§ THRIFT PLANS
- (1) Subject to the provisions of this section a payment made by an employer into a thrift plan trust fund on behalf of an employee shall not constitute taxable income of the employee entitled but shall be allowed as a deduction from the profits or gains of the employer. 'A payment' shall for this purpose include a deduction made at the request of an employee from income to which he would otherwise be entitled.
- (2) Payments under subsection (1) above shall not be eligible for tax relief to the extent to which they exceed in any year of assessment in value 5 per cent. of the taxable income of the employee in that year.
- (3) A thrift plan trust fund shall be a fund set up for the employees of one or more employers for the purpose of encouraging thrift amongst employees, under the rules of which at least 90 per cent. of the employees,
1354 resident in the United Kingdom of any participating firm, are eligible for membership and which shall have been approved as such by the Commissioners of Inland Revenue.
- (4) Funds held by the thrift plan trust fund shall be designated for the benefit of individual employees and may be invested in National Savings, British government securities or unit trusts and investment trusts as defined for the purpose of section 37 of the Finance Act, 1965.
- (5) The income of any securities held in the thrift plan trust fund shall be exempt from income tax under the provisions of section 381 of the Income Tax Act, 1952.
- (6) The rules of a thrift plan trust fund shall not restrict the right of members to withdraw the shares of the fund at any time, but save as provided in subsections (7) and (8) below, the trustees shall deduct income tax at the standard rate from any funds so withdrawn and the funds shall be assessed and charged on the recipient under Schedule E as income in the year in which they are received.
- (7) On the death, disability or retirement of a member of a thrift plan trust fund, withdrawals shall not be assessable to income tax under Schedule E but shall be taxable as if the whole sum received were a chargeable gain assessable under section 20 of the Finance Act 1965.
- (8) A member may at any time cease to be a member for a thrift plan trust fund and any sums thereafter withdrawn representing contributions made three years or more before the date of withdrawal shall not be assessable to income tax under Schedule E but shall be taxable as if the whole sum received were a chargeable gain assessable under section 20 of the Finance Act 1965.
- (9) An individual who ceases to be a member of a thrift plan trust fund under subsection (8) above shall not be eligible for membership of the same or any other thrift plan trust fund for a period of three years from the date on which his last withdrawal of funds was made.
- (10) The Commissioners of Inland Revenue may make regulations in connection with the operation of this section and in particular may specify the conditions which must be fulfilled if a thrift plan trust fund is to be approved under subsection (3) above.—[Mr. Grant.]
§ Brought up, and read the First time.
§ Mr. Deputy Speaker
With this new Clause we are taking also new Clause 10— "Own as you earn", new Clause 90 "Abatement of tax payable under Schedule E", and new Clause 91 "Encouragement of personal savings for old age".
§ Mr. Grant
I hope that this will be the opportunity to call attention to the 1355 need to increase savings generally at this time, because the subject of savings was never properly touched upon during the whole course of our lengthy proceedings on the Bill in Committee because of the effect of the Guillotine.
I realise that there is a sophisticated argument which, I believe, is held in elevated circles by people in the Treasury —I exclude the Financial Secretary from this charge—that increased savings have only a marginal effect on increased investment. I do not believe that this is necessarily true. Even if it were true, which it is not, there are many other compelling reasons why a dramatic change in our whole attitude to savings should take place at this time.
Even allowing, however, for a certain amount of switching when one encourages savings, I believe that an increase would provide resources for increased investment. Certainly, increased savings relieve inflationary pressure. They certainly cool down an overheated economy far more effectively than does higher taxation, which is a direct disincentive and leads to cost increases.
Indeed, if only we had applied our minds as keenly and vigorously and had spent as much time on devising ways of encouraging people to save and to be thrifty as we have spent on considering the subject of wages and pondering how we could send people to prison for getting increases in their remuneration, I believe that we would have seen a dramatic change in our economic circumstances as a result.
The other reason why an increase in savings attracts me, and, I believe, my hon. Friends on this side, is because it is essentially a voluntary act. People exercise choice in increasing their savings as much as they can, whereas the higher taxation which has been the vehicle used by the Government to curb consumer spending is essentially an act of the State over which the individual has less and less control as time goes on. Increased savings and the spirit of ownership encourage independence. They enhance the status of the individual and form an essential bulwark against the ever-increasing powers of the State as it is today.
Year after year, I recall Treasury Ministers enunciating those famous words 1356 "More savings, less taxation". That has always been the answer which I have received when trying year after year to do something in this direction—and, of course, that is true. We all agree about it and we are at one. The opposite is not true, however, that a reduction in taxation necessarily means more savings. Alas, a reduction in taxation all too often goes into extra consumer spending and only a limited proportion—say, 10 per cent.—seems to go into increased saving. That is the evidence as I understand it.
It can be said that £100 increased savings by an individual is almost directly £100 less taxation. That is certainly my view and the view of the Financial Secretary, and it is now, I am happy to say, the view of the C.B.I. and of all the economic commentators whom I can discover. I hope that it commands support, as I believe that it does, among hon. Members on the Government benches.
My condemnation of the Government is not of their words, but of the fact that they have not translated their words into action, nor have they attempted to do so. The proportion of our national income saved and invested is lower than that in any other developed country in Europe. It is, perhaps, not purely coincidental that our growth rate is similarly well below that of any of our competitors. It is small wonder that there is little enthusiasm for saving, because in recent years savers, so far from being encouraged, have been repeatedly clobbered by a barrage of extra taxation. They are, first, stigmatised as people who do not really work, because they are regarded as unearned income holders. Secondly, they are singled out for exceptionally heavy treatment in respect of Income Tax and Surtax. The Corporation Tax and the Capital Gains Tax have militated against increased savings.
The Post Office and various media of national savings almost verge on the level of fraud. Take, for example, the 2½ per cent. ordinary account in the Post Office. This 2½ per cent. can be contrasted with an inflation level of about 3.4 per cent. since 1910 which has gone on through the community. So a holding in the Post Office Savings Bank has been worse than a dead loss. It has been a fraud. A 1357 more recent example is 1962 5 per cent. Exchequer Stock redeemable in 1967. It is called 5 per cent. Let us calculate the real rate of return. Allowing for inflation, a holder who pays tax at the standard rate gets a derisory figure in real return of about 1½5 per cent.
These are the many reasons why there has been little or no incentive or encouragement to save in the community. Nevertheless, there is a latent desire to do so, as can be instanced by the enthusiasm there was for the growth of investment clubs and the dramatic increase in unit trusts. It is clear that our existing methods are hopelessly inadequate and that something dramatic is required. I believe that one of the methods whereby this can come about is through thrift schemes such as that which I outlined in the Clause and for which direct fiscal concessions are necessary.
There are many ways in which this can be done. There are the ways adopted in Germany and in France. The Liberals make a suggestion in a new Clause which has been grouped with this one. That suggestion is a good idea, and I have no objection to it. My hon. Friend the Member for St. Ives (Mr. Nott) has tabled details of a plan thought out, I believe, by Mr. Lionel Barras very imaginatively. There are many ways of doing it.
Our Clause is based upon the United States' tried and proven method of company thrift schemes. I pay tribute to the work of Mr. John Chown. He has made a great study of the United States' method of thrift schemes and has contributed so much to the drafting of the Clause. It is a scheme which the Wider Share Ownership Council, an all-party organisation of which I am a member, supports as the most suitable vehicle. The Financial Secretary was a distinguished member of that organisation until he fell among bad friends and into evil ways and joined the Government.
The thrift plan that we have outlined envisages a scheme set up by individual companies, be they great or small, under which payments are made into a fund by the employer. Payments made by the employer into this fund are not to be regarded as the taxable income of the employee up to a limit of 5 per cent. of the employee's income for that year. Equally, the payments made by the em- 1358 ployer are to be allowed as a deduction from his profits or gains for tax purposes.
To be approved under the Clause schemes have to be open to not less than 90 per cent. of employees who wish to participate. The fund is invested in National Savings, British Government securities, unit trusts, or investment trusts. Perhaps I have been a little timid and I would not object to this being widened into a much greater range of equity shareholdings. As a modest move forward, I commend it on those lines.
The one way in which I differ in this scheme from that in operation in America is that I provide for withdrawal, not only on death or retirement. I provide for an employee to be able to withdraw from the scheme after he has been in it for three years, provided that he cannot join the scheme again for another three years. I believe that this is necessary to retain flexibility and to enable movement of labour between one company and another. I think that the United States scheme is a little rigid in that respect. Lastly, I have provided the long-stop. The hallmark of respectability for any scheme is that it must be approved by the Commissioners of Inland Revenue.
I do not regard this scheme necessarily as holy writ; nor do I think that the drafting is absolutely perfect. A change in savings attitude in Britain is essential. A radical approach is essential. I believe that the Clause is a novel step in that direction which, if accepted by the Government would, in the words of Mr. Harold Wincott, show that they have had asudden attack of common sense".
§ Mr. F. A. Burden (Gillingham)
If a member of a thrift club operating in a group of companies leaves one company in the group and joins another company in the group, will he then be debarred from joining for another three years?
§ Mr. Grant
I should have to take legal advice on that, but I think that he probably would be. We have provided the three-year period. This is a point of detail. I would not mind the period being extended or reduced, as was thought desirable. There must be flexibility in these schemes. It is essential that any scheme should be based on the company or on the individual and not on some great rambling bureaucratic central body 1359 such as C.B.I. has in mind. It is vital that it should be geared to the wage packet. It is vital that fiscal concessions should be given by the Government to enable it to get off to a reasonable start.
The scheme embodied in the Clause fulfils all these criteria and has been shown to work in America. For these reasons, and because I believe that it is directly relevant to our present economic difficulties, and, above all, because it is wholly in accordance with my philosophy of a free society based upon individual ownership, I commend it to the House.
§ Mr. Barnett
All of us are in favour of increasing savings and, in particular, real net savings—that is, not simply switching from one form of savings to another. That is why I supported the original idea of the right hon. Member for Enfield, West (Mr. Iain Macleod) of a save-as-you-earn scheme. I believe this is an idea well worth following up.
However, the Clause highlights the extent of the problem. The right hon. Member and the hon. Member for Harrow, Central (Mr. Grant) have obviously devoted a great deal of thought to the problem of how this could be done. We understand from the hon. Gentleman that the scheme contained within the Clause is based on the United States scheme. I believe that the scheme as shown in the Clause is an administrative nightmare.
We hear constant complaints in the House about the complexities of our tax system. There are many of them. The Clause shows that an enormous number of administrative problems would arise. I am not judging this merely by the drafting of the Clause. Nor do I mean that problems would arise for the Inland Revenue only. I am thinking that the 5 per cent. expressed weekly, if we are talking about the small saver, could become a problem of under-payment or over-payment of tax throughout the course of a year, which would be administratively a little difficult. However, that is only one small matter.
Many other factors would crop up. What would happen on the transfer of job? What is much worse is the administrative burden which the thrift idea plan, as outlined in the Clause, would place on companies, particularly smaller companies, even if they grouped together. I 1360 think of the complexities which could arise on the transfer of employees, with withdrawals, and with apportionments under some of the subsections as between one employee and another, giving rise to problems as to sharing of interests or of a cipital gain on reinvestment. Other questions which it would be difficult to answer would be when disability arose, when retirement occurred and when a person was eligible to join a scheme. For smaller firms, at any rate, it would be an extremely difficult administrative task, to say the least.
There would also be administrative problems for the Inland Revenue itself. These would include an individual's tax liability arising out of withdrawals and amounts put in in any given year, and total salary at the end of the year when individual weeks were not exactly similar because of bonuses and short time and so on. All sorts of complexities could arise for the Inland Revenue.
§ Mr. Grant
Before the hon. Gentleman says too much about administrative difficulties, let me say that I have always believed that if the will is there, we have a Government to overcome the difficulties. I am not bothered about the Inland Revenue's difficulties. Secondly, the hon. Gentleman overlooks the fact that the scheme would be entirely voluntary. Nobody would compel a company to undertake it.
§ Mr. Barnett
We have to take account of administrative problems all round and I do not think that any of us would want to introduce a scheme which caused enormous administrative difficulties to anybody, particularly the Inland Revenue, which has a burdensome enough task as it is.
§ Mr. Kenneth Baker (Acton)
Is not the hon. Gentleman aware that the arguments of administrative difficulty and inconvenience which he has just postulated were exactly the arguments used 30, 40, or 50 years ago, when companies were first thinking about setting up pension funds?
§ Mr. Barnett
The administrative problems which I am postulating are exactly those which we have heard used about other schemes by hon. Members opposite in the last few years. That is why I am 1361 surprised that they are prepared to consider such an extremely complex scheme. The Inland Revenue would have the problem of deciding how much should be subject to Capital Gains Tax and how much to Income Tax and to make an apportionment in any given year. We simply cannot ignore the administrative problems.
We have also to consider whether such a scheme would be attractive to a saver. Personally, I am in favour of making it easy for an employee to have a deduction from his wage in respect of savings, but it should be clear to him what he is to get at the end of the day. For example, an employee earning £1,000 a year, under the terms of the Clause would save 5 per cent., or an average of £50 a year. If he were to put £50 a year into a life assurance policy with a respectable company, so that the policy matured fairly early, he would have a policy of £1,000 with profits and bonuses which might bring him somewhere near £2,000 at the end of the day, and he would also have cover of £1,000 plus bonuses during the course of his life. Under the terms of this scheme, he would have the additional disadvantage of not having the cover and he would also have a smaller net return, having regard to the fact that the final sum on realisation would be subject to Capital Gains Tax. Assuming that he went to the trouble of working out the computation of what he would get, such an employee would find that the net return to him was rather better in other schemes.
Something much better than this type of Clause is required. This scheme is too complicated and not sufficiently attractive to an employee. Such a scheme must be administered nationally rather than by small and medium-sized individual firms which would not have the skills required to deal with the management of investment such as the large insurance companies have and which have enabled them to build up the sort of bonuses which they now pay. I would rather that the administration were handled nationally, so that there was better management and a better return for those concerned. It might be easier to deal with it by way of a certificate issued weekly to the employee who had a certain amount deducted from his wage, with the certificate cashable at an 1362 amount which became larger the further away from the date of issue.
Basically, I am sympathetic to this idea, but the scheme is administratively difficult and not sufficiently attractive. Nevertheless, it is valuable to have a debate of this description and the hon. Gentleman has done the House a service by initiating it and enabling us to expose the limitations open to us in any scheme for improving savings and getting new net savings.
We underestimate the ingenuity of past Chancellors of the Exchequer who have gone to enormous lengths to find methods of improving savings and meeting the wishes of all kinds of savers, from those in the high tax brackets to those in the lowest who for £1 can buy a National Savings Certificate in a Post Office, where it is easily obtainable, or who can buy Premium Bonds and so on. Former Chancellors have considered and thought up many schemes. It is important to recognise how limited is the scope now left. The Clause emphasises that limitation, because the hon. Gentleman and the right hon. Gentleman have clearly thought a great deal about the idea, and yet have been able to come up only with a Clause like this which, when examined in detail, goes to show just how difficult is the problem in practice, although at first sight the idea seems attractive.
It is not possible to say whether the scheme would be too costly to the Exchequer. Clearly, one could have a savings scheme by which it would be easy to persuade people to save, but which was so costly to the Exchequer that it would not be worth while. It is not possible to say whether the Clause would be too costly, because we do not know how much would be invested by employees, or how quickly withdrawals would be made. However, that does not matter because, even allowing for the fact that only two-fifths of the premiums for a life assurance policy are allowable for tax, whereas this scheme would allow the whole against tax, the return on such a policy would be better.
That is clearly important in the consideration of a scheme of this description or something like it. It is not possible for a small group of people without all the facilities available to a Government to work out all the complexities which 1363 might be involved. I gather from the Press and elsewhere that the C.B.I. scheme is being favourably considered by the Government, and I hope that they will give it a good deal of thought and that before next year a rather simpler scheme will be brought forward, although with the same purpose, because we can all support the purpose.
§ Mr. Henry Clark (Antrim, North)
The House owes a debt of gratitude to my hon. Friend the Member for Harrow, Central (Mr. Grant) for introducing this subject, and one must compliment him on the work which he has done on his savings scheme. I wish to direct my remarks not to his excellent scheme but to my own which is outlined in new Clause No. 91, an incentive to saving which would complement any of the schemes which have been put forward. We suggest that there should be £100 of unearned income tax-free for everybody over 60. This would set a target to which savers of any income could aspire. I believe that setting a target for the future is extremely important, because financial laws and taxes have created a large number of psychological barriers to having, even for the small saver.
The figures contained in new Clause 91 are not arbitrary but were chosen with care. We chose £100 as the income which could be earned from the kind of capital sum which any family could save with reasonable thrift, over a reasonable period. It is about equivalent to the income one would get if instead of buying a house one saved one's money. In justice, every person over 60 who has saved that money should be able to enjoy it Income Tax free.
The age of 60 has been chosen so as not to coincide with the old-age pension age for men. Too many people, particularly many younger people, regard the age of 65 and the old-age pension as a kind of Nirvana to which they look forward, when everything will be all right and all that they will have to do is to collect their money from the Post Office. Although they know very well that the pension is not adequate today, they believe, as a result of what is said by politicians on both sides, that there will be a time in the 1970s or 1980s when it will keep us all in comfort.
1364 Far too many fail to realise that no matter to what level we raise the pension, because it is universal, it will provide only the floor level of living standards. Those who want to keep up with the Joneses, or be a little better, can do so only by saving before they become too old to do so. The two figures have been chosen because, as far as I can estimate—and I got no Treasury help when I put down a Question—the cost of the new Clause would be about £20 million per annum.
§ The Chancellor of the Exchequer (Mr. Roy Jenkins) indicated dissent.
§ Mr. Clark
I see the Chancellor shaking his head. It is certainly not an excessively expensive scheme and would start people saving. The money would go to those who deserved it, very often to those who had invested in War Loan and house property to let—two of the worst and commonest investments among the lower income groups. This target could fit in with any of the several proposed schemes.
My hon. Friend the Member for Harrow, Central, with admirable brevity, went through the arguments for saving. I was happy too to hear a favourable comment from the hon. Member for Heywood and Royton (Mr. Barnett). To some extent I agree with him that the administrative complications are considerable, but none of us can disagree about the tremendous advantage that would accrue to the economy by an increased level of personal savings.
We all know that Lord Keynes in 1936 voiced considerable criticism of personal savings and sinking funds. I believe that some of the Keynesian doctrine of 1936 has stuck with Labour to this day. It is interesting to see that Lord Keynes changed his tune remarkably quickly and that by 1939 he was saying that in the new circumstances:… savings will again serve social purposes and private prudence will coincide with public interest.I do not think that there is any reason to doubt that what he said then is equally true today.
When we know that personal savings can replace increased taxation, we must tie that to the remark attributed to the Chancellor in today's papers, that this country is reaching its limit of taxable 1365 capacity. I see that he is to say this on television tonight. If we cannot raise taxes further to reduce consumption, there is only one other hope and that is savings. The Chancellor told us this in his Budget speech, and then proceeded to do virtually nothing about it. He cannot honestly claim that the increase in Premium Bonds, and one or two other adjustments in National Savings, will really change the national propensity to consume to any considerable extent.
The tragic thing about the Budget is that it is likely, more than anything else, to reduce savings. Increased taxes will cut savings more than they will cut consumption. A high proportion of families will reduce their bank balances, draw on capital, increase their debts to the shops, to try to maintain their living standards. The proportion of income spent on consumption may be higher in 1968 than at any other time. We look to the Chancellor to give us a satisfactory answer and explain more clearly than he has done so far why he did not adopt a level of incentives for savings in the Budget.
The other side of the House does not like capitalism in the old sense of the word, but no one can have any objection to capital if it is spread broadly to every family and homestead. Everyone knows that £500 invested in a reasonably reliable way is a better hedge against worry and bad luck than any social security scheme. In Northern Ireland, where there is widespread ownership of land, and where usually one person in every family owns land, the effect has been to help Northern Ireland very considerably during the real social difficulties of unemployment, suffered over the last 30 years.
I take the hon. Member for Heywood and Royton to task to some extent, because it is not the function of this House to discuss theoretically what will or will not make people save. We all have our own pet schemes. Mine is that we should let people save from taxed income, and get a tax refund, rather than save from income before tax and get a tax rebate. The sum of £1 a week saved from taxed income, with a refund, would become £70 or £80 a year. This would be a real incentive and similar to the scheme whereby people make gifts to a charity on a seven-year covenant. I personally feel particularly generous when I see my 1366 meagre subscriptions to a charity boosted by the tax reclaimed by that charity.
It is pointless for us to sit here talking, it is not a matter which we or the Treasury can decide. To persuade the British public to save we have to get the product right; we have to have a flexible and broad scheme, to suit all income groups and to appeal to the huge body of non-savers whose earnings are below £1,500 a year. To get this scheme right we have to appeal to the marketing industry. We have to find out by research, what kind of savings will appeal before introducing any scheme. I hope that before the Chancellor introduces a scheme, as he inevitably must next year, if he is to keep the country steady, he will do a great deal of market research.
I conclude with a plea for sympathetic treatment by the Chancellor of the various schemes put forward, particularly that suggested by myself and my hon. Friends. I suggest that, if we can create a property-owning democracy—a capital-owning democracy—we shall create a country and society with the morale to stand up to the problems of the modern age.
§ 6.0 p.m.
§ Mr. Eric Lubbock (Orpington)
I shall not add to what the hon. Member for Harrow, Central (Mr. Grant) said about the virtues of savings, except to draw attention to a recent article in The Times by Francis Cairncross, who pointed out that one of the best reasons for encouraging savings is that it means less taxation. The article added that if we had been saving as high a proportion of post-tax income as in 1951, the Chancellor would not have needed to take £560 million out of the economy in his Budget. That is the strongest possible reason for encouraging savings in a more radical way.
I therefore deplore the remarks made by the hon. Member for Heywood and Royton (Mr. Barnett). Every time a scheme of this nature is put up, he casts doubt upon the principle, not because he disagrees with it—at one point in his remarks he accepted the idea—but because it is administratively unworkable. He knows very well that any hon. Member trying to put forward a scheme like this can only deal with principles. He cannot do other.
The hon. Gentleman says that I do this every time. Can he quote the last occasion? Can he say on how many other occasions I have done this?
§ Mr. Lubbock
On 14th June, 1967, the hon. Member made a sarcastic speech about a scheme put forward by my hon. Friend the Member for Colne Valley (Mr. Richard Wainwright). He condemned it in much the same words as he has just used. He said that the scheme was administratively impracticable. This afternoon, he said that the scheme in new Clause 25 would be an administrative nightmare. But the only difficulties he pointed out were in relation to the P.A.Y.E. system, saying that, if people withdrew money and put it into savings schemes of the kind proposed, the Inland Revenue would have to take this into account in code numbering.
But the Inland Revenue has faced this problem for many years. What does he think happens in the case of a scheme of payment by results where, according to the state of the economy and the fortunes of his company, a worker's earnings may fluctuate widely? A code number may be allotted to him at the beginning of the year which, unfortunately, because of the Chancellor's other actions to reduce consumption, may not be in accordance with his actual earnings. The Chancellor may decide to increase Purchase Tax on cars so that earnings in the motor industry decline because there is no overtime and perhaps there is even short time working. The code number then has to be adjusted.
Does the hon. Gentleman really think that a system of P.A.Y.E. which can deal with these fluctuations would be incapable of accommodating a scheme for small savings such as that proposed by new Clause 25 or by my hon. Friend last year, about which the hon. Gentleman was so scathing? It is a pity that the hon. Gentleman did not make a sensible contribution about the principle of contractual savings instead of trying to make niggling details about new Clause 25, into which the hon. Member for Harrow, Central has put a great deal of thought and work, for which the House should be indebted to him.
There is a lot to be said for examining the experience of the United States and 1368 I also draw the Chancellor's attention to the experience in West Germany over the last few years, which also has something to teach us. It was decided there some years ago that a tax concession should be given to contractual savings. Because the maximum benefit would be felt by those who paid most tax if the scheme were done by means of a tax allowance. it was decided, in order to stimulate savings by the lowest paid workers, who were not paying the standard rate of tax. to have higher interest rates for contractual savings than for the normal avenues of savings which had been open before then.
The West German Government offered a premium of 46 per cent. on top of the normal rate of interest for savings which were kept in a special account for a period of five years or more. They refined the scheme because it was found that this inducement appealed more to the executives and the staff than to the manual workers. In 1964, they found that only 30 per cent. of new savings accounts opened under the 1959 law were those of manual workers, and as the manual workers were numerically by far the largest potential market for the scheme, this indicated that only a small proportion of them were being attracted to it—a much smaller proportion than that of the salaried employees, who formed 49 per cent. of the total.
In 1965, therefore, the West German Government extended the principle of contracutal savings so as to permit collective arrangements negotiated between workers and managements for special accounts into which the employer could pay up to 312 DM per annum for each employee on his books. These payments were allowable deductions from the company's profits for tax purposes, but did not count as part of the income in the hands of the recipient if he left the money for the period of five years.
New Clause 10 contains many of these principles, although, of course, there are differences in detail between its scheme and the West German scheme. Under subsection (3)(a), it would be open to an employer to open a special savings account on behalf of an employee. This would permit collective arrangements between management and unions. The amount which could be deposited in the 1369 account each year would be very much larger under our scheme but, on the other hand, the beneficiary would not escape tax altogether even if he left the money in for a very long time. When he came to withdraw the money, he would pay Income Tax as if he had received it in the year of withdrawal.
Under subsection (4), the employee would not be liable to Capital Gains Tax on the amount which could be secured by his deposit in the special account. As my hon. Friend the Member for Colne Valley pointed out last year, this would provide an incentive to the employee, either individually or collectively, to put money away during periods when he was earning a good wage or salary and only withdraw it when he faced a period of adversity such as sickness or unemployment, when the effective rate of tax would be much lower and the money withdrawn would count as part of his income during the year of withdrawal.
It is true that new Clause 10 would not provide for higher rates of interest to be paid on money deposited under the scheme, which is a feature of the German law, but this, I think, would be an added refinement which we might consider as a further improvement of the proposal. If money is to be invested for long periods, there is every justification for offering a bonus, as we already recognise in the case of National Savings Certificates, although the bonus there is not large enough to make it worth while investing in them in present circumstances.
Sir Miles Thomas has been trying to persuade the Chancellor that interest rates of 8 to 9 per cent. should be offered where savings are left in for at least five years. The C.B.I. has proposed a variety of methods for retaining long term savings, and much higher interest rates are only one example. Both the C.B.I. and the T.U.C. have been advocating schemes which have something in common with new Clause 10. For many years, we have called for additional savings and have paid tribute to the National Savings Movement and to the most dedicated and unselfish work done by thousands of volunteers. But we are not prepared to give them what is needed to enable them to extend national savings to the extent necessary in the present climate.
1370 I have attended annual rallies of the National Savings committee in my constituency over many years. I attended one in March this year. I am always very impressed by the dedicated spirit of the volunteers who are prepared to give up so much time and effort in the cause of savings to help Britain in this most practical way. In the last few years they have been struggling against heavy odds when trying to persuade the small saver that it is worth while putting his money aside. When we look back on the history of savings ever since the last war, we see that hundreds of thousands, perhaps millions, have been defrauded by inflation and rising interest rates.
If the Government really want to help small savers to put the economy straight, they have to give the savings movement and others concerned the proper tools to do the job. A scheme for contractual savings along the lines of our new Clause or that proposed by the hon. Member for Harrow, Central would do a great deal to restore the morale of workers in the National Savings movement and would allow them to make the significant contribution which they are ready and anxious to make.
§ Mr. Sheldon
What unites the whole House is the obvious need for a reassessment of all we are doing with reference to savings. I shall not spend time discussing the details of various schemes. It is a pity that we are discussing minutiae in matters which we are not well fitted to judge and which the Treasury can examine very closely. It can then come up with a workable scheme if it agrees that the principle is right. We should be discussing the principle rather than the details.
Not only do we need to attract new savings, but it is also extremely important to retain present savings. If we look at the figures of slowly rising savings, we see that they present a complacent picture. Even our slowly rising trend of savings can show an actual drop in real terms. This is not just because of inflation, important though that may be, but because of the growth in real incomes which has been taking place.
If this had been reflected in increased savings it would have been no more than what we should have expected. If we take the increase in inflation at about 3 per cent. per year and the 1371 increase in growth of incomes in real terms at about 2 per cent. per year, we should have about 5 per cent. increase in savings, and that, obviously, we have not had. We tend to view the picture rather too complacently.
We need not only to think in terms of new schemes, but to find ways of making present ones more attractive. Hon. Members are queuing up with pet ideas but if we are to think in terms of a radical look at savings probably the first thing we should do should be to tackle the whole question of confidence in the value of savings which will be obtained by the person who invests his money and hopes to see an appreciable return at the end of a given period. Because of this it may be that to get any movement off the ground and to reverse the process which has been going on for so long through lack of confidence which, unfortunately, has been continuing, we shall have to think in terms of some sort of tax incentive.
Although I am unwilling to accept ideas of tax relief in general for this kind of saving, mainly because it is undiscriminating and helps the better-off more than the less well-off, there is a strong case at this time to give a boost to confidence and to have a new look at saving so that people can see a definite return and a chance of increasing their wealth in this way to their own good and that of the country.
There is one important point which we must not lose sight of. We are getting very near to a situation of not having a net interest rate for savings, but almost a reverse interest. This is important because people are becoming more sophisticated about it. They are beginning to understand it and to understand that with present levels of interest, even though they are high, by the time tax is paid there is not much difference between what is left and the level of inflation. If we take the fixed interest and deduct taxation charges, what is left is not much different from the level of inflation rising each year and so the capital of the saver does not appreciate and, in certain circumstances, may actually diminish.
It is becoming increasingly understood by people—not only by those knowledgeable in these matters but generally—that 1372 something is needed to reverse this attitude to savings. It may be that we shall have to think in terms of tax concessions to give a new impetus to the whole movement.
Whether the schemes which have been discussed this afternoon are used is not important; what is important is that new ideas are necessary. I hope that my right hon. Friend the Chancellor will consider this.
§ Mr. John Smith
I found listening to the hon. Member for Heywood and Royton (Mr. Barnett) a very lowering experience. He had a difficulty for every solution. I had no idea that he was such an abominable no-man; I can only imagine that he is limbering up for the bottom job on the Treasury Bench. His other half, his hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) did a great deal better by addressing himself to questions of principle instead of giving the Government an opportunity of saying, "We have heard of a great many schemes, all different and each contradicting each other and therefore nothing can be done."
But I am sure that both hon. Members must recognise that it has been tragic that in this Budget, of all Budgets, there was no savings incentive. Well, there was one, the rate of prize money on Premium Bonds was increasesd from4½ per cent. to 4⅞ per cent., but there was no proper incentive to saving. Instead, we were taxed again. We were treated, once again, like a train of pack mules trudging our way through the sands of time. We had extra taxation and in some cases doctrinaire taxation. I welcome particularly what my hon. Friend the Member for Harrow, Central (Mr. Grant) said about choice, that savings are worth it, even ignoring financial reasons, because they give people a choice which they do not get with taxation.
The whole Budget as it proved was an incentive not to savings, but to extravagance.
§ Mr. Speaker
Order. We are not discussing the Budget now. The hon. Member must come to the schemes on the new Clauses.
§ Mr. Smith
—and, therefore, I have a suppressed Second Reading speech inside me. If savings had been properly encouraged in the way in which all these new Clauses would ensure, the Chancellor could have avoided these heavy increases in taxation. He said that he had to impose sacrifices; that he had to take purchasing power out of the economy, but in my opinion he could have coaxed it out.
Chancellors, by nature, cannot like savings, because they make the control of consumption a great deal harder, as we are seeing now. But savings and tax are complementary. Indeed, the Chancellor said so. He said that:if every working person in this country were to save 1s. a day, this would bring in over £400 mill on in a year and would go a long way towards solving our economic difficulties —and oar taxation problems."—[OFFICIAL REPORT, 19th March, 1968; Vol. 761, c. 270.]If the Government put into savings a fraction of the thought and energy that they put into taxation our burdens could be greatly lightened. Indeed, savings can do the job of taxes without increasing the cost of living, as taxes do, and as, indeed, this Finance Bill will do by 2 per cent. we are told.
Instead of legislation on the lines of these new Clauses the Chancellor simply uttered the now customary ritual platitudes about the National Savings Movement, though I think that he went a little far in saying thatthis year offers a special opportunity in the field of national savingswhen the value of money is, we are told, going to fall by at least 5 per cent. I endorse what has been said by several other hon. Members about National Savings, though I do not agree that they are a fraud. That is much too strong a word to use. The National Savings Movement at the moment is simply a way of tearing up your money slowly.
But National Savings can be reconstructed if none of the new Clauses or similar schemes find favour with the Chancellor. There is nothing wrong with fixed-interest investment. We have heard a great deal about the cult of equity shares, but there is nothing wrong with fixed-interest investment, providing that 1374 the rate on such investment is high enough. As was said, there should be allowance in the rate for the effect of inflation.
If National Savings carried a rate of 7 or 8 per cent., reflecting current interest rates, plus a net addition of perhaps 3 or 4 per cent. for inflation, they would be perfectly attractive, and reasonable to put forward to the public. But if we are not to have that type of scheme, but are to have instead the types of scheme put forward in these new Clauses, let us remember that, whichever we are to have, savings have been the chief instrument of civilisation. They have been the backing for our position in the world, as the 19th century, indeed, recognised, with, to my mind, its noble ideal of freedom from dependence; from dependence on other people, dependence on charity; and, particularly, from dependence on the State.
It is time for a return to that great Victorian ideal built on savings. What is wanted is a savings policy. By that I mean incentive to save, ability to save, and faith in savings. That involves far more than can be put into a Finance Bill. Moreover, we want not only a savings policy, but a savings scheme. I thought that the Chancellor was a bit feeble about this. He said that no satisfactory scheme could be discovered. But an arrangement very similar to what is required already exists. The savings scheme which we need, in the absence of a revitalised National Savings Movement, should be one based on ordinary shares; and here we must keep in mind a great danger to saving and investment of all kinds.
We have seen people lose faith in fixed interest investment and turn to equity investment. We are now seeing them lose faith in equity investments and turning to non-conventional savings media altogether. People are turning to investment in chattels, for example, which is totally unproductive for the country. Therefore, I feel that any schemes which are put forward should be well based on equity shares.
Secondly, such a scheme should—
§ Mr. Speaker
Order. The hon. Member must come to the schemes in the four new Clauses that we are discussing.
§ Mr. Lubbock
Perhaps I can help. If the hon. Member for the Cities of London and Westminster (Mr. John Smith) looks at subsection (3)(b) of the new Clause 10 he will see that the amounts may be inmoney, stocks and shares or other securities.There is a limitation in the Clause. It does not include chattels.
§ Mr. Smith
The second aspect of these new Clauses which I welcome is that they are open only to savings from earned income. Thirdly, they must be more attractive—and this is most important—to remain in than to cash your savings and come out of. Those to my mind are the criteria of a successful savings scheme.
If the Government feel that is all too difficult, as was set forth by the hon. Member for Heywood and Royton (Mr. Barnett), I would point out that there is already in existence, approved by the Revenue and the Government, a parallel scheme of this kind, namely, the existing equity-based retirement annuities for the self-employed, with which the Revenue is familiar. They could be used as a model for a savings scheme on the lines of these new Clauses, or, if they are not acceptable to the Government, for a similar scheme.
I am not, in fact, in favour of the State setting up a scheme of its own. It would be better if the State simply set the framework for schemes arranged by other people—be the ring master, as it were. But I would point out that, since the Chancellor spoke in the Budget debate, the advent of the Post Office giro system will make a State savings scheme a great deal easier to administer.
The Chancellor, in his Budget speech, said that he would consider suggestions to modify the problems which owners of dollar securities have when they realise them. Will he, on that analogy, consider suggestions for a National Savings scheme? To do that would be far better than to dally as we have done, with decadent schemes such as the national lottery, which are only suitable for the sort of dead-beat and down-and- 1376 out countries that make fresh issues of postage stamps every three weeks or so. If we could get away from that approach to savings, and concentrate on something with the solidity of the 19th century schemes, which were such an enormous success, we should give the Chancellor the pleasure, in subsequent Budgets, should he come to open any, of reducing taxation.
§ 6.30 p.m.
§ Mr. Kenneth Baker
I strongly support the new Clause. This is the first occasion, during the many hours spent on the Bill, that we have had the opportunity of discussing savings as such. The debate, before you, Mr. Speaker, resumed the Chair, was rather wide ranging on the principle: to what extent should the Government encourage savings? We on this side of the House are not convinced that the Government put this at the top of their list of priorities, and the earlier speeches seemed to indicate that. It should not be necessary for us to argue—and I should be out of order if I attempted to do so— the case for greater savings in our economy, but it is a fact of economic history—
§ Sir G. Nabarro
On a point of order. Mr. Speaker, in your absence we had a debate on the principles of National Savings and their application to the three alternative schemes. If it is now to be ruled out of order for any speaker to talk about the principles of savings, that will stand the whole of this debate—or at any rate its earlier stages—on its head. For the benefit of anybody who may catch your eye later will you now rule on whether we may talk about the principles of National Savings, their influence on the levels of direct and indirect taxation, with which they are indissolubly linked, and also the content of these three Clauses?
§ Mr. Speaker
The hon. Member must wait until he makes his speech. I shall then rule whether he is in order. These Clauses seek to give certain tax concessions to savings. As the hon. Member said at the beginning of his point of order it is in order to talk about savings, 1377 their incidence, and the reason why they should benefit from the various Clauses concerning them.
§ Mr. Baker
The point I was making was that economic growth depends to a large extent on the percentage of the gross national product which goes into personal savings. One of the characteristics of the 1950s was the continual rise in personal savings as a percentage of the gross national product. That rise was dramatically checked from about 1964, and there is evidence of this in the recent Report to the Bank for International Settlements. This is not a bank of gnomes but one which has been a very good friend of the Government for the last three and a half to four years.
The Report says that for the last three and a half yearsTotal savings did not keep pace with the rise in home investments and this was reflected in the external deficit.I hope that that short quotation puts the whole question of savings into perspective, because we on this side of the House put it at the top of our list. One of the great disappointments of the Budget is that the Chancellor neglected and rejected this wonderful opportunity, in 1968, to do something imaginative about savings and to adopt a new approach to encourage new savings.
The philosophy and reasoning behind the new Clauses—and particularly new Clause 25—is that they will provide an imaginative approach. Far from introducing a new approach, the Finance Bill generally introduces disincentives to saving by the investment levy, the aggregation of children's unearned income, and the tighter rules—
§ Mr. Baker
I appreciate your Ruling, Mr. Speaker. I was making the point that the Government are not very sympathetic to this issue. They have introduced disincentives. They have done nothing to hack away the disincentives which already exist. The most important of these is the distinction which still exists between earned income and unearned income and I should like to see this distinction removed and unearned income called savings income.
1378 I commend new Clause 25 to the House for four specific reasons. First, it will bring in new savings, thus tapping a market which generally has not been tapped before in an effective and imaginative way. Secondly, the scheme is voluntary. Thirdly, it introduces an employer/ employee relationship such as that which exists in pension schemes operating in most companies. Fourthly, it will encourage capital formation, and this is a desirable end to all taxation. There is not enough formation of capital in this country.
Indeed, the redistribution of income is taking far too long. I agree with that politician who said:As a general rule, nobody has money who ought to have it.I am glad that two hon. Gentlemen opposite agree with what I think is one of the better aphorisms of Benjamin Disraeli.
I ask my hon. Friend the Member for Harrow, Central (Mr. Grant) to change the name "thrift scheme". Thrift is an old-fashioned word. Its synonyms are meagre, unlavish, cheeseparing and self-denial, and anybody who wants to sell a new exciting scheme will not do it with the name "thrift". We want "Savings with Profits", and ideas like that.
I believe the case has been argued most strongly that we should have a scheme of that sort. I believe that what, in effect, is the American scheme would be most useful, and I hope that the Chancellor will consider it sympathetically.
§ Mr. Roy Jenkins
Without wishing to bring the debate to a close, I wonder whether I might be permitted to intervene for a short time at this stage. The hon. Member for Harrow, Central (Mr. Grant) and others have raised a most important subject, and I am, therefore, anxious to say a few words in reply.
We have had a fairly wide-ranging discussion, not perhaps, under your guidance, Mr. Speaker, as wide-ranging as some hon. Gentlemen would have liked, but, nevertheless, wide-ranging and useful, and I think there has been a considerable degree of consensus between us about the desire to stimulate savings. I attach the greatest possible importance to savings, for any Chancellor who did not do so would be extremely foolish. I assure 1379 the hon. Member for Antrim, North (Mr. Henry Clark) that I regard the present circumstances as making the later Keynes a good deal more appropriate than the middle Keynes, both of which he quoted.
The methods and techniques for achieving these objects are, I think, an extremely valuable subject for study and debate in the House. I do not think that any one can claim to have found answers of complete validity in the changing social and economic climate in which these have to be viewed. They are problems which have faced every Government in this country in the post-war era, and the Governments of every developed and developing country encounter similar difficulties in stimulating and maintaining a high level of voluntary personal saving.
Inevitably, therefore, one has to begin any survey of the possibilities in this field by defining some of the limits of what is fair and practical, and what is relevant to the economic circumstances of today and the next few years.
Nor do I think, even though I attach great importance to savings, that one can really take the view, as the hon. Member for the Cities of London and Westminster (Mr. John Smith) seemed almost to be suggesting towards the end of his speech, that savings can be a substitute for taxation. He spoke almost as though I could have done the whole job by savings. I do not think that that can be held, and I do not think that any of my predecessors—of either party—when confronted with the problem of managing the economy felt able to rely on savings. If they had done so there would not have been increases in taxation in 1952, 1955, and in many other years.
But that in no way minimses the importance of the subject. What I think is clear is that what is wanted is net additional personal saving on top of the present effort. There is no national gain or real encouragement to new savings in schemes which merely induce a switch of savings out of some channel into others with all the wasteful by-products of competitive rate-bidding and excessive handling of transactions. Thus attention increasingly focuses on new ideas to satisfy what appear to be gaps in the present range of inducements to save; the pre occupation with some kind of taxation help as in the new Clauses we 1380 have been discussing; the searching after new forms of contractual saving which build on the self-generating impulse after an initial commitment; and also the natural concern to guard against changing money values.
I dealt with the last of those points, changing money values—in its most extreme form a safeguard would be an index-linked Government security—in my Budget speech. I indicated that I had considered this possibility, and, indeed, that I had considered the possibility of some "save-as-you-earn" scheme related somewhat to the basis of the old postwar credit scheme, but I found the existence of post-war credits unredeemed after 25 years an inescapable obstacle in the path of proceeding in this direction.
I do not under-estimate the strength of feeling which lies behind the idea of the index-linked Government security or the genuine concern for the personal saver's welfare which inspires it, but the obstacle, to which I referred in my Budget speech—the virtual impossibility of limiting the repercussions throughout the whole fixed interest market of introducing such a security—seems to be insurmountable. If hon. Members will study the experience of other countries in this respect, and the recent experience of one of the O.E.C.D. committees in its works on capital markets, they will see that there is a good deal of support for this view.
Stimulating savings through special tax concessions also attracts people, although it attracts Chancellors somewhat more when out of office than in office, because real difficulties are involved. It is very difficult to find ways of doing this which would be fair and would guarantee real additional saving, and would avoid a substantial loss of revenue beyond the limited arrangements which have been part of our tax system for many years.
I do not regard it as the last word on the matter, but the Royal Commission on Taxation had a good deal to say on this in Chapter 3 of its final Report. Aside from the major problems of principle there are serious practical obstacles in the way of operating savings schemes which depend on tax relief for the contributions.
I suppose that no tax problem of this sort is completely insurmountable. I 1381 forget which Member opposite took up the point made by my hon. Friend the Member for Heywood and Royton (Mr. Barnett)—I believe that it was the hon. Member for Orpington (Mr. Lubbock)— that one should not adopt the attitude of saying that because something has not been done it can never be done. Equally, however, it would be very irresponsible for any Chancellor not to have regard to the extreme complications and burdens of work which might be placed on the Revenue.
§ Mr. Henry Clark
I have followed the right hon. Gentleman's argument with some interest. I should like to know why his arguments do not apply to the £160 million a year in tax rebates on life insurance and pension funds. Is he thinking of abolishing them in his next Budget?
§ Mr. Jenkins
I do not propose to do that. The fact that we have one somewhat complicated scheme to operate is not necessarily a reason for saying that the Revenue can take another in its stride.
I would point out to the hon. Member for Orpington that it is not a sound argument to say that since the Revenue was able to deal with natural fluctuations in income and earnings from week to week or month to month by means of P.A.Y.E. it should be able to deal with the problems of saving schemes based on tax relief. I have been into this matter because the same thought occurred to me, but I can assure the hon. Member that there are considerably greater problems involved in coping with a scheme geared to tax reliefs than are involved in coping with fluctuations in earnings. I am not saying that it could not be done in any circumstances; I am saying that the fact that P.A.Y.E. can cope with wage fluctuations because the tables are so designed does not mean that it can cope with other schemes in the same way.
There is a more limited area within this broad field which could well merit further study as other Government policies develop. In particular, I have it in mind that when the Government's proposals for earnings-related State pensions have proceeded a stage further there could well be scope for the clarification and simplification of tax rules affecting other super- 1382 annuation schemes. I had already asked for a review of this subject, and I am not without hope that when we clarify pension fund arrangements there could be opportunities to improve upon the present inducements for such saving.
Consideration of saving through insurance and pension fund schemes leads on to thinking about other possibilities of harnessing new inducements to other contractual forms of saving. I agree that there is a potential source of new saving in the shorter-term scheme which offers high rewards for those who pay their contributions by deductions from pay. The National Savings Movement has operated in this field for many years with its group savings schemes. Gross national savings in its industrial groups last year were £158 million, and about 2¾ million members participated. We all want this kind of scheme to continue to thrive for the benefit of those whom it suits best.
The C.B.I. has produced some proposals for a new contractual savings scheme and I welcome this reaffirmation that employers are prepared to support and assist in practical ways the provision of good savings facilities for employees. The Government will be discussing with the C.B.I. and T.U.C. some of the new features of contractual savings schemes which are urged upon the Government, including those provided for in the new Clauses which we are considering.
Some of these schemes are bound to present their own difficulties on close examination. It will be clear from what I have already said that the idea of tax relief on contributions to a scheme presents practical difficulties, as well as being open to objections of principle. For these reasons—I do not think that this will be a surprise to hon. Members, because they have indicated quite fairly that the Opposition Clauses were a sounding board and could not be regarded as completely final schemes—I shall have to advise the House not to accept the new Clause in the name of the right hon. Member for Enfield, West (Mr. Iain Macleod), which was moved by the hon. Member for Harrow, Central, or the new Clause standing in the names of the hon. Member for Colne Valley (Mr. Richard Wainwright) and the hon. Member for St. Ives (Mr. Nott).
1383 The new Clause standing in the name of the hon. Member for Antrim, North is rather different—not that I shall advise the House to accept it. It is different in that it proposes an extension of age relief on unearned incomes. It is not confined to people earning modest incomes; indeed, it would give the greatest benefit to Surtax payers. I doubt whether this would have much relevance to the sort of savings that we are discussing, and it would be a very expensive inducement —costing the Revenue not £20 million but about £80 million a year. In these circumstances I have no hesitation in advising the House to reject this new Clause.
But there is scope for a new development in contractual savings, and I am having the possibilities re-examined as a matter of urgency. What I have in mind as a starting point is a scheme specially geared to the needs of employees, with all the advantages of deductions from pay at source. I feel that generous terms, perhaps with a tax-free yield, linked to an unbreakable contract to save regularly for a minimum period, are worth examining as a means of tapping a new source of money on terms which could be justified having regard to the firm commitment and the ease of handling.
Obviously, a great deal of detailed work must be done on this. The hon. Member for the Cities of London and Westminster (Mr. John Smith) asked me if I were open to receiving advice. I am —from him or anyone else. I look forward to the co-operation of the many representative bodies in the savings world who would wish to be associated with the Government's study. I cannot commit the Government at this stage to introduce a scheme, still less to fix a date for its starting, but since I have to ask the House to reject these Clauses I have thought it right to indicate the directions of my thinking and the specific areas of work which I have commissioned. I hope to be able to report further to the House on some of these in the new year.
§ Mr. Edward Du Cann (Taunton)
The right hon. Gentleman has been good enough to tell the House that he is conducting a full investigation of this matter. This has been listened to with gratification by all who are interested, especially those with a personal interest 1384 in the National Savings Movement. Will the right hon. Gentleman undertake to incorporate in the review everything that is happening—especially in respect of employees—in United States and Germany as well as in connection with proposals in the United Kingdom?
§ Mr. Jenkins
Yes. Wherever it is relevant I am most anxious to have the full benefit of the experience of these two countries, as well as many other countries.
I am aware that I have not been able to announce any further dramatic new advance to the House. I also remind the House that many of my predecessors from the other side have studied this problem over a very long period without arriving at a dramatic new advance. I believe that it needs sympathetic and intensive study, and that I propose to give it. I hope that I have said enough to show that I attach very great importance to this subject.
§ Mr. Iain Macleod
I follow the Chancellor only because it will be convenient for the House that the contributions from the Front Bench should be consecutive. This has been an excellent debate. I am sure that many of my hon. Friends wish to contribute to it, but I will quite understand if the Chancellor, who, of course, is a busy man, is not able to stay for the whole debate.
We are grateful to my hon. Friend the Member for Harrow, Central (Mr. Grant) for initiating the debate and for the work that he has put in on new Clause 25, which is the first of the four which we are discussing. Almost everybody has a scheme for the increase of savings. There is new Clause 25, which is the child, basically, of my hon. Friend the Member for Harrow, Central; there is the Liberal scheme; there is the scheme of my hon. Friend the Member for St. Ives (Mr. Nott); there is the C.B.I. scheme; there is the scheme to which I am particularly attached, which was mentioned by the hon. Member for Heywood and Royton (Mr. Barnett), which is based on a S.A.Y.E. policy, save-as-you-earn. It seems that everybody has a scheme except the Government, although it is, I suppose, something that the Chancellor has said that he is thinking about having one.
1385 I remember very well an anniversary meeting of the National Savings Movement, held a year or so ago at Guildhall, which I attended with the Chancellor's predecessor, the present Home Secretary. We both made speeches. The theme of the Home Secretary's speech was the theme of more savings, less tax, which came from his Budget speech. That is an admirable principle, only slightly spoiled by the fact that we have the exact reverse under the present Administration. We have, in fact, more tax and less savings.
The Chancellor would, I think, agree that the urgency of the present search for new methods of savings is very much pointed by the fact—and that is why we have these four Clauses for discussion now—that there can be little doubt that, partly with the increasing sophistication of people, the traditional methods of saving are less and less automatic and, perhaps, less and less productive. There can be little doubt that what has been called the "spending spree" has been largely financed by the drawing-down of savings. There is little doubt that the flight from money in one way or another is gathering pace. I find it almost impossible to reconcile what I read yesterday in the Board of Trade returns with what I know to be the facts about consumer spending at the present time. But that is a digression, and I will return to the four Clauses, particularly Clause 25.
We have all paid tribute in our day, and quite rightly, to the excellent work of the National Savings Movement, splendidly led and splendidly staffed by volunteers at all levels. Nothing which I have to say in any way derogates from that, but I feel that some methods of national savings are becoming a little outdated. I find the advertising humdrum, in fact rather dreary, and the concept is less exciting than it used to be. As the House knows, my hobby horse, the S.A.Y.E. scheme, is based on what has been called the habit of saving.
The Chancellor said a few moments ago, and he is quite right, that what we want, and what these Clauses are designed to achieve, is net additional new savings. I think that he is wrong, however, to link the efforts which are being made in any way with the failure, as many people would regard it, looking back, of the post-war credit scheme. I see no reason 1386 why he should do this and no link between the two, for the obvious reason that the post-war credit scheme was compulsory, whereas I do not suggest, and none of these forms suggests, compulsory savings. This objection of the Chancellor's, which I fully understand in relation to a compulsory form of saving, is not relevant to most speeches which have been made today.
The really big money available, if it could be tapped through a thrift plan or in some other way, is the regular comparatively small savings from an enormous number of people, rather than the present tendency and the past tendency of Chancellors for a long time, of trying to encourage comparatively small extra amounts from few people by offering them inducements to switch. It is a thoroughly desirable part of the hunt for new savings that there should be some excitement attached to the savings, that there should be a chance of appreciation of the amounts invested, and this becomes important as the investor becomes more sophisticated.
It seems clear from the debate that the other side of the House, particularly the Chancellor and the hon. Member for Heywood and Royton, have been obsessed with the difficulties, whereas the speakers from the Liberal benches and from these benches have been interested in the opportunities put forward by the various schemes. I do not for a moment underestimate the difficulties. I have done quite a lot of work on this, and even outside the Government machine I can see many of the difficulties. I have the feeling that the right answer is the Churchillian one, "Do not argue the difficulties. The difficulties will argue for themselves."
If it is made clear that this is what will be done, I do not believe for a moment that the difficulties will be insuperable. My hon. Friend the Member for the Cities of London and Westminster (Mr. John Smith) was quite right; it was a failure of the Budget, and it has been one of our main criticisms of the Budget, that, on balance, it was anti-saving. That is why there is a vital need for such a Clause as is before the House.
We suggest in the four Clauses—and I am linking the Liberal Clause with them —that we should learn from the experience of other countries. The Liberal Party points to West Germany; new 1387 Clause 25 points to the experience of the United States. When we have learned from other countries, we should put in our own experience, which is not inconsiderable, and we should do a great deal of work on it. The Conservative Party has already produced a pamphlet of one possible method of saving, and we are in advance of the Chancellor in the work he is doing here.
Making allowance for the difficulties, which I recognise, and for the problems which he outlined to the House, I found the right hon. Gentleman's response to these imaginative proposals unhappily negative. For the reasons I have given, I regard this as an important debate, and I hope that it does not end until hon. Members who wish to speak have contributed to it, but in due course I suggest to my hon. Friend the Member for Harrow, Central that we would be right to carry out dissatisfaction, not with the ultimate intentions of the Chancellor, but simply at the snail-like progress which he is making on this topic, in to the Division Lobby when the time comes.
§ 7.0 p.m.
§ Mr. Geoffrey Hirst (Sheffield)
I am sorry that the Chancellor has to leave. I appreciate that he is a busy man. However, I take the view that when the Finance Bill is discussed on the Floor of the House for only four or five days, a Chancellor of the Exchequer should not deny himself the opportunity of hearing the views of back-bench hon. Members. But I have every faith in the Financial Secretary, who is very attendant on the House.
I join my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) in disappointment at the right hon. Gentleman's approach to the subject. It is surprising that there is not already a Government solution along these lines. Equally, I am frightened when I hear him speaking about post-war credits, and so on, although it may not mean anything except that something is wrong with his thinking. Certainly, it has no relevance.
It is not often that I agree with the hon. Member for Orpington (Mr. Lubbock), and I am rather frightened at the suggestion that I may. However, I agree with him today when he says that we need a new, radical approach to the sub- 1388 ject of savings. No one can doubt that there is a big awareness in people's minds that they have to protect themselves as never before from the fall in the value of money. There is no shadow of doubt about that, whatever is done, and much has been done by the National Savings Movement. But that will not be repeated. Therefore, we must think anew. The Chancellor clearly is not thinking anew, and that is our objection. He must think anew, as must the whole Treasury.
It is no good arguing about the difficulties. I was shocked by the speech of the hon. Member for Heywood and Royton (Mr. Barnett), who generally enters our debates with rather more imagination than he displayed today. If we make up our minds to do something, my experience in the House has been that the Treasury finds the answer. It is for the Government to satisfy themselves that a new radical approach to savings is required and that it has to be along certain lines. Once a policy decision is taken to that effect, somehow or other the officials behind the scenes will find a way. After all, they have found ways to some dreadful policies in my time, and this is a simple matter by comparison.
We are not satisfied that the Chancellor's mind is up to date and that he is conscious of the way that people are thinking. If we are to get this completely new approach to saving, it is no use our making up our minds in a vacuum simply because the Treasury suggests it or a Royal Commission thinks that it is a good idea. We have to realise what it is that the people want. They want to be protected against the fall in the value of money, and a scheme which does not take that into consideration is a waste of time.
It is along those lines that the C.B.I. was thinking. I was on the committee of that body which devised its scheme. I do not agree with it all, but I think that the idea behind it is right. But where are the Government in this matter? As my right hon. Friend has said, everyone has a scheme except the Government, and that is what makes us nervous. I am sure that the Financial Secretary is conscious of that feeling in the House today. He realises the vast importance of it.
If the Government got out some sort of scheme of their own, they could protect the nation from the further inroads 1389 of taxation which we shall see again whether this miserable Government remain in office much longer. We have to take this very important factor into consideration. I sincerely hope that the Government will now do some rapid thinking and realise that they have to get a new level of savings from people who are making fairly good money and who want a simple scheme available. It would be possible to sell a scheme where savings were made as on earned on a contractual basis, and I will not be put off by the argument that it would make the P.A.Y.E. card difficult. If it gets as difficult as all that, we must bring out a system to replace it.
If we are to correct the present situation in the country, and encourage people to greater effort, we must get away from the idea of damning with taxation and, instead, devise a scheme of savings which maintains the value of money. Let us have some up-to-date thinking instead of the old bureaucratic line of thought, and let us have some sense.
§ Captain Walter Elliot (Carshalton)
I find it depressing to speak in support of a victim whose head has been cut off, but, if it is depressing for me, I am certain that this lack of a dynamic approach by the Chancellor to national savings will be infinitely more depressing for the country.
Naturally, when the Chancellor speaks about tax concessions and what he considers might be a substantial loss in revenue as a result, one must respect what he says. But, just as a small influx of money into a business at the right time leads to results out of all comparison to the size of the sum of money, small concessions in certain areas of savings would lead to results out of all proportion to the costs.
I want to speak in support of the scheme in new Clause 91, which was touched on by my hon. Friend the Member for Antrim, North (Mr. Henry Clark). I am sure that the Treasury Bench would be the first to agree that one of our great troubles even today is a consumer boom. I imagine that, in the last six or eight months, the Treasury has probably thought about little else. However, I do not believe that the problem should be looked at in the narrow sense. We should look further than the 1390 pre-Budget boom, further than a boom from one quarter to another, and even further than a boom from one year to the next. The situation has to be looked at in a much wider sense.
The Chancellor referred in his Budget speech to the fact that we consume too great a proportion of our gross national product, with the result that not enough is exported and there is insufficient capital investment. As a result, we have resorted to what seem desperate and temporary measures by successive Chancellors to curb the spending boom. Socialist Chancellors especially have relied heavily on the tax weapon. I saw today, if the Chancellor was reported correctly in the Press, that he said that we have just about reached the limit of taxation in this country. I think that he is right.
As well as the tax weapon, we have seen various financial inducements to persuade companies to invest more and to retain their earnings. But these are palliatives only. We need a massive re-orientation in the habits of the nation towards thrift and the saving of money. This is an extremely difficult task.
Ever since the war, Government policies have tended to weaken the habit of thrift. In earlier decades the fear of poverty in old age was a spur to thrift. With the development of social services, this has been mitigated, and probably that is all to the good. Many services are now free and that leaves resources with which people can buy consumer goods. The development of hire purchase for all ages, along with high-pressure advertising, has greatly increased the pressure on people to buy goods and something must be done to counteract it. We must buttress and foster thrift to weaken the pressures to consume.
In spite of the change in our habits and the development of social services, I am convinced that the urge to save for retirement or old age is extremely strong. Time and again, when I have been trying to arrange for supplementary pensions for elderly people—I am sure that other hon. Members have had this experience —I have been stopped, understandably enough, by the firm and ingrained desire of people to hold on to and preserve the small amount of capital which they have 1391 managed to save and which gives independence and security far more than any State system.
This desire to save for old age must be encouraged. It is highly desirable for the nation and the individual. If it can be developed, it will lessen the burden of taxation, decrease consumption of goods, make room for exports and assist investment. New Clause 91 is a beginning. It is simple, people will understand it and it will encourage the small man to save, which, I believe, is what we want.
It was most disappointing to hear the Chancellor enumerate all the difficulties against allowing the Clause. Of course there are difficulties. The Clause may need rewording and the limit may have to be altered, but that is nothing which the Treasury cannot overcome. I am sorry that the right hon. Gentleman has turned it down and I hope that, in the time ahead, the Government will seriously consider incorporating it in the next Finance Bill.
§ Sir G. Nabarro
The new Clause with which we are primarily concerned is No. 25, to which my name has been added as fourth on the list,. after those of my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod), my right hon. Friend the Member for Taunton (Mr. du Cann) and my hon. Friend the Member for Harrow, Central (Mr. Grant), and I have waited for 2½ hours, Mr. Deputy Speaker, to catch your eye or that of your predecessor. Of course, I had not hoped to speak after the Chancellor but before him. I have now torn up what I was going to say and will confine myself to his statement.
I alluded in an intervention in the speech of my hon. Friend the Member for Acton (Mr. Kenneth Baker) to the indissoluble link between savings and taxation. The Chancellor referred to taxation, and savings in the context of taxation, and it was that part of his statement which caused me the greatest disappointment. I am much closer to my hon. Friend the Member for the Cities of London and Westminster (Mr. John Smith) than I am to the Chancellor. This evening, we have heard a further fragment of "The emerging Tax Philosophy of Mr. Jenkins"—
§ Sir G. Nabarro
I will finish my sentence, Mr. Speaker.
—as an appendix to the leading feature contribution to the Financial Times under that title on 9th April last. So you can see, Mr. Speaker, that I am absolutely in order.
I have been awaiting this savings fragment to complete "The emerging Tax Philosophy of Mr. Jenkins"—to quote again the article in the Financial Times— in the special context of savings, for the important reason that every chancellor since the late Sir Stafford Cripps has, at one time or another—generally in the country, rarely in the House—alluded to the fact that he could take less in taxation if he could secure more in personal savings. That was the policy of the late Sir Stafford Cripps when Chancellor, of the late Mr. Gaitskell when Chancellor, of Lord Butler when Chancellor, of Mr. Harold Macmillan when Chancellor, of Lord Thorneycroft when Chancellor, of Mr. Heathcoat Amory when Chancellor, of my right hon. and learned Friend the Member for The Wirral (Mr. Selwyn Lloyd) when Chancellor and of my right hon. Friend the Member for Barnet (Mr. Maudling) when Chancellor.
It was the policy of the present Home Secretary when Chancellor—[Interruption.] Does the Financial Secretary to the Treasury wish to intervene? What he murmured—sotto voce, but my hearing is acute—was that it is the policy of the present Chancellor—
§ Mr. Harold Lever indicated assent.
§ 7.15 p.m.
§ Sir G. Nabarro
But I say that it is not. Manifestly, it is not his policy, because the present Chancellor said today that of course he could not raise the large extra sums of taxation which he deemed necessary in this Budget by savings as an alternative to taxes. No one ever suggested that he could. No hon. Member would suggest that £939 million, being the added burden of taxation in this Budget, could be raised by additional savings alone, but a substantial part of it could have been.
1393 What the Chancellor should have done in the Budget was reduce direct taxes as an incentive and offset the fall in revenue by an increase in personal savings with powerful incentives provided to attract those personal savings. This is not a new concept. The Chancellor did not embrace it this evening, although the Financial Secretary says that he did. I listened to his speech: he did not embrace it. When the Financial Secretary reads it tomorrow morning, he will recognise that I am right and he is wrong.
I said it much more unequivocally in 1966, and this quotation, in the context of savings, allows of no possible misunderstanding. I said:The Chancellor will spring to the defence of his Budget proposals this year, and will say that he cannot afford reduction of the standard rate of 8s. 3d. in the £ to 7s. 6d. He will say that he cannot afford a reduction in the revenue of £240 million. But the same Chancellor of the Exchequer and all his predecessors for years and years past have stumped the country saying, ' Give me National Savings and I will abate tax revenue by an equivalent sum'. Every Chancellor, the present Chancellor included, makes dynamic speeches in support of personal savings and National Savings and says, 'If I can get an increase in National Savings it is as good to me as tax revenue'."—[OFFICIAL REPORT, 20th June 1966; Vol. 730, c. 61.]The Chancellor this year has made no attempt to do that, although he averred half-heartedly his support for the principle this, evening. The reason that he has made no attempt to do it is, I suppose, that he knows that he could not succeed on the scale that he would have preferred to achieve had he substituted savings for taxes—I mean by that a figure of £300 million or £400 million from additional personal savings of all kinds, and the money surely is there to be saved if the incentives are provided and the attractions offered.
I added my name to this new Clause largely because the name of my right hon. Friend the Member for Taunton was on it. No one in the field of unit trusts has a record to compare with his for tremendous success in attracting new savings. It is an alternative to National Savings. In May, 1968, alone, £28 million of new money was invested in unit trusts. In two short years, between 1966 and 1968, the aggregation of sums vested in unit trusts; has grown from £600 million to more than £1,000 million. Investment 1394 in unit trusts is increasing at the rate of more than £200 million of new savings every year. The National Savings Movement cannot hold a candle to it.
I urge hon. Members to study the comparative results of national savings, and I repeat this in the context of what my right hon. Friend the Member for Enfield, West said about the unattractiveness of National Savings today. In 1964–65, the last year of Tory government, £195 million was the increase in National Savings. In the first year of Labour Government that was transposed to a deficit in national savings of £54 million✶ so that in one year the change-over from a surplus of £195 million to a deficit of £54 million represented a change-over of no less than £249 million.
The next year, 1966, National Savings broke even and in 1967 they showed a modest surplus of £80 million. That compares with the present rate of increase in the aggression of unit trusts of more than £200 million per annum. Surely these figures demonstrate that there is something gravely wrong with the condition of National Savings today and with the incentives offered to attract new national savings.
That is the major point I wish to make. Shortly, it is that unless we have a scheme of the kind enshrined in new Clause 25 we will not attract new savings. Only through the medium of a scheme of this sort can we match the attractiveness that the unit trusts offer—that attractiveness which proliferates in the national and Sunday newspapers, offering, for example, life assurance with a saving of a few pounds per month, all sorts of attractive benefits for children's savings and the rest, few of which are matched by the National Savings Movement.
The Chancellor rubbed along in an unattractive, pedantic way about tax incentives for savings when he should have told the House that there are admirable precedents for giving such incentives. Lest he has forgotten them, I remind the Financial Secretary of at least three of them. For many years we had a system of allowing relief of Income Tax at the rate of 3s. 6d. in £, with a maximum of one-sixth of the annual income of any saver, through life assurance schemes✶ a tax relief for small savings linked to life assurance.
1395 My second example, brought in by a Tory Chancellor about 10 years ago in response to pressure from my hon. Friends and myself: the first £15 of annual interest in the National Savings Bank would go tax-free, and at a flat rate of 2½ per cent. interest, that would mean a capital vested of £600. In other words, tax on the interest derived from a capital sum of £600 is tax-free as an incentive to small savers, in the National Savings Bank.
The third example is, of course, in the form of National Savings Certificates, which are free of tax on the interest accrued, but not only for the initial published life of the certificate. For example, we have the tenth issue, of which millions are held today, but not encashed. These aggregate more and more interest year by year, though on a reduced scale, and all tax free.
These are just three examples of tax incentives for savings. It is, therefore, ridiculous for the Chancellor to say that he cannot evolve a comparable scheme for tax-free contractual small savings through the machinery of P.A.Y.E., all of which could be operated on tax tables and by company accountants who are thoroughly skilled in these operations.
Does the Chancellor genuinely desire new capital formation in this country to be created by the orthodox method, the correct method, of resting on the aggregation of personal and corporate savings? That is how new capital formation should be created. I do not believe that we can ever save sufficient capital sums unless we are prepared to embark on contractual savings schemes of the kind enshrined in new Clause 25.
Last night the House of Commons behaved splendidly. It threw out Clause 50 of the Bill. In one of the final speeches in that debate I said that gambling was running at an excessive rate in this country because taxation was excessively high. I add to what I said then, in the context of savings, that National Savings in Britain are debilitated today, because of the excessive level of direct and indirect taxation.
I prefer savings to taxes. I prefer contractual savings of the kind suggested in new Clause 25 to sporadic savings, which are much less valuable to the Treasury. It is for all these reasons that I castigate 1396 the Chancellor for his speech tonight, a speech which was obscurantist in character and feeble in the note it struck when he should have been bold and decisive in appealing to the nation for far larger savings, all of which are vitally necessary to our national economy in its present predicament.
I am delighted that my right hon. Friend the Member for Enfield, West asked me to vote with him tonight.
§ Sir G. Nabarro
It is all very well for my hon. Friend to say bully for me, but I am only too delighted to walk into the Lobby with my right hon. Friend. Although I have often quarrelled with him on matters of fiscal minutae, I have great respect for his financial and fiscal philosophies. The House might be interested in a quotation from an article written by right hon. Friend, gathered from my encyclopaedic file of his utterances, a file which is collated by my researchers. Writing in the Sunday Telegraph on 30th July, 1967—I quote his words because they are most apposite to the debate—he said:I want to see a capital-owning democracy and I want to see an economy of choice. The phrases are mine, but each has a political parent. A capital-owning democracy complements Sir Anthony Eden's aim of a property-owning democracy. If today you start with wealth it is not difficult to keep it. If you start with nothing our present levels of taxation mean that even the ablest salaried man cannot acquire a modest competence.I congratulate my right hon. Friend. When he is Chancellor—a time which I hope will not be long delayed—I will call on him to implement those words and put into practice the principles which he has given to the House tonight, all of which I will shortly support in the Lobby.
§ 7.30 p.m.
§ Sir Henry d'Avigdor-Goldsmid (Walsall, South)
My hon. Friend the Member for Worcestershire, South (Sir G. Nabarro) began his memorable remarks with the information that he had already torn up his speech, so presumably his notes were thrust into his hands during that moment when he absented himself after the Chancellor of the Exchequer had spoken.
I am glad that his research department worked with such skill and speed. 1397 It was, perhaps, a skill and speed like that of the great Lord Birkenhead. He went further. When the great Lord Birkenhead taxed the Chancellor of the Exchequer of the day, then Mr. Lloyd George, with some words which Lloyd George denied having spoken, Lord Birkenhead said, "I had anticipated that —a lapse of memory. I have here a copy of the appropriate newspaper". Perhaps my hon. Friend has said, "I anticipate not being called, so I have here an alternative speech". Whether it was his first, second or third speech his was a very fine performance.
On the very important subject of savings, altogether different points are at issue. One is the requirement of the Government to borrow from their citizens. It is clear that this requirement cannot be made today without some element of fiscal privilege in those who lend to the Government. This is a fact that the Treasury must now accept and absorb. I confess that I had not intended to speak at this stage, but I do so because I was so disenchanted by the Chancellor of the Exchequer's remarks. His was the kind of speech that could have been made from the Treasury Bench at any time during the last 20 years, yet even the most ignorant student of current affairs must realise that times have changed during the last 20 years, and that the Government, as borrowers, are now meeting very severe competition.
The great mass of people are inclined to save. What worries them very much is to think that what they save is being eroded through no fault of their own. Where we have gone wrong so often has been that in trying to attract new savings all we have done has been to invite people who have money to change from one form of security to another.
The important thing is to attract the new saver, which is exactly the purpose of the new Clause. But I believe that there is an alternative to giving him a fiscal advantage. The new saver, and I speak only of the new saver, should be given a built-in insurance against inflation. He should not necessarily be given a righ rate of interest—probably a low rate of interest—but a guaranteed assurance that his interest moves with the changes in the cost of living.
1398 There is no question that that would attract new saving. It is, very clearly, not practicable to extend that assurance to the entire field of savings at present, but to get the new saver in is the most important contribution that can be made in the coming 12 months, because we see a situation today where the entire fixed-interest market of the country is crumbling.
Why is it crumbling? It is crumbling because, as the Financial Secretary very well knows, every person who has money in fixed interest is saying to himself, "What will my position be next week? What will my position be next month?" I do not believe that all our constituents spend their time reading the Financial Times—I do not think that basically they want to bother with these things— but they like to feel that what they put into the savings bank will be there when they need it.
At the same time, I do not see that there is any special national interest involved in making it cheap and attractive for people to invest their money in various forms of speculative enterprise— some of it more speculative and some of it less—but this is something that people go into because they regard it as a means of protecting their funds. We really must apply ourselves to the question of protecting the funds of the individual.
We have been a great deal too light-hearted in our approach to this subject over the years—and I do not think that either side can be free of that charge— and now we see where that light-hearted-ness has got us. As the Financial Secretary very clearly recognises, there is such a very large amount of money still in Government fixed-interest stocks which, theoretically, is free to come out at any moment, that if there were any real dissaving movement, a movement from fixed-interest stocks in a big way— because what we have seen so far is relatively small and unimportant—the consequences to Government credit would be disastrous.
The only way in which the Govern-men can remedy this state of things is to accept the principle that they need the people's savings and must offer the people some form of fiscal attraction to induce them to part with their savings. I suggest that the small new saver should be 1399 rewarded with a built-in guarantee against inflation.
I believe, as my right hon. Friend the Member for Flint, West (Mr. Birch) has urged in the past, that the case of the large investor might broadly be met by exempting from Capital Gains Tax transactions in the fixed interest market. I do not pursue that point now, because it only relatively affects the position. I am glad to have the opportunity this evening to support this Clause and, particularly, with my hon. and right hon Friends to mark my dispproval of the attitude of the Treasury which, like Casabianca, remains on the burning deck of the fixed interest market whence all but it has fled.
§ Mr. du Cann
I had not intended to intervene, because I knew my hon. Friend the Member for Harrow, Central (Mr. Grant) would make so admirable a speech in this sector of our ideas where he has spent so much time and constructive thought that it would not be necessary for any of us to support him at all. On the other hand, I was a little shocked by what the Chancellor of the Exchequer said, and I feel that some of his comments merit some form of reply.
I must declare an interest, although it is an interest well known to the House, and this is about the ninth time that I have declared it. I am chairman of the unit trust group which I founded about 11 years ago.
The Chancellor of the Exchequer said that he did not wish to put himself in a position in which he was obliged to rely 100 per cent. upon an increase in savings, but no one has ever asked him to do that, or suggested that such a course would be realistic. The fact is that by his actions, or rather by his lack of actions, he relies not at all on savings at the present time. It is with that attitude and that view that we on this side substantially quarrel.
The right hon. Gentleman said that he wanted to find ways of producing a net addition to personal savings. With that view we would all precisely agree. On the other hand, it seems to be entirely outside the right hon. Gentleman's understanding that with taxation at its present high levels, and the complications of the present tax system, it is inevitable that there will be a substantial degree of switching; and nothing en- 1400 courages switching more than marginal improvements in the rates of certain of the securities issued, with the approval of the Chancellor of the Exchequer, by the National Savings Committee. In other words, I accuse the right hon. Gentleman of encouraging people of switching savings, and of creating just that volume of work which he stated it was his intention to avoid.
Thirdly, the right hon. Gentleman said that he wished to avoid losses of taxation. Again, none of us would quarrel with that. On the other hand, again the matters of which I have spoken lead almost inevitably to this process. In his speech I had hoped and expected to listen to an intellectual argument which would refute my hon. Friend's new Clause and the speeches made in support of it. The disappointment of this debate was the commonplace nature of the Chancellor's reply. I regret having to say this. It was a betrayal of his intellectual capacity and an insult to all who have laboured constructively in this field for many years.
The Chancellor said that he and the Treasury were undertaking a wide-ranging review. The Acton Society Trust results were published many years ago emphasising the need for interest in contractual savings, a point with which my hon. Friend the Member for Harrow, Central is particularly concerned. All the evidence of public demand is available, and has been available for many years. There is no need for a review in that regard.
As to a review of new possibilities in future, I beg the Financial Secretary— for whose understanding of these matters I have the highest regard, as does the whole House—to bear in mind that it is not only a matter of finding new methods, but a question of looking at the situation as it already exists. It is the duty of the Treasury not only to facilitate the new suggestions made from time to time, but existing savings media and to remove disabilities from them.
Many of us have argued in different ways and at different times that those disabilities are enormous. It will be within your recollection, Mr. Speaker, that the Chancellor said that he wished to avoid complication of any sort, but I am one who, year after year, has badgered the Treasury to do something about 1401 the incidence of Capital Gains Tax on exactly the sort of contractual schemes we are discussing. It is well known that many small investors, by banking orders, subscribe small amounts of money—10s., £1, or £2—for purchase of shares in unit trust savings schemes. This, over a period of years, may involve several hundred transactions. In each and every one the Capital Gains incidence has to be separately assessed. If ever there were an absurd labour on behalf of individuals and the Inland Revenue, surely this is it.
I quote one example to show that there is a substantial need to look at the existing situation and to remove the disabilities affecting those whose purpose to encourage savings at present[...] I hope, entirely innocent and meritorious. My hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid), speaking with the knowledge so characteristic of him, has referred to the subject of gilt-edged. In Committee, we discussed, gilt-edged. We had no comment from the Chancellor this afternoon that income from gilt-edged is currently regarded as unfranked income, a second example of disability. There is much that various savings media could do to encourage a new popular investment in gilt-edged if this silly disability were removed.
It would be possible easily to give a catalogue, a lengthy catalogue, of disabilities which could be removed and thus providing an impetus to the existing sources of savings. I have given two examples. I regard that as sufficient to make the point. As one who has devoted his commercial life to the encouragement of savings, I say that the Government, instead, as my hon. Friend the Member for Shipley (Mr. Hirst) clearly pointed out, of engaging in platitudinous statements from the Front Bench, should encourage those who are doing their best in this field to get on in a practical fashion.
I turn to the point made by my hon. and gallant Friend the Member for Carshalton (Captain W. Elliot). He spoke of the reasons why people save. One matter of the bitterest disencouragement to me
§ in my 12 years' membership of this House has been that there has never been a clear appreciation of what the philosophy of the Government should be in the savings field. Why did the Chancellor say this afternoon that a review was under way? The answer is obvious. It was because he is under pressure from this side of the House and in the country in various ways. There is no initiative. What the Chancellor speaks of is in response to consistent pressure from my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) and other hon. Friends over many years.
§ I believe that the national interest requires a substantial initiative in this field in the interests of us all. It is the duty of the Government to provide that initiative. I strongly support the Clause, I argue, also, something different. It is clear to us all that for the rest of our lifetime there will unquestionably be a shortage of capital for practical purposes in this country and in those abroad. It is the duty of this House to foresee situations of this character and to endeavour to supply the need for practical help of one kind or another.
§ If that is insufficient in itself as an argument, I return to the point made by my hon. and gallant Friend. The reason why I got into the unit trust movement was very simple. It was because it was in accordance with my philosophy. I have long believed that the diffusion of power is infinitely better than concentration of power in a single pair of hands, or the hands of the State. There are practical ways of encouraging savings and bringing this process about.
§ Last, but by no means least, there is re-encouragement of that spirit of independence and integrity of mind which has made our country great in the past and probably can make it great again. Why the Treasury sits indifferent to these great purposes I cannot imagine. I am impatient of it and I am glad to see that my hon. and right hon. Friends are as impatient as I am.
§ Question put, That the Clause be read a Second time: —
§ The House divided: Ayes 135, Noes 189.1405
|Division No. 258.]||AYES||[7.48 p.m.|
|Alison, Michael (Barkslon Ash)||Bell, Ranald||Boarctman, Tom (Leicester, S.W.)|
|Baker, Kenneth (Acton)||Bitten, John||Boyle, Rt. Hn. Sir Edward|
|Balniel, Lord||Black, Sir Cyril||Brewis, John|
|Brinton, Sir Tatton||Hawkins, Paul||Pike, Miss Mervyn|
|Buchanan-Smith, Alick(Angus,N&M)||Heald, Rt. Hn. Sir Lionel||Pink, R. Bonner|
|Bullus, Sir Eric||Higgins, Terence L.||Pounder, Rafton|
|Burden, F. A.||Hirst, Geoffrey||Powell, Rt. Hn. J. Enoch|
|Campbell, B. (Oldham, W.)||Holland, Philip||Pym, Francis|
|Campbell, Gordon (Moroy & Nairn)||Hooson, Emlyn||Ramsden, Rt. Hn. James|
|Carlisle, Mark||Hornby, Richard||Rawlinson, Rt. Hn. Sir Peter|
|Cary, Sir Robert||Hunt, John||Rhys Williams, Sir Brandon|
|Chichester-Clark, R.||Jenkin, Patrick (Woodford)||Ridley, Hn. Nicholas|
|Clark, Henry||Kaberry, Sir Donald||Ridsdale, Julian|
|Clegg, Walter||Kimball, Marcus||Rodgers, Sir John (Sevenoaks)|
|Cooke, Robert||King, Evelyn (Dorset, S.)||Rossi, Hugh (Hornsey)|
|Cooper-Key, Sir Neill||Kirk, Peter||Royle, Anthony|
|Corfield, F. V.||Knight, Mrs. Jill||Sharpies, Richard|
|Craddock, Sir Beresford (Spelthorne)||Langford-Holt, Sir John||Shaw, Michael (Sc'b'gh & Whitby)|
|Crouch, David||Longden, Gilbert||Silvester, Frederick|
|Crowder, F. P.||Lubbock, Eric||Sinclair, Sir George|
|Dance, James||McAdden, Sir Stephen||Smith, Dudley (W'wick & L'mington)|
|Davidson, James (Aberdeenshire,W.)||Mackenzie, Alasdair(Ross&Crom'ty)||Smith, John (London & W'minster)|
|d'Avigdor-Goldsmid, Sir Henry||Maclean, Sir Fitzroy||Stainton, Keith|
|Dean, Paul (Somerset, N.)||Macleod, Rt. Hn. lain||Steel, David (Roxburgh)|
|Deedes, Rt. Hn. W. F. (Ashford)||McMaster, Stanley||Summers, Sir Spencer|
|Eden, Sir John||Maddan, Martin||Taylor, Sir Charles (Eastbourne)|
|Elliot, Capt. Walter (Carshalton)||Marten, Neil||Temple, John M.|
|Emery, Peter||Maude, Angus||Thatcher, Mrs. Margaret|
|Eyre, Reginald||Mawby, Ray||Turton, Rt. Hn. R. H.|
|Farr, John||Maxwell-Hyslop, R. J.||van Straubenzee, W. R.|
|Fortescue, Tim||Maydon, Lt.Cmdr. S. L. C.||Waddington, D.|
|Fraser, Rt. Hn. Hugh (St'fford & Stone)||Mills, Peter (Torrington)||Wainwright, Richard (Colne Valley)|
|Glover, Sir Douglas||More, Jasper||Walker-Smith, Rt. Hn. Sir Derek|
|Coodhart, Philip||Morgan, Geraint (Denbigh)||Wall, Patrick|
|Goodhew, Victor||Munro-Lucas-Tooth, Sir Hugh||Walters, Dennis|
|Cower, Raymond||Murton, Oscar||Ward, Dame Irene|
|Grieve, Percy||Nabarro, Sir Gerald||Weatherill, Bernard|
|Griffiths, Eldon (Bury St. Edmunds)||Nicholls, Sir Harmar||Whitelaw, Rt. Hn. William|
|Grimond, Rt. Hn. J.||Noble, Rt. Hn. Michael||Williams, Donald (Dudley)|
|Gurden, Harold||Onslow, Cranley||Wilson, Geoffrey (Truro)|
|Hall, John (Wycombe)||Osborne, Sir Cyril (Louth)||Winstanley, Dr. M. P.|
|Hall-Davis, A. G. F.||Page, Graham (Crosby)||Wolrige-Gordon, Patrick|
|Harrison, Brian (Maldon)||Pardoe, John||Younger, Hn. George|
|Harrison, Col. Sir Harwood (Eye)||Pearson, Sir Frank (Clitheroe)|
|Harvey, Sir Arthur Vere||Peel, John||TELLERS FOR THE AYES:|
|Harvie Anderson, Miss||Percival, Ian||Mr. R. W. Elliott and|
|Mr. Anthony Grant.|
|Abse, Leo||Davies, Harold (Leek)||Heffer, Eric S.|
|Albu, Austen||Davies, Ifor (Gower)||Henig, Stanley|
|Allaun, Frank, (Salford, E.)||Dempsey, James||Herbison, Rt. Hn. Margaret|
|Aldritt, Walter||Diamond, Rt. Hn. John||Hooley, Frank|
|Anderson, Donald||Dickens, James||Howarth, Harry (Wellingborough)|
|Archer, Peter||Doig, Peter||Howell, Denis (Small Heath)|
|Armstrong, Ernest||Driberg, Tom||Howie, W.|
|Atkins, Ronald (Preston, N.)||Dunn, James A.||Hoy, James|
|Atkinson, Norman (Tottenham)||Dunwoody, Mrs. Cwyneth (Exeter)||Huckfield, Leslie|
|Bacon, Rt. Hn. Alice||Dunwoody, Dr. John (F'th & C'b'e)||Hughes, Emrys (Ayrshire, S.)|
|Barnett, Joel||Edelman, Maurice||Hughes, Roy (Newport)|
|Baxter, William||Edwards, William (Merioneth)||Hunter, Adam|
|Bidwell, Sydney||Ellis, John||Hynd, John|
|Bishop, E. S.||English, Michael||Jackson, Colin (B'h'se & Spenb'gh)|
|Blackburn, F.||Evans, Albert (Islington, S.W.)||Jackson, Peter M. (High Peak)|
|Boardman, H. (Leigh)||Fernyhough, E.||Jeger,Mrs.Lena(H'b'n&St.P'cras,S.)|
|Booth, Albert||Fletcher, Raymond (Ilkeston)||Johnson, Carol (Lewisham, S.)|
|Boston, Terence||Fletcher, Ted (Darlington)||Jones, Dan (Burnley)|
|Braddock, Mrs. E. M.||Foley, Maurice||Jones, J. Idwal (Wrexham)|
|Brooks, Edwin||Foot, Michael ((Ebbw Vale)||Kerr, Mrs. Anne (R'ter & Chatham)|
|Brown, Bob(N'c'tle-upon-Tyne,W.)||Forrester, John||Kerr, Dr. David (W'worth, Central)|
|Brown, Hugh D. (G'gow, Provan)||Fowler, Gerry||Kerr, Russell (Feltham)|
|Brown, R. W. (Shoreditch & F'bury)||Freeson, Reginald||Lawson, George|
|Buchanan, Richard (G'gow, Sp'burn)||Galpern, Sir Myer||Leadbitter, Ted|
|Butler, Herbert (Hackney, C.)||Gardner, Tony||Ledger, Ron|
|Callaghan, Rt. Hn. James||Gray, Dr. Hugh (Yarmouth)||Lee, Rt. Hn. Frederick (Newton)|
|Cant, R. B.||Gregory, Arnold||Lee, John (Reading)|
|Carmichael, Neil||Grey, Charles (Durham)||Lestor, Miss Joan|
|Carter-Jones, Lewis||Griffiths, Eddie (Brightside)||Lever, Harold (Cheetham)|
|Chapman, Donald||Griffiths, Will (Exchange)||Lewis, Arthur (W. Ham, N.)|
|Coleman, Donald||Hamilton, James (Bothwell)||Lewis, Ron (Carlisle)|
|Concannon, J. D.||Hamilton, William (Fife, W.)||Lomas, Kenneth|
|Corbet, Mrs. Freda||Hannan, William||Loughlin, Charles|
|Crawshaw, Richard||Harper, Joseph||Luard, Evan|
|Cullen, Mrs. Alice||Harrison, Walter (Wakefield)||Lyon, Alexander W. (York)|
|Dalyell, Tam||Haseldine, Norman||Lyons, Edward (Bradford, E.)|
|Darling, Rt. Hn. George||Hazell, Bert||McCann, John|
|MacColl, James||Orme, Stanley||Small, William|
|MacDermot, Niall||Oswald, Thomas||Spriggs, Leslie|
|McGuire, Michael||Owen, Dr. David (Plymouth, S'tn)||Steele, Thomas (Dunbartonshire, W.)|
|McKay, Mrs. Margaret||Page, Derek (King's Lynn)||Symonds, J. B.|
|Mackintosh, John P.||Paget, R. T.||Taverne, Dick|
|Maclennan, Robert||Palmer, Arthur||Thornton, Ernest|
|McMillan, Tom (Glasgow, C.)||Parkyn, Brian (Bedford)||Tinn, James|
|Mahon, Peter (Preston, S.)||Pearson, Arthur (Pontypridd)||Tuck, Raphael|
|Mahon, Simon (Bootle)||Peart, Rt. Hn. Fred||Urwin, T. W.|
|Mallalieu, J.P.W.(Huddersfield, E.)||Pentland, Norman||Varley, Eric G.|
|Manuel, Archie||Price, Thomas (Westhoughton)||Walker, Harold (Doncaster)|
|Marquand, David||Price, William (Rugby)||Watkins, David (Consett)|
|Mason, Rt. Hn. Roy||Rankin, John||Watkins, Tudor (Brecon & Radnor)|
|Mellish, Rt. Hn. Robert||Reynolds, Rt. Hn. C. W.||Weitzman, David|
|Mendelson, J. J.||Robertson, John (Paisley)||Wellbeloved, James|
|Millan, Bruce||Robinson, Rt. Hn.Kenneth(St.P'c'as)||White, Mrs. Eirene|
|Miller, Dr. M. S.||Robinson, W. O. J. (Walth'stow,E.)||Wilkins, W. A.|
|Milne, Edward (Blyth)||Rose, Paul||Willey, Rt. Hn. Frederick|
|Mitchell, R C. (S'th'pton, Test)||Rowlands, E. (Cardiff, N.)||Williams, Alan (Swansea, W.)|
|Molloy, William||Ryan, John||Williams, Alan Lee (Hornchurch)|
|Morgan, Elystan (Cardiganshire)||Sheldon, Robert||Willis, Rt. Hn. George|
|Morris, Alfred (Wythenshawe)||Short, Rt.Hn.Edward (N'c'tle-u-Tyne)||Wilson, William (Coventry, S.)|
|Morris, Charles R. (Openshaw)||Short, Mrs. Renée (W'hampton, N.E.)||Winnick, David|
|Murray, Albert||Silkin, Rt. Hn. John (Deptford)||Yates, Victor|
|Neal, Harold||Silkin, Hn. S. C. (Dulwich)|
|O'Malley, Brian||Silverman, Julius (Aston)||TELLERS FOR THE NOES:|
|Oram, Albert E.||Slater, Joseph||Mr. Ioan L. Evans and|
|Mr. Neil McBride.|