Popplewell, Ernest Winterbottom, R. E.
Lever, L. M. (Ardwick) Price, J. T. (Westhoughton) Woof, Robert
Lewis, Arthur (West Ham, N.) Pursey, Cmdr. Harry Wyatt, Woodrow
Loughlin, Charles Randall, Harry
Mabon, Dr. J. Dickson Redhead, E. C. TELLERS FOR THE AYES:
MacColl, James Roberts, Albert (Normanton) Mr. Grey and
Melnnes, James Robertson, John (Paisley) Mr. Charles A. Howell
Agnew, Sir Peter Duncan, Sir James Joseph, Sir Keith
Allason, James Elliot, Capt. Walter (Carshalton) Kerans, Cdr. J. S.
Atkins, Humphrey Emery, Peter Kerr, Sir Hamilton
Barber, Anthony Errlngton, Sir Eric Kershaw, Anthony
Barlow, Sir John Farey-Jones, F. W. Klmball, Marcus
Batsford, Brian Fair, John Kirk, Peter
Bennett, F. M. (Torquay) Flnlay, Graeme Langlord-Holt, Sir John
Bennett, Dr. Reginald (Cos &Fhm) Fisher, Nigel Leather, Sir Edwin
Berkeley, Humphry Fraser, Ian (Plymouth, Sutton) Legge-Bourke, Sir Harry
Bidgood, John C. Galbralth, Hon. T. G. D. Lewis, Kenneth (Rutland)
Blffen, John Gammans, Lady Lilley, F. J. P.
Biggs-Davlson, John Gardner, Edward Linstead, Sir Hugh
Birch, Rt, Hon. Nigel Gibson-Watt, David Litchfield, Capt. John
Bishop, F. P. Gilmour, Sir John Lloyd, Rt. Hon. Selwyn (Wirral)
Black, Sir Cyril Glover, Sir Douglas Longden, Gilbert
Bourne-Arton, A. Glyn, Dr. Alan (Clapham) Loveys, Walter H.
Bowen, Roderic (Cardigan) Goodhart, Philip Lubbock, Eric
Box, Donald Cower, Raymond McLaren, Martin
Boyd-Carpenter, Rt. Hon. John Green, Alan Maclean, SirFitzroy(Bute&N. Ayrn.)
Boyle, Sir Edward Hall, John (Wycombe) MacLeod, John (Ross &Cromarty)
Brewis, John Hamilton, Michael (Wellingborough) M CM aster, Stanley R.
Brooke, Rt. Hon. Henry Harris, Reader (Heston) Macmillan, Maurice (Halifax)
Brown, Alan (Tottenham) Harrison, Col. Sir Harwood (Eye) Macpherson, Niall (Dumfries)
Buck, Antony Harvey, John (Walthamstow, E.) Maddan, Martin
Bullard, Denys Harvey Anderson, Miss Maginnis, John E.
Butcher, Sir Herbert Hastings, Stephen Maitland, Sir John
Campbell, Gordon (Moray A Nairn) Hay, John Manningham-Buller, Rt. Hn. Sir R
Carr, Compton (Barons Court) Heald, Rt. Hon. Sir Lionel Markham, Major Sir Frank
Carr, Robert (Mitcham) Hendry, Forbes Marten, Nell
Chataway, Christopher Hlley, Joseph Matthews, Gordon (Meriden)
Chichester-Clark, R. Hill, Mrs. Eveline (Wythenshawe) Mawby, Ray
Clark, William (Nottingham, S.) Hirst, Geoffrey Maxwell-Hyslop, R. J.
Cleaver, Leonard Hobson, Sir John Maydon, Lt.-Cmdr. S. L. C.
Cooke, Robert Hocking, Philip N. Mills, Stratton
Cooper, A. E. Holland, Philip Miscampbell, Norman
Cordeaux, Lt.-Col. J. K. Hooson, H. E. Montgomery, Fergus
Corfleld, F. V. Hornby, R. P. More, Jasper (Ludlow)
Costain, A. P. Hornsby-Smlth, Rt. Hon. Dame P. Morgan, William
Coulson, Michael Howard, Hon. G. R. (St. Ives) Mott-Radclyffe, Sir Charles
Craddock, Sir Beresford Howard, John (Southampton, Test) Nabarro, Gerald
Critchley, Julian Hughes-Young, Michael Neave, Airey
Currie, G B. H. Hulbert, Sir Norman Nicholls, Sir Harmar
Dance, James Irvine, Bryant Godman (Rye) Noble, Michael
d'Avigdor-Goldamld, Sir Henry James, David Nugent, Rt. Hon. Sir Richard
Deedes, W. F. Johnson, Dr. Donald (Carlisle) Oakshott, Sir Hendrie
de Ferrantl, Basil Johnson, Eric (Blackley) Orr, Capt. L. P. S.
Donaldson, Cmdr. C. E. M. Johnson Smith, Geoffrey Osborn, John (Hallam)
Doughty, Charles Jones, Rt. Hn. Aubrey (Hall Green) Page, John (Harrow, West)
Page, Graham (Crosby) Skeet, T. H. H. Tweedsmulr, Lady
Pannell, Norman (Kirkdale) Smith, Dudley (Br'ntf'd & Chiswick) van Straubenzee, W. R.
Pearson, Frank (clltheroe) Smithers, Peter Vickers, Miss Joan
Percival, lan Stevens, Geoffrey Wakefield, Sir Wavell
PicKthorn, Sir Kenneth Stodart, J. A. Walder, David
Pitt, Miss Edith Stoddart-Scott, Cot. sir Malcolm Walker, Peter
Pott, Percivall storey, Sir Samuel Walker-Smith, Rt. Hon. Sir Derk
Price, David (Easlelgh) Studholme, Sir Henry Wall, Patrick
Prior, J. M. L. Talbot. John E Webster, David
Profumo, Rt. Hon. John Tapsell peter Wells, John (Maldstone)
Proudfoot, Wilfred Taylor Edwin (Bolton E) Whitelaw, William
Pym, Francis Taylor Frank (M'ch'st'r, moss side) Williams, Dudley (Exeter)
Ramsden, James Taylor, W. J (Bradfor, N.) Wills, Sir Gerald (Bridgwater)
Redmayne, Rt. Hon. Martin Teeling, sir William Wilson, Geoffrey (Truro)
Ridley, Hon. Nicholas Temple, John M. Wise, A. R
Roberts, Sir Peter (Heeley) Thatcher, Mrs. Margaret Wolrige-Gordon, Patrick
Robinson, Rt. Hn. Sir R. (B'pool, S.) Thomas, Peter (Conway) Wood, Rt. Hon. Richard
Rodgers, John (Sevenoaks) Thompson, Richard (Croydon, S.) Woodnutt, Mark
Roots, William Woollam, John
St. Clalr, M. Tiley, Arthur (Bradford, W.) Yates, William (The Wreidn)
Sharpies, Richard Touche, Rt. Hon. Sir Gordon
Shaw, M. Turner, Colin TELLERS FOR THE NOES:
Shepherd, William Turton, Rt. Hon. R. H. Mr. J. E. B. Hill and Mr. Rees
Agnew, Sir Peter Harris, Reader (Heston) Noble, Michael
Allason, james Harrison, Col. Sir Harwood (Eye) Oakshott, Sir Hendrie
Amery, Rt. Hon. Julian Harvey, John (Walthamstow, E.) Osborn, John (Hallam)
Atkins, Humphrey Harvie Anderson, Miss Page, John (Harrow, west)
Barber, Anthony Hastings, Stephen Page, Graham (Crosby)
Barlow, Sir John Hay, John Pannell, Norman (Kirkdale)
Batsford, Brian Heald, Rt. Hon. Sir Lionel Pearson, Frank (Clitheroe)
Bennett, F. M. (Torquay) Hendry, Forbes Percival, Ian
Bennett, Dr. Reginald (Gos &Fhm) Hiley, Joseph Pickthorn, Sir Kenneth
Berkeley, Humphry Hill, Mrs. Evellne (Wythenshawe) Pott, Percivall
Bldgood, John C. Hirst, Geoffrey Price, David (Eastleigh)
Biffen, John Hobson, Sir John Prior, J. M. L.
Biggs-Davison, John Hocking, Philip N. Proudfoot, Wilfred
Birch, Rt. Hon. Nigel Holland, Philip Pym, Francis
Blshop, F. P. Hooson, H. E. Ramsden, James
Black, Sir Cyril Hornby, R. P. Redmayne, Rt. Hon. Martin
Bourne-Arton, A. Hornsby-Smith, Rt. Hon. Dame P. Rees, Hugh
Bowen, Roderic (Cardigan) Howard, Hon. G. R. (St. Ives) Ridley, Hon. Nicholas
Box, Donald Hughes-Young, Michael Roberts, Sir peter (Heeley)
Boyd-Carpenter, Rt. Hon. John Irvine, Bryant Godman (Rye) Roots, William
Boyle. Sir Edward James, David St. Clair, M.
Brawls John Johnson, Dr. Donald (Carlisle) Sharples Richard
Brooke, Rt. Hon. Henry Johnson, Eric (Blackley) Shaw, M.
Brown, Alan (Tottenham) Johnson Smith, Geoffrey Shepherd, William
Buck, Antony Joseph, Sir Keith Skeet, T. H. H
Bullard, Denys Kerans, Cdr.J.S Smith, Dudley (Br'ntf'd &Chiswlck)
Campbell, Cordon (Moray & Nairn) Kerr Sir Hamllton Smithers, Peter
Carr, Compton (Barons Court) Kerashaw, Anthony Stodart, J. A.
Carr, Robert (Mltcham) Kimball, Marcus Stoddart-Scott, Col. Sir Malcolm
Chataway, Christopher Kirk, Peter Storey, Sir Samuel
Chlchester-Clark, R Langford-Holt, Sir John Studholme, Sir Henry
Clark, Henry (Antrtm, N.) Legge-Bourke, Sir Harry Talbot, John E.
Clark, William (Nottingham, S.) Lewis, Kenneth (Rutland) Tapsell, Peter
Cleaver, Leonard Lilley, F.J.P. Taylor, Edwin (Bolton, E.)
Cordeaux, Lt.-Col. J. K. Lloyd, Rt. Hon. Selwyn (Wirral) Taylor, Frank (M'ch'st'r, Moss Side)
Corfield, F. V. Longden, Gilbert Teellng, Sir William
Coetain, A. P. Loveyes, Walter H. Temple, John M.
Critchley, Julian Lubbock, Eric Thomas, Peter (Conway)
Curran, Charlea Maclean, SirFltzroy(Bute& N. Ayrs.) Thompson, Richard (Croydon, S.)
Currie, C. B. H Macleod, Rt. Hn. lain (Enfleld, W.) Tiley, Arthur (Bradford, W.)
d'Avlgdor-Goldemid, Sir Henry MacLeod, John (Ross &Cromarty) Touche, Rt. Hon. Sir Gordon
Donaldson, Cmdr. C E M. McMaster, Stanley R. Turner Colin
Doughty, Charles Macmillian, Macurice (Hallfax) Turton, nt. Hon. R. H.
Duncan, Sir James Macrnillan, Maurice (Hallfax) van Straubenzee, W. R.
Elliot, Capt. Walter (Carehalton) Maddan, Martin Vaughan-Morgan, Rt. Hon. Sir John
Emery, Peter Macpherson, Niall (Dumfries) Walder, David
Errlngton, Sir Eric Maginnis, Jonn E Walker, Peter
Farr, John Manningham -Buller Rt Hn Sir R Walker-Smith, Rt. Hon. Sir Derek
Flnlay, Graeme Markham, Major Sir Frank Wall, Patrick Webster,
Fisher, Nigel Matthews, Major Sir Frank Webstar, David
Fraser, Ian (Plymouth, Sutton) Matthews, Gordon (Meriden) Wells, John (Maidstone)
Gaibraith, Hon. T. G. D. Mawby, Ray Whitelaw, William
Cammans, Lady Maxwell-Hyslop, R. J. Williams, Dudley (Exeter)
Gardner, Edward Maydon, Lt.-Cmdr. S. L. C. Wills, Sir Gerald (Brldgwater)
Gibson-Watt, David Mills, Stratton Wilson, Geoffrey (Truro)
Gllmour, Sir John Mlscampbell, Norman Wise, A. R.
Glover, Sir Douglas Montgomery, Fergus Wolrige-Gordon, Patrick
Goodhart, Philip More, Jasper (Ludlow) Wood, Rt. Hon. Richard
Cower, Raymond Morgan, William Woodnutt, Mark
Green, Alan Mott-Radciyffe, Sir Charles
Crlmond, Rt. Hon. J. Nabarro, Gerald TELLERS FOR THE AYES:
Hall, John (Wycombe) Neave, Alrey Mr. J. E. B. Hill and
Hamilton, Michael (Weillngborough) Nicholls, Sir Hamar Mr. Martin McLaren.
Abse, Leo Craddock, George (Bradford, S.) Fitch, Alan
Ainsley, William Cronin, John Fletcher, Eric
Albu, Austen Crosland, Anthony Foot, Dingle (Ipswich)
Allaun, Frank (Salford, E.) Cullen, Mrs. Alice Foot, Michael (Ebbw Vale)
Allen, Scholefield (Crewe) Dalyell, Tam Forman, J. C.
Awbery, Stan Davles, G. Elfed (Rhondda, E.) Fraser, Thomas (Hamilton)
Baxter, William (Stirlingshire, W.) Delargy, Hugh Galtskell, Rt. Hon. Hugh
Bennett, J. (Glasgow, Bridgeton) Dempsey, James Galpern, Sir Myer
Blackburn, F. Diamond, John Ginsburg, David
Blyton, William Dodds, Norman Greenwood, Anthony
Bowden.Rt. Hn. H. W. (Leics, S.W.) Donnelly, Desmond Griffiths, W. (Exchange)
Braddock, Mrs. E. M. Dugdale, Rt. Hon. John Hannan, William
Bray, Dr. Jeremy Edelman, Maurice Harper, Joseph
Broughton, Dr. A. D D. Edwards, Rt. Hon. Ness (Caerphilly) Hay man, F. H.
Callaghan, James Evans, Albert Henderson, Rt. Hn. Arthur(RwlyRegtS)
Cllffe, Michael Fernyhough, E. Herblson, Miss Margaret
Hilton, A. V. Mackie, John (Enfield, East) Ross, William
Holman, Percy MacPherson, Malcolm (Stirling) Short, Edward
Houghton, Douglas Mallalieu, E. L. (Brigg) Skeffington, Arthur
Howell, Charles A. (Perry Barr) Manuel, Archie Slater, Mrs. Harriet (Stoke, N.)
Howell, Denis (Small Heath) Marsh, Richard Slater, Joseph (Sedgefleld)
Hoy, James H. Millan, Bruce Small, William
Irvine, A. J. (Edge Hill) Milne, Edward Soskice, Rt. Hon. Sir Frank
Irving, Sydney (Dartford) Mitchison, G. R. Spriggs, Leslie
Janner, Sir Barnett Morris, John Stewart, Michael (Fulham)
Jeger, George Noel-Baker, Francis (Swindon) Swingler, Stephen
Jenkins, Roy (Steohford) Noel-Baker, Rt.Hn.Philip(Derby,S.) Taverne, D.
Jones, Dan (Burnley) Ollvwr, G.H. Taylor, Bernard (Mansfield)
Jones, Elwyn (West Ham, S.) Padley, W. E. Thompson, Dr. Alan (Dunfermllne)
Jones, Jack (Rotherham) Warbey, William
Jones, J. Idwal (Wrexham) Pargiter,G.A. Watkins, Tudor
Jones, T. W. (Merioneth) Pavitt, Laurence Weltzman, David
Lawson, George Pearson, Arthur (Pontypridd) Wigg, George
Ledger, Ron Pentland, Norman Wilkins, W. A.
Lee, Frederick (Newton) Price, J. T. (Westhoughton) Williams, W. R. (Openshaw)
Lever, L. M. (Ardwick) Randall, Harry Willis, E. G. (Edinburgh, E.)
Lewis, Arthur (West Ham, N.) Redhead, E. C. Winterbottom, R. E.
Loughlin Charles Rhodes, H. Woof, Robert
Mabon, Dr. J. Dickson Roberts, Albert (Normanton) Wyatt, Woodrow
MacColl, James Robertson, John (Paisley)
Mclnnea, James Rodgers, W. T. (Stockton) TELLERS FOR THE NOES:
McKay, John (Wallsend) Rogers,G. H. R. (Kensington, N.) Mr. Ifor Davies and Mr. Charles Grey.
Mr. Mitchison

I beg to move, in page 7, line 37, to leave out paragraph (b).

Mr. Deputy-Speaker

With this Amendment, it will be possible to discuss the Amendment to the Eighth Schedule, page 51, leave out lines 14 to 48.

Mr. Mitchison

This is an Amendment to remove the tax which it is sought to impose on sweets, soft drinks and the like. This is an amazing Finance Bill. We are engaged in a financial crisis. The right hon. and learned Gentleman cannot afford this and cannot afford that. Busy in saving the economy and rescuing the nation, with the assistance or under the directions of "Neddy", 'this is his main instrument for the purpose. This is a tax to yield £30 million this year and £50 million in a full year on ordinary sweets and ordinary soft drinks. It is not until the latest financial crisis has come upon us that any Government have thought it necessary to tax any of these things, but this now remains the only method of saving the country.

It is, as I see it, the largest item of taxation, certainly the largest item of personal taxation, in the whole of this Finance Bill. There is not much more to be said about that than that it is utterly ridiculous, that it shows the straits to which the Government and the Treasury have apparently been driven and that it throws a lurid light on the complete absence of even a sense of humour in those who are charged with directing the financial fortunes of the country at the moment. There is nothing whatever to be said for this tax. If the Government cannot think of anything better than this to rescue the nation, they had better resign at once.

That is the point about this Amendment and this tax. There is no more to be said for it. I do not suppose for a moment that even at this late hour the Government will see how ridiculous the tax is, how particularly ridiculous it is in a year when they are remitting £83 million to Surtax payers. What utter idiots they are making of themselves and their party by relying on this kind of tax to rescue the country from the financial difficulties into which their own policy has plunged it.

11.15 p.m.

Mr. Barber

I said that the subject of the last series of Amendments had been discussed at all stages since the introduction of the Budget. The same observation is true of the tax on confectionery. soft drinks and ice cream. When this tax was considered in Committee my right hon. and learned Friend the Chancellor replied to the debate himself, and the Amendments to which he replied on that occasion were identical in effect with those we are considering now. I shall, therefore, follow the example of the hon. and learned Member for Kettering (Mr. Mitchison) and deal with the matter briefly.

What are the basic facts on which any fair consideration of the matter must depend? The British people are at present spending £300 million a year on confectionery, £100 million a year on soft drinks and £75 million a year on ice cream. Our consumption of chocolate and sugar confectionery is the highest in the world. The average for every man, woman and child in the country is half a pound a week. In the United States, the figure is 5 ozs. and in Western Germany it is 4 ozs. These are the facts, and the question to be considered is whether the extension of Purchase Tax to these three commodities is fair.

The reason for the extension was put concisely and frankly by my right hon. and learned Friend on 16th May when he said: The hon. and learned Member for Kettering (Mr. Mitchison) asked me the reasons for this tax. The answer is money. It is to obtain revenue. If we did not put this tax on we should have to put some other tax on to obtain the revenue in another way "—[OFFICIAL REPORT, 16th May, 1962; Vol. 659, c. 1475.] It is said that the tax is unfair, particularly to old-age pensioners, children and so on. We have been into this in considerable detail. Anyone who honestly and objectively looks at the facts will agree that this tax will not impose any intolerable burden or hardship on any of these groups of people.

Mr. Mitchison

On that point, is the hon. Gentleman aware that the effect of the tax is to cause manufacturers and others to put up prices far beyond the actual increase called for by the imposition of the tax? If he goes into the tea room and asks for a bottle of mineral water, he will find that he is charged half as much again as he would have been before the tax was imposed.

Mr. Barber

It is true—it is a matter of common observation—that price increases have varied as between one product and another. I can only say to the House that, as I am sure hon. Members know, the confectionery industry is one of the most competitive of industries, and I have no doubt at all that, with the passage of time, these prices will settle down.

Mr. Callaghan

Settle up.

Mr. Barber

This is not a case where one is dealing with a monopoly or even a near-monopoly. It is a highly competitive industry.

I was about to say that, in the course of our debates, hon. Members have spoken sometimes as though there was something almost immoral about this extension of tax. The surprising thing, I suggest, is that confectionery, ice cream and soft drinks have not been made liable to Purchase Tax before. Since we last debated the matter, I have made inquiries, and I find that most of the E F T A. countries tax them. All the Common Market countries tax them. In France, for instance, they are taxed at a rate equivalent to a Purchase Tax at 25 per cent. In Sweden, which no one will consider to be a backward country, the tax burden is even higher, equivalent to a Purchase Tax of about 150 per cent. It has frequently been suggested that we should broaden the base of Purchase Tax. This is a range of goods which by and large certainly are not necessities. Given the fact that it was necessary to raise the revenue, I do not believe that the country considers it unreasonable to select these goods for liability to Purchase Tax.

Of course my right hon. and learned Friend considered very carefully the effect of the tax, both on the consumer and on the industries concerned. He concluded that the standard rate of 25 per cent. would be too high. He therefore decided on a new and a modest rate of 15 per cent. I said at the outset that the Amendments would cost the Exchequer £50 million in a full year and that the Amendments are identical in effect with those moved in Committee. Nothing since our discussion in Committee on Amendments with the identical effect has caused my right hon. and learned Friend to change his mind. I would therefore like to remind the House of my right hon. and learned Friend's concluding remarks on that occasion. He said: I think that the tax is common sense, that it is fair, and that it is reasonable. As long as we have these taxes on the necessities, or near necessities, I think that it is entirely right and proper that this very large field of consumption, which is not absolutely essential consumption, should also bear its share of the national burden. I therefore commend this tax to the Committee."—[OFFICIAL REPORT, 16th May, 1962; Vol. 659, c. 1478.] I do likewise and therefore ask the House to reject these Amendments.

Mr. W. A. Wilkins (Bristol, South)

May I ask you, Mr. Deputy-Speaker, whether this would be the appropriate moment to discuss the Amendments in page 51, line 27, at end insert: (4) Chocolate specially prepared for con- sumption by diabetics; and in page 51, line 32, after second beverages", insert "specially prepared for consumption by diabetics".

Mr. Deputy-Speaker (Sir Robert Grimston)

They will be called separately at the end of the debate.

Mr. Peter Emery (Reading)

There is one part of this enactment about which I am not at all happy and which I had hoped that the Government would have reconsidered. I refer to the inclusion of chocolate biscuits in the Clause with sweets and soft drinks. Nobody will be surprised to hear that Huntley and Palmer is part of Reading. Its tradition goes back much longer than the tradition of the constituencies represented by many hon. Members. It is, therefore, in close conjunction with the firm that I draw the attention of the Treasury to the fact that this is the first time, the war being no exception, when chocolate biscuits have been classed as sweets. I believe that it has been done in this Measure only because the Treasury can- not see a way of distinguishing between some sweets which have biscuits in them and the ordinary chocolate biscuits which are considered to be a basic food and, indeed, part of the ordinary luxuries of the nursery, even in the poorest home in the land.

It should not be beyond the wit of my right non. and hon. Friends on the Front Bench to devise a method of distinguishing between the two. The Government were able to do it during the war by keeping chocolate biscuits which are used as food on a points system as distinct from the chocolate biscuits which are sold as sweets, which went on the sweet coupons. It was possible to do that during the war, and it should have been possible for the Government to have found some method of doing this in peacetime.

Mr. Mitchison

On a point of order. This speech would no doubt be in order on an Amendment to omit chocolate biscuits, but so far I have been entirely unable to discover whether the hon. Member supports or opposes the Amend- ment. In these circumstances, I suggest that so far this speech is out of order.

Mr. Deputy-Speaker

I do not find the speech out of order. It often happens that we do not know which way a Member will come down until towards the end of his speech.

Mr. Emery

I am always delighted to have interjections from the hon. and learned Member for Kettering (Mr. Mitchison). I have had to listen to him many times for much longer to get to his points than he will have to listen to the whole of my speech.

In considering chocolate biscuits on the Amendment, it might have been much more fortunate if we could have had an assurance from the Government that they will continue to consider the matter, because unless I can have an assurance of that nature I will have to consider fully whether, even at this late hour, while wishing to expedite business as much as is humanly passible, I can support my right hon. Friends on the Front Bench. If they will assure the biscuit industry that this matter will be permanently kept under review, I will have great pleasure in being able to support them.

Mr. John Diamond (Gloucester)

The hon. Member for, I think, one of the Reading constituencies—

Mr. Arthur Lewis (West Ham, North)

For Huntley and Palmer's.

Mr. Diamond

I thought I was right. It is one of the constituencies which one associates with the biscuit industry. The hon. Member has raised a point which, in addition to being a perfectly valid constituency point, which we all fully recognise, is a point of extreme importance, because he is drawing attention to the fact that the Government are taxing food.

The Government have so far taxed ice cream. There was a time when ice cream was, perhaps, regarded not as an essential food and not as part of a normal diet, but one has only to think of the amount of ice cream consumed by hon. Members regularly in the House of Commons with every meal—

Mr. Nabarro

Talk about yourself. Not me.

Mr. Diamond

The hon. Member for Kidderminster (Mr. Nabarro) reminds me that there are two categories of hon. Member: (a) the hon. Member for Kidderminster and (b) the rest of us.

One has only to notice the amount of ice cream consumed by hon. Members in this building, and one knows that in every private house there is regularly with part of a meal at some time or other an ice-cream sweet of some kind which is part of the regular diet.

The hon. Member for Reading (Mr. Peter Emery) points out accurately that the Government are now starting to tax food and that when there is the slightest administrative difficulty in differentiating between a foodstuff and confectionery, they are not prepared to take the trouble of differentiating because they are prepared to tax food. This is another reason why we should strongly object to their proposal. I find myself entirely in support of the hon. Member for Reading notwithstanding that the largest ice-cream factory is in the constituency of Gloucester.

Mr. Wilkins

It may be that what my hon. Friend the Member for Gloucester (Mr. Diamond) has said about the taxation of confectionery will find an echo in the minds of many hon. Members. I want, however, to bring to the notice of the Economic Secretary to the Treasury the question of how this tax affects people who suffer from diabetes.

11.30 p.m.

Here is an exception to the general rule which is applied by these proposals. Here are people who may consume only a product which has to be specially prepared for them. I am talking of diabetic chocolate and squash, two preparations which have to be specially prepared for these people.

Mr. Deputy-Speaker

Order. I am sorry to interrupt the hon. Gentleman, but this is exactly what a later Amendment in his name, to the Eighth Schedule, is about, and I think that discussion of it had better take place on that Amendment.

Mr. Mitchison

On a point of order, Mr. Deputy-Speaker. I do not find anything about diabetic squash in that Amendment or the following one.

Mr. Deputy-Speaker

I think that we can bring that in under the Amendment I have referred to.

Mr. Mitchison

With respect, can we? I do not know what diabetic squash is, but it does not appear to be diabetic chocolate, to which the Amendment you mention refers.

Mr. Deputy-Speaker

I think that diabetic squash would come under the following Amendment, which refers to beverages prepared for diabetics.

Mr. Mitchison

Further to that point of order. We have just been told, in a long speech, about chocolate biscuits. Is not the only ground, apparently, for ruling my hon. Friend out of order, or suggesting that what he is saying is out of order, that there is a later Amendment dealing with these matters? But I can find no Amendment dealing with diabetic squash.

Mr. Deputy-Speaker

In my opinion, diabetic squash can be discussed under the Amendment dealing with beverages. That is my Ruling.

Mr. Wilkins

I had originally though of challenging this item on the question of whether this squash was a medicine. It is, of course, retailed by chemists. It is not retailed in the ordinary way in confectionery shops and one might be able to argue, with some success, that it should be brought into the category of medicine. The people for whom I plead are those who, in almost every case, already have to find 4s. per week for prescription charges. This new tax is therefore a serious matter for them.

Mr. Deputy-Speaker

Order, I must insist that this matter is discussable on the two later Amendments I have mentioned. We cannot have the discussion twice over and therefore I rule that it must take place later.

The Question is—

Mr. Callaghan

On a point of order. Are we not to have a reply?

Mr. Barber

I am afraid that I did not rise because I was concentrating on the remarks of the hon. Member for Bristol, South (Mr. Wilkins) about diabetics. If I cannot deal with that now, perhaps I might say a word about the only other matter which has been raised since I spoke, the question of chocolate biscuits.

This was a matter which we considered with great care. because obviously it was an important decision to extend the tax from what one might call normal confectionery to take in chocolate biscuits as well. The reason we decided to do this was simple. It was because chocolate biscuits are, as many hon. Members know, put up for sale in a wide variety of forms, and it is quite impracticable to draw a dividing line between them. I suppose that it would not be appropriate for me to mention the particular types of chocolate biscuits which may be purchased and which compete directly with what I might call ordinary chocolate confectionery.

Sir B. Janner


Mr. Barber

The hon. Member shouts "nonsense," but if he will buy a bar of Kit-kat he will see what I mean.

Sir B. Janner

I sympathise with the difficulty the hon. Member finds himself in. I also have in my constituency biscuit producers who will regard their chocolate biscuits not as a luxury but as a food. Why does not the hon. Gentleman realise that he ought not to tax foods under the heading of confectionery?

Mr. Barber

I was only pulling the hon. Gentleman's leg.

I was saying that if we had left out chocolate biscuits from the charge to tax there would have been serious distortion of the pattern of the chocolate confectionery trade.

With regard to the position during the war, to which my hon. Friend the Member for Reading (Mr. Peter Emery) referred, this was, of course, something which we considered and, without going into details, the pattern of trade in chocolate confectionery and chocolate biscuits has changed very much since those days. After the fullest consideration we came to the conclusion that it would be wrong to leave chocolate biscuits out of this tax, having decided to include ordinary confectionery.

Mr. Peter Emery

Before my hon. Friend sits down, can he go one step further and say how he draws the line between a mixture which is cake and a mixture which is biscuit? A chocolate covering on something which is cake is not taxed. A chocolate covering on something that is biscuit is taxed, and I am informed that it is very easy to mix the biscuit with the cake.

Mr. Barber

I can only assure my hon. Friend that other biscuits, cakes and pastries are outside the scope of the tax.

Question put,That the words proposed to be left out stand part of the Bill: —

The House divided:Ayes 161, Noes 101.

Division No. 236.] AYES [11.37 p.m.
Agnew, Sir Peter Chlchester-Clark, R. Glover, Sir Douglas
Allason, Jamea Clark, William (Nottingham, S.) Goodhart, Philip
Amery, Rt. Hon. Julian Cleaver, Leonard Gower, Raymond
AtKlns, Humphrey Cordeaux, Lt.-Col. J. K. Green, Alan
Barber, Anthony Cordle, John Hall, John (Wycombe)
Batsforcf, Brian Corfleld, F. V. Hamilton, Michael (Wellingborough)
Bennett, F. M. (Torquay) Costain, A. P. Harris, Reader (Heston)
Berkeley, Humphry Critchley, Julian Harrison, Col. Sir Harwood (Eye)
Bldgood, John C. Curran, Charles Harvey, John (Walthamstow, E.)
Biffen, John Currie, G. B. H. Hastings, Stephen
Biggs-Davlson, John d'Avlgdor-Goldsmld, Sir Henry Heald, Rt. Hon. Sir Lionel
Birch, Bt. Hon. Nigel Donaldson, Cmdr. C. E. M. Hendry, Forbes
Bishop, F. P. Doughty, Charles Hill, Mrs. Eveline (Wythenshawe)
Black, Sir Cyril Drayson, C. B. Hill, J. E. B. (S. Norfolk)
Bossom, Clive Duncan, Sir James Hirst, Geoffrey
Bourne-Arton, A, Eden, John Hobson, Sir John
Box, Donald Elliot, Capt. Walter (Carshalton) Hocking, Philip N
Boyd-Carpenter, Rt. Hon. John Errington, Sir Eric Holland, Philip
Boyle, Sir Edward Farr, John Hornsby-Smith, Rt. Hon. Dame P.
Brooke, Rt. Hon. Henry Fisher, Nigel Howard, Hon. G. R. (St. Ives)
Brown, Alan (Tottenham) Fraser, Ian (Plymouth, Sutton) Hughes-Young, Michael
Buck, Antony Galbraith, Hon. T. G. D. Irvine, Bryant Godman (Rye)
Campbell, Cordon (Moray & Nairn) Gammans, Lady James, David
Carr, compton (Barons Court) Gibson-Watt, David Johnson, Dr. Donald (Carlisle)
Chataway, Christopher Gilmour, Sir John Johnson, Eric (Blackley)
Johnson Smith, Geoffrey More, Jasper (Ludlow) Storey, Sir Samuel
Joseph, Sir Keith Morgan, William Talbot, John E.
Kerans, Cdr J. S Mott-Radclyffe, Sir Charles Tapsell, Peter
Kimball. Marcus Nabarro, Gerald Taylor, Frank (M'ch'st'r, Moss Side)
Kirk, Peter Neave, Airey Teeling, Sir William
Langford-Holt, Sir John Noble, Michael Temple, John M.
Legge-Bourke, Sir Harry Oakshott, Sir Hendrie Thomas, Peter (Conway)
Lewis, Kenneth (Rutland) Osborn, John (Hallam) Thompson, Richard (Croydon, S.)
Lilley, F. J. P. Page, John (Harrow, West) Tiley, Arthur (Bradford, W.)
Litchfleld, Capt. John Page, Graham (Crosby) Touche, Rt. Hon. Sir Gordon
Lloyd, Rt. Hon. Selwyn (Wirral) Pannell, Norman (Kirkdale) Turner, Colin
Longden, Gilbert Pearson, Frank (Clitheroe) Turton, Rt. Hon. R. H.
Loveys Walter H Pickthorn, Sir Kenneth van Straubenzee, W. R.
McLaren, Martin Pott, Percivall Vaughan-Morgan, Rt. Hon. Sir John
Macleod, Rt. Hn. Iain (Enfield, W.) Price, David (Eastleigh) Walder, David
McMaster, Stanley R. Prior, J. M. L. Walker, Peter
Macmillan, Maurice (Halifax) Proudfoot, Wilfred Wall, Patrick
Macpherson, Niall (Dumfries) Pym, Francis Webster, David
Maddan, Martin Redmayne, Rt. Hon. Martin Wells, John (Maidstone)
Maginnls, John E. Ridley, Hon. Nicholas Whitelaw, William
Maitland, Sir John Roberts, Sir Peter (Heeley) Williams, Dudley (Exeter)
Manningham-Buller, Rt. Hn. Sir R. Roots, William Wilson, Geoffrey (Truro)
Markham, Major Sir Frank Sharpies, Richard Wise, A. R.
Matthews, Gordon (Meriden) Shaw, M. Wood, Rt. Hon. Richard
Mawby, Ray Shepherd, William Woodnutt, Mark
Maxwell-Hyslop, R. J. 8keet, T. H. H.
Maydon, Lt.-Cmdr. s. L. C. Smith, Dudley (Br'ntf'd & Chlswick) TELLERS FOR THE AYES
Mills, Stratum Smithers, Peter Mr. Finlay and
Miscampbell, Norman Stodart, J. A. Mr. Rees.
Montgomery, Fergus Stoddart-Scott, Col. Sir Malcolm
Abse, Leo Galpem, Sir Myer Milne, Edward
Alnsley, William Greenwood, Anthony Mitchison, G. R.
Albu, Austen Grey, Charles Noel-Baker, Francis (Swindon)
Allen, Scholefield (Crewe) Griffiths, W. (Exchange; Noel-Baker,Rt.Hn.Phllip(Derby,S.)
Awbery, Stan Grimond, Rt. Hon. J. Padley, W. E.
Baxter, William (Stirlingshire, W.) Hannan, William Pargiter, G. A.
Bennett, J. (Glasgow, Bridgeton) Harper, Joseph Pavitt, Laurence
Blackburn, F. Hayman, F. H Pentland, Norman
Bowden, Rt. Hn. H.W. (Leics. S.W.) Henderson, Rt. hn. Arthur(RwlyRegls) Price, J. T. (westhoughton)
Bowen, Rodenc (Cardigan) Herbison, Miss Margaret Randall, Harry
BraddocK, Mrs. E. M. Hilton, A. V. Redhead, E. C.
Bray, Dr. Jeremy Holman, Percy
Broughton, Dr. A. D. D. Hooson, H. E. Rhodes, H.
Callaghan, James Houghton, Douglas Rodgers, W. T. (Stockton)
Howell, Charles A. (Perry Barr) Rogers, G. H. R. (Kensington, N.)
Cliffe, Michael Howell, Denis (Small Heath) Ross, William
Craddock, George (Bradford, S.) Hoy, James H. Short, Edward
Cronin, John Hynd, John (Attercliffe) Skeffington, Arthur
Crosland, Anthony Irving, Sydney (Dartford) Slater, Mrs. Harriet (Stoke, N.)
Cullen, Mrs. Alice Janner, Sir Barnett Small, William
Dalyeli, Tam Jeger, George Soskice, Rt. Hon. Sir Frank
Davies, G. El led (Rhondda, E.) Jones, Elwyn (West Ham, S.) Spriggs, Leslie
Delargy, Hugh Ledger, Ron Stewart, Michael (Fulham)
Diamond, John Lee, Frederick (Newton) Taylor, Bernard (Mansfield)
Dodds, Norman Lever, L. M. (Ardwick) Warbey, William
Dugdale, Rt. Hon. John Lewis, Arthur (West Ham, N.) Watkins, Tudor
Edelman, Maurice Loughlin, Charles Weitzman, David
Evans, Albert Lubbook, Eric Wllkins, W. A.
Fernyhough, E. Mabon, Dr. J. Dickson Williams, W. R. (Openshaw)
Fitch, Alan MacColl, James Willis, E. G. (Edinburgh, E.)
Fletcher, Eric Mclnnes, James Winterbottom, R. E.
Foot, Dingle (Ipswich) MacKie, John (Enfield, East) Wyatt, Woodrow
Foot, Michael (Ebbw Vale) Macpherson, Malcolm (Stirling)
Forman, j. C. Mallalieu, E. L. (Brigg) TELLERS FOR THE NOES:
Fraser, Thomas (Hamilton) Manuel, Archie Mr. Lawson and
Gaitskell, Rt. Hon. Hugh Millan, Bruce Mr. Ifor Davies.



11.45 p.m.

Mr. Barber

I beg to move, in page 15, line 31, at the end to insert: Provided that a body corporate carrying on a business which consists of or includes the management of trusts, and acting as trustee of a trust in the course of that business, shall be treated in relation to that trust as not resident in the United Kingdom if the whole of the settled property consists of or derives from property provided by a person not at the time (or, in the case of a trust arising under a testamentary disposition or on an intestacy or partial intestacy, at his death) domiciled, resident or ordinarily resident in the United Kingdom. The Amendment is concerned with the liability of trusts administered overseas by companies resident in the United Kingdom to tax under Case VII. Clause 11 (6) provides, in effect, that the trustees of a settlement shall be treated as resident and ordinarily resident in this country and taxed on short-term gains accruing to the settled funds if the general administration of the trusts is ordinarily carried on here or if the trustees or a majority of them are resident and ordinarily resident here.

It has been put to us that where a trustee company resident here carries on a trust business overseas through branches of its trustee department in an overseas country, this provision unfairly imposes a liability to Case VII tax in respect of trusts administered overseas simply because the company itself is resident in the United Kingdom.

This point is a good one in principle because the trusts in question are, in fact, at least in the general run, trusts set up by person having no connection with this country, and the ordinary administration of the trusts is carried on abroad It seems wrong that the trusts should be liable to tax on any short-term gains they make simply because the person setting up the trust has decided to employ as his trustee an overseas branch of a British trustee company.

What is causing concern is not that the trusts will on rare occasions have some tax to pay but the danger that the theoretical liability to Case VII tax on trusts administered by United Kingdom companies will discourage overseas settlors from employing them as trustees. I understand that there is strong competition in this field from foreign concerns; and it is feared that the possibility of Case VII liability if a United Kingdom company is appointed as trustee may induce local residents not to set up trusts with a United Kingdom company as trustee.

I am sure that hon. Members will agree that we should not run the risk that the overseas business of United Kingdom trust companies may be handicapped in this way, and this Amendment has been tabled to allow an exemption for trusts of the type to which I have referred.

Mr. Diamond

This seems to me to be an Amendment which should cause no delay at this late hour. I should have thought that we would all be pre- pared to accept it as a perfectly sensible help particularly for those institutions which want to cater abroad and which we would want to encourage so to do.

Amendment agreed to.