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THE PARLIAMENTARY DEBATES OFFICIAL REPORT IN THE FIRST SESSION OF THE FORTY-TH[RD UNITED KINGDOM OF GREAT BRITAIN PARLIAMENT OF THE AND NORTHERN IRELAND.

WHICH OPENED 27th OCTOBER.


1964 fN THE FOURTEENTH YEAR OF THE REIGN OF HER MAJESTY QUEEN ELIZABETH ll FIFTH SERIES VOLUME 712 TWELFTH VOLUME OF SESSION 1964-65 HOUSE OF COMMONS Monday, 10th May, 1965 The House met at half-past Two o'clock PRAYERS [Mr. SPEAKER in the Chair] ORAL ANSWERS TO QUESTIONS LAND AND NATURAL RESOURCES Land Commission Mr. Willey: This is a piece of neces­ which will be generally sary legislation welcomed, which the hon.

Gentleman but I appreciate the point has raised.


Mr. Hector Hughes: Is the Minister difference aware that there is a striking and nomen­ between the phraseology and that in Scot­ clature in English law tish law, which is derived from largely and based on Roman law?

Will he take that into account citizen ordinary strue any Measures who will have to con­ for the benefit of the which he introduces?

Mr. Willey : I am aware of that, but I would ask my hon.
and learned his observations to address law to my right hon.

Friend the Secre­ tary of State for Scotland.

Friend about Scottish 7.Mr.

Jackson Land and Natural now announce Commission statement.

asked the Minister Resources, if he wiIJ of the setting up of the Land ; and if he will make a 1.Mr.
Evelyn King asked the Minister Resources whyther, for he will bring forward of Land and Natural in the proposals a Crown Land Commission, nomenclature phrase Crown Land, as used in the older sense, and any land which may subse­ quently be vested in mission.

he will devise the between to distinguish the new Land Com­ The Minister of Land and Natural (Mr. Frederick WiJiey) : Yes, Resources Sir.
Mr. King: In view of the fact that con­ fusion will be caused by the use of the word " Crown " in this highly controver­ sial piece of party legislation nationalisation, under­ take not to bolster "Crown"?

based on will the Minister it up by using the name 10.Mr.

Bence asked the Minister if he will of Resources Land and Natural take steps to enable local authorities acquire at reasonable land for essential prices.
house building to to The Joint Parliamenta ry Secretary of Land and Natural (Mr. Arthur Skeffington) the Ministry Resources right hon.

Friend will be introducing legislation and to deal with the problem of land as soon as possible.

prices to set up a Land Commission : My Mr. Jackson : Can my hon.

Friend tell the period in whioh there me whetiher dtrring vhis legislation is being prepared 3 Oral Answers 10 MAY 1965 • Oral Answers 4 has been any drying up of the land available for building development?
Mr. Skeffington: No, Sir.

We have no such evidence.

Board, in its study of Water Resources the Dee and Morecambe the Mersey Docks and will consult Harbour Board, on whose efficiency much of the weHbeing of Merseys,ide must depend.

Bay barrages, Mr. Boyd-Carpenter: Will this legisla­ by a White Paper?

If in the tion be preceded it is, in order to keep himself fashion will the Minister Paper debated listen?

bave the White and then be prep•ared to Mr. Bence: Is my hon.
Friend aware it would be found t<hat in the t>hat if a White Paper were issued on land prices last 15 years land prices have rocketed nearly 1,000 per cent.

and that huge fortunes WiH he do somet>hing plortabion by stopping have been made out of land?

this racket in land prices?

needs for housing of people's to stop this ex­ Mr. Skeffington: The rise in the cost of land is common knowledge only way of deal-ing legislation has in mind.

and the with it is by the which my right hon.


Friend directly On tlhe More­ 'Ilhe Wa,ter Resources ooncerned Mr. Skeffington: Board is not at present with the Dee Barrage.

cambe Bay scheme the Board will of course have to consult right hon.

Friend bas not t-hought to give the Board detailed necessary as to the scope of its consulta­ strnctions br·ing tihe hon.

Member's tions, but I wi·ll Question very widely.

My it 10 their notice.


in­ Mr. Tilney: When the Water Resources looks at the Dee barrage using sand dredged which is at present Board ultimately will it also consider up from the Mersey, dumped in the Irish Sea, and the feasi­ the Wirral?

it across bility of taking Mr. Skeffington: Now that the hon.

Gentleman see that it is considered.

bas made that point, I shall Mr. Boyd-Carpenter: Member be good enough to answer my question as to his right hon.

inten•tion about a White Paper?

Will the hon.


Friend's for not answering : I apologise to t:he Mr. Skeffington right hon.

Gentleman t,he whole of his question, altogether it.

On the purely factual queslion, Paper.

understand it is intended but I do not the second part of part of the to publish a White Forestry, South-West 4.Mr.

Peter Mills asked the Minister what of Land and Natural Resources plans he has for the expansion of forestry in the South-West, particularly Hartland and Beawortby area.
in the Mr. Skeffington: Together with the : Arising question responsible so tha-t we may have it on will my hon.

Friend out of fae asked by my hon.

for forestry and Wales, my right hon.

Friend Mr. A. J. Irvine supplementary Friend tihe Member for Dunbartonshire, East (Mr. Bence), a,t least agree, the record, when a local authority acquires land for housing purposes it s,hould rhe compulsory element planning or other social have to pay.
within acquisition price, t•ha1 from the Ministers Scotland is reviewing Great Britain the specific districts Member the Forestry examining lishing Channel area, which might help the marketing including Member bas in mmd.

by the hon.

Commission possibilities industries problems those areas which the hon.

of value whioh derives permiss1on various wood-using that it is entirely of estab­ in the Bristol compulsorily which it itseM gave?

the forestry mentioned wrong that programme as a whole.
Referring to of the South-West, for in is Mr. Skeffington : 11his view is entirely shared by the Government.

Barrage Schemes (Mersey and Harbour Board) 3.

Mr. Tilney asked the Minister Docks of the whether Land and Natural Resources Mr. Mills: Will the Minister bear in for an extension in the South-West, mind the very real need of forestry in these areas, which have some of the poorer land?

Will he also bear in mind that what really industry in that area?
would be a chipboard would help the forestry factory particularly 5 Oral A11swers IO MAY 1965 Oral Answers 6 Mr. Skeffington: The Forestry Com mission and my right hon.

Friend entirely accept the latter part of the hon.

Gentle man's Question.

I must point out to him, however, that one real difficulty is to get owners of land, even of marginal land, in the areas which he specifies, to switch to forestry.

There has been a reluctance to do so, and this is one of our difficulties.

The Wash 6.
The Wash 6.

Sir G. de Freitas asked the Minister of Land and Natural Resources what progress has been made in the studies of the possibility of damming the Wash to create a reservoir by holding back water from rivers such as the Witham, Welland, Nene and Ouse in order to pro vide fresh water for use in the dry coun ties of the East Midlands and East Anglia.

9.
9.

Sir D. Renton asked the Minister of Land and Natural Resources whether, in view of the present and prospective shortage of water supply in East Anglia, he will hasten the feasibility study of the water storage potentialities of the Wash and give this scheme priority over schemes which would benefit other parts of the country where the water shortage is less acute.

23.
23.

Mr. Derek Page asked the Minister of Land and Natural Resources whether, in his study of the feasibility of a Wash barrage scheme, he will pay due regard to its effect on the port of King's Lynn.

Mr. Willey : A preliminary report by consultants on the storage potentialities of the Wash is expected before the end of the year.

The Water Resources Board has put in hand studies of the long-term water demand in the South-East and ways of meeting it.
It would be pre mature to undertake feasib ility studies, which would be expensive, until this further information is available.

Of course, any feasibility study would have to have regard to the effect of the ~cheme on the port of King's Lynn.

large body of water for fishing, boating and other recreation?

Mr. Willey: Certainly.

When I have these reports about water conservation, I shall have to consider, along with my colleagues, factors affecting any proposed barrage scheme.
the o~her Sir J. Maitland : I recognise the urgent need for water conservation in this area, but is it not important in the meantime to offer better opportunities and induce to farmers and landowners to ments conserve water themselves?

The expense of the scheme would be enormous and might create considerable difficulty for the growing harbour and port of Boston.
Therefore, is it not important to weigh up these matters and offer inducements to people to conserve water, as they can do, and are doing in many cases.

Mr. Willey : I agree with the hon.

Gentleman.

We have to take what steps we can to encourage the conservation of water.

I would emphasise, as he has, that any barrage scheme on the Wash would be a long-term measure.

It would not help us in our immediate difficulties.

Land Entitlements (Register) 8.


Mr. Hamling asked the Minister of Land and Natural Resources if he will take steps to produce a register of land entitlements in the Uni ted King dom.

Mr. Skeffington : If my hon.

Friend has in mind a statistical record of the uses to which land is put, my right hon.

Friend has referred to the Natural Re sources Advisory Committee the ques tion of land use surveys and statistics.
If he is thinking of the registration of title, the course of being effected by Her Majesty's Land Registry.

this in is Land (Recreation Purposes) 13.

Mr. Urwin asked the Minister of Land and Natural Resources if he will take steps to enable local a uthorities to acquire land for recreation purposes.

Sir G. de Frietas : When the Minister nsiders these reports, will he take into .
•~ount not only their technical recom- 1 ndations on water conservation ~ ich are extremely important- but also arguments in favour of creating a Mr. Skeffington : Local authorities al ready have full powers to acquire land for recreation purposes, either by agree ment or compulsorily.

However, I a m aware that some local authorities are discouraged from buying land for open.

.

:;i =s:=::.. + 7 Oral Answers 10 MAY 1965 8 Oral Answers 21.
Mr. Symonds asked the Minister space by the price that they will have to pay for it, but for any sol ution of this of Land and Natural Resources what are the terms of reference of the Water I must ask my hon.

F riend to await the introduction of legislation for the Land Resources Board in connection with their feasibility studies of the Morecambe Bay Commission.

Barrage.

Mr. Urwin : While thanking my hon.

Friend for that reply, may 1 sincerely trust that he will keep in his right hon.
Friend's m ind the necessity to enable land to be procured at much cheaper prices than have hitherto obtained in this respect?

Mr. Skeffington : T hat is very much in the Government's mind, as I expect my hon.

Friend knows.

Mr. Corfield : Will the hon.

Member give an undertaking that his words do not imply that we shall go back to a two-tier system of prices by which the price is determined by who buys and not by the inherent value of the land?

Mr. Skeffington: I think I must ask the hon.


Member to await the legislation and the White Paper.

Mr. George Jeger : Ts my hon.

F riend aware of large tracts of land, particu larly in industrial areas, which are dis figured by spoil heaps?

Is he aware that if some initiative were taken by the Gov the ernment National Coal Board and local authori ties it might well be that some of this iand could be reclaimed at a reasonable price for recreational purposes?
talks with in having Mr. Skeffington : This is one of the matters which is being considered by the Ministry.

Mr. John Wells : Will the Minister bear in mind the particular difficulties of areas of Kent near Maidstone and Greater London about which I have written to him recently?

Mr. Skeffington : We will bear that very much in mind.
Morecambe Bay and Solway Barrage Schemes Mr. Willey : Comprehensive terms of reference for the Board's studies of the Morecambe Bay and Solway barrage schemes have now been agreed.

I will, with permission, circulate them in the OFFICIAL R EPORT.

The Board hopes to have appointed consultant engineers and to have begun work on its other studies by the end of the month.

Mr. Hall-Davis : Is the Minister aware that this reply will be very much appre ciated in the area?
Can be give an assurance that at the same time as these initial feasibility the barrage are being conducted, preliminary initial investigations will be made of the physical the areas bordering Morecambe Bay of a barrage in respect of such things as drainage and sewerage?

consequences on investigations of Mr. Willey: Yes.

One has to keep various studies in mind, but one must get this study going first .

We shall see how it develops and, if necessary, pursue oth er studies.
Following is the information: WATER RESOURCES BOARD Terms of R eference for studies of the More cambe Bay and Solway Barrage Schemes "To examine and report upon the following matters in respect of both Schemes : 1. the feasibility and probable costs of con struction; 2. the yields and qualities of water which would be made available ; 3. the demand for water, and the ra te of growth of that demand, in areas which might be supplied ; 4. the arrangements necessary to distribute barrage water ; 5. the delivered cost of treated or partially treated water ; 6. other possible sources of supply in rela tion to the demand at 3. above and the costs of their staged development."
14.

Mr. Hall-Davis asked the Minis ter of Land and Natural R esources if he will publish the full terms of referen.

::e in his instruction to the Water Resources Board to undertake an initial feasibility study of a Morecambe Bay barrage p roject.

Water Conservation 15.


Mr. Geoffrey Lloyd asked l Minister of Land and Natural Resoun what progress he has made in assessi national requirements for water cons vation ; and if he will make a statem1 9 Oral Answers 10 MAY 1965 Oral Answers 10 Mr. Willey : The river authorities and the Water Resources Board, whose re sponsibility it is to keep requirements for water conservation under review, assumed their full functions only on 1st April of this year.
Nevertheless, I have asked the Board to let me have a preliminary assess ment of the situation.

I have just re ceived this and am now studying it.

Mr. Temple : Is the Minister aware that the action of his right hon.

Friend the Minister of Agriculture is in some respects running contrary to his action about water conservation?

Will he take into consideration schemes which may well operate contrary to the best interests of conservation when he is studying this problem?
land drainage Mr. Willey : I will bear in mind what the hon.

Member said, but I am not aware of any conflict between the Minis ter of Agriculture and myself.

Mr. Corfield : Will the Minister bear in mind that water conservation is the crux of the problem and that the nation alisation of water undertakings is wholly irrelevant?

Will he give an undertaking that we shall not have the farce over water undertakings which we are witness ing over steel?
Mr. Willey: On the contrary, I am considering the reorganisation of water supplies for the very reason which the hon.

Member raised-that we have to be very concerned about the conservation of water and look forward to the steps which we can take immediately to avoid a crisis in the near future.

Building Land 16.

Mr. Boyd-Carpenter asked the Minister of Land and Natural Resources what proposals he has for making more land available for building.
Mr. Willey : First we have to decide what the regional distribution of popu lation will be and then to ensure that enough land is allocated for development in the regions.

The regional organisa tions now established by the Government will help to ensure that this is done and the Land Commission, when it is estab lished, will be able to ensure that the land which is allocated is indeed avail able for development.
Mr. Boyd-Carpenter : Will the Minister amphfy that and say what positive pro posals be has for making more land avail able for housing now?

Mr. Willey : The best contribution which I can make is to speed forward the proposed legislation on the Land Commis sion.

Mr. Costain : Does not the Minister agree that the price of land depends on the amount available?

What has any nationalisation legislation to do with that factor unless it confiscates the land?

Mr. Willey : The right hon.


Member for Leeds, North-East (Sir K. Joseph) appreciated the need for increasing the supply of land.

He failed to persuade bis colleagues that this was necessary and the last Government did nothing about it.

We are determined that the Land Com mission will help in seeing that a greater supply of land is available.

National Parks Commission 17.


Mr. Blenkinsop asked the Minister of Land and Natural Resources what action be proposes to take to assist the National Parks Commission in carrying out its duties under the National Parks Act.

Mr. Willey: I am glad to be able to tell my hon.

Friend that an increase in the staff of the National Parks Commission has been authorised and the first of the new staff are already at work.

They will help to speed up the present work of the Commission.
I am also considering what increase should be made in the Commis sion's technical planning staff.

I have asked my officials to review the fi nancial procedures to see whether they can be simplified so as to help the National Parks Commission and the Park Planning Authorities.

The National Parks information ser vices have been increased and any further proposals which the National Parks Com mission may put forward will be sympa thetically considered.
Mr. Blenkinsop : While welcoming very ·nuch my right hon.

Friend's statement a bout the increase in staff, may I ask whether he can do anything to press forward the work of establishing national park centres in each of our National ~ 11 Oral Answers 10 MAY 1965 Oral Answers 12 Parks?

Does be not agree that the biggest help would be to get on with a revision of the National Parks Act?

Mr. Willey : Yes.
Mr. Willey : Yes.

I am in touch with the National Parks Commission and we are prepared to give them any assistance that we can give.

But the greater issue is that which my hon.

Friend mentioned a new countryside policy.

That I shall, I hope, present very shortly.

Land (industrial Spoliation) 18.

Mr. Bence asked the Minister of Land and Natural Resources what s,teps he is taking to restore to usefol purposes indusrt:r,ial by land spoliaition.
s,teri1ised past Mr. Willey : I am, of course, concerned I witlh the overall strategy of land use.

shall also contribute advice on tech the economic aspects of niques and reclamation and shall be assisted by the Natural Resources Advisory Committee.

this in I Mr. Bence : Is my right hon.

Friend aware thaJt in the industrial belt of Scot land, particularly in my constituency of Dunbartonshire, there are large areas of land which were spoilt in the 19th cen tu,ry by coal heaps?
Now that many pits have closed and old industrial works have been scrapped because they are out of daJte, will my right hon .

Friend do something to help local authorities and others to bring these areas into use?

Mr. Willey : I am very conscious of this dereliction and I am anxious that my Department should be able to give all the assistance it can in seeing that th is problem is tackled very expeditiously.

Mr. George Jeger: Ts my right hon.


Friend aware of the very useful survey whiah was conducted and published about a year ago by the Civic Trust, and will he take tJhat into account when he is considering aotion?

Mr. Willey : I am very much aware of it and I take this opportunity to say how obliged we are to the Civic T rust for the work it did.

Common L:md 19.
Common L:md 19.

Mr. Hamling asked the Minister of Land and Natural Resources what steps ,he is taking to preserve common land for recreational and other purposes.

Mr. Skeffington: The essential first step is to establish the facts-what land, in England and Wales, is oommon or a green, whait are the rights of common over it a:nd the ident~ty of the owner of the soil.
This will be aohieved by the Commons Registration Bill, now before the House, which will pave the way for furt1her to provide wider faoilibies for public access and enjoyment, and an increase in nhe productivity of the la nd.

legislation Mr. Hamling : Will my hon.

Friend bear in mind the need for urgency in this matter in view of the threat of industrialisation and urbanisation of existing common land?
Will he also bear in mind the possibility of extending common land by taking over some of the large estates?

Mr. Sk~ffington : The question of extending common land does not arise out of the legislation to which I have land can be referred, but common created either by deed or by local planning authorities.

Some of the legis lation to which reference has been made this afternoon may help in this con nection.

Mr. Allason : Will the hon.


Gentle man bear in mind that there is a conflict between the unrestricted access of the and public on recreational purposes, and that one can not have both?

Of which is he in favour?


common land to is Mr. Skeffington : This is one of the reasons why we want, first, to establish the kind of common land that already exists a nd then to see that the use of it the fairly distributed between genuine needs of the public for recreation or, in certain cases, for increased pro ductivity.

Of course, in regard to access for the less active sports, my right hon.

F riend in this Ministry which has been in a particularly suitable created position to undertake th.is task.
is Sir G. Nicholson : Is the hon.

Gentle man aware that while these inquiries are going on a good many commons, particularly the smaller ones, are being ruined-are being damaged by the unlicensed dumping of old building 13 Oral Answers 10 MAY 1965 Oral Answers 14 is the responsibility of materials and other rubbish?

Although it local authority in many cases, cannot some steps be taken to enable chief con stables to take more interest in them so that the police could intervene on more occasions?
the Mr. Skeffington: The hon.

Gentle man's question does not arise specifically out of the Answer which I gave.

When we get to the second stage of legislation there will be schemes of management for commons so that they may be looked after very much better than they are at present, fo.r today a large number of commons apparently have no one in In regard to the other charge of them.

part of the supplementary question, I expect that the hon.
Gentleman is aware that the Ministry of Housing and Local Government is already actively con sidering what can be done about the dumping of motor cars and matters of that sort.

Mr. Corfield: Will the Joint Parlia the mentary Secretary elaborate on answer which he gave to the supple mentary question put by his hon.

Friend about the identity of ownership of soil, because that seemed to conflict some what with what he said on Second Reading?

Mr. Skeffington: I am sorry, but I do not quite get the hon.
Gentleman's point.

Mr. Corfield : I understood the hon.

Gentleman to say that the Bill provided for identifying the ownership of soil, which to say on Second Reading it did not do.

Would he elaborate?

I understood him that.

Mr. Skeffington : Every endeavour will be made to find the owner.

First, schemes can be made to register com I do not think there is mon rights.
any dispute about Secondly, owners should register, but where an owner of a common or open space does not register, the Commons Commis sioners will use all the means open to them to try to discover the owner.

To that extent, where the right is not claimed we will do all we can to dis cover the identity of the owner of the soil.

Urban and Agricultural Land (Ownership) 20.


Mr. Shinwell asked the Minister of Land and Natural Resources what pro portion of urban and agricultural land in the United Kingdom is owned by the State and local authorities, respectively.

information required.


Mr. Willey: Acreage figures are avail able for certain classes of land in the United Kingdom owned by the State and local author1ties, but they are not in a form or sufficiently comprehensive to pro I am vide the aware of the inadequecy of the informa tion about land at present available and the Natural Resources Advisory Com mittee under the chairmanship of Sir Dudley Stamp is now considering ques tions of the survey and statistics of land use.
Mr. Shinwell: Is it not remarkable that no figures or statistics have been collated of the land owned by the State or the local authorities?

Is my right hon.

Friend aware that we have had successive Tory Governments for 12 or 13 years and that they have never thought it desirable to collate these statistics?

Mr. Willey : I agree with my right hon.

Friend.

There is a remarkable absence of information about land in this country and I hope that my Department will help to repair it.
Mr. Corfield : In view of the somewhat scathing comments that have been made, will the right hon.

Gentleman say to what function he proposes to put these statistics when he has them, since every Department and local authority knows its ownership?

What value will there be in this collation?

Mr. Willey : This information is not known generally, apart from particular J.t might be quite useful to ownerships.

know more about land ownership.

Mr. Shinwell: Would my right hon.


Friend agree that the State should have some information about tbe property it owns?

Mr. Willey: The State has some information, but it is not adequate.

Mr. Sydney Silverman: Is it not the last assembly of such that the case 15 Oral Answers 10 MAY 1965 information as my right hon.

Friend is seeking took place almost exactly 900 years ago, in the Domesday Book, and is it not time that we bad another Domes day Book?
Mr. Willey: I think that there is a good case for a new Domesday Book.

Although there were partial surveys, apart from the Domesday Book, I agree that it is time that we returned to the general question of land ownership.

Mr. Boyd-Carpenter : Does it follow from the right hon.

Getleman's last reply that the policy of the progressive Labour Government is back to Domesday?

Barrage Schemes (Investigations) 22.


Mr. Monro asked the Minister of Land and Natural Resources if he will make a sum of money available to Strath clyde University and to universities in England to enable them to investigate the Solway and Morecambe barrage schemes.

Mr. Willey : Not at this stage.

The Water Resources Board is now conducting feasibility studies into the Morecambe Bay barrage project and jointly with the Scot tish Office, into that for Solway Firth.
We must first see how these studies progress.

Mr. Monro: Is the right hon.

Gentle man aware thart three Ministries have been making statements about these barrages for six months but that not a penny has been made available to the universities to set up study groups?

enthusiastic Mr. Willey: I am anxious to encourage co-operation with the universities, but in this particular case we have feasibility studies in hand and we must see how they go.
These are properly with the Water Resources Board and the engineering con sultants.

Sir G. Nicholson : Is the Minister aware that in Morecambe Bay there are mil lions of shrimps?

Who will watch their interests?

Mr. Monro : Is the right hon.

Gentle man aware that some study groups, par ticularly the one at Strathclyde Univer s~ty, are willing to move now if the Minister will give them the money?

Mr. Willey: We must decide, first, whether this project is feasible.
Studies Oral Answers 16 are in train to determine whether that is so.

When that is determined we will certainly look to further studies.

Motorways (Shrubs and Trees) 24.

Mr. Costain asked the Minister of Land and Natural Resources if he will take steps to encourage the planting of shrubs and trees on new motorways.

Mr. Skeffington : The Forestry Com mission, for which my right hon.
Friend is responsible, already provides extensive assistance to the Ministry of Transport in its very large programme of planting and maintenance of trees on motorways and trunk roads.

He will be pleased to con tinue or extend this service in consultation with his right hon.

Friends the Secretary of State for Wales and the Minis,ter of Transport.

Mr. Costain : Does not the Parliamen tary Secretary agree that this is an excel lent way to avoid daz:zile from headlights on dual motorways?
May we have an assurance of an early development in this connection?

Mr. Skeffington : The Ministry of Transport takes decisions on the materials which are used to combat dazzle.

The Forestry Commission is very willing and anxious to discuss with the Ministry of Transport the production in large quan tities of any species whic·h are thought suitable for this type of operation.

Sir B. Janner: Would my hon.

Friend consult with t:he Ministry of Transport on this very important matter?
Ts he aware that the Minister of Transport previously stated that the reason why rose bushes, which are so important in the prevention of accidents in this con tex1, have not been planted before is that not sufficient land was provided between 1the two carirlageways?

Will he see iliait Is something is done in this direction'?

he- - Mr. Speaker : Order.

Would the hon.


Member for Leicester, North-West (Sir B. Janner) not agree thait it might be wise to stop his supplementary there in order to avoid trespassing on his later Question.

No.

57?

Mr. Tilney : WiH the hon.

Gentleman look particularly at the new spur from London Airport, which is the modern gateway to London?

., OW.f JV = L ~ 17 Oral Answers IO MAY 1965 Oral Answers 18 Mr. Skeffington: I do not mind look ing art anything, but I am sure that the hon.
Genrtleman will realise that my responsibi,lities are limited in this sense only to providing the material.

Mr. Costain: What steps is the Minis ter taking to see that the best agricul is not used for building tural land purposes, and that the least productive land is used for building purposes?

Sir B. Janner: On a point of order, Mr. Speaker.


In respeot of the statement you have just made, I was referring parti cularly to the provision of trees, which do come wiJthin the scope of the Minister's I do not know whether the duties.

Minister of Transport himself can provide the trees without my right hon.

Friend's assistance ; that is why I asked the ques tion.

Mr. Skeffington: As the hon.


Gentle man knows, there are already procedures for examining the respective merits of different uses for development but, in addition to that, the regional administra tive machinery, whereby, in time, long term designation of land use will be possible, will go a long way to preventing many of the conflicts that have sometimes arisen in the past.

Mr. Speaker : I do not wish to mislead the hon.

Member.

I heard so much about the roses.

We will have to exolude them.


Meantime, I call Mr. Geoffrey Wilson, and will come back to the hon.

Gentle man.

Mr. Geoffrey Wilson: Will the Cabinet be very cautious about any policy of planting trees on the edges of the motor way, because German experience was that such trees were apt to have a soporific effect, and caused a number of accidents?

Mr. Skeffington : I do not think that I should comment on the subjeot any I have defined the limitation further.

of my interest in it.


Mr. Speaker : Sir Barnett Janner-if he will dodge the subject of rosa multi flora Japonica bushes, and the progress made relative to central barriers.

Farming Land (Non-Agricultural Use) 25.

Mr. Costain asked the Minister of Land and Natural Resources what is the acreage of farming land which he esti mates will be required annually in the industrial and next domestic bui,Iding and other non-agricul tural use.
three years for Mr. Skeffington: I understand that the aooual change of land in England and Wales from agriculture to all other purposes as shown in the Agricultural Census returns has averaged over 57,000 acres in the five years 1959-60 to 1963-64.

Having regard to current policies, I see no reason to expect any marked change in this rate over the next three years.

Mr. Boyd-Carpenter : As the hon.

Gentleman's right hon.


Friend is not responsible for planning decisions, will the Parliamentary Secretary tell me how the Minister, in fact, carries out this policy?

Mr. Skeffington: I am very surprised that the right hon.

Gentleman does not seem to have understood the regional set up in the Ministry, and the fact that my right hon.

Friend has representatives upon the regional bodies which will be dis charging this function of long-term land designation.
Mr. Evelyn King: Is the Minister aware that, apart from agricultural lana, there are large areas of rural land covered by scrub and silver birch, and that owing to the negative attitude of many rural plan in fact, ning authorities, this land is, sterilised.

Mr. Skeffington: This may well be the case.

I think that the sort of machinery I have outlined will help to solve some of these problems, and get the best use of land for the respective purposes we have in mind.
Mr. George Y. Mackie: Will the Minister consider consulting his right hon.

Friend the Minister of Agriculture to see that he understands that land that is being covered with buildings in the South might well be replaced by reasonable grants for the reclamation of land in the Highlands and elsewhere?

Mr. Skeffington: I am quite sure that my right hon.

Friend the Minister of Agriculture will take note of the hon.

Gentleman's comment.


~ __J 19 Oral Answers 10 MAY 1965 Oral Answers 20 Mr. Corfield: Was the figure given by the hon.

Gentleman an England and Wales figure or a United Kingdom figure?

Mr. Skeffington : It was an England and Wales figure.

Beauty of the Coastline (National Trust Appeal) ,, 26.
Mr. Chapman asked the Minister of Land and Natural Resources what representations have been made to him about an Exchequer contribution to the National Trust's appeal for funds to help to safeguard the beauty of the coastline, and " Enterprise Neptune" ; called whether he will make a statement.

Mr. Willey : My right hon.


Friend the Chancellor of the Exchequer and I have received representations from the National Trust about "Enterprise Neptune", and we have informed the Trust that we are ready to recommend to Parliament that an Exchequer contribution of £250,000 be given.

Provision will be made in the Estimates in due course.

I hope that this substantial contribution will encouragement at the outset to those organising the appeal, and that it will stimulate the generosity of other donors.
I am glad to make this contribution as part of the wider policy for the country side on which I am now worki ng.

be a Mr. Chapman : Is my right hon.

Friend aware of the satisfaction and pleasure with which his Answer will be received in all parts of the House, and certainly by the National Trust and those who are organising this very worth-while venture?
Can he say whether he is making pro in his own studies of coastline gress policy and the preservation of the coast line, and how this project fits in with his wider consideration?

Mr. Willey: We are obliged to my hon.

Friend for his reference to the National Trust.

The coast will most clearly be an essential part of any countryside policy, and in the countryside policy on which I am now working the coast will have a prominent part.
We regard the work of the National Trust as being part and parcel of what we wish to do about the coast of Britain.

Mr. Deedes : Will this £¼ million come out of the National Land Fund, because is not this object precisely what the late Hugh Dalton had in mind when he origin that Fund?

Has the ally established right hon.

Gentleman an eye on it as a potential source for this sort of work?

Mr. WiUey : I cannot assure the right hon.


Gentleman that this comes from the Land Fund, but I am much obliged to him fo r calling my attention to that Fund.

Mr. Blenkinsop: As a member of the executive of the National Trust, may I add my thanks and those of the National Trust?

May I also ask whother, in addi tion, my right hon.

Friend hopes to try to make available some of the surplus Service Departments land on the coast line, which will help towards the same objective?
Mr. Willey : The land in the hands of the Services is under constant review.

Mr. Scott-Hopkins : What the Minister doing to stop plann ing permis sion being given in coastal a reas where this will be obviously detrimental to the beauty of the coastline?

is Mr. WiHey : That is a matter fo r the Ministry of Housing, but it is also a matter for me, and it is being considered i the context of the countryside policy.

National and Regional Planning 27.


Mr. Corfield asked the Minister of Land and Natural Resou rces what pro gress he has made in setting up the machinery that he envisages as necessary to enable him to contribute advice and information on the most effecti ve use of land and other natural resources in rela tion to national and regional planning.

Mr. Wi11ey : The Advisory Committee on Natural Resources, the setting up of which I announced on 25th March, in reply to my hon.
Friend the Member for Birmingham, Northfield (Mr. Chapman), has met under Sir Dudley Stamp and is considering a number of questions which I have referred to it.

These include the provision of information and the develop ment of methodological techniques relat ing to use of land and other natural re sources .
A small mixed unit of adminis trative and professional staff is being set up in my Department, to service the the Advisory Committee, necessary links with academic and other institutions, and to assist me in partici pating in national and regional planning.

to organise 21 Oral Answers 10 MAY 1965 Oral Answers 22 Mr. Corfield : In view of the rather wide area of work which the right hon.
this Advisory Gentleman has given Committee to do, will he, or it, be pub lishing an annual report to give some indication to Parliament of what the results of its investigations are?

Mr. Willey : I will certainly consider this, but I doubt whether there will be annual reports.

But there wi,U certainly be publication of reports.

Land Uses (Evaluation) 28.


Mr. Corfield asked the M inister of Land and Natural Resources if he will make a statement describing his plans for the development of techniques of comparative evaluation of land uses, and giving an indication to the House of the nature of the techniques involved.
Mr. Willey : At my request, Sir Dudley Stamp's Committee has agreed to study certain aspects of the com parative evaluation of It would be premature fo r me in advance of its advice to go into detail, but the Committee is a t present considering the application of cost / benefit analysis to such factors as amenity.

land uses.

the Mr. Corfield : Does the right hon.


Gentleman appreciate that this phrase techniques of comparative abo ut evaluation of land usage is open to a large variety of interpretations, and can he give some idea of the interpretation he himself puts on it, bearing in mind that the country will be interested to know exactly what this is all about?

that Mr. Willey : I think that the best way to give a definition is by way of illus tration, which I have done.

Let me say at once the hon.


Gentleman appreciates the impor tance of this sor t of work being done.

If he has any proposals or suggestions to make, I shall be very happy to dis cuss them with him.

I am sure that Mr. Corfield: May I press the right hon.

Gentleman a little further in that respect?

He talks about cost analysis in relation to amenity.

Again, it is not immediately obvious how one goes about it and what we do with the answer when we get it.
Will the Minister give us a little more informa tion?

Mr. Willey : Several Q uestions have been answered about barrages.

One has to consider not only the use of a barrage, but the effect it has on the environment.

This is the sort of question to bear in mind.

One also has to think of the way in which to evaluate this.

Other coun tries h ave made considerable use of this sort of technique.

It is appalling that this country has been so far behind in th is respect.
Mr. George Y. Mackie: In reference to his last reply, will the right hon.

Gentleman say why he is not taking into account the effect on agricultural land in the first study of the Morecambe bar rage scheme?

/ Mr. Willey : Because the first study is a feasibility study to see whether it is feasible for the conservation of water.

Until this is determined we cannot go on to consider the other questions.

PUBLIC BUILDING AND WORKS House of Commons (Strangers' GaJiery) 29.
Sir J. Smyth asked the Minister of P ublic Building and Works what acoustic a ids and otJher facilit ies are avail able for d~sabled pe,rsons in wheeled the listen to chairs Strangers' Gallery.

to debates from The Parliamentary Secretary to the Ministry of Public Building and Works (Mr. James Boyden) : A miniature loud speaker has now been instaUed in the panelling at 'tlhe back of the Strangers' Gallery where disabled persons in wheel cha,irs are accommodated.

Sir J. Smyth: Does nbe hon.


Gentle man realise bhat there are two main difficulities about bringing a disabled per son in a wheeled chai r to bear a debate in this House?

The first is that one is not allowed ito park a disabled person's car in New Palace Yard, whioh involves the expense and delay of having a taxi to bring suoh a person in and out.

The seoond was, when I put down tihis Ques tion, the-re was no microphone through which a disabled person could I a m grateful to the hon.

hear a debaite.
hear a debaite.

t•hat 23 Oral Answers IO MAY 1965 Oral Answers 24 Gentleman for having a microphone put in which enables one disabled person to hear a debarte in this House.

Government Car Service asked 31.

Mr. Biggs-Davison tlhe Minister of Public Building a nd Works what changes have been made since 15th October, 1964, in the composition and staffing oif the Government's pooI of cars, and in bhe public cost 11hereof.
The Minister of Public Bui]ding and Works (Mr. Charles Pannell): Since 15th October rtihe Government Car Service fleet has increased by 10 to a total of 381 vehicles, of whioh five are due for dis posal.

11he number of staff has increased by 15 to 369.

The annual cost is now £442,000 compared with £406,000.

Of this about £10,000 of the increase is due to higher wages fixed by trade union agreements.

Mr. Biggs-Davison : Can ~he right hon.


Gentleman S'ay whe11her the increase is in Ube proportionate number of Ministers?

increase to nhe " Answer Mr. Pannell : I should say it is, but this is a trend whioh has been going on all the time.

I could easily cite the figures for 13 years and show bow they have gone u p aH the time.

For instance, I notice that there were 18-[HoN.

MEM I BERS: answer a question under the guidance of Mr. Speaker, not that of hon.

Members opposite.
Members opposite.

This is not a matter on which hon.

Members opposite should make im plied oharges that we are not so fastidious as were our predecessors.

In 1952 18 cars were allocated, in 1959 28 were allo cated.

The present figure shows a trend.

the question."]

Mr. Paget: Can my right hon.

Friend say whether there is any other European country in whioh Ministers are not pro vided witih a car and a driver?

Admiralty House 32.
Admiralty House 32.

Mr. Biggs-Davison the Minister of Public Building and Works what decision has now been made on the future of Admiralty House.

asked Mr. C. Paone]) : No final decision has been taken.

Mr. Biggs-Davison : How much 111ore delay will there be before the right hon.

Gentleman comes to a decision?

M any of us are anxious to know whether the Secretary of State for Economic Affairs will move into Admi ralty House since he is all at sea or whether be will be moved into Steel House.
Mr. Pannell : I take it that part of that supplementary question is completely out of order.

[HON.

MEMBERS: "Oh."]

I cannot understand the enthusiasm or solicitude of hon.

Members opposite for the comfort of the Secretary of State for Economic Affairs.

Mr. Shinwell : Is my right hon.

Friend aware that the delay in coming to a deci sion about the future of Admiralty House is because the previous occupant left such a mess behind?

Mr.

Snow : When my right hon.


Friend comes to a decision, will he be good enough to bear in mind the importance of keeping together the extremely valu able and historical collection of furniture in Admiralty House?

Mr. Pannell : Questions about the tenant for Admiralty House a re not for me but for the Prime Minister.
Sir Rolf Dudley Wmiams : Is not the real reason for the delay that the Secre tary of State for Economic Affairs may find that he is without a job and that someone is installed in his place within a short time?

Mr. Pannell: I cannot say whether bhere are any, but hon.

Members who go abroad wiU see how much better mem trearted bers of other legislatures are compared with this country.

There was a famous occasion when the right hon.


Member fo r Hampstead (Mr. Brooke) led a delegation of the Common wealth Parliamenrary Associartion and had to borrow a car locally.

those in Whitehall Area (Redevelopment) 33.

Mr. Longden asked the Minister of Public Building and Works whether be is yet able to lay before Parliament the plans for itihe redevelopmenrt of ibhe Whitehall area.

34.
34.

Mr. Strauss asked the Minister of Public Building and Works whether he proposes to publish the reports presented \... 25 Oral Answers 10 MAY 1965 Oral Answers 26 to him by Sir Leslie Martin and Professor Buchanan.

Mr. C. Pannell : I am now considering the reports on the Whitehall area which I recently received from Sir Leslie Martin and Professor Buchanan and will make a further statement just as soon as I can.

Mr. Longden : I thank the right hon.

Gentleman for that reply.


Will he ensure that not a brick is touched in this heart of the Commonwealth until this Home and the public outside have had an oppor tunity to pronounce upon the matter?

Often in the past London citizens have awakened-too late- after each fresh out rage has been perpetrated.

May I refer the right hon.

Gentleman to a letter in which I ventured to tender some advice to his predecessor on this subject on 17th July last?

Mr. Pannell: I have been very par ticular about this.
I can assure the hon.

Member and the House that any pub lished document will be available to hon.

Members before it is available to anyone else, but I cannot at this stage commit myself to a date.

Because I say that, rn all that follows from the hon.

Member's apprehensions this is the best assurance I can give now.

Mr. Lipton : Does my right hon.

Friend take note that there appears to be a great deal of building going on at the top end of Whitehall?

What is that in aid of?


Is it part of the permanent future develop ment plan of the Whitehall area?

Mr. Pannell : I do not think that arises from this Question, but perhaps we are not thinking of the same building.

Industrialised Building 38.


Mr. Geoffrey Lloyd asked the Minister of Public Building and Works what steps he is now taking to promote the industrialisation of building in the light of the recent appraisal of the prob lem presented to the Royal Institute of British Architects, a copy of which has been sent to him.

Mr. Boyden : Many of the recommen dations of the report are already accepted and acted upon in this and and other Departments.
I am examining its detailed conclusions to see if further action is called for.

Mr. Lloyd : Is not this a particularly opportune moment to press on with the industrialisation of building to take up some of the gap left by the wholesale failure of the Government's housing policy?

Mr. Boyden : The industrialisation of building has been proceeding smoothly for some time.

The answer to the second part of the supplementary question is, "No, Sir".

Housing (European Building Methods) 39.


Mr. Carmichael asked the Minister of Pubiic Building and Works if he is aware that the German Federal Republic expect to reach a house building target of 700,000 houses this year ; what studies his Department are making of E uropean building methods with a view to adapting them where applicable to British condi tions ; and if he will seek to send a Parliamentary delegation to examine European housing standards and targets.
Mr. Boyden : I understand that the West German Housing Minister recently announced a target of 600,000 dwelling for 1965.

We continue to study and apply Euro pean building methods wherever we think such methods will be helpful to the British building industry.

I welcome my hon.

Friend's interest in these matters, and will gladly consider with those concerned the possibility of a Parliamentary delegation.

Mr. Carmichael: I thank my hon.


Friend for the little piece of hope he held out at the end, that a delegation to Western Germany may be considered.

On my information the West Germans expect to build nearly 700,000 houses in 1965.

This will bring the total over the last three years to almost 2 million.

Does not my hon.

Friend think that something may be available in Germany which we have not caught on to here and which will greatly increase our hous ing output?
Mr. Boyden : Conditions are very different in Germany.

My Department and other Departments in the Govern ment take every note they can of 'llatters 27 Oral Answers 10 MAY 1965 Oral Answers 28 that help.

I doubt whether a direct com parison is as useful as my hon.

Friend thinks.

information a bout his job and that he ought at least to come clean with the House?

Mr. Boyd-Carpenter : Can the hon.


Gentleman say how many of the impres sive total of houses built in Germany he mentioned are built by public and how many by private enterprise?

Mr. Boyden : No, not without notice.

Mr. Richard: Is my hon.

Friend aware that th e figure which was pub lished by the West German Government of houses completed last year was 623,000?

Can my hon.

F riend say why the Conservative Government d id no t get anywhere near that figure in 13 years' rule?
Mr. Boyden : I have a feeling that at certain stages of the last Administration the housebuilding programme was used as a political card.

Mr. Biggs-Davison : Do these German figures apply to houses or to housing units?

Mr. Boyden : .. Housing units " was the phrase I originally had, but " dwel lings " sounded nicer.

HOME INFORMATION SERVICES 35.

Sir J. Eden asked the Paymaster General how many official meetings he has had with home newspaper correspon dents and overseas correspondents res pectively.
The Paymaster-General (Mr. George Wigg) : None, Sir.

Sir J. Eden: Did I hear the r ight hon.

Gentleman correctly as saying " None "?

Mr. Wigg: None, Sir.

Sir J. Eden : Do I understand from that that since he has been in office the right hon.

Gentleman has done nothing, fo r example, to co-ordinate information ser vices for overseas correspondents, of whom there are a large number in this country?
In view of the publicity given to his activities by the weekend Press, may I ask whether he has told foreign and domestic home correspondents any thing at all about what he has been doing with the security services?

Is it not about time that he gave a lit tle more to Mr. Wigg : I am not responsible for what appears in the weekend Press abo ut If the hon.

Member is my activities.

really interested, he should address his the Conservative Central remarks If he Office concerning my activities.
will be good enough to look at the reply given by the Prime Minister on 12th November, 1964, pr inted in col. 1186 of the OFFICIAL REPORT, he will get all the info rmation he wants.

Sir Knox Cunningham: Could not the right hon.

Gentleman be a little more forthcoming with the public and tell them what be is doing in a ll this secret work?

Mr. Wigg: I suggest that the hon.


and learned Member should address his ques tions to the Chairma n of the Conservative Party, who seems to have some responsi bility for the publicity about my activi ties.

Apart from that, if his question is serious I suggest that he should put down a Question to the Prime Minister.

Mr. Speaker: There seems to be some misunderstanding.

T his is not a question about secret work.

It is about meetings with newspaper correspond ents.

Sir J. Eden : On a point of order.


The right hon.

Gentleman has consistently referred to a n Answer given by the Prime Minister on 12th November, which states tha t the Paymaster-G eneral will answer Questions the House about co ordination of information services.

So far we have had absolutely no answer from him at all.

in Mr. Speaker : My recollection is that the Answer related to co-ordination of home informa tion services.

The only com plaint that would arise would be of an inadequate answer.
T hat is not a point for me.

PENSIONS AND NATIONAL INSURANCE National Assistance 40.

Mr. Carmichael asked the Minister of Pensions and National Insurance if National Assistance Board officers verify the actual rent charged for accommoda tion ; and if this information is made JO MAY 1965 Oral Answe,, 30 Oral Answers 29 available on request to the local rent tribunals.
The .Joint Parliamentary Secretary to the Ministry of Pensions and National Insurance (Mr. Norman Pentland) : The answer to the first part of the Question is " Yes ", Sir.

As regards the second part, information given by a person in connec tion with bis application is regarded as confidential, b ut the Board would be pre pared to make the informa tion given about rent available to a rent tribunal on request if the applicant agreed.

Mr. Carmichael: I thank my hon.

Friend for that Answer.


Does he realise that in many parts of the country, par ticularly in my constituency of Glasgow, Woodside, many people do not have a rent book.

In many cases the landlord has refused to provide one.

They are on National Assistance.

Can my hon.

F riend give me any details of the type of verifica tion or confirmation of the rent charged which takes place?
Mr. Pentland : Where an applicant for assistance does not have a rent book, he is asked to obtain one from his landlord or at least to get a receipt for the rent he is paying.

Failing this, the Board's officer may be able to obtain confirmation of the rent paid from the landlord or the agent.

Mr. Lipton : Will my hon.

Friend ask the National Assistance Board to prepare annually accurate figures showing bow much of the National Assistance grant is being paid by way of rent?

Mr. Pentland : My right hon.


Friend will have heard my hon.

Friend's supple mentary question.

HOSPITALS Medical Records (Standardisation) 42.

Mr. Pavitt asked the Minister of Health if he has yet completed his con sideration of the Report of the Standing Medical Advisory Committee, E/ 155 / 1, on the standardisation of medical records ; and if he will make a statement.
The Minister of Health (Mr. Kenneth Robinson) : The Report will be published shortly, and I shall be asking hospitals to adopt its recommendations.

Mr. Pavitt: When my right hon.

Friend is considering the standardisation of hos• pita!

records, will he examine the possi bility of having patients' records in the form of an identity card when the patient is suffering from a complaint which may be difficult to treat?
If such a person is involved in a n accident, he may be in danger from there being no knowledge of what previous treatment he has been given.

Mr. Robinson : I will certainly consider wha,t my hon.

Friend has suggested.

It is a fact that the Report favours standard isation of hospital medical records and a number of its specific recommendations a re directed to that end.
Perhaps I could take this opportunity of thanking the members of the Sub-Committee of the Standing Medical Advisory Committee for the hard work and the enthusiasm which went into the production of this Report.

Professions Supplementary to Medicine (University Study) 43.
Mr. Pavitt asked the Minister of Health what support he will give to the Nottingham University study on the recrui,tment, training and demand for physiotherapists, radiographers, dieticians, occupational therapists and orthoptists ; if he will request the University to supply him with a copy of this report; and if he will make a statement.
Mr. K. Robinson : My Department has given all the co-operation and guidance requested by the university ; the situdy will take some time yet, but when it is completed I shall be getting a copy of the report.

Mr. Pavitt: May I ask my right hon.

Friend not to await the report before coming fo rward with definite proposals to these recruitment professions supplementary to medicine, in view of the urgent need there is in most of these specialties?
increase in all Mr. Robinson : Efforts of that kind need not await the production of this report, but I am sure that the report when it comes will be a great assistance to us.

Mr. English: Will my right hon.


Friend make it quite clear that the phraseology of this Question- .. if he will request the University to supply him with a copy of this report" 31 Oral Answers 10 MAY 1965 Oral Answers 32 does not imply that there is any secrecy about it and that it was always intended that he should receive a copy of it?

Mr. Robinson: Yes, I am aware of that.

It is a study sponsored by the Nuffield Provincial Hospitals Trust and there has been no request to my Depart ment for funds.
being created for this reason.

My right hon.

Friend would be reluctant to take any action unnecessarily whiali could in an prevent the scheme beginning atmosphere of trust.

I repeat what I said at the beginning- my right hon.

Friend is watching ~he position and if any evidence were to come to light he would certainly look at it.

MINISTRY OF LABOUR Redundancy Payments mn asked 46.
Mr. Frank Allaun the Minister of Labour if he will take steps to prevent from deliberately dismissing workers before the Redundancy Payments Bill becomes such operative payments.

in order employers certain avoid to The Joint Parliamentary Secretary to the Ministry of Labom· (Mr. Richard Marsh): My right hon .

Friend does not expect that this will be a serious problem but he will watch the situation.

Mr. Allaun : I thank the Parliamentary Secretary for that Answer.
T o prevent this kind of victimisation taking place, will he do everything possible to get the Bill through and into operation quickly?

Could he give the H ouse any idea how soon this will be?

Mr. Marsh: I am afraid it would be impossible to give a clear indication of when we can put the Bill into operation wirthout knowing how much obstruction there will be from right hon.

and hon.

Members opposite.


~ Mr. Ronald Ben: While no one wants victimisation, would it reall y serve the economic purpose of the country if men were re,tained for an indefinite period in employment after any useful function they could perform had disappeared?

question.

Mr. Marsh : I cannot see the point of (HON.

MEMBERS: the "Answer it."]

Hon.

Members miss the If I cannot see the point of a point.

question, it is difficu!Jt to answer it.

Captain W. Elliot: Has the hon.


Gentleman any evidence at all that employers are carrying out this sort of action?

Mr. Marsh : No.

At the moment we have no evidence that redundancies are \ TSR2 Project (Redundant Aircraft Workers) 47.
Mr. Godber asked the Mi nister of Labour how many redundant aircraft workers have now notified employment exchanges of their need for alternative employment in the ma in a reas affected by the cancellation of the TSR2 project ; and how these numbers compare with the number of redundancies announced by the firms concerned.

Mr. Marsh : According to the latest figures available, 865 workers, out of 1,693 given notice, have so far sought our Department's help at Preston.

Wey bridge and Woolston.


Mr. Speaker: Mr. Godber.

Mr. Godber : Question No.

48.

Mr. Marsh: That shows what advan tage a good Answer is.

Aircraft Workers (Employment in South Africa) 48.


Mr. Godber asked the Minister of Labour what information he has about aircraft workers from this country seek ing similar employment in South Africa at the present time ; what reciprocal facilities are available for such workers seeking information about employment opportunities in South Africa ; and if he will make a statement.

Mr. Marsh: No vacancies of any kind have been notified to our Department by any South African firm .
Anyone seeking information about employment oppor tunities would, since no vacancies are held, be referred to South Africa House without any record being maintained of the enquiry.

I hope that &ircraft workers will remain in this country where there is a good demand for their skills.

Mr. Godber : In view of the comment the hon.


Gentleman made when I did not ask a supplementary on my last 33 Security Commission 10 MAY 1965 Security Commission 34 to Question, may 1 point out that it was not the excellence of his Answer but the take that clock which caused me action.
Taking the two Questions to gether, does he not agree that it would be very much better if a full record were kept of exactly what these workers are going to, so that there will be a clear indication that the sort of thing that the hon.

Gentleman hoped would happen is If he really believes in fact happening?

that, would it not be an advantage to do ·what I have suggested?

Mr. Marsh : I am sure the right hon.


Gentleman will agree that there are real difficulties records of in maintaining people who seek employment in South Africa when neither the jobs nor the men are registered with the employment ex changes.

D espite all the rumours, so far as we· are aware, no vacancies for any to any such employment exchanges.
jobs have been notified the cancellation of Sir J. Eden : Since one of the professed the purposes of to make available skilled TSR2 was labour for employment in other key industries in this country, will the hon.

Gentleman ask his right hon.


Friend to do his level best to keep closely in touch with the movement of anybody rendered redundant as a result of this cancellation and keep the House informed how many get transferred to other employment and, of equal importance, from which employ ment they have been moved?

Mr. Marsh : Redeployment was not the professed intention of the cancellation, although it is an outcome of it.
All the evidence at the moment is that there has not been widespread unemployment as a result.

The men are being redeployed into useful industry.

If the hon.

Gentle man looks again at some of the answers which have been given recently to Ques tions he will see that the effect of the TSR2 cancellation has been of great benefit indeed to the export industries of this country.

SECURITY COMMISSION 3.31 p.m.

The Prime Minister (Mr. Harold Wilson) : With permission, Mr. Speaker, I wish to make a statement.
As the House will know, there have been two recent breaches of security and today, Mr. F. C. Bossard, of the Ministry of Aviation, and Staff Sergeant P. S. Allen, of the Army Department, pleaded guilty at the Central Criminal Court to offences under Section 1 of the Official I have accordingly asked Secrets Act.
the Security Commission to investigate the these breaches of security have occurred in the public service, and to advise in the light of their investigation whether any change in security arrangements is necessary or desirable.

Lord Justice Winn and his colleagues will begin their work forthwith.
circumstances in which in I must, however, tell the House that these two cases have revealed a diffi culty about the working of the Security Commission which was not foreseen when its establishment and terms of reference were announced by my pre decessor two statements on 16th December, 1963 and 23rd January, 1964.

It was then envisaged that an announce ment in this House would be made as soon as a reference was made to the Commission.
But the House will recog nise that where court proceedings are pending an announcement of this kind, involving an assertion that a breach of security has occurred, might in certain circumstances be thought capable of pre judicing a fair trial of the accused.

But to delay the activation of the Commis sion until the matter was no longer sub judice might involve months o f delay and seriously prejudice the effectiveness of the Commission's inquiries.

I have told the right hon.


Gentleman the Leader of the Opposition about this problem, and I propose to alter the pro cedure so that a reference can be made to the the Commission as soon as Government are satisfied, or have good reason to think, that a breach of security has occurred in the public service.

In each case I propose that the Leader of the Opposition be informed before a reference is made.
But when a reference to the Commission relates to a matter which is the subject of criminal pro ceedings before the courts, then, for the reason I have explained, no public announcement of the reference to the Commission would be made until it is appropriate to make a statement.

35 Security Commission 10 MAY 1965 Security Commission 36 immediate requiring to take other action.

[THE PRIME MINISTER.]


On the present occasion, beca use ,he Security Commission could not begin its investigation while the cases were still sub judice, and because it seemed to me there might be apparent weak that remedy, nesses I had I de cided, therefore, as soon as the a rrests were made and there was a prima fade breach of security, that there should be a preliminary inquiry within the Govern I therefore a ppointed a ment Service.
committee of senior officials under the chairmanship of the Head of the H ome Civil Service, Sir Laurence H elsby, to examine the circumstances in which these two men had been charged with offences under the Official Secrets Act and to consider whether, and if so what, weak nesses in the security arrangements of the two Departments were indicated by the circumstances.
This Committee has now reported to me and its report, which includes a statement of certain action already taken, will be made available immediately to the Security Commission.

in certain respects affecting the investigations neces sary before an individual public servant is put on to work involving access to highly sensitive material, and also in the variations in the procedure of individual Departments on matters affecting Depart mental security immediate action needed to be taken, and has been taken.
The Commission will, of course, be com pletely free to comment on all these mat ters and to advise on the adequacy of the measures which are now being put into effect.

The H ouse will understand that pending the Report of the Com mission it is difficult for me to say more about these ind ividual cases.

When the Report is received, and following pre cedent, seen by the Leader of the O ppo sition, I will make a further statement to the House.
It is already clear that But there is one thing I want to say now.

T he Security Service operates far removed from public gaze.

When public a ttention does fall on them it is through breaches of security which, whatever their nature, are bound to lead to criticism of security arrangements "in the public It is plain that the Service de service.

serves the thanks of us all for a job well done.

Hon.

Members: Hear, hear.


Sir Alec Douglas-Home : T he H ouse will be grateful to the Prime Minister for In the last the statement he has made.

Parliament we agreed upon a procedure, [ think with the assent of the whole House, to try to take these matters of na tional security out of pa rty conflict so that they would no longer be a matter of party dispute.

As we all understand, spying cases do come up from time to time, w,hatever Government are in power.
I think this is enormously important and in the public interest, and therefore I would say at once that I will co-operate with the right hon.

Gentleman in exam ining any proposals which he wants to put forward fo r the modification of the procedu re on which we decided.

the The immediate question which the Prime Minister's statement raises is this : whether it is desira ble to put into opera tion some kind of investigation bet ween the arrest of an individual and the opera tion of the Security Commission.
As the Prime Minister said, trail, so to speak, may get cold and thus the Security Service may be at a disadvantage_._ If the Commission were to take evi dence outside H er Majesty's Services, I must say that I think it creates a pre sum ption of guilt.

I should therefore like to ask the Prime Minister whe,ther the action which he is considering in setting up the Commission, so to speak, after t>he arrest but before the judgment of the court, will be solely within Her Majes,ty's Services.
Lastly, may I say that the balance in these matters is very fine and has to be considered by us all with the most careful judgment.

We must certainly satisfy the needs for establishing the security of the nation-that is beyond dispute-but we must not begin to establish machinery which would in any way prejudice the individual or lead to the establishment of any kind of police State.
I am not sug gesting in the slightest bit that any of us on either side of the H ouse has this in our minds, but it is this against which we must guard and it is this, therefore, on which I concentrate the one question that T h:1ve to ask.

The Prime Minister : I thank the right hon.

Gentleman for what he has said.


I think we are all agreed that the security of the State must be of the deepest con cern of whatever Government should be 10 MAY 1965 Security Commission 38 Securily Commission 37 in power and whatever Opposition is co I operating with them in these matters.

agree, however, that it musit be carried out in such a way that there can never be any suspicion that the right of any individual to a free trial is prejudiced in any way.

When, as the right hon.


Gent,leman says, the previous Governmelllt announced the establishment of the Security Com mission after consultation with myself, we laid down machinery for the activation of the Commission.

But this weakness has already come to light in the first case in which the Commission came to be I am sure the House will activated.
agree tbat it would have been wrong to have announced the setting up of the Commission and activated it because one of the defences that any individual might want to raise is that there has been no To activate the breach of security.

Commission involves a decision by the Government that there has been a breach of secur1ty.
This has now been looked a£ter iin the way I ,have suggested, 111amely, that the Commission can be activated but that, apart from telling the Leader of the Opposition, there is no announcement until after longer sub judice.

the case is no I have suggested also that the terms of reference should be widened not only where the Government know that a breach of security has occurred but where there may be reason to think that irt may have occurred.
There may be other less clear cases than those involving decisions of the courts.

This will, I think, meet the point that the right hon.

Gentleman has in mind.

I certainly agree that where the Com is activated it should not be mission free during the period when the case is sub judice to take evidence from people outside the public service because of the reason he gives.

I fully agree wi•th t 1hat, and I welcome the right hon.
Gentle man's suggestion that we should keep in touch on the future procedures while these are being worked out, because this is not a matter which is really suitable for full public exchange across the Floor of the House.

Mr. Grimond : I should like to ask the Prime Minister two questions.

First, will any part of the Helsby Report be made available to this House?

Secondly.

on 23rd January last year the right hon.


Gentleman particularly stressed that if there was no prosecution, an announce ment of the setting up of the Commissiou should be made to this House.

His state ment today seemed only to cover the case in which there has been a prosecu tion and in which, therefore, no announce ment will be made.

But a trial might well be prejudiced by the prior setting up of the Commission, whioh itself might uncover evidence leading to a prosecu tion.
Do we take it, therefore, that no announcement will be made to this House until suoh time as it is clear that no prosecution in any circumstances may be J.aundbed?

This is raither different from what the Prime Minister has said this afternoon.

internal document.

The Prime Minister : The Report from Sir Laurence Helsby must be regarded as It contains a an considerable amount of highly sensitive matevial on the operation of the security services.
Just as in the pas,t, by agree ment between the then Prime Minister and the Leader of the Opposition, reports such as the Radcliffe Report were not published in full, I must take the view that the Report of Sir Laurence Helsby is not appropriate for publication.

With regard to what I said on 23rd January last year, wbat I had in mind then was a case, which was in all our minds, in which perhaps, a person res ponsible for a breach of security, or a presumed breach, had fled the country.
That should not prevent the establishment I asked of the Security Commission.

then that if that happened, there should be an announcement of the establishment of the Commission.

I still take this view.

My own view is that while what I am now suggesting makes things slightly more flexible concerning the defence of secu rity, in every case at the earliest appro should be an priate moment there announcement in this House that the Security Commission has been set to work.
In those obvious cases such as I have mentii.oned where ithe maitter :is sub judice, I am sure that the whole House will agree that it would be wrong to announce that the Commission had been set to work.

In the case of a man who had absconded abroad leaving a pretty clear trail behind him, I think that the House could be 39 Security Commission 10 MAY 1965 Security Commission 40 [THE PRIME MINISTER.]

told immediately or soon after activation of the Commission.

There may be some In doubtful cases.


the announcement would have to depend upon when the Government felt that the announcement could be made wi thout prejudicing the right of anyone to a fair trial.

those cases, Mr. Shinwell : Is my righ t hon.


Friend aware that the man Bossard to whom he referred in his original reply, and who, I understand, has today been convicted on a charge of espionage, was charged in a court at the end of March last year with dishonesty and admitted nine additional charges and that in the course of the proceedings in court he admitted having previous associations with the Nazis?

Is it within my right hon.


Friend's knowledge whether this man, who was still retained in the service of the Crown after the charges were preferred against him, was vetted by the authorities, and, if so, with what result?

The Prime Minister : One point made by my right hon.

Friend needs immediate correction.

There was no court case last year or in recent times.

But there is reason to think that in this man's case there was a charge in 1934 and that it was stated in court, and not denied.
that he was associated with Nazi activities.

One of the points which I have men tioned today as causing disturbance is the whole system of inquiry before in dividual members of the public are given access to sensitive material.

All the facts, including those mentioned by my right hon.

Friend, will be available to the Security Commission.
It would be well to wait for the Commission to produce its report and to see whether, in its view, having regard to all the facts, the arrange ments for individual examination in this case were adequate.

As I have already made clear, the Government took the view that there were certain loopholes, which have already been closed as a result of this particular case.

It is for the Security Commission to say whether we have gone far enough in closing those loopholes.
Sir Alec Douglas-Home : I understand very well what the Prime Minister is getting at, and, indeed, there may be loopholes which ought to be closed.

When we are considering matters, for instance, l of positive vetting, this is a procedure which should be looked at with a fresh eye to see whether this is achieving the national security which the nation has a right to expect.
I would, however, say-the Prime Minister will understand this-that enor mous consideration has been given to this matter over recent years, and we must be careful that we do not prejudice the rights of the individual to a fair trial in these cases.

This must be a counter balancing factor when we are considering these matters in relation to the security of the nation.

The Prime Minister : It is for that reason that no public reference was made by the Government in this case until the trial was over.
With regard to what the right hon.

Gentleman has called positive vetting-I did not use the phrase myself - this is a matter of supreme importance in these cases, and the kind of considera tion which my right hon.

Friend the Mem ber for Easington (Mr. Shinwell) has mentioned is obviously relevant.
In case there is any doubt on the matter, I want to make it clear that since there has been a reference to possible political affiliations of this man many years ago, it is absolutely the policy of the that Communist and Nazi authorities affiliations equally regarded as anathema from the point of view of reliability sensitive access documents.

are for to Mr. Bellenger: From what my right hon.


Friend bas said, it looks very much as if a great deal of investigation into individual oases will be undertaken in secret and not disclosed either to the House or to a wider public.

My right hon.

Friend will recollect that an hon.

Member of this House was involved for a time in the Vassall case.
May I ask therefore, whether he has any him, further proposals for dealing with cases like this, which affect the individual and affect a wider public than my right hon.

Friend may be thinking of?

H as he any proposals for altering the procedure under the Tribunals of Inquiry (Evidence) Act, I 921, in that connection?

The Prime Minister : Of course, this matter is not being conducted, at least so far, under the 1921 Act.
This was one of the purposes of the previous Government 41 Security Commission 10 MAY 1965 Security Commission .

42 in setting up the Security Commission.

The usual procedure with all inquiries that have been held on security matters -whether departmental inquiries, tribunal inquiries as in the case of Lord Radcliffe's tribunal or the individual inquiry con ducted by Lord Denning-is that when the Report is available, the Prime Minis ter of the day shows it to the Leader of the Opposition in full.
The Prime Minister then indicates to the Leader of the Opposition certain passages which he feels, on security grounds-for example, on the methods of operation of the security services- should be deleted before pub lication, if the document is being pub lished.

It is for the Leader of the Oppo If sition then to say whether he agrees.

he did not agree, no doubt he would say so in this House.
But on all the occa sions of which I have experience, in the days of Mr. Macmillan as Prime Minister and subsequently, there was never any dis Indeed, in agreement about excisions.

the case of the Denning Report it was published in full.
With regard to the Security Commis sion, it was announced by the present Leader of t_he Opposition that the Com mission would have full power to carry on with its work and to ask questions of members of the public service, but that if at any time the Commission felt that it needed more powers, particularly if there was a question of getting evidence from persons outside, the Commission would be free to report to the Govern ment and ask to be duly constituted a tribunal and clothed with all the powers of a tribunal.
If that were to occur, we would, of course, have to consider such a proposal and come to the House about it.

Jn the present case, however, all I can say at present is that the Commission has been set up as a Security Commission and will have full access to all departmental evi dence bearing on its work.

As to the general question of the future of the Tribunals of Inquiry (Evidence) Act, 1921, this is a matter which, I have explained to the House, the Government are considering urgently.
I hope that there will be a statement very soon.

Dame Irene Ward : T he right hon.

Gentleman has mentioned once or twice the word " Government".

Arn I to understand that the decisions really go than the responsibility of further the Prime Minister and what he shows to the Leader of the Opposition?
Am I not right in understanding that although the Prime Minister is the head of the Security Services he really does not keep ihis matter within his own person , so to speak, and those who are connected with the Security Services?

Or does this matter run right length and breadth of all the members of the Gov ernment, from the Cabinet to Ministers and Parliamentary Private Secretaries and all the whole gamut?

I want to know who knows when all these matters are being discussed?
throughout the The Prime Minister : In the first place, as the hon.

Lady with her long experience of the House will remember, Parliamen tary Private Secretaries are not members of the Government.

Dame Irene Ward: Well, they nearly are.

The Prime Minister: But they are not and they never were.

In regard to the general responsibility for security matters, there has been no change in the situation as was announced in the debate following the Denning Re port.
Every Minister, every bead of a Department, is responsible for security within his own Department and must satisfy himself about it.

That is 1he first point.

Secondly, responsibility for operation of the Security Services together with re sponsibility for the police is in the hands of the Home Secretary.

That became clear during the Denning inquiry.

Per haps not many people realised it before that that was the fact.
In iadd~tion to it:his, it:he Pinime Minister has a very special responsibility as head of the Security Services.
I have taken to ceritain dispositions, certain action, make sure I am kept fully informed of everything that I feel can possibly in volve any security risk, and perhaps I may say that in this particular case, be cause of the dispositions I took, it was possible to get on very quickly indeed with certain points which needed dealing with is not enough once the horse has bolted to have a high-level inqllliry six mon,ths afiter to see what was wrong.
It is the d uty of the Prime Minister to see that he immediately-because it 43 Finance Bill- 10 MAY 1965 Second R eading 44 [THE PRIME MINISTER.]

is so informed about these matters that he can take immediate action and close that door and any other doors which may be open.

T his we have had to do in this particular case through the machinery I have described.
Mr. Derek Page: The man Bossard was convicted and sentenced to six months' goal at King's Lynn court in 1934 for a cheque fraud and during the pro ceedings it was not m erely stated that he was a member of the Nazi Party but that he ha d been actively employed by it in a paid position on the Continent.

Will my right hon.

Friend assure himself that the Security Services?

If not, why not, and if they were known, why was this deci sion of the King's Lynn court dis regarded?
these facts were known to The Prime Minister : Yes, I am well aware tha t the facts stated by my hon.

Friend have been alleged in this parti cular case and that there is a certain am ount of material evidence in suppor1 of it.
The question whether the Security Services or others concerned should have been aware of them, o r, if they were aware of them, took sufficient account of them is a m atter of judgment on which l think it is better to await the report of the Security Commission, but everything bearing on this particular aspect of the case, including the sentence-for dud cheques, I think it was- and including the political affiliations, then known to the Government and presumably known and on the oount's records, will be avail able to the Security Commission.
NEW MEMBER SWORN Reginald E dwin Eyre, esquir e, for Biirmingham, Hall Green.

l ORDERS OF THE DAY FINANCE (No.

2) BILL Order for Second Reading read.

3.55 p .m.

The Financial Secretary the Treasury (Mr. Niall MacDermot): I beg to move, That the Bill be now read a Second time.

to When the right hon.


Gentleman the Member for Altrincham and Sale (Mr. Barber) moved the Second Reading of the 1963 Finance Bill, a modest docu ment of some 103 pages, he succeeded in the shor t space of 55 minutes in explain ing to t he House with great lucidity and care the contents of that Bill.

When my right hon.

F riend the present Chan cellor of the D uchy rose to congratulate that the right hon.

him he suggested Gentleman's speech might have been published beforehand as a White Paper.
My right hon.

Friend the Chancellor has this year presented not one but two White Papers, composed, as I a m s~re the House will agree, in lucid prose, which explain the contents of the major part of this B ill far better than I could ever I am tempted to sit down hope to do.

a t once and thus earn the gratitude of hon.

Members on both sides by introduc ing one of the longest Finance Bills with one of the shortest speeches.

But I fear that the gesture might be misinterpreted.
However, the House will be relieved to hear that I do not intend to attempt a traditional Second Reading exposition of the contents of this Bill.

T he two great tax reforms which make up the greater part of it have already been fully outlined, not only in the White Papers but in the statement which my right hon.

Friend made to the House last December, and, a bove all, in his masterly Budget I will not seek to go over tha t speech .

ground again.
ground again.

tedious if I were Equally, I it think the House would to star t find commenting on the very many Commit tee points which are likely to arise at a later stage.

Perhaps the most helpful course I can adopt is to comment upon some of the points of m ore general in terest which have been the source of mis understanding or of misguided criticism I 45 Finance Bill- IO MAY 1965 Second Readi11g 46 since my right hon.

Friend p ublished his proposals.


The first point I may mention is in con nection with vehicle excise duties.

Some people have complained that it is in equitable that anyone whose licence ex pired on 31st March but who took ad vantage of the so-called 14-day grace period and did not renew it until after 6th April had to pay duty at the high er rate whereas someone who had renewed his before 6th April was able to do so at the old rate.
In both cases the licence itself will run from 1st April, as the Vehicles (Excise) Act, 1962, does not provide for part-monthly licences.

I cannot accept that this is inequitable.

Increases in 11he rates of tax on expendi ture are normally brought irnto effect immedi;ately to prevent forestalling, and tihis increase in tihe vehicle exoise du·ties followed the general pattern in applying to all licences taken out after Budget Day.
To have put off the da1e of opera tion of the increase would have enabled holders of current licences to surrender tlhffill and take out new licences valid for It 12 months at tihe pre-Budget rate.

would h ave been impracticable, and also, I think, unfair, to have wi1Jhdrawn all ohose l~cences running from 1st April that were issued before 7rh April and compeJ.led the holders to take out new licences at the higher rate.

That would indeed have b een retrospective taxation.
Perihaps tihe only matter on which 1 need comment in Part II of the Bill is Clause 14, whioh contains the di sallow ance of business entertainment with the exception of entertainment of customers, or prospective customers, from overseas.

As my right hon.

Friend indicated in his Budget speech, so far as possible the disa.Jlowance will be made in computing the business profits.
'J1hus, where a com pany pays the bill for entertaining or makes speoific reimbursement to its direc tors or employees for business entertain ing done by thffill the payments will be disallowed in arriving at the tax liability of the company.

The same rule would apply where a director or employee re ceives an allowance which is specifically earmarked for business entertaining.

That In these is contained in subsection (3).


cases ~he burden of this allowance will fall on ·fae employer, and the closing words of subsection (3) indicates that the tax position of the director or employee It is in obese cases remains unaffected.
impracticable to make the tax disalilow ance in •tihis way when the director or employee receives a general expenses allowance out of which he has to meet orher expenses besides entertainment and also where 11he entertaining is done by a director or employee out of an inclusive In those cases the disallowance s,aJary.

will have to be made in Soheduie E in a tax the director or employee.

assessment of Ente·rtaining is defined in subsection (5) as including any kind of hospitality, a nd gifts.
I suspect tihart many firms feel tJhat uhe practice of sending Christmas presents to customers or suppliers has been rather overdone and will be glad !

'hat it is to be discouraged.

There is an exception in subsection (8) for gifts of his own pro ducts which rt-he trader makes " with 1:Jhe object of advertising the public generally".

We have two tihings in mind here.


T he fi rst is free samples which any m ember of <the public can have and, secondly, suC'h ~hings as free tickets which are sent to t-he Press for 11he first night of a play.

to The right hon.

Member for Bexley in the Budget (Mr. Heath}, speak,ing debate, asked why if we h ad found abuses we bad not got the Inland Revenue to stop them.
The answer is that it would be quite wrong to ask the Revenue to engage in long or detailed inquis itions into the scale of necessity of this type of business expenditure.

Nothing would be to cause bad blood more calculated between the business world.
inspectors and In any event, it is not always easy, when a taxpayer claims that his expendi ture was necessarily incurred on business account, for the Revenue to demonstrate that it w~s not, and I have no doubt that there have been widespread abuses, in the sense that relief has been claimed and allowed for private expenses which do It is not not qualify under the law.

merely this kind of abuse, which is simply cheating, that is in question.
It is also the exploitation of the law, under which some businessmen have been giving themselves the benefit of every doubt and spending more money than is justified because the Revenue meets most of the It is this kind of thing which has bill.

47 Finance Biil- [MR.

MACDERMOT.]

10 MAY 1965 led to the lush living at the taxpayer's expense which everyone must deplore.

Clause 14 makes a clean cut and dis allows entertaining expenditure generally, except for the overseas buyer.
I do not think this will do any real harm to the many businesses that have been scru pulous in this matter, for the disallowance will have no great effect on them.

Those who want lavish entertainment can do it at their own expense.

I come now, Mr. Speaker, ,to the Capital Gains Tax.

I do not think I need deal at great length with this.

The general purpose of this tax is well under stood, and I think widely accepted.
It is to tax substantial sources of revenue which have hitherto escaped the tax net and so remove an obvious social injustice and one which has been a major obstacle It will to achieving an incomes policy.

also discourage or render less profitable many avoidance devices aimed at dressing up as capital what is essentially income.

There are a few matters in connection with this tax which I should like to refer to.

Firstly, may I remind the House of the assets that will not be subject to charge.
The tax will not apply to a per son's only or main residence ; to chat tels disposed of for £1,000 or less ; to Savings Certificates, National Develop ment Bonds or Defence Bonds, or to the proceeds on maturity or surrender of It will normal life assurance policies.

not apply to gambling winnings.

[HON.

MEMBERS: " Why not? "]

Hon.

Mem bers ask why not.

It is for the simple reason that it is not an apt subject for a capital gains tax.
Such winnings are not an asset as defined in the Clause pre scribing what is covered by the tax.

Hon.

Members who have studied tax matters know tha t taxation of gambling is an exceedingly complex subject with which previous Chancellors have un successfully wrestled.

If we had found it possible to solve that problem by the simple expedient of making the Capital Gains Tax apply to gambling no doubt my right hon Friend would have been very tempted to do so.

It is not a tax apt for that purpose.


He has, however, made clear that he is continuing to study this subject and hon.

Members may think we have brought forward sufficient proposals for tax reform for t. .. Second Reading 48 one Budget this year.

Jf my right hon.

Friend is minded to bring forward a general tax to cover gambling next year it would be interesting to know in view of these comments whether he will have the support of hon.

and right hon.

Gentlemen opposite.


In addition to exempted assets, there are also e:x:empted bodies.

Charities, approved superannuation funds, trade unions (in so far as gains are applied to approved provident benefits), friendly societies, and local authorities will be among the exempted bodies.

is no There retrospection.


It will apply only to gains since Bud get Day, and where an asset was acquired before Budget Day at a value greater than its Budget Day value, it is only th e actual gain since acquisition which will be taxed.

The same principle applies the other way to the calculation of capital losses, which can be set off again capital gains.

Mr. Frederic Hanis (Croydon, North that West): Would ithe Minis,ter say actuahly applied to gifts of money from one person to another?
Mr. MacDermot : I do not see how a gift of money can be the subject of a capital gain, but if the hon.

Gentleman has a more detailed point in mind per haps he will write and I will be glad to help.

Some people have suggested that the rate of the tax, at 30 per cent., is on the high side.

In our view it is a moderate rate ; it is less than three-quarters of the standard mrt:e of Inoome Tax, and for 0IIl individual who is a Surtax payer it can fairly be called light.
For the less well to-do there is the alternative of paying Inoome Tax-and Suritax 1also, where applicable-at ordinary rates on two thirds of the gain.

This means that a person whose ordinary income is not big enough to make him liable to ta x at the standard rate will be able to set the balance of his personal allowances and reliefs against the two-thirds of his capital gains.
For example, take a mar ried man with two children over 16, undergoing full-time education, whose income is nearly all earned ; if his earn ings are £5,000 and his income from in vestments is £200 the alternative basis will still be to his advantage if his capi tal gains do not exceed £600.

This shows 10 MAY 1965 Second Reading 50 • Finance Bill- 49 that the tax is by no means an oppressive burden on people of moderate means.
the Member On the taxation of gilt-edged securi ties, it is argued that the Government are in some way in breach of contract, or are under some moral obligation to provide exemption for these cases.

I cannot accept this.

People who enter into any kind of financiail transaction have always had to take their chance in regard to future changes in the tax law.

In 1962 when the right hon.


and for learned Gentleman Wirral imposed (Mr. Selwyn Lloyd) Estate Duty on land situated abroad, he any land which had pre exception for viously been bought in the expectation that it would be exempt from Estate Duty.

On that occasion the then Attor ney General, Lord Dilhome, regarded irt as a " startling proposition " that a per son who entered transaction should claim a right to have the Estate Duty law frozen for his benefit as it s,trood ad: the it1me of ithe transiaotion.
Th[S iwas in illhe OFFICIAL REPORT, 3rd May, 1962; Vol.

658, c. 1348. to make refused into a rightly The introduction of the Capital Gains Tax affects other securities issued at a discount just as much as Government securities, and the fact that the Govern ment are the borrower does not provide a valid argument for a special conces sion.
It would rightly be considered un fair if Government securities issued at a discount were to be exempted from a new tax to which other comparahle: securities were made subject.

Some doubts have been expressed about the definition of the " market value " of quoted shares and securities in Clause 40(3) of the Bill.
As the White Paper says, the intention is to follow the well established estate duty practice, which is briefly, that the market value is either the middle market price on the relevant day as derived from recorded bargains, or " a quarter up " from the stock exchange quotation.

The market value is is of these two, and this is what we have intended to state in the Bill.

It has been questioned whether the drafting this result.
We will have achieves another look at it, and if necessary propose suitable amendments to make the meaning clearer.

lower price whichever less the the in I should perhaps draw attention to the relief proposed in the Bill for unit holders in unit trusts and shareholders in investment trusts, in respect of that part of the gain arising on a sale of shares or units which represents gains already taxed in the hands of the trust.
The arrangements for apportioning the gains realised by the trust among the unit, or shareholders, are set out in Clause 63 ; the provision for the allowance to the investor is in Clause 34.

Briefly, what is proposed is that each investor shall be notified by the trust of the amount of his proportionate share of the net capital gains realised by the trust in the relevant period-that is, the net amount after payment of tax by the trust.
This amount will then be allowed to the investor as a deduction from the sale price o.f his shares or units when he comes to sell them.

We realise that the trusts would much prefer the simple solution of having their own gains exempted from tax altogether, but we do not think it would be right I appreciate that to go as far as that.

the charge on capital gains raises diffi culties for the unit trusts in regard to the valuation of units.
Nevertheless, to exempt the trusts would place their favourable in an unduly investors position compared with other taxpayers.

The taxpayer who makes his investments direct will have to pay tax when he changes his investments and realises a gain, and it would not be right to give investors in the trusts the privilege of deferring payment of tax on the gains realised such occasions until they sell their shares or units, or indeed until their death.
their benefit on for universal admira,tion I come now to the Corporation Tax.

To listen to some of the speeches of ihon.

Genrtlemen opposite, and to read some of the cri.tiioisms in the Press, one would think tihat we were laying sacrilegious hands on a perfect tax system which had aroused and respect.
Memor~es are sihort, and to anyone who holds tihis view I would commend a study of the Press, technical journals, and the debates in this House in the past few years- not to mention the eleotion ma111ifestos of all 1!1he parities.

There was universal agreemenit that our tax sys~em was out of date and in urgenrt: need of Scarcely a voice was raised in defence of the existing reform.

Vol.

712 B 51 Finance Bill- 10 MAY 1965 [MR.

MACDERMOT.]

arrangements.


The only doubt was whether any Government would ever find the time or the courage to tackle the problem.

Let me remind hon.

Gentlemen that our existing income tax system was born in an era when joint stock companies as we know them hardly existed, and has never been radically overhauled.

For some years there has been a growing feeling that it must be brought up to date.

The right hon.
The right hon.

and learned Mem ber for Wtirnal fliiinted wi1th !the iidea of a Corporam1on Tax rt:wo or three years ago, but somehow be never qUJi<te rnached rtbe poiilllt of an aotual engagemelllll:.

Mr. Selwyn Lloyd (Wirral): It was a Corporation Tax which no resemblance at all to this rather ancient bag which the hon.

and learned Gentle man is bringing in now.

bore Mr. MacDennot: I am sorry that the right hon.

and learned Gentleman flirted with a hag.


I am sure he will find that the maiden we are presenting for his attention is far more attractive.

Other Members of the party opposite have lent tiheir support to the idea that tihe time had come when company taxa tion ought to be divorced from personal taxation.

A pamphlet called "Taxes for Today " published in 1958 by the Con servative Political Centre on bemalf of the Bow Group came down strongly in favour of a Corporation Tax.

One of its authors was the hon.


Member for Wanstead and Woodford (Mr. Patrick Jenkin).

That challenging body "The Young Conserva tives" issued a January, 1963, in pamphlet saying: is "A simpler direct tax system for com panies required urgently.

We would support the creation of a C orporation Tax to the present income and profits tax.''
replace One of a series of articles on Tory policy in the Daily Telegraph on 27th July, 1964, iadvooated ithe replacement of Income Tax and Profits Tax on com panies by a Corporation Tax.

This, it said, "would at last enable personal taxation a nd company taxation to be handled separately."

There are, of course, as the right hon.


indicated a and moment ago, many possible varieties of Corporation Tax, and there is room for learned Gentleman Second Reading 52 differenoes of opm1on on pa,rticular features, but I hope that we shall be able to count on hOlll.

and right hon.

Gentle men opposite suppomng at any rate the general idea of tihe Corporation Tax.

The arguments in favour of a Cor poration Tax were briefly deployed by my right hon.

Friend the Chancellor of the Exchequer in his Budge~.
First, it is a contribution towards the simplifica tion of the tax system.

[Laughter.]

Hon.

Members may laugh at the idea that this I did Bill represents a simplification.

not say that the Bill was simple.

I said that it would result in a simplification of company taxation.

To cut a path through a jungle is not a simple matter, in but once someone has succeeded doing it, it greatly simplifies the task of anyone who has to try to get from one side of the jungle to the other.
The first and elementary simplification is that whereas at present there are two separate taxes in company profits, calcu lated on similar but by no means identi cal rules and on different and unrelated base periods, in future there will be only one.

Secondly, the separation of com pany and personal taxa,tion will remove some of the major anomalies in our tax system, in particular the absurdity that the Revenue may be compelJ.ed to pay large sums of so-called tax which has never been received.
One of the great advantages of the Corporation Tax is that it gives a strong incentive to all companies to plough back more of their profits for expansion.

A great deal of ink has been spilt in argu ing whether the Corporation Tax will in fact encourage retentions, or whether the low distributors will retain no more, and the high distributors retain even less, be cause they will feel obliged to keep up their divide,nds.

The answer to all these speculations lies in past experience.
When differentiated Profits Tax was the abolished in 1958, and tax incentive for retentions was removed, there was an immediate upsurge in distributions, and this has continued to •the present day.

There is every reason to believe that the Corporation Tax will resul<t: in an increase in retentions, and it is from retentions that the great weight of money comes for in dustrial and commercial expansion.
Even the Issuing Houses Committee, in evidence before the Radcliffe Commi<ttee, volun teered the view <that the amount of new ...,;,r-·--1 10 MAY 1965 Finance Bill- 53 money raised through the market is mar ginal in relation to the total investment.

It is retentions that are responsible for far the greater part of capital investment in the private sector.

"Ah", say the critics, "but there is no need .to believe that these rel:entions will necessarily be used productively ".
To answer this, one need only refer to the many progressive companies who have financed virtually the whole of their expansion over a long number of years out of retentions.

I do not know whether the right hon.

Member for Bexley would include the oil companies in his strictures about the survival of the fattest?

By and indus,trial busi large, commercial and nesses do not salt away retained profits in passive investments.

They find a more fruitful use for the money.


Sir Tatton Brinton (Kidderminster): If one accepts the hon.

and learned Gen tleman's argument, may I ask why he makes such a complete differentiation in the case of what are described as closed companies?

The rate of pay-out is set here as standard, at .60 per cent.

of what remains after Corporation Tax.

Would not the hon.
Would not the hon.

and learned Gentleman agree thart: •in rtihe case of priWl!te close com panies, which are manufacturing com panies with large physical assets, this is an excessively high pay-out and must result in lower retention?

Is this a good thing?

Mr. MacDermot: They are already manufacturing retentions for rather a I am coming to that different purpose.

point in a moment.
point in a moment.

The companies to which we have been referring, apart from the close companies, by and large, do not salt away retained profits in passive investments, but use the money for more fruitful purposes.

In any event, we have taken steps by our taxation of inter company dividends to see that there will be little inducement for passive invest ment.

In respect of closely controlled companies, to which the hon.
Member re ferred, there may be a greater danger of retentions which are purely passive in nature.

It is for that reason that we are taking adequate powers in the Bill to ensure that such investments are treated as distributions on which the company will be liable at personal tax rates.

Sir T. Brinton: That does not answer the question.

Vol.

712 Second Reading 54 Mr. MacDermot: The reason for the separate treatment of closely controlled companies is well known.
They are used as a method of avoidance of Surtax.

This is the reason why they have been subject to special legislation already, in relation to the existing taxation of companies.

We are continuing to apply the same precaution for preventing tax avoidance in relation to this system.

Then it has been said that we are mov ing over to the Corporation Tax at the very time when Western Europe is mov ing against it, and when influential forces in the United States would like to move against it if they could.
What has hap pened in the past in Western Germany and in Belgium, and what may be about to happen in France, should not be exag gerated.

All these countries started from the fundamental position that company taxation is divorced from personal taxa tion.

In so far as they modify their sys tems, it is within the framework of a tax system such as we are now adopting.
And where modifications are made in over the reasons are often seas systems, peculiar to their particular economic or fiscal needs and have no necessary rele In respect of the United vance here.

States the facts speak for themselves.

Such tax credit as a shareholder got in respect of tax paid by the company has recently been abolished in favour of a straight forward Corporation Tax system.
T-here has also been some criticism of the Chancellor's proposals because he has not adjusted what is called the value of the investment allowance.

It is said that, when bhe combined Income and Profits Tax rates stand at 56¼ per cent., a com pany investing in new plant obtains relief from tax of just over 16 per cent.

of its cost, but tihat when the Corporation Tax is introduced at a rate less than 56¼ per cent.

the percentage of relief in terms of cost wiH fall.

11his is no new pheno menon.


J.f the rate of tax falls, so also wiH t!he value, in ~his sense, of tax reliefs.

This is the way in whioh tax reliefs It is a new view of tax reliefs work.

whioh seeks to obtain ~he same cash advantage for them whatever the rate of tax.

I do not recall, for example, that my right hon.


Friend the Chancellor was congra:tula•ted and bhanked by industry when be was obliged to increase the stand·ard rate last November, because he B2 55 ·_ Finance Bill- 10 MAY 1965 Second Reading 56 [MR.

MACDERMOT.]

bad tihereby increased the value of invest ment allowances.

The truth is that in dustries who make this complaint are regarding investment allowances not as a tax relief but as a subsidy.
The substanti<al fall in the tax on com pany retentions, Which w-iU follow the introduction otf the Corporation Tax, will leave more money in the hands of com panies for capital investment.

Moreover, it will rnaoh tlhem muoh quicker than under tihe scheme of investment allow ances, where there is a substantial period between the investment and the reduc tion in tax in respect of ·the allowance.
Any increase in tlhe value of invest ment allowances wou1d require a higher rate of Corporation Tax to pay for it.

This ,bas not prevented at least one com pany ohairman from demanding both a lower rate of Corporation Tax and higher rates of investment allowances.

Perhaps, like myseli, he was an Jt,ishman.

As my right hon.

Friend the Chan cellor said in his Budget Statement , we must examine itJhe effectiveness of Vhe in vestment allowances.
All the evidence arising out of a number of independent inquiries is that the great majority of businessmen, whether the business be iarge, medium or small, do not have regard to the itax position and, therefore, to the investment allowances, in deciding on capital projects.

One oan produce companies that do h ave regard to the tax position, and it may be that in the future industry wiH change its practice and h ave greater regard to tihe effects of tax incen centives.
But as ·things stand, we must base ourselves on ~he practice of the great majority of industrialists when we are deciding on the future of a costly conces sion l,ike tthe investment allowances.

In our view, the right hon.

Member for Barnet (Mr. Maudling) increased these allowances without any real effort to dis cover whether they were acting as an incentive or whether they were merely reducing the tax bill of those who received Investment allowances cost £80 them.
million ten years ago ; now they cost £320 million, and the cost is still rising.

The Corporation Tax will serve a useful pur pose, if only because it will put a brake on the growth of this relief while a review is undertaken to see whether this is the most profitable way in which to secure ~ l ~ t r I • ' t the increased efficiency of British indus try, wbiah ~s our common aim.

I suggest that the House should await the outcome of that review.

the difficulty the hon.


and Mr. Stratton Mills (Belfast, North): learned Gentle Has there man considered forward the may be business men when planning the whole basis of investment allowances in the future has been put in doubt by the Chancellor's speech?

respect of in of Mr. MacDermot : The hon.

Member is grossly overstating the matter to say that the whole basis bas been put in doubt.

There has been a reduction in its effect by these Measures.
There have been com plaints about that, and a suggestion that more assistance should be given.

But what has been indicated is that in view of these representations we shall review the whole system of investment allow ances-and that is being done-in order to see <1:'hat ~he relief really operates where it is most needed and will most help the national economic effort.
Mr. Stratton Mills: That may be widely interpreted as meaning that the Govern ment are thinking of doing away with the system of investment allowances and moving to other methods of incentive.

Will he clear up the point and say this is not so?

Mr. MacDennot: I cannot anticipate our conclusions, arising from the review.

However, it is not the intention in total to withdraw assistance from industry.

What we want to do is to see that the assistance which is given is purposefully directed.
Most of the criticism of our Corpora tion Tax proposals has been about their In the effect on overseas investment.

first place, let me emphasise what my right hon.

Friend the Chancellor said in the Budget debates.

The Government are fully alive to the importance of over seas investment in relation both to the encouragement of exports and to the help we all want to give to developing coun tries.
But the fact remains that consist ently, over a period of years, capital in vestment overseas has been proceeding at a rate which we cannot afford, and has thus served to aggravate our balance of payments position.

57 Finance Bill- 10 MAY 1965 The Corporation Tax will act as a brake, but will not prevent desirable overseas investment.
We should be shirk ing our responsibilities if we were to bury our heads in the sand and try to regard tlris as a purely temporary phenomenon, calling for some temporary palliative.

It is not.

There is here a chronic imbalance, which must be corrected.

We believe that the Corporation Tax will provide the brake that is needed.

Of course, medi cine of this kind is unpalatable, and those who have to take it will naturally com plain.
But to depict the tax as putting an end to overseas investment is as irre sponsible as it is ignorant.

Some people have complained at our reference to the bias in the tax system which favours our overseas investment.

Let me explain again what we mean.

The existing system treats the tax paid by a company as covering the shareholder's Income Tax liability on his dividends.
One of the consequences is that the credit which is given, whether unilaterally or under a double taxation agreement, for overseas tax paid on the company's pro fits, may not only wipe out tbe company's own liability but may also free the share holder from any Income Tax on his divi dends.
This treatment of the income arising from overseas investment is far more generous than any other important country in the world provides and is cer tainly more than we can afford in the present position of our balance of pay ments.

Moreover, we insist on confusing the company and the shareholder not only in relation to our own Income Tax but in relation to other country's taxes as well.

The Take the U.S.A., fo r example.


U.S.A. keeps its Corporation Tax separate from its personal tax: it does not allow one to be set off against the other, and a United States individual is chargeable to United States tax on bis dividends from a United States company without any set-off or credit for the tax which the company may have paid on its profits.
But under our existing tax laws we pay no attention to the way the United States regards its tax system ; we refuse to recognise the distinction between the two kinds of tax.

A United Kingdom indi vidual who invests in the same United States company gets credit against his United Kingdom tax on the dividend not only for the United States withholding Vol.

712 ---.,,::::-,-, Second Reading 58 tax, but also for the United States Cor poration Tax.

This is pushing our doc trine to absurd lengths.


Just how the new proposals will affect overseas investment is a very complex matter.

It is not enough just to take tJhe rates of Corporation Tax in an overseas country and consider the exttent to which they exceed-if they do-tbe Corporation Tax in this country.

Much depends on the aMowances that are given.


There are countries with high rates of Corporation Tax where, nevertheless, tihe tax burden on a British enterprise is below the tax that will be due from the same enterprise in this country.

illaxes Where the overseas tax is about the ~ame or is less than ithe UniJted Kingdom t,ax, ,a Brirors:h company is iin muoh lthe same posiitiion as ,a compa'Ily here.
Overall i,ts ttax iburden---itlalcing Umted Kiingdom ,together-will be md roversea,s the same under Oorporaition Tax as the tax burden of a company trading at home which distributes 1the same pr;oporti:ion of ~tis p110fi1Js.

Neveiltheless, ibardshiip wlhich may ilo meet any be oaused by ithe ,immediaite ,impaot of the oharge, Clause 79 provides for payment to companies which paid over seas tax in a base year at a rate higher than Corporation Tax.
For the first two years payments will equal the amount by which their overseas tax in the base year exceeded Corporation Tax to the extent that this attributable to excess is aittributable to the profits paid out as dividends.

There has been much discussion of the effect of the Corporation Tax on the oil companies.

Spokesmen of the major oil companies have been criitical.

This is not surprising, since the changes we are making will certainly mean that tax will be paid where it has not been paid before.
But the effeot of the changes must be kept in proper perspective, in relation to the scafo of these companies' operations.

As I will explain, t:he changes should not hinder them from continuing to play their full part in the world oil trade.

We are, of course, aware of the immensely important coll'tribution which the British oil companies make to our economy and our balance of payments, and their im portance is recognised in the special treat overseas to ment investment programme.
But it does not foUow that these companies should be accorded their B3 59 Finance Bi/1- 10 MAY 1965 Second Reading 60 [MR.

MACDERMOT.]

exempt from rhe tax modifications we propose for companies operating over seas.

It is, of course, difficult to discuss in pubHc the affairs of particular com panies, but bo~h B.P.

and Shellhaveraised publicly their own position and I think l I am justified in commenting on it.
should emphasise that the figures and facts I propose to quote are all taken from public sources generally available.

The first striking fact about these two companies is that neither of them has paid any appreciable United Kingdom tax on their profits for several years.

This is apparent from their dividend warrants which show the " net United Kingdom rate", that is, the rate of United Kingdom Income Tax actually borne after allow ance of credit for overseas tax.
For four of the last five years Shell's net United In Kingdom rate has been one penny.

the fifth year it was nil.

B.P.

's rate for all five years has been nil.


We all know that these companies carry on the bulk of their business overseas, and since they can credit the tax they pay in countries overseas against the United Kingdom tax charged on those overseas profits, we can understand how it is that they have been paying no tax on the profits earned overseas, but, as everybody knows, they have substantial In 1964 installations in this country.

over one-fifth of the oil refined through out the world by B.P.
and nearly one-tenth of the oil refined throughout the world by Shell was refined in this country.

In addition they control very large distri bution organisations.

Their road tankers and petrol stations are a familiar sight.

On any realistic view, the United King dom activities of each must be making a very important contribution to their total profits.

No question of double taxation relief could arise on these United Kingdom profits, and yet no United Kingdom tax Indeed B.P.

has done is paid on them.


even better than this.

Its published accounts show that in some years it has actually received repayment of large sums of tax paid in the past.

The Chairman of B.P.

criticised the Government's proposals by saying that B.P.

was in the position of a patient who has had a severe coronary and has been told by his doctor that he might live for another four or five years, provided he keeps to a very restricted diet.

I am afraid that my clinical diagnosis would be different.
Here is a very healthy sub ject, exuding profits and dividends, who has not been acting as a donor like other citizens but who has taken a blood transfusion from his hard-pressed fellow the citizens amounting, according company's own accounts, to over £44 million between 1958 and 1962.

I do not think that we need concern ourselves with the technical means by which this has occurred-inter-company payments, loss claims, investment allowances and so forth.

Foreign tax does not enter into the matter.


to I ask the House whether it is fair or sensible that this large company should not only pay no Income Tax or ProfitsTax, and its shareholders pay no Income Tax on their dividends but should actually be drawing out of the Exchequer tax paid on past profits.

This company, like the whole of the oil industry, makes great claims on the Government for the defence of its undertaking.
It makes use of all our public services for its large under takings in this country.

There is some thing, I suggest, radically wrong with a tax system that allows it to escape all tax charge.

This case of B.P.

illustrates some of the main arguments for a Corporation Tax.

Another a rgument raised by the oil companies is they will be penalised by their competitors in comparison with other countries.

I cannot accept this argument.


Their complaint is that they will, for the first time, be required to account to the Revenue for the Income Tax deducted from the dividends they pay.

This tax is of course the share holders' tax, repayable if they are not liable to it, and it is only a matter of machinery that the company will deduct tax and pay it over to the Revenue.
With the exception of Belgium, at present and possibly France in the near future, I know of no other country where a share holder in a domestic company is given credit for any tax paid in another coun try on the company's profits.

That certainly does not happen in the United States of America.

A U.S. shareholder in a U.S. oil company will pay U.S. tax on his dividend without any deduction for the foreign tax paid by the company.
Similarly, a Dutch shareholder in the Dutch company of the Shell group will pay full Dutch tax on his dividend.

All 61 Finance Bill- 10 MAY 1965 Second Reading 62 that is happening is that the United Kingdom shareholder is now being put in the same position as overseas share holders.

The Deputy-Chairman of Shell has described our proposals as a "mill stone for the British oil industry " ; I can only comment that the Dutch side of the group seems to have survived and pros pered with a similar millstone.
I am not, of course, denying that under the new system these companies and their subsidiaries will fare less well than under the old.

But the very considerable growth which they have shown over the past decade does not seem to be related to the fact that their shareholders have received their dividends almost tax free.

They have financed nearly all their total retained profits and investment from depreciation, having raised very little capital from their shareholders and none since 1958.
Over the last 10 years Shell financed no less than 98 per cent.

of its total investment, amounting to £3,354 million from retained profits and depreciation.

In the last 8 years B.P.

financed 83 per cent.

of its £1,165 million investment from internal resources, 13· 5 per cent.

from borrowing and only 3·5 per cent.

from new money raised from shareholders.

Moreover, its dividends have grown very substantially, both absolutely and as a proportion of income.

Those paid by B.P.
Those paid by B.P.

doubled between 1956 and 1964-they rose from £15·1 million to £31·3 million, excluding capital distributions in the last three years.

Shell Transport's dividends nearly trebled over the same period from £15 million to £41·4 million.

It is not for me to forecast the future actions of the oil companies.

They have made and are making substantial invest ment in the expectation of further growth.
This, together with the transitional relief which will be due for the next five years should provide a cushion which will soften the effects of the changeover.

But even if these companies decided to maintain their gross dividends unchanged so that the whole burden fell on the shareholders, the shareholders of Shell would still re ceive the same net dividend as they had in 1960 and of B.P.

the same as in 1958.


The burden of the Income Tax would do no more than offset the dividend increases of the last few years.

Thus, while figures of loss which have been bandied about sound very serious, the effects of the tax Vol.

712 payments on the shareholders and the companies should not be alarming in relation to the scale of operations of the companies and their prospects.
I cannot help thinking that the fears that have been expressed about the future of the oil companies have been much exaggerated.

I return to the general question of overseas investment.

Some of our critics have said, in effect," We agree that some thing has to be done about this excessive overseas investment, but it is unnecessary and penal to make your measures bite on existing overseas investment.

Your brake should apply only to new investment".


In effect, what these people are proposing is that overseas investment should be exempted from the change-over to the Corporation Tax system-with its separa tion of company and personal taxation by allowing overspill.

They suggest that we should instead use exchange control or the Capital Issues Committee proce dure to restrict new overseas investment.
Exchange control would, of course, be quite inadequate, as it does not apply within the sterling area, and I do not think that anyone is seriously suggesting that it should.

Whether the Capital Issues Committee procedure would be suitable for this purpose depends upon whether a temporary remedy is all that is needed, or whether a long-term in fluence is required, to correct a chronic tendency towards excessive overseas in vestment.
We believe that it is the latter, and I think most of our critics believe that it is the former.

This is the real If a permanent issue which divides us.

influence is required, I do not think any hon.

Members in any part of the House would like to see that done as a per manent method by the Capital Issues Committee procedure.

If there has to be a permanent correc tion, most hon.
Members would agree that the taxation system is the better way to do it, leaving the greatest amount of freedom of decision to the companies which are considering whether to make the particular investments.

I do not think that anyone is suggesting that it would be possible to apply one set of double taxation reliefs to pre-Budget day invest ment, and another set of reliefs to post Budgc:t day investment.

It would, of course, be wholly impracticable.


And if what has to be done is to be done by B4 63 Finance Bill- 10 MAY 1965 Second Reading 64 [MR.

MACDERMOT.]

taxation, it must apply to existing as well as to future investment.

The real question is whether our over seas investment requires to be bolstered up by a special protection, which no other country which operates the Corporation Tax system grants to its overseas investor.
We believe that it does not, and that the transitional provisions we have made will afford time and opportunity for our companies to adjust themselves to the change.

I know that there are special problems for some developing countries, and my right hon.

Friend has undertaken to watch thi~ position with great care and has said that he would be ready to consider whether any new action was needed in relation to aid to these countries.
But these are not reasons for failing to apply the principles of the new Corpora tion Tax system to our overseas invest ment, particularly when, as we believe, its overall effect will be to serve the real economic interests of this country in rela tion to our overseas position just as it does internally.

4.44 p.m. ~\1r.

Edward Heath (Bexley): There are three main groups of sections in this Bill, and there are three main themes running thrnugh them.
The House will agree that they are all linked together as part of the attempt of the Chancellor of the Exchequer to deal with the balance of payments problem.

The first group is those levying heavier taxation on con sumer goods-on tobacco, spirits, and so on-and on motor licences.

With those go the Capital Gains Tax, which the Financial Secretary has again emphasised exists in order, he says, to ensure fairness, and the measures about business entertain ment.
Both are put forward in an attempt to secure the acceptance of an incomes policy.

The general purpose of this group is to reduce the demand on the economy.

The second main section is the Cor poration Tax in relation to borne affairs in the economy.

The purposes really are to secure a greater investment by com panies at home and to penalise the investors in those companies.

The third main section is the Cor poration Tax in relation to companies overseas.
Its purpose is to reduce over- seas investment to help the balance of payments and is, I think, an attempt to force people to invest more at home.

Thus, there is in the minds of hon.

and right hon.

Members opposite this con necting link between the Corporation Tax at borne and the Corporation Tax over seas in creating greater investment.

The argument is that if we can stop people investing overseas surely they will be forced to invest at home.

I want to deal with each of these broad issues in turn.
I hope that the Financial Secretary will forgive me for not going into the detailed matters with which he dealt.

Our first task, as the hon.

and learned Gentleman indicated, is to its comprehend present form.

It might be easier to com prehend were we not so apprehensive about what we might apprehend if we had comprehended it.

It is the longest and most complicated Finance Bill for over 50 years.
the Finance Bill in I must offer a protest against so much legislation by reference in a Bill which makes fundamental changes of this kind.

It places an intolerable burden on hon.

Members.

I see that even the chartered accountants, according to The Times, have declared that this is the last straw.

We have bad many gallant attempts to put the Bill in a form which a layman, or a Member of the House of Commons, can understand.
We had the first Budget the Statement of the Exchequer, his amplification House, the second Budget Statement, the Finance Bill, two White Papers, and now a long and detailed account by the Financial Secretary, which could well have been published as a third White Paper or explanatory memorandum of the other two White Papers.

the Chancellor of to Everybody will agree by this time that any idea that this has led to a simplifica tion of the tax system is way out through the window.
We can all take our pick of the examples, but the one which I take is Clause 55(3): " A claim for relief under this section may require that capital allowances in respect of the trade, being allowances which fall to be made to the company by way of discharge or repayment of tax and to be so made for an accounting period falling wholly or partly within the 12 months ending when the com pany ceases to carry on the trade, shall (so far as they cannot be otherwise taken into account so as to reduce or relieve any charge the Joss tax) be added to corporation to - ---~----,~-, Second Reading 66 10 MAY 1965 Finance Bill- 65 incurred by the company in that accounting period or, if the company has not incurred a loss in the period, shall be treated as a loss so incurred : Provided that the allowances for any period including amounts shall not be treated as carried forward from an earlier period."
This is a1J1 example of the Chancellor of the Exchequer's opoo declaration about simplifying t:he whole of our tax law and tax system.

The Financial Secretary went to con siderable lengths to emphasise what a great a~traction all this was.
But surely he must realise that most of those who were originally attracted by the idea of a modernisation and simplification of our tax system-whioh I agree was supported in the election manifestoes--now see the ramifications and implications of doing it in the way in which the Chancellor and his colleagues suggest.

I do not t!hink that most of them are any longer in love with the suggestions whioh he has put forward.
It is clear that this is ll bad Bill as a tax reform Bill, and nothing that the Finanoial Secretary said bas done anyitlhing to ahange our view on that.

I turn to the tihree main sections.

The first is that dealing with what 1lhe Chan cellor of the Exchequer described in his Budget Speeoh as 1lhe short-term manage ment of the economy and t!he Budget judgment.

He is asking us in the Bill to levy additional taxes and to take con suming power out of the economy.
For this debate we should have an up~to-date report on the si,tuation.

The Financial Secretary has not given it to us.

The Ohancellor of the Exohequer did not open, so he has not taken advantage of I hope that the opportunity to do it.

when be winds up tonight, although it will be too late to help tihe House in considering tlhese matters, be will never theless give us the informa,tion for which I shall press him.
to In the Budget debate we got him to tiJ:J.e point of discussing t:he £ sterling and coming forward with strong arguments in favour of it.

We even got the Prime Minister to stand up in New York in his tibe Economists Oub and address boast of the resources which are now, and always have been, behind the £.

What tlhe economists were asking themselves they did not have the ohance to put it to the Prime Minister- was why did he not say all this the moment tha,t be came to power.
Then, they say that he might into which have saved himself the crisis of confi the Government dence plunged themselves in November.

We know why he did not do it.

He was much too busy playing bis own party tricks to worry about the national inrterest or the strength of th~ .

He wanted an to carry out the alibi for not being a · promises which he m &e at the election and which we now debate from Supply day to Supply day.
All this has cost us the three billion dollar stand-by and the indebtedness which we now face.

What is the Chancellor of the Ex chequor's present judgment about the economic situation for which he is ask ing support in this Bill?

How does he explain his past judgments on this mat ter?

The judgment started with the White Paper in November, which we have so often quoted to him, in which he said that no further action was re quired for the economy.

That was the first statement.


It was followed by the first Budget a month later, by the 7 per cent.

Bank Rate and by the credit the squeeze.

This was followed by second Budget, in which he said that be was aiming through these taxes and two other means- the TSR2 canceilation and the Post Office charges-at taking £250 million out of the economy.

In fact, he took £231 million.

The conclusion to which he came was very interesting and specific.

I should like to quote it to the House.


He said: " Taking into account the nature and incidence of these increases "- this is his conclusion- " my estimate is that, working with the other measures I have mentioned, they will bring about the desired reduction in home demand and so make room for a progressive improve ment in the balance of payments."
He went on: " The Committee is only to well aware that we have a Bank Rate of 7 per cent., and that, following the letter from the Governor of the Bank of England to the London Clearing and Scottish Banks last December a tight and effec tive control over bank lending is at present in operation-[OFFICIAL REPORT, 6th April, 1965; Vol.

710, c.

287.]

T hese were his conclusions at this stage of his Budget speech.

What is the situation today?


Only three weeks after he made that speech and reached those conclusions we have the imposition of the special deposits.

67 Finance Bill- 10 MAY 1965 Second Reading 68 [MR.

HEATH.]

After exactly three weeks another £95 million is taken out of the economy.

We have another letter from the Gover nor to the banks.
The Chancellor has ailready said that we have a " tight and effective control " over bank lending, yet we have another letter to the clearing banks about it, and, within three weeks of his Budget speech, he demands these extra measures.

What is the explanation?

The Chancellor of the Exchequer owes the House of Commons an explanation of this.

Is it a fundamental misjudg ment of the situation?

He has never given us an explanation of how he came to the conclusion that he ought to take £250 million.
He gave us no analysis of this in his Budget speech, so we cannot judge whether he was right or not.

In winding up the mortgages debate, the Chief Secretary to the Treasury said that it was due to an increase in the clearing bank advances.

I cannot believe that the Chancellor of the Exchequer did not know the trend of the clearing bank advances when he produced his Budget.
This is a very simple-perhaps an over simple-explanation by the Chief Secre tary-- The Chancellor of the Exchequer (Mr. James Callaghan) : The right hon.

Gentle man ~hould ask Reggie.

He will tell him.

Mr. Heath: Was the mistake a mistake in calculating the ,increase in wages?

The Chancellor of the Exchequer has not told us what he took into account in his Budget statement so we cannot judge for ourselves.
What we have had in the first settlements three months amounting to between £80 million and £90 million a year-almost exactly the same as the special deposits which have now been taken out.

are wage This raises the general question of the extent to which the Chancellor is relying on a 3 to 3½ per cent.

money incomes policy for the rest of the year.


I should like to quote to him what the First Secretary said on the second day of the Budget debate: " What is new and dramatic is that in the short space of six months we have reached agreement with both sides of industry on the intent, on the machinery, and on the criteria to be applied.

There is now a prices and incomes policy in existence.

"-[OFFICIAL REPORT, 7th April, 1965; Vol.

710, c.

533.]
710, c.

533.]

Does the Chancellor of the Exchequer base all his claims on that statement by the First Secretary, or does he take the view of Mr. George Woodcock, who said at the T.U.C.

Conference : "This is not a plan.

It is not even a policy.

Let us not make any false claims.

These words are much too grandiloquent to describe what we are putting before you.

A policy may come out in time.

This is only the first cautious and sensible step in that direction ...
I can tell you this, and Mr. Brown will not be pleased at this, the remotest possible chance that incomes and wages will be kept down to 3½ per cent.

in this year."

What has the Chancellor of the Exchequer taken into account in his claims for which he is asking support in the Bill?

there is not the Chancellor of This can either be the latest of a series of misjudgments or there can be another explanation.

Did something happen between the Budget and the demand for the special deposits?
What has happened is that the conduct of the economy by the Exchequer and the Government have been under constant examination by foreign the the Common Finance Committee of Market, by O.E.C.D., by the Group of Ten and by the Financial Ministers in E.E.C.

themselves.

What have been their comments on this situation?

They have been reported in the press of 5th May.


The Times said: international bodies-by " As M r. Giscard d 'Estaing " the chairman- " put it, the meeting hoped very much that the Chancellor of target, notably for bringing the British payments into balance by early I 966, would be suc cessfully achieved."

-- the Exchequer's Mr. Callaghan : That is not a quo tation.

Mr. Heath: d'Estaing put it.

It is as Mr. Giscard Mr. Callaghan : It is not a quo tation.

Mr. Heath : Apparently the right hon.


Gentleman does not accept what The Times says-- Mr. Callaghan: I only want to make the point that there is no- [HoN.

MEM BERS: " Do not get excited.

"]- !

am not getting excited.

I have been accused of bad faith by some of the hon.

Friends of the right hon.

Member for Bexley.

What I want to get clear is that I take no 69 Finance Bill- 10 MAY 1965 Second Reading 70 responsibility for what appears .

in The Times.

That was not a quotauon.

If the right hon.


Gentleman will make that clear I shall be happy.

Mr. Heath: I read it as a statement of what The Times said that Mr. Giscard d'Estaing said.

The next quotation from his speech is in the Daily Telegraph of the same date: " There is a great convergence of our points of view.

Every one of us hopes that the objectives stated by Britain will be achieved.
The British Cabinet plans include detailed description of their objectives, figures, and a calendar for the achievement of them.

The Ministers also took note that if these objec tives are not attained other measures will be put in hand by the British Government."

That is a firm quote.

On the same date, the Chancellor of the Exchequer said in answer to a Written Question: restore our balance of payments to equilibrium by the end of next year.

"-[OFFJCIAL REPORT, 4th May, 1965 ; Vol.

711, c.

140.]
711, c.

140.]

When he winds up the debate, perhaps the Chancellor will tell us what exactly these detailed plans and descriptions of objectives and figures and a calendar for achievement are.

The information has been given to foreign Governments.

It has not been given to the House of Commons or to this country.
"The Government aim the people of to Perhaps he will also take the oppor tunity- as he obviously wants to do-of explaining whether the report of Mr. Giscard d'Estaing that it is to be done by the beginning of 1966 or his Written Reply that it is to be done by the end of 1966 is the more accurate.

It is of great importance to know what the policy of the Government is.

I hope that be will give us full details of these pro posals and also let us know whether they include a 3 to 3½ per cent.
wages basis for the rest of this year and whether these proposals also include the effects of the nationalisation of steel or whether that is only put in as a listening post, rather inadequately manned.

It leads to the- - Mr. Callaghan: I am a little surprised that the right hon.

Gentleman should be so anxious to press the inquest on his Government's achievements.
It is well known that we are now in the process of negotiating the second part of the Joan, which will total £850 million, and which will help us to finance the deficit which the right hon.

Gentleman and his friends left behind.

As to disclosing the details of these matters, the Budget Statement contained all the necessary information.

I was asked about the detailed negotia tions between Governments.

The right hon.
The right hon.

and learned Member for Wirral (Mr. Selwyn Lloyd) who performed a similar exercise in 1961- and his right hon.

Friend the Member for Enfield, West (Mr. Iain Macleod) was also in communication with the working party will tell the right hon.

Gentleman that it is not the practice to disclose details of negotiations of this sort between Govern ments, and I hope that he will not press me to change that practice.

Mr. Heath : The right hon.


Gentleman well knows that the loan which he is at present negotiating from I.M.F .

to replace the drawing on standby was to meet the crisis of November which his own Prime Minister admitted was the fault of his own Government.

That is the plain truth.

As to the details, I do not recall any statement published about my right hon.
and learned Friend's negotiations of the kind which I have read, made by the Chairman of the Finance Ministers of the Six and saying that detailed targets, plans and undertakings have been given.

The true explanation of the special deposits three months after the Budget statement the Chancellor has been made to do this in order to get the standby.
It is summed up by the Statist this week-and that is not usually regarded as a magazine support ing this side of the House- when, refer ring to the Government, it said : that is "For the time being we have in consider able degree lost our financial sovereignty."

That is the fault of right hon.

Gentlemen opposite.

What iit amounts to is t,hat what the Ohancellor is asking for in tlhis Bill is out of date, and he has taken no opportunity to teH tJhe House what the position is today.
I want to turn to other ma·tters.

Mr. MacDermot: Such as the Finance Bi11.

Mr. Heath : This is very much con cerned witb the Finance Bill.

The fact that the Treasury spent his time dealing wi·th items concerning businessmen's small accounts is no reason why we cannot rhe Financial Secretary to 71 Finance Bill- 10 MAY 1965 Second Reading 72 [MR.

HEATH.]

look at 1lhe great country.

issues facing tlhis Finally on this point, I want to ask the right hon.
Genbleman it:o reconcile this : having been put in rVhe position of being compelled to rtake rtlhese additional steps, how does he reconcile rtlhem witJh his own expressed anx:iety of what will happen to ,inves001.ent iin 1Jhis country, with a pos sible down-tu:rn in inves-tment at the end of itihis year or at rthe beginning of next year?

lesson of past experience, is the danger at which we must be looting.
'11hat, on the I tum next to the section of the Finance Bill dealing with the Capital Gains Tax, and I will make a brief reference to business expenses as the Financial Sec retaTy brouglht the matter up.

Looking at tihe Bill, it is clear that the Chancellor bas taken no note of any suggestions or comments made in t,he whole of the Budget debate.

Wihat is more, as far as I can see •he lhas taken hardly any account of any of the representations whioh were made to him between November and April.
I!f we are to make reasonable progress with this enormous Bill, then l hope ,that inhere will be a ohange of attitude and heart at least when we are disoussing i:t in this House.

The Oapioo.l Gains Tax will.

certainly not encourage savings or risk-taking or building up one's own firm or investment in growth industries.

In fact, it wiill dis courage all tlhese things.

It is beiing done in the name of fairness.

This is ,!Jhe argu ment put forwa'l'd by the Chancellor and 1Jhe Financial Secretary.
I1: has been done to get an incomes policy.

I do not think tJhat t he settlemelllts since it was an nounced in November suggest ,tJhat it has, in fact, made a penny difference to the wage settlements in This country so far.

Let us be realis·tic about that.

I have five points to make on this part of the Bill.

The Financial Secretary said that it was a very moderate tax.

It is a very comprehensive tax, and I believe that it is at a high level.
Taking these two things together, they make it the most severe capital gains tax of any country If the right hon.

in the Western world.

Gentleman can find one which is more severe, I hope that he will tell the House the details of it.

We have studied this tax very carefully.

Secondly, it makes absolutely no allow ance for inflation.

This is fundamental.


Those who see their savings, in whatever form, increasing at exactly the rate at which the currency is being depreciated will still have to meet the gains tax and thus lose part of their capital, whether they sell or whether it happens on death.

Is this the Chancellor's idea of fairness?

If one's savings increase only at the rate of depreciation of the currency, one is still bound to lose a large slice.

Surely that does not appeal to the people of this country as being fair.
Thirdly, it is the growth industries and the growth activities which will suffer most.

The more they grow and expand the larger the slice they will lose.

Is this what the right hon.

Gentleman and his hon.

Friends want to encourage?

What it means is that, combined with the Corporation Tax, it will make it almost impossible for the small private company to grow to a stage at which it can become a public company.
That is the conse quence of the two taxes together because of the arrangements for close companies.

If hon.

Members look at it, they will find that that is exactly the case.

These companies will have a higher burden of tax than any suffered by any other section Is of the community.

that what the right hon.

Gentleman means by introducing a tax to bring about fair ness?
One can only come to the con clusion that it has been deliberately arranged, by this combination of taxes, to damage the small privately-owned com In the process the Chancellor is panies.

damaging the real growth companies of this country.

Is that fairness?

Fourthly, the ten-year treatment of dis cretionary trusts which is laid down in the Bill can also, in cases where they exist for a family company, be damaging and lead to the break-up of family com panies on death.
The Minister of State, Department of Economic Affairs (Mr. Austen Albu): And about time.

Mr. Heath : It is a very good thing to have that stated in public.

Now we have it on the record that what the Labour Party want to do is to damage and break up family companies even where they are efficient and growing.

73 Finance Bill~ 10 MAY 1965 Second Reading 74 the land m says .
about small man at home- We must consider the damage to the Fifthly, will the Chancellor deal at the small business some length with a question which has those-and specialist-and been discussed in detail by my right hon.

man, Friend the Member for Flint, West (Mr. there are a considerable number of them -who use entertainment, meals, for Birch)?

No doubt he will be able to doing business.

Even Ministers, to my contribute to our discussions on the point in Committee.
The plain fact is that in knowiedge, do that, and at any rate the the particular case of gilt-edged stock Prime Minister has not volunteered to surrender bis position in regard to such and local authorities' stock the general public regards the Capital Gains Tax as special allowances.

The Financial Secretary could not tell fraudulent.

No matter what th~ hon.

Gentleman us how much abuse there is. "


In my the opinion there is abuse", he said, but he Bahamas, the ordmary o"".ner, and very often the s_mall owner, of gilt-edged st_ock I have never know,n the gave no details.

r~gards this as fraud~lent, and ~ bel_ie".e Revenue to be in the position of not being rightly so.

But leavmg that aside, it is able to deal with suob an abuse if it bound to affect Government borrowing, wan~ed to.
Certain marginal cases have been brought before the courts and some The as we have empbasis~d ~efore.

times the Revenue has won.

Why would Chanc~ll?r says that it will not affect it not be possible for the Revenue to the flu1d1ty of the mar~et, ~ut I can find nobody who shares bis view-not one bring big cases before the courts?
We person-p~rticularly be_cause of the very would certainly support the Chanoellor large holdmgs by the hfe offi':es o~ long- in dealing with either a big or small abuse, but why deal with it in the way he has d~ted Government s_to_ck.

This will cer- It is rather like throwing out tamly affe?t the flm~1ty _of the market, chosen?

and I behe':e t~at rt.

\\:I!l damage the ~he baiby wi11h the bath water.

Wihy abolish the whole of this to deal wioh an Chancellor m his actJv1t1es.

We shall abuse?
We shall abuse?

therefore resist this very strongly and put forward constructive ideas as to bow to deal with it.

t "" i s eu•ec a I have dealt To sum up on this part of the argu- with -the question of the simplificaJtion of tax and the object of increasing invest ment, I believe that in its form and ~ have po~nted out that the way in the context of the present burden of ~e_nt.

it 1s being done 1s a bad reform of the taxation, this is a bad and indeed a system.
It is interesting to look briefly vicious Capital Gains Tax.

It is intro- at the history _of this_matter.

.

It was Lord duced for the wrong reasons.

It does not achieve the fairness which the Chan- Dalton who, m April, 1947, rntroduced a cellor gave as the reason for it and it differential profits tax.

As recently as bis Swansea SI?eecb C?f.

January last year damages the economy.

We have to add the present Pnme Mims:ter said : to it this very petty and spiteful measure " ...
I am strongly in favour of the return about businessmen's expenses which, as everybody knows, is just a nasty little bit the pre-1958_ system of discr~mi~ating to of political manoeuvring by the Chan- ~~~lh~y,,between d1stnbuted and non-d1stnbuted cellor of the Exchequer.

The Chancellor admits the principle-the Financial Sec- That :"~s a ~reat ~ono_rrnc statement retary bas just repeated it-that when one of Sociahs~ pohcy_.

.

It is still held as such by the.

Pnme Mmister.


Only last JU111e is doing business which apparently the the Chtef Secretary to !he Treasury sud Government want done- export business denly came forward with the statement, -one can have these allowances.

But there is an immediate contradiction.

If at !he lnv~Slors Chromcle and m a. d1scuss10n one has resident buyers in this country, on mvestment after the election, as re- ported in The Times: T r 10n ax an borne is my second theme.
The Corpo at· arra?-ged _by .

e overseas th t th a conferei:ce d ·t ts a h · .

.

.

fi .

h • rm 1s a w 1c means very large firm which can afford to have people permanently stationed here and that it is therefore likely to give larger export orders, they cannot be entertained.

We see, therefore, that even when the Chancellor is trying to help exports there is an extraordinary contradiction. "

The most likely .

.

.

solution .

.

.


was a corporation tax-the separation of the com bined rate of tax into two, one for individuals and one for corporations " So they stumble into it.

They stumbled over the Minority Report of the Royal Commission and, in tripping over it, the 75 Finance Bi/1- 10 MAY 1965 Second Reading 76 [MR.

HEATH.]

dust came up and suddenly it became Suddenly, adopted as Labour policy.
without realising where we were and that 10 years had gone by- and that a great deal of European and American thought had changed-they introduced their policy in November in a mad rush.

That is why we are suffering from it today.

There are several points with which I will deal.

On the financial and other aspects, there are cases where tax is paid back without it being received.

This has been a constant thing.


Having been told that, may we now be told how many cases of this kind there are and how much is involved?

All the authori ties I have consulted say that such cases as exis1t are very few in number and could easily be dealt with by amendment of the law, certainly without the whole of this part of the Finance Bill.

Thus what we have been told so far is no justi fication of this part of the Bill and I hope that such arguments will not be adduced again.
Then we are altering the way to tax distributed profits.

It is a backward step.

Bit by bit, with the help of the Chief Secretary, the Financial Secretary is get ting himself off the hook he was on because in an Adjournment debate he said that we were moving " with one rush " towards the German and European system.

That was immediately contra dicted in the N eumark Report, in which it was shown that they are moving to wards our system.
The Bill is riddled with contradictions, of which I will point out a few.

The Bill is supposed to encourage public com panies to retain and invest, but it forces small companies to pay out 60 per cent.

It is supposed to encourage overseas companies to retain but not to invest.

So we have these contradictory processes being carried out at one attempt by the Corporation Tax.
The tax will damage innovators, par ticularly, in the small companies, and I hope that the Economic Secretary, who bas always been so strong in his support of innovators, has looked at this one very carefully.

It should , at the same time, be remembered that the na,tionalised indus tries will get substantial preferential treatment in this process because they do not have shareholders but only loan capital.
This is demonstrated by the fact that while local authority water com panies are exempt under the Bill from tax, private water companies must pay tax.

How can this be fair or justifiable?

Or is it that the Chancellor wants to pro duce a situation in which he can have another argument for nationalising water It looks very much like it.

companies?

Mr. Callaghan : I had not thought of it, but I will.
Mr. Heath : As to its effect on invest ment a:llowances, the Financial Secretary discussed these at some length and pro duced typical Treasury arguments.

He has never uttered the argument thait this was being done as part of the Corporation Tax ; just that it was happening and that it must be accepted.

I believe that it is damaging and I do not accept his argument that firms do not take any notice If something of investment allowances.
should have been done, and I do not accept that it should, the job could have been done by way of firms' accountants.

We should recognise the importance of investment allowances and similar finan cial arrangements.

What concerns me is its effect in the development districts.
One who is prob ably more experienced in matters of regional development than anybody else is Mr. George Cbetwynd, who has com mented forcibly on the damage that this will do to the development districts, parti cularly those in the North-East.

I believe this to be wholly true.

The figures which have been produced are, I think, about right- that firms get up to 79·2 per cent.

on plant and machinery and 71 ·3 per cent.

on the 40 per cent.

rate, whereas in future they will get 56·8 per cent.
and 59·4 per cent.

respeotively.

This is a considerable difference.

What we discovered in regional develop ment is that unless there is a sufficient scale of inducement to industry, not just a differential, we will not get firms to go to the trouble of expanding and going into the development districts to achieve their expansion.

There is an inherent contradiction in the whole operation of getting firms to invest and cutting back allowances in this way.

What is the real purpose?


It is, in fact a measure against shareholders and I do not think that the Chancellor will, in 77 Finance Bill- 10 MAY 1965 Second Reading 78 fairness, deny Indeed, on 3rd October, 1950, ,the right hon.

Gentleman who is now the Chancellor said : that.

"Let shareholders be content with fixed divi let us abolish ordinary shares dends and altogether" I agree a boyish prank, but while the right hon.
Gentleman has grown to adult status it is obvious that he has not yet grown to adult wisdom.

There may still be things like that lurking at the back of his mind.

is the ,~n some deta:iil.

The overseas question What are the possible results of all this?

The first possibility is that there will be a diminution in investment in equities because people will not save or put their money into equities because an adequate return is not very likely.
The second possibility is that companies will feel compelled to keep up dividend levels.

What will suffer, tiherefore, wiiill be what they oan use for rtiheir own rnsources or there will be an attempt to increase profits by .increasing prices.

Indeed, !the •lart:ter is the mosrt: likely ourt:oome.

Neither oan be described as · desirable in terms of the way the Chancellor has organised the tax.

third theme.
third theme.

The Financial Secretary dealt with thi,s I suppose that this is the biggest and probably the most the Bill.

The important Government want to take acNon to slow up overseas investment.

I fully under stand their desire to do this, but they already have very good machinery for doing it outside the sterling area.

There is, for example, exchange control.

It operates effectively, and if hon.


Gentle men opposite criticise Shell for having a very large amount of investment, as shown in the 1964 figures when they are published, because of Montecamine they should realise that Shell had to get autho rity to do that and that it was given because it was thought to be in the national interest.

Therefore, there are actions which the Government could have taken for dealing with this problem.
impact of and We could certainly support the Chan cellor in action to stop false holiday allowances switch market, the although many people may not like the action.

What I find difficult to under stand is that in the whole of the Financial Secretary's discussion this afternoon and in the discussion of the Chancellor of the Exchequer and others there has always been emphasis on fairness but never a mention as to what this is worth to us, whether or not it is fair.
This is whaJt matters: what is it worth to us from the point of view of the national interest, and balance of payments and returns from overseas?

I do not the Chancellor of the know whether the Exchequer setting out with is Financial Secretary to go back- I regard it as going back- to the taxation prin ciple that there should never be discri mination of any kind.
I was personally immensely glad when the Treasury was finally defeated and we got away from that principle, particularly for the regional development areas, because there was most definite discrimination tax matters.

in Instead of looking back to non-dis crimination in every form we should be looking forward to other methods of dis crimination in taxation to produce the results we want.

Therefore, the hon.
Therefore, the hon.

and learned Gentleman has been argu ing without any point as to what the overseas investment is worth.

I think that the action he is ,taking is very damaging to overseas companies, and it cannot jus,t be wafted aside as he tried to do.

And it is humbug for the Prime Minister to stand up in New York and boast of our immense international inves,tments and say what a standby they are for the £ when, at the same time, his right hon.
Friend the Chancellor of the Exchequer is saying in the House of Commons that to is doing everything he can he slow up new investment and to bring down existing investment.

There is this argument about the bias in our present system of inves,tment over seas and in this country.

I cannot find any tax authority which will advise me that there is bias in this system as between overseas and domestic investment.
Has the Inland Revenue really advised the Chancellor of the Exchequer that there is bias in this system, when every company has 11:o pay t'he higher 11aite of overseas or home >tax,ation?

The Fiinanoial Seorert:a,ry Daitlher indioated 1that he did not like people paying ltaxJart:ion overseas at all.
But it:he fact .is thaJt ~:t is a welJ~accepted inlter naitional iprlllciple, whiah it:he Chancellor of rthe Exahequer w,irli not be able 11:o ohaoge, thart: if one makes one's profits in anot-her col.lllltiry one pays one's rtax there.

ThaJt wiU conrt:inue.

;79 Finance Bill- 10 MAY 1965 Second Reading 80 [MR.

HEATH.]

In my view, the Chancellor of the Ex chequer has never demonstrated, nor has the Financial Secretary, the way in which -with the exception of the O.T.C.s there is bias in this system.
I hope that in our more detailed discussions in Com mittee we can be given much more in formation about this.

The hon.

and learned Gentleman gave the return of figures for investment over seas and at home.

He gave the figure abroad after tax and at home before tax -8 per cent.

in one case and 15 per cent.

in the other-but that is just not com parable.

That is what I have been talk ing about-the idea that if one makes money abroad one should not pay tax aibroad.
Tihis is Ito say ,that one should not have any overseas investment of any kind and should withdraw any one has.

That is the logical conclusion of the Chancellor of the Exchequer's figures in his Budget speech.

It is not comparable to give the figure before tax at home and after abroad.

In any case, he said that it was 8 per cent.

in one case and 9 per cent.

in the other aflter lt:ax.

Wi:th such acouracy of figures as tthere is, I do not Imow •how one can make a judgmernt:.
I do not accept that bias has been proved, but even if it has, as in tbe oase of 1:!he O.T.C.s, is not the real question: is 1lhiis wortJh tt for us as a nation in the returns we get back?

T!hait is the real lit is not jus,t a question of can pomt.

we afford it for the fotlllfe but also a quest1:iion of whether what we have done in llhe past has been worth it at the price?

That is the other half of the matter.


It is very important to get t!his rigihit, because we have had no figures in substantiaition from the Chancellor of the Exahequer, and nothing whatever from the Fiinanoial Secretary.

As we all know, last week in the other interesting tbere was a very place indeed, a fascinating-deba.te on this whole question.
A great deal of informa tion was given tbere, and I hope tihat we shall have more information given to us here durmg the Committee stage of 1lhis BiilL There has been no discussion of tbe returns from these investments in exports, in management fees, in otiher raw tmdirng ma:teiials available to us, as well as in tihe actual remittances through profits, in making invisibles, div.idends, and so on.

Surely, this is fundamental.


The greait companies have published figures, and extracts have been givein by tbe Financial Secretary today, bUJt I believe llhait the O.T.C.s have also served a very useful purpose-that is why we legislated as we did-and tihait they still In view of serve a very usefu~ purpose.

vhe time, I shall not go into all tbe details now-because we, too, shall have oppor tunit y when in Commititee-but perhaps one can look ait tbe other figures, as the Financial Secretary did not.
If we look, for example, at the Federa tion of British Industries' Overseas Invesitment Survey, published recerntly, we find tth,a,t it gives indications over a wide field of tthe returns from some of these companies.

We see that Shell in 1963, at a total currency cost of £30 million ~he 1964 figures are not yet out-brought us foreign raw material worth £140 million, and also brought the longer-term benefit of £30 million of overseas invest ment.

Is that suoh a bad arrangement in the national interest?
LC.I.

has published its figures for the 15 years from 1950 to 1964.; £37 million direot oUJtflow and £120 direct net iinflow.

That is worth while.

B.P.

shows a total net gain to us of £67 million a year.

This is invaluable.

The Hudson's Bay Company- an O.T.C.-has in this century paid out £9 million from this country in investment, and in the last eight years alone has had £9l million back.

The Chancellor of the Exchequer now says to that company, "You will pay another £1,075,000 in tax."
That j/; the result of ithis Bihl.

Can the right hon.

Gentleman say that that will not affect the activities of ~hat one company?

I believe is an absolutely this unbalanced argument, without foundation or proof.

that My third point is that Government lending overseas still going on.

is Government expenditure overseas still goes on and has not been cut.

How can the Government justify lending for what is almost inevitably a far less profitable investment, and cutting back on this one?
I think that the House will agree that at the United Nations Conference in Geneva last spring we in the British delegation did our best to help the developing countries, and I would go on IO MAY 1965 direct Finance Bill- 81 doing so.

But I firmly believe that those countries prefer private investment without governmental strings attached to ait, allld ,wciJth all the "know-how" a111d management experience going with it to investment governmental through aid.
So the undertaking, and it bas been repeated by the Financial Sec retary, which the Exchequer gave in his Budget speech, that if any difficulties arise, be is willing to look at the position-by increasing, presumably, Government-to-Government lending- the damage done to the investments of the private companies.

is not a substitute for the Chancellor of the action My fourth point is that these develop ing countries are showing great anxieties -Malaysia, in particular, but others as well.
It is also noteworthy that the Americans have exempted the developing countries from they have taken, which is very effective, to deal wi.ilJh !their ibaiance of payments.

I do not believe that this aspect of the Corpora tion Tax is justifiable, because I do not believe that anything the Government can do through pumping out additional aid will replace the work that bas been done by the mining companies, by the plantations, by the oil companies, which will be damaged.
I also fear, and I must warn the Chancellor of the Exchequer of this, that if he continues with his policy it will produce in other countries reactions that are damaging to us.

I am sure that that will be the case, and there are signs of it already.

Fifthly, there is the general belief that these companies, if only they are stopped, can invest more in Britain.

That is just not the case.


The great companies we have been discussing today cannot just turn round and say, "Instead of invest ing in Malaysia, we will invest in Great Britain ".

It is just not a tenable argu ment.

If they cannot get their resources, they will be in danger of being taken over by our competitors- by the Ameri cans, the Germans and the Japanese and, I believe, at lower prices than they would otherwise realise.
One must therefore ask : are all these consequences unforeseen because of the Corporation Tax being looked at mainly from the domestic point of view, or were they carefully foreseen, and is this a balanced judgment?

The Economist had a very interesting article putting forward Second Reading 82 another way of dealing with the Corpora tion Tax.

The Economist was at first very favourable to the Chancellor of the It Exchequer, but now no longer is.

said: " Do we now contradict ourselves .

.

.

?"


It then urged : " It would be greatly in the national interest if Mr. Callaghan .

.

.

were now to contradict himself too."

I believe that there is a great deal of truth in that.

I come, finally, to my conclusion about the Finance Bill.

We can sum it up by saying that it is going to do nothing It is not to modernise our tax system.

going to stimulate our economic growth, because I have pointed out where it damages it.
It is not going to help exports, but it is going to damage them because of rtihe effeot of the Corporation T1ax on companies overseas.

I,t is not going rtio simplify :the max sys-tern because of the sepa,rart:e code for Capital Gains Tax and because it is grafted on to our present taxaitioo system.

It ris not bringing us into l,irrle w~th otbeQ' countries.

What is the philosophy underlying the Finance Bill?

The Chancellor of the Exchequer says that it is fairness.
I believe that behind it is not a philosophy but a set of primitive Socialist tribal beliefs.

All this is really part of an attack on the free enterprise system and the individual.

Of course, this is only one aspect of the Government's policy.

We are now beginning to see the whole thing.

We are seeing the extension of the nationalised industries more and m01'e illlto ,the field of priviaite enterprise.

We a1:'e seeing nationalisart:ion through the High land Development Board.
We are seeing the curtailment of the private airlines in the interest of the nationalised industries and the attempt to get the nationalisation of steel, the White Paper on which said that the Corporation would have power to take over more steel companies ,and ooher ,types of companies for diversifioart:ion.

This is an attack on those who invest and who receive their rewards.

The country is now waking up to what this is all about.
This is why we saw the result we did at Hall Green and the result of ,the Gallup poll.

We on ithi-s s~de of the House will do our utmost to alert the country to what is going on.

This is a 83 Finance Bill- 10 MAY 1965 Second Reading 84 [MR.

HEATH.]

bad Bill and we will go into tonight to vote against it.
the Lobby 5.33 p.m. Mr. Harold Lever (Manchester, Cheetham): The Conservative Party has managed to persuade itself that when it left office last year the country was in a state of fundamental soundness both in the international and domestic econo mic sectors and that an ungrateful and uncomprehending British public stabbed the Tory Party in the back and threw a good many very unfortunate babies out with the bath water.
This has led to a mythology as complicated as some nations invent to cover their military defeats.

The Conservatives have a simple unction to lay to their soul in regard to the crises which befall on their leaving office.

They say that the crisis of ster ling was a crisis of confidence due to the line taken by the Prime Minister, and that the nation's affairs the Tories had led a blameless life.
the conduct of throughout In fact what the Prime Minister's statement said was that this one of the many crises of confidence which have beset sterling after the war began immedi ately after the Conservative Party left office and the fundamentally feeble state of our reserves had left us in a position where we could not deal easily with that crisis.
The most elementary look back at Tory rule shows that even the most blue-blooded Conservatives provide us prophylactic against this and that even a booming balance of payments is no prophylactic against them.

So I hope that we shall not hear any more on this juvenile level.

I was abroad during the Easter Recess and found that the standing of the lead ing members of the Cabinet was exceed ingly high.
In fact, on my return from travels I found that the severest my critics of the leading members of this Government were to be found in the City of London and in the Parliamentary Labour Party.

The Budget in its main objectives, the Finance Bill in its main objectives and the strategy of the Chancellor in its main objectives are, first, the defence of the £ sterling at its present parity.
I am abso lutely convinced that the Prime Minister and the Chancellor of the Exchequer have, by standing by these parities in international negotiations and agree ments, acted in the best interest of this country and that this will lead to further international developments arrangements which are necessary if the world is to continue at its present level of prosperity.

the in It seemed to me that nothing could have done more good and been better than the Prime Minister's statement in New York.
I am very much in favour of the Chancellor being courageous in the difficult circumstances which he faces in the reform of our Income Tax system.

I must say that the introduction of the Corporation Tax was not a light undertaking at the present time and that even the detai.led measures of reform a which measure of courage in present circum stances.

accompanied required it I believe that the case for the removal of the entertainment allowance is not really based, as the right hon.
Gentle man opposite seemed to suppose, on the kind of malicious spitefulness which he the Chancellor's mind.

says occupies Broadly, the case could be put in this way.

One entertains one's customer and is then entertained, in turn, by another customer.

Expenditure set against revenue liability.

None of the receipts of entertaining are accountable to the revenue as a perquisite of trade.
is It seems that in the circumstances the Chancellor could defend the abolition of entertainments allowance, since he does not call for the beneficiaries to account for it as a trade receipt.

This is a matter which we might examine in more detail in Committee.

I hope that my right hon.

Friend the Chancellor will not mind if I trespass on our old friend ship and if I say that I did not think his references to penthouses, yachts and the grouse moors were really apposite.

If my right hon.
If my right hon.

Friend wants to abolish the entertainment allowance for grouse moor shooting, yachting and penthouse this could be done g~ite occupation simply without the blanket abohtton proposed here.

Mr. William Hamling (Woolwich, West): Why was it not done by the party opposite?

Several Hon.

Members rose - - Mr. Deputy-Speaker: We cannot have a five-part debate.

-~ - - - - ~ 85 Finance Bill- JO MAY 1965 Mr.


Lever: All I would say is that it is hard on those who run their yachts at their own expense, and the Chancellor will know that that is so in the case of one hon.

Member of this House.

Those who have either visited grouse moors or occupied penthouses at their own ex pense may find it hard to have a totally unconnected allowance disallowed on this ground.

I hope to make the case in more detail in Committee.
There is a very respect able case to be made for the blanket abolition which has been proposed.

It would help us to get the case over to people who will be injured-to our regret if we managed to avoid talking of the - more extreme end of the entertainment allowance business.

The Surtax on deeds of covenant proposal is equally defen sible, and I think no one objects to that.
I am glad to congratulate the Chancellor who, with his manifold problems and difficulties, has realised that he cannot leave these matters any longer but has to tackle them right away.

I have been saying for years that this country has been investing overseas be yond its strength.

I am glad that the Chancellor has adopted a general propo sition which I have put forward for many I never thought that the special years.

tax treatment of overseas trade corpora It has become less tions was justified.
and less apt to our circumstances and I am glad that it is being abolished.

I am glad also that the Chancellor intends to ensure a close scrutiny of future overseas investment.

In the 10 years before 1964 this country invested nearly £4,000 mil lion abroad.

We cannot help feeling that if we had had a little more of that in our short-term reserves we would not have been mauled so badly, forced to distort our economy so badly, and found ourselves in constant crises which beset the pound.
This is not because investing abroad is a bad thing, but investing beyond our strength is bound to make us recoil in general domestic programmes, such as happened in 1957, 1961 and 1964.

Then we have to take these economic measures, including 7 per cent.

Bank Rate, which a,re ia sei1lback rto the •whole economy.

Incidentally, I hope that the Chancellor will be as eager as I am to see that rate reduced.
It does not seem to be fulfilling Second Reading 86 much purpose at present and it is time that we had a look at the idea of I am glad to see that bringing it down.

the dollar pool is to have close examina tion to see how far useful aid can be given in that respect.
I am glad, too, that a Government have come into being which recognise the need to measure the breadth of a taxpayer's back in order to assess the burden which he can undertake and that we shall have regard to a man's capital position, in cluding capital gains and capital assets.

This principle should have been intro duced into the tax system long ago.

Whether in detail I can finally approve it is another matter.
Being a man of a somewhat benign disposition and able to see the difficulties of many people who have a different political and economic point of view from mine, I particularly the Chancellor's peroration, welcomed which stood in sharp contrast to the out of-context exuberance of the party con ference quotations of the right hon.

Gentleman the Member for Bexley (Mr.

It is plain that we shall need Heath).

to have a united nation if we are to tackle the problems ahead.
All this met with my intense approval and my full support.

I have not been able to agree with com plaints ~hat the Bill is badly drawn.

It is a httle masterpiece of its kind.

[An HoN.

MEMBER: "A big one."]

Account ants said that it was the las,t o,f several successive "last straws " which taxpayers had ,to interpret and to be advised upon, but those who are at all expert in under s·tlanding tJhe drafting and style of Finance Bills must find this an outstanding one.
One cannot help feeling ~hat the Chan cellor has had tihe advantage of the help of advisers who have not always been present before to assist him in giving what was a'1ways a brilliarut drafting staff their It is quite clear that marohing orders.

there was a high s1andard of competence in giving tihe instructions for drafting.

t1he What r,ight hon.


Member for Bexley referred to was a me-re nothing compared wi•bh the ecs-tasies of incompre hensibihty to whioh the draftsmen have been lashed in previous years, often with I cannot agree at all out mudh effect.

thait the drafting is bad.

The drafting is exceBe'll!t and tJhe advice whioh the Chan cellor has received has been of a very 87 Finance Bill- 10 MAY 1965 [MR.

LEVER.]

high order.


It is not for me to speculate aboot how advisers come and go, but I have never sh.aired rthe xenophobia and narrow folly of those who criticise out siders entering the Civil Service.

The Civil.

Service has been refreshed during and after wars by the introduction of advisers from outside.

The brilliant and higih quality Civil Service we enjoy today is in no smaU part due to the new blood admixtures which it has received from time to time.
11his has done no harm at all to this Finance Bill.

Irf this were all rtJhat had to be said I should be very happy in congratulating my right hon.

Friend on taking a first step in wihat I believe will be a remark able career as OhanceBor of the Ex chequer.

He is the firs,t Chancellor in recent years to show courage, charncter and personal,ity to put over tax reforms which were very muoh overdue and which are in the interests of the whole economy, and, incidentaUy, in tihe interests of social justice.
But alas, some of tJhe these priinciples, attempts when they are examined in close detail, leave some ground for anxiety.

I have always been in favour of a corporation tax being introduced, but I favour a high corporation tax and a smaM or negligible withholding tax.

It would produce the same revenue but would be fairer to those affected.

to execute Before tJhe election in •t!he Statist I pub lfahed two articles to this effect.

Alas, rtJhey do not appear to have been accepted by tihe Treasury.
One of the consequences of rthe scheme adopted by the Ohancellor is that where there is ,total distribution of income there has to be a rate of tax approaching sometJhing like two-thirds of profits.

This is tihe highest standard rate ever applied to a company's profits.

lt is said that this is only for companies whioh pay out the whole of their profits in dividends, but that is not necessarily the wrong thing to do.
Sometimes it is the most reasonable thing to do ; some times rtJhe Inland Revenue insists on it.

The question is, can we justify so high a standard rate simply because a company pays out The whole of its profits in divi dends?

I tJhink rthe answer is no.

automatically profits Those come within the grasp of the most severely progressive Surtax system in the world.
Second Reading 88 I do not suggest that Surtax should be modified, but it would be be,tter if we taxed income paid out at a rate which was not so high before Surtax as to bear so hardly on those concerned.

This tax bears heavily, too, on existing overseas investment, and this has nothing whatever to do with the balance of trade.
To find some means for selective payment of tax which would decrease investment beyond our means is one thing, but to impose a burden of tax on existing invest ment must be defended on its merits and not on the question of balance of pay ment.

Some people say that this cannot be the from consideration of excluded balance of payments because, as the Financial Secretary said, it would be impracticable to make this selective dis crimination, even if we accepted the need I must say that the Chancellor for it.
of the Exchequer is well able, and pre vious Chancellors of the Exchequer have been well able, to perform ,the most extra ordinary verbal acrobatics in selecting and defining so as to prevent ,the tax payers avoidro.g ,tax rwhen ibhey, :rightly, did not want him to avoid tax.

I would like to see some of that same ingenui,ty applied, if we make out our case in respect of overseas companies, in saying that we shall discourage new investment but will not penalise old in vestment.

Would my right hon.
Would my right hon.

Friend the Chancellor of the Exchequer say as a matter of principle that he is not in favour of penalising old investment but is merely in favour of deterring new in vestment?

If he were to say this, some of us would lend our efforts to assisting some of the brilliant draftsmen he has at his disposal to achieve this end.
We do not want to be pu,t into the position where these companies will say to us, " Under your system we would have been better off in the last few years if, instead of painfully and at grea•t hazard building up vast and useful overseas in vestment of benefit to the country, we had been engaged in setting up a chain of pin table saloons.

We would have been rather better off, fiscally speaking, tJhan we sihaB.

be now".

I hope that we shall not ignore l'he case thait has been made.
I hope ~hat Vhe Ohancellor of the Exohequer will look art t!his again.

He is a moderate man.

He is a man of great flexibility of temperament and character.

89 Finance Bill- IO MAY 1965 There is another matter which troubles me-[Interruption.]

I do not think ,that my Tighrt hon.

Friend needs any protec tion from me.

He stands in sharp, excit ing and encouraging contrast to his pre decessors of the Tory Party.
I thought I had made it abundantly clear in my opening that every one of his policy objectiives is intelligenrt and well con ceived and has my fullest support.

What I am now dealing with are detailed matters, points which the Chancellor of the Exchequer is quite able to consider in Committee and put righrt.

They are not in any sense fundamental criticisms of his approach or of his handling of our I have the affairs since he took charge.

in my right hon.
in my right hon.

greatest confidence F riend's handling of our affairs.

I have the greatest confidence in his budgetary approach.

As I have sa,id, these much overdue motivations are very much what we need, but that does not prevent me from making detailed criticisms and [Interruption.]

making tihem in public.

These private criticisms sometimes lead to the most unhappy results.

They sometimes impose a burden upon borth parties.


After all, my eccentric con stituents elected me to the House of Commons and it is here that I should make such contributions as I have to that I shall not be make.

accused of atltacking my right hon.

Friend, because I am most anxious to support him.

I hope Another matter I should like my right hon.


Friend the Chancellor of the Ex chequer to look at-I do not want to take up too much time now on Commit tee points-is the question of closed com panies and the effect of his legislation upon them.

The Corporation Tax, which can, as I have indicated, be very severe in its impact jf there is total distribution, has been defended on the ground that it encourages retention.
It seems a little anomalous rt.hat the Bill, wihose impact is it encourages com justified because panies their profits, also to contains a Clause which grants more dra conian powers compulsorily to exclude profits than has ever been seen in a Finance Bill.

This matter should be further considered.

retain The kind of things I do not like about the Clause dealing with this-I will tell the Chancellor of the Exchequer about them-are, first, that a standard of 60 It seems to per cent.

dividend is set.
dividend is set.

Second Reading 90 me a little too high to assume that 60 per cent.

is a reasonable percentage for a trading company to pay.

Again, this is more of a Committee point.

The second thing is that I do not like the fact that ,tihe onus of proof in deciding what dividend shall be paid is trans ferred from the Revenue, where it bas always been firmly put in tax legislation of this kind, to ,the taxpayer.

This onus of proof should never be upon the tax payer.
If tibe Revenue says thart: more dividend should be paid than the direc tors think fit, let the Revenue prove it, not the taxpayer.

If any benefit of doubt is to be given, it must be given to the board of direotors and not to the Revenue.
It is a pity that when the Clause was introduced a new phrase was used different from that which tradi>tionally has been used in the old legislation and which seemed to be a very apt phrase, that people were allowed to keep in their businesses as much money as was reason ably required for their extension.

I do not like the new phrase which is used.

It has caused many people perhaps un necessary anxiety.
Many business people seem to think that the Chancellor of the Exchequer is up to some mischief by I am sure that he changing the words.

is not.

As a matter of fact, when the Chancellor of the Exchequer introduced this part of the Bill he used practically the same language as the old Section 245.

I suggest that, ins,tead of calling upon the company some adaptation of the old Section 245 words be used.
to prove prejudice, Another thing that confuses the tax payer is that he does not know, since he is subjected to this Clause and to the old Section as well, as far as one can make out, wbet:her he is to get directions under this Clause as an alternative to directions under the old Section, or whether J.hey can be both used against him.

If this is in substitution of Section 245, it should be so stated and no doubt taxpayer will be correspondingly the relieved.
However, I do not want to go on making too many Committee po1nts.

I want to move ito capita~ gains.

The Chancellor of the Exchequer has shown in many of his great understanding actions in the very short space of time that he has been in office.

These are novel and very complex problems.

He 91 Finance Bill- 10 MAY 1965 Second Reading 92 [MR.

LEVER.]

has exempted investment trusts and unit trusts, or at any rate he intends to exempt their members from paying tax twice on the same capital gain.
Can we have from my right hon.

Friend some guidance upon this as a matter of principle?

Unless somebody can argue cogently to the contrary, it seems to me unfair that some capital gains should be taxed twice-once in the hands of the company, and once in the bands of the If the principle for which shareholder.

I contend is accepted, we can all pro ceed from there, without burdening our selves with an excessively complicated, impracticable Finance B~ll.
to put sugges tions to the Chancellor of the Exchequer as to how the unfairness of double taxa tion can be avoided.

I should Eke my right hon.

Friend to te11 us-I hope that he will do so tonight -that he is able to accept, in principle at any rate, that it is not a good thing or a fair thing to tax the same capital gain twice-once in the hands of the company and once in ~he hands of the shareholder.
If he wiB say that, some of the unfor tunaite occasions where, under the Bill as drafted, that will occur may well be avoided.

If the Chancellor thinks that it is proper to tax capital gains twice-once in rhe company's hands and yet again in the hands of the shareholder-let him say so openly.

I would disagree with him, but he must tell us why he thinks it is justifiable to tax the same capital gain twice.
I want to make it quite plain to any body on this side of the House who thinks that I am defending the company taxpayer or the capital gain achiever that all I am seeking to do is to achieve fairness between the members of a par ticular class of taxpayer.

I do not dis sent in any way from my right hon.

Friend's desire to raise an appropriate amount of tax from this class of tax payer.

I do not want to reduce the amount of tax he is to get out of com panies or out of capital gains.
All I wish him to do, within his global targets, is to say that those who are subjected to tax are consistently sub jected to it on the basis of equity and fair play, so far as this can practicably be achieved in a Finance Bil1.

The next matter that causes me very great concern on the Capital Gains Tax is the question of capital gains on per sonal chattels.

A friend of mind, when I mentioned this to him, said that I should declare an interest.
I am bound to say that I suppose that every one of us has an interest in every matter which I have raised on the Budget.

So if any of these taxes were to be lowered to my own personal advantage, let it be now declared that I have an interest in them all being lowered.

It is likely that I would pay every single one of them at some time or other if they were put in force.

So I think that I had better declare my interest.


I should imagine that it is very much in the interests of everyone that, so far as possible, we should not bring within the Capital Gains Tax the personal chattels and belongings enjoyed by people in good faith in their homes.

It surely is not impossible to exempt this class of goods from tax.

The amount of tax which the Chancellor would get from his present proposal would be very little indeed.
There are bound to be anxieties and inconvenience involved in this matter, and I ask my right hon.

Friend to reconsider the tax on personal chattels.

I know It is not justified.

that the Inland Revenue has a kind of neurotic obsession with stopping poten tial loooholes for tax avoidance, but suppose· that the Chancellor enacts this tax without.
this provision and suppose we see whether, in fact, tihere is any con ceivable scale of tax avoidance that could result from people buying personal chattels and making gains thereon.

I think the Chancellor is going up a blind alley, with no benefit to himself and with considerable inconvenience to It will not be a Capital other people.

Gains Tax on personal cba;ttels.


It will be a penalty on realisation only, which will fall upon the most innocent and simple people, and will not produce any benefit comparable with the harm and inconvenience iit will cause.

Tihese are ,tJhe few maitters of detaiJ tha,t I wanted to mention.

The Chancellor will be relieved to know that it is unlikely that the Committee stage will produce any more from me.

I sum the matter up thus.


The Chan cellor is the inspiration for these criticisms being made, in a way prematurely before the Committee stage.

He is anxious to unite the nation behind the immense f· 10 MAY 1965 ------, Second Reading 94 this Finance Bill- 93 tasks that he has set out to accomplish.

It would be dishonest to pretend that the Finance Bill has succeeded in any noticeable way in achieving that objec I put it to him that one of the tive.

reasons for is not merely hon.


Members opposite who have played little part in recognising the nation's dire need.

They have played very much the party game.

They have shown little sympathy for the Chancellor's difficulty and very little sense of communal effort to put matters right.

They have shown very liHle willingness to help in getting a spirit of national unity in tackling these affairs.

I suggest tha,t the Chancellor should not rely upon hon.
Members opposite too much in that respect but should rely on If he shows flexibiI,ity, his own efforts.

moderation and good sense in the kind of matters that I have outlined as matters of detail, I believe that he will get the nation behind him.

The nation is aware of the disreputable record of the Con servative Party in relation to the state of the economy.

The nation 1s not interested in the verbal quibbles with which they seek to defend themselves.
It is aware of the immensity of the task that faces the Chancellor and will back him if it I ask my right hon.

gets half a chance.

Friend to show his good sense, modera tion and flexibility and then be will find the country is behind him.

6.3 p.m. Mr. J. Grimond (Orkney and Shet land): We have listened to a most interesting example of how to criticise one's own Government.

I would suggest to the hon.


Member for Manchester, Cheetham (Mr. Harold Lever) that he ought to conduct a seminar for other members of bis party, including the hon.

Member for Bosworth (Mr. Wyatt), on how to make the Chancellor listen.

The Chancellor not only listened.

He beamed like a cat presented with a bowl of milk.

In general, he was being buttered up.

He was told that there were only a few detailed criticisms here and there.
But in fact the major proposals of the Finance Bill were taken to pieces by the hon.

Gentleman for Cheetham and were found not to work.

The Corporation Tax is all right in principle, of course, he said, but not with a 40 per cent.

Corporation Tax and the present level of the with holding tax.

We aJl agree with that.

The Capital Gains Tax should be removed from all personal chattels ; hardly a detail.

The overseas companies are not to be penalised on their existing investments.
All I can say is that I hope that we shall see these very impor tant amendments in the Bill.

I agree with the hon.

Gentleman in being greatly puzzled about the way in which the general principles of taxation introduced in the Bill, with many of which I agree, have been dealt in detail.

One of the questions we have to ask is, what is the real thinking behind this Bill?

My party, for instance, certainly fuvour a change to a Corporation Tax.
We favour a Capital Gains Tax at a reasonable level, and we are not at all blind to the difficulties which the Labour Government inherited.
But the way in which reforms have been brought in, the rates proposed for the Corporation Tax and the witholding tax which goes with it, and the measures taken outside this Finance Bill, many of them in the name of the need to deal with short-term difficulties when, in fact, they will have far-reaching results -these open the question of the real thinking behind the Bill.

these tax I turn to the Corporation Tax.

The Chancellor said that it is not his inten tion to throw new burdens upon industry.
But he is throwing new burdens upon industry.

One medium-sized engineering firm of which I know, which has a good record of growth, will find its own profits reduced from £45,000 to £21,000.

Another of the main arguments behind the Chancellor's proposals is, as the hon.

Member for Cheetham said, that com panies will be encouraged to plough back profits.

As has been said again and again, the mere retention of profits by a company is not necessarily good.
The money retained may be put to purposes which yield a very low rate of return.

Some big companies appear to be diver sifying their activities because they have nothing else to do with the large funds which they acquire.

Some companies should and their distribute their reserves rather than retain money on which they do not earn· as high a rate as is needed in the national interest.

In fact, the retention of profits may strengthen the brakes on change in the economy if it is carried too far.
activities curtail 95 Finance Bill- 10 MAY 1965 [MR.

GRIMOND.]

Equally true is the fact that if reten tions are well invested they can be a valuable element in growth.

They are particularly valuable in building up smaller companies which have some difficulty in raising money on the market.

But these are the very companies which will be heavily hit by Clause 72 of the Bill.

This brings one_ up again against the contradictions in the Bill.

The Chan cellor's intentions seem to be contrary to the Clause.
It is fair to argue that some small companies' profits have been retained, in spite of Surtax directions, for the purposes of Surtax evasion.

But to cure this by taking steps which may dis courage investment in general is to sacri fice the short-term and long-term: to cut off one's nose to spite one's face an operation which occurs pretty often throughout the Bill.

However, let me take the question of investment allowances.
The Chancellor argues that if taxation is reduced, invest ment allowances are reduced.

But what we have to consider is the effeot upon one of the major aims of the Chancellor, and that is investment.

With a 37½ per cent.

Corporation Tax on a £1 million purchase of a ship, an investment allow ance, if retained at the present level, will be wor,th £85,000 less than it would have been worth under the existing system.
On the purchase of similar value of plant it wolllld ,be reduced by £56,000 and on in dustrial buildings £28,000.

These are substJantiaJ reduations.

If 1t is argued that industry is taking no account of investment allowances I think this is ex aggerated.

Industry will begin to realise how serious the matter is when they come to compute the effects of the new steps in the Bill.
On the ques,tion of these closed com panies which I have already referred to, I understand that this Clause will affect most of the companies in Britain today most in number, I do not say in size.

Many are small but some are big and It is not simply a re very important.

enactment of the old law allowing for Sur,tax direction.

For one thing, the onus is changed and many companies may be involved in protracted litigation or at least negotiation if this Clause is not lt is in its present form auto amended.
matic.

It is inflexible, and it will put hundreds of companies in doubt about ~' l Second Reading 96 their future.

Furthermore, there is no ex emption if more than 25 per cent.

of the shares are in the hands of the public.

On the present drafting, 100 per cent.

of investment income and 60 per cent.

of trading income have to be distributed un less the company can make out a case for some exemption from this provision.
It puts great power in the hands of those who will administer this Clause, and it may be a serious brake on development in the economy.

Another line of argument used by the Government is that we are simply moving towards tax systems adopted by our suc cessful industrial competitors.

This was argued, for instJance, by ithe noble Lord, Lord Longford, who leads for the Govern ment in another place.

But it is not true.

The tax systems of the world vary very greatly.


Many of them contain a cor poration tax, but, if •they do, most have a much lower rate of withholding tax.

There would be a great deal to be said for the Chancellor's tax changes if that were t he case.

France has a corporation tax of 50 per cent., but there is a credit against this for dividends.

Corporation tax in Germany is 51 per cent.

on undis tributed profits and 15 per cent.

on dis tributed profits.


If that argument fails, the Chancellor of the Exchequer turns to the argument that he does not believe that dividends above a very low rate are essential to the efficient running of the economy.

This may be the real argument behind a great deal of the thinking in the Bill.

I believe that it is a disastrous argument.


Liberals at any rate must oppose the great con centration of wealth and power in the hands of bigger corporations and the very rich-the very rich will always get past all efforts to control their capital : they are the people who can move their capital about the world- and in the hands of the Government.
But, further, whether one is a Liberal or not, whatever one's views, we now depend on the efficient working of the free enterprise system, and there is no way out of this.

Unless com panies distribute a reasonable amount of their profits and dividends, the system will not work, the incentive disappears and it will become impossible to raise money on the market.
It has been said this afternoon that only very small amounts of money are ~aised in the market, but they are margmally 10 MAY 1965 Second Reading 98 Finance Bill- 97 important.

They are needed to finance the sort of new enterprise which we should be encouraging.

Further with the high rate of personal taxation which we have, we are in danger of driving our more eDJter,prising people a:broad.
I accept ibhe argument ihi~ !taxa tion does not prevent people already in a job from working harder, but I believe that it weighs with people when they are considering where they will take a job.

There are many skilled people and tech nicians who wonder whether their future will be better in this country or abroad, and some attention must be paid to the reward they can earn and their views in an economy based on private enterprise.

ithaJt This brings me to overseas companies.


Again we come up against the main diffi culty in judging the Bill.

It is perfectly reasonable to argue that in the present situaJtion it is undesirable that too much new capital should be invested abroad, but, as has been said, this does not mean that we should penalise capital already invested abroad.
This matter has been cleared up to some extent this afternoon, because the Government spokesman, the Financial Secretary to the Treasury, made it perfectly clear that he does not regard this as a temporary matter.

The Gov ernment wish permanently to reduce the amount of capital invested overseas.

Yet even here the Minister was ambivalent because he said at one stage that the effect of the tax changes had been exaggerated and would not make so much difference.
The oil companies can easily retain their 1958 and 1960 rate of dividend.

The idea that we can stop the economy at its 1960 level and say that we will hold it there is a disastrous attitude in the British economy.

Every major oil company in the world is expanding.

Do not let us delude ourselves that B.P.

and Shell can hold their position the highly competitive international oil mar ket by resting on whatever happened five or six years ago.
in Further, the Government have very severely altered the balance of advan tage.

They have not only equalised in vestment at home and overseas.

It is not a question of removing so-called advantages of investing overseas.

What the Government suggest will put com- .

l panies which operate overseas at a severe disadvantage with their competitors.
One major oil company shows that on the 1964 figures if it had set aside the same amount for retention and reduced its dividend, and if tihe proposed rates of taxation had been in force, it would have had to find £13 million more in taxation.

The chairman of B.P.

has been Cl'iti cised for the remarks which he made about tanker building, but I think that they have been misunderstood.

He did not, as I understand, say that he would order iankers somewhere eilse than in tlhis country.
He said, "I will not order tankers at all.

I will charter tankers from companies which operate in coun tries which give greater tax incentives than those to which British companies will be entitled."

It is not a question of putting the British shareholder in a comparable position with the American shareholder.
We must consider what will be the position of British companies in Africa and Asia against their competitors and the pressures to which they are sub jected, rightly in many cases, by their pareDJt oounrtries Ito plou~ back money.

Does the Chancellor really think that the countries in which these companies operate w:ill not insist that they pay the full rate of tax?

Of course they will.

And on top of 11hat they want further invest ment.

Does he think that if they pay BTitisib.


tax m addition •this is a possible and a viable situation?

The United States give a very considerable depletion allow ance.

O~her countries give certain ad vantages to their companies operating overseas.

Under the present arrangements a com pany operating in a country where local company tax on profits is 50 per cent.

pays an extra 6¼ per cent.

to bring the level up to the British combined rate.
But, under the new arrangements of the Chancellor of rthe Exchequer, a company wiH pay on each £100 of profit which irt earns abroad £50 in foreign tax, and if the remaining 50 per cent.

were dis tributable in this country it would pay 41¼ per cent.

on the remaining £50.

This is an impossible position.


The net result will be: either that the United Kingdom's companies operating abroad are sold far below their true value to other nations or that they can distribute only a very 99 Finance Bill- 10 MAY 1965 Second Reading 100 [MR.

GRIMOND.]

low rate of dividend.

F urther, British exports will suffer- in the currency re mitted in our access to raw materials and in the exports which directly flow from this country because we have these in vestments overseas.
to Let no one suppose that all this can be palmed off on to shareholders or that it is Olllly a matter of concern to them.

As bas been merrtioned, the Prime Minister, in New York, pointed to the enormous national advantage of having these great overseas investments.

They are part of the substratum of the reserves on which we rely.

M any companies are invest very cheaply overseas abie because of their past record and future prospects.
T he Chancellor wants them to raise as much money as they can in foreign currency.

I sympathise with this.

But if companies are to do this they must be able to raise at least a marginal pro portion of their capital on the equity market in this country.

Once that dis appears ~hey will find it very much harder to raise money on good terms.

is the Chancellor of If dividends are so drastically reduced that it becomes impossible to raise new equity capital.
the Exchequer will find that they have very great difficulty in borrowing abroad.

The the right h on.

Gentleman, even on shortest in grave term calculation, danger of killing the goose which lays the golden egg.

He will be aware of the I.C.I.


statement that the effects of its in vestments overseas during the past 15 years have been that it has established outle,ts for the export of equipment and materials from this country and these, together with dividends, fees and so on, have been worth more than double the amount invested.

If we were to lose that sort of benefit, it would have an extremely serious effect on our balance of payments.

country will take into account.


T he man who tries to save and to build up capital, and rightly so, will find that he is the person most affected by this tax.

I also suggest tihat anyone associated wh:h the National Savings Movemernt should now carefully consider his pos,i,tion.

time, Respected leaders of the community For cannot afford to mislead people.

some it has been questionable whether many forms of saving were a good investment.

The value of the pound has fallen by 50 per cent.


over the last twenty years.

People who invested originally in Government stocks in, say, the late 1940s will find tha t if they hold them to redemption, they will get only £48 in real terms for the £100 which they are nominally repaid.

Even adding in terest to it, they will lose.

Some of them believed that they were making a patriotic gesture as well as being told that this was a good form of saving for their old age.
It is a queer commentary on the way we run our affairs that we should appeal for patriotic reasons for National Savings, possibly persuading ignorant people that they are making this reasonable provision for their old age, and then tax their in crease in value if they are sensible enough to buy Government stock below par a.nd wait until it is redeemed.

They are to be hit both ways, by inflation and the Capital Gains Tax and yet, at the same time, we allow most gamblers to go scot free.
T here are other anomalies in this tax which must be looked at.

People who live in t ied houses and who, therefore, cannot accumulate a ho use for their old age, will find that if they put their savings into Government stock which increases in value no more than enough to offset the decrease in the value of the pound they will be charged.

These, however.

are points for Committee.

We must look at the Bill against the Government's economic measures :.rnd judge it against their professed intentions.
The Government are calling in the special deposits.

Bank Rate is at 7 per cent.

If this is a Bill which is based upon the belief that what Britain needs is a higher rate of productive investment, I find it difficult to reconcile what the Chancellor is doing with what be is saying, because l01 Finance Bill- 10 MAY 1965 Second Reading 102 it is not giving incentive to capital invest Investment allowances, the effect ment.
on small companies, the calling in of special deposits and a high Bank Rate, although that is much less important, are all things which go against productive investment.

There is no sign that the Government appreciate that the doubts about the country's economy are largely centred upon the very high level of Government expenditure and the fact that much of this expenditure is not productive.
The real criticism of the Bill is that it will penalise a great deal of the productive side of the economy but do nothing to c urb the unproductive side.

One of the most necessary things for the Government to do in the coming year is to see that we get value for money in the public sector.

Furthermore, there is about the Bill a new and unpleasant taste.

The onus in taxation matters should be upon the Government to prove that they need the money.
In the Bill, the onus frequently seems to be shifted and people are told that they ought to be taxed and that they must prove that they are entitled to escape tax.

As I have said, I have doubt about the real intentions behind the Bill.

Good as many of the principles which it introduces may be, it could be the instru ment of a defeatist and inward-looking policy.
I am not one of those who have in dulged in personal abuse of the Chan the contrary, I cellor's advisers-on think that they are able and dedicated men ; I believe, however, that some of the advice which the Chancellor must be getting comes from a long way back in history and that some of his present policies seem to be rather reminiscent of the type of closed economy which was common in Europe before the war and was particularly associated with the name of Dr. Schacht.
to tend There are policies in this Bill which, if extended, would insulate Britain from the rest of the world and to make it that type of tightly planned little island which years ago was dear to a certain type of continental Socialist.

The Government sometimes seem to be afraid of individual enterprise and to have little faith in the capacity of in dividuals their own affairs.

to order They have a liking for big corporations and for uniformity for uniformity's sake.
The Bill could lead to the concentration of power, wealth and decision, and that is something against which my party at least should always be on guard.

Again, we see in the Bill a strong streak of pessimism.

There are people who advised us against entering the Common Market on the ground that British industry could not compete.
Per haps the Government do not share that view, but if that view were to prevail it would be wholly disastrous for the country and out of keeping with the attitude of a radical party.

I notice that the Minister of Housing and Local Government has lately pub lished some of his old essays.

One argu ment in them is that we must have a Socialist economy because the Socialist economy of Eastern Europe will inevit ably beat the free enterprise economies of the West.
The argument is that by stepping up the Socialist investment, economies of Eastern Europe will expand faster than we shall.

That is shown to be quite wrong.

The Communist countries are turning to Western ideas and even to Western capi tal.

They are coming out of their shell at the very moment when we may be in danger of going back into our shell.

The reason why they are doing this is their Socialist the economies.
The gross national product of Czechoslovakia actuailly declined in 1963 and only a 2 per cent.

increase is claimed by the Czechs for 1964. sluggishness of running The Soviet bloc countries are faced as much as we are by a balance of payments problem.

They are finding that the advanced types of machinery and equipment of all sorts which they need, from liquid oxygen converters to fer tilisers, can be bought only in the West.
Do not, therefore, let us be pessimistic abount enterprise a economy which QiUl · take its place in the forefront of .the, :;pw'.d~tn, zy:qrld.-,.

Do not let us be_ .told.

"either that we',at~' -simply moving ·· ig, · 'the direction of what the moder;r1.

world is doing, because although the typ~- of taxation on which we are now ·embarking may be common, the rates bf taxation and the form of taxa tion proposed in the Bill ,are ncit com- mon.

.

:;.-.,·· free ·· , 103 Finance Bill- 10 MAY 1965 [MR.
GRIMOND.]

The Chancellor should announce that he will make concessions to overseas companies and that he will give credit for dividends or the withholding tax against the Corporation Tax.

He might well look at the proposals already out lined by the Economist.

He should also look at the effect upon closed companies of the direction to distribute 60 per cent.

of their earnings.

Mr. Callaghan : This is hardly true Liberal policy.

Mr. Grimond : It happens to be the right policy.


As most of the Govern ment's sensible policies were got out of Liberal Party policy in the past, it might be better to see how those who thought of them would work them.

If the right hon.

Gentleman reads what his hon.

and learned Friend the Financial Secretary has said, he will find that he, too, is a convert to Liberal policy.

Mr. Callaghan: The right hon.

I said that I Gentleman misheard me.


did not think that his speech was in the true vein of Liberal policy ; but I am not the real interpreter of that policy.

Mr. Grimond : We want the Chan cellor not to agree with us but to take action.

We want not fine statements about expansion of investment but alteration of the Bill so that such state ments may be made effective.

Without such amendments, the Bill as it stands could be harmful to modernisation.
It could be harmful to this country's stand ing in the world and it will be quite contrary to the speeches made by Mem bers of the Labour Government them selves calling for incentives to ohange, to efficiency and enterprise in our affairs.

6.29 p.m. Mr. Christopher Rowland (Meriden): I wish to address myself entirely to one subject which has been already touched on by most of the speakers this after noon, and that is the effect of Cor poration Tax on overseas investment.
I believe that the Government's case is that overseas investment is less profit able than investment at home and has been unduly favoured by tax legislation I think that, if I may say in past years.

so to my right hon.

Friend the Chan cellor, in the statements which we have ~- ~ Second Reading 104 had so far on this subject the Govern ment have been somewhat long on assertion and short on proof.
The Times today has already queried the facts and not the opinions on which policy is being based, and I should like this even ing to apply a slightly closer scrutiny to this possible immediately after the Budget.

I hope, in doing this, that the Government's case will also be clarified in the reply to the debate tonight.

If my criticism is mis guided, as the Financial Secretary has already implied that such criticism is, I trust that it will be realised that it is also well intentioned.
than was subject There is, I believe, no question that overseas investment under the proposals will become less attractive than home investment.

There are three good reasons why this should happen.

I will list them in descending order of import ance, in my judgment only.

I think that first of all it will be desirable for there to be much sterner criteria of profitability applying to overseas invest ment.
Secondly, I believe it can be argued I believe that the Chief Secretary him self bases much of his own position on this argument-that it is bad for this country that the tax which is paid on profits made overseas is, in a sense, lost to this country and accrues only to the Governments of the countries in which the companies operate.
This is one of the facts of the situation which cannot be altered, but it is an argument which we have to admit has some force: the operation of double taxation relief so far has tended to mean in a sense that the British taxpayer has been subsidising the foreign Government.

If, as I believe to be the case, India taxes gross profits at 65 per cent., Ghana, I believe, at 70 per cent., and this compares with a tax in this country of 56¼ per cent.
this means that the foreign Governments are allowed to tax more heavily than per haps they should.

There is another point, if I may be mildly critical of foreign Governments, and that is that it could be argued that overseas investment, in a changing world of very revolutionary characteristics in Asia and Africa, is at risk of expropria tion, and it would be foolish to deny that this must have an effect which also we should bear in mind.

105 FiMnc,B:11~ ,.
105 FiMnc,B:11~ ,.

,10 MAY 1965 SecondReading 1~ a policy with these results.

The third argument for the Govern• which all hon.

Members will agree as ment's policy is that we must to somt: being desirable.

The tax will in fact be extent cut down on new investment ; but, slightly reduced and retention by the company will have been increased.

This of course, the main charge against what is the avowed purpose of the tax.
I think the Government are doing is that, even if all the arguments I have advanced are that, certainly on this side of the House, overwhelmingly powerful, in fact the effect we applaud the Chancellor for instituting of the proposals will be not only to cut down new investments but gradually to cut down all existing investments.

I think we should try to get some clarity of a simple, factual character into this subject.
It has been said by the Financial Secre tary and the Chief Secretary in the Budget debate, and by the Chancellor as reported in The Times of 3rd May, speaking in Manchester, that all that is happening is that the new proposals will remove an existing bias in favour of overseas invest ment.
In fact what is happening is that a position of rough parity between overseas and borne investment is going to be moved towards bias against overseas investment, and this is quite different from what the Government are suggesting is the case.

A British company operating overseas -not an overseas trading corporation - at present pays 55½ per cent.
in tax and retains 24½ per cent., very similar to the situation existing for British com panies operating entirely in Britain, and the difference in tax is only ¾ per cent., admittedly in favour slightly of the com pany operating overseas.

But under the post-Corporation Tax figures the British company overseas, still with this desire to pay one-fifth of its gross profits in dividend, will have to pay 69 per cent.

in tax and retain only 11 per cent.


So I think the figures show quite clearly that what is going to happen is that the position of rough parity between home and overseas investment will be removed to the very considerable disincentive and disadvantage of the company operating overseas.

When this was put to the Chancellor by an hon.

Member opposite in the Budget debate he indicated dissent-according to the OFFICIAL REPORT.
When it was put to him by the Leader of the Liberal Party a few moments ago I noticed that the Chancellor indicated neither dissent or assent.

I trust that when I finish he may possibly even indicate assent that that is what the proposals are- not to remove a bias in favour of overseas investment but to institute a bias against overseas invest ment.

I said that we should have some mini mum, factual comparisons to make, and I have been anxious to get a very simple level of comparison.
I have found out what the figures are, assuming a Corpora tion Tax of 40 per cent., Income Tax at 8s.

3d., overseas tax of 55 per cent., which is not a unreasonable average of overseas tax at present, and with a desire by a company to distribute one-fifth of its gross profits in dividends, £20 out of £100.

These are arbitrary figures, I must admit, but taking these as assumptions, what do we find the figures produce?
We find that a British company operat ing in Britain under the pre-Corporation Tax system pays 56¼ per cent.

in tax and would retain 23¾ per cent.

Under the post-Corporation Tax system it will pay 54 per cent.

in tax and retain 26 per cent.

I would say that this is something with If the Chancellor wishes to say that this is the intention, fair enough ; but I do not think he should say that all that he is doing is bringing overseas com panies into line with British companies.
What he is doing is quite clearly making it more difficult for British companies to operate overseas.

This is a policy which can be argued, but let it be argued on the basis of the kind of fair figures which, I think, I have given.

Mr. Callaghan : Is it not the fact that the 55¾ per cent.

of tax was paid by the company operating overseas, and am I not right in deducing that it would pay 55 per cent.

to the foreign Government and only ¾ per cent.

to the United King dom Government?


That is the reason for the difference.

Mr. Rowland : Yes, precisely, I said earlier on that what I think is one of the main parts of the thinking, of the Chief Secretary in particular- that this is precisely this argument, which can be advanced in favour of the present pro posals.
But in terms of the present posi tion there is no advantage at present between operating overseas and at borne, except of ¾ per cent., whereas in future I I l I j ~ I 107 Finance Bill- 10 MAY 1965 Second Reading 108 [MR.

ROWLAND.]

there will be a very considerable dis advantage.

So I think that the Chan cellor must admit, talking in terms of the companies concerned, that he is not removing an existing incentive, he is instituting a new disincentive.

Sir Douglas Glover (Onnskirk): The hon.


Member is doing very well.

Mr. Rowland: What do these figures show?

I think they show that the system to a company presently investing over seas may well become Jess attractive.

It is an important and fundamental fact which should be known, because what is happening at the moment is that many of my hon.
Friends, who are naturally influenced by what the Chancellor says, take it as axiomatic that there is an existing preference in favour of com panies operating overseas.

I should like to say why I am con cerned about two aspects of the long-tenn outcome of the present proposals.

One is in relation to under-developed countries and the other deals with exports.

Hon.

Members have already referred to this.


As regards under-developed countries the Chancellor said in the Budget debate that there would probably be no effect on under-developed countries.

After a period of three to four weeks, during whiah time we all considered this problem, it was very inte,resting to note that my hon.
Friend the Parliamentary Secretary to the Ministry of Overseas Development, in Standing Committee A considering the Oversea5 Development and Service Bill, went out of his way to admit that there would be a considerable disadvantage in under against overseas developed countries.

investment I I I I trust we can take this as one of the faots of the situation.

It is one of which I hope tihe Chancellor will take note.

We have already had foreign Govern ments complaining against this.
In the area of the world which I mostly know, ~he West Indies, the four Prime Ministers of the major territories of that area, independent States, at including their recent Caribbean summit conference spoke in their final communique, of the harmful effects on British investment in the West Indies by the present proposals.

More important is the possible impact I say possible because this on exports.

two is a completely unproven field.


I asked the President of the Board of Trade, in a Question a few weeks ago, if there was any !

'es·earch or study on the extent to whioh British exports can be attributed to •~e ownership of British assets over seas.

Speaking from my memory, the answer was tha.t no suoh study existed and that such faots as were known were too difficult to communicate in a Parlia mentary Answer.

for Birkenhead I think we should all know a great deal more about this subject.
In the Budget debate itself my hon.

Fr1ends the Mem bers (Mr. Dell) and Dewsbury (Mr. Ginsburg) both raised rhis , and I hope the Ohancellor may feel able to say thait some study is being made on this subject, not only for a week or two but in the years that lie ahead.

We must consider where we are going on this particular front.

At the moment I must confoss that when one asks questions on this subject one ge,ts the feeling that the answer first and verdict is afterwards.
sentence Why have the Government allowed the incidence of the CorporaJtion Tax to have such a considerable effect on overseas I think that it is to some investment?

ex-tent a n accidental by-product.

The F inancial Secretary has already indicated tms afternoon that we cannot infringe the principles of the Corporation Tax.

He almost implied "Well, it is going to happen ; because there is the principle of the Corporation Tax it is bound to happen."

This is what I would call acci dental.


I know there are other deliberate advantages but I th ink there is an element of accidental application of the principle.

in I have the feeling that what is happen ing both ~nside and outside the House is the desire to cut down on investments overseas, particularly the under developed countries, and that this is a kick-back against the moralising on this subject of the past 10 or 12 years.

One is always preaching the virtues of assist ing underdeveloped countries.
The im plication is that virtue hurts and one does this at one's own cost.

I am as guilty of this as anyone.

All of us who have spoken in those tenns have laid ourselves open to the most massive counter-attack when the nation goes into a deep crisis and cannot afford to be moral or generous and must weather its own storm.

109 Finance Bill- IO MAY 1965 Second Reading 110 This is the psychological backdrop to the Government's thinking on this sub In many ways it is very embarrass ject.
ing for many of us, the companies con cerned, and for progressives of all parties.

A lot of this investment has been very good business for this country.

It may be that sceptical, cynical, hard-headed non-idealistic non-moral gentleman oppo site have always known this.

We are now having to change gears on this and the Federation of British Industries is now trying to prove that this investment is good business for this country.
We know that this is one of those things no one has ever really dared attempt for the last 10 or 15 years.

But if it is good business for this country ,them.

I think that t his is a reason for the Chancellor to look at this subject once again.

To turn to the export point, I think another reason we have these proposals is the feeling that what cannot be quanti fied or is not already quantified is not particularly important.
We do not know what the effect on exports will be and I think that until we do we should be very careful about committing ourselves.

I sometimes think- and this is true of all of us in politics- that we have this heroic view of ourselves, that omelettes cannot be made without breaking eggs and the very fact that this is going to be hurtful to our overseas investment shows how tough we are being.
I am in favour of being tough, but not if it means hurting this country in the long run and, to some extent, hurting overseas countries in the shorter run.

I do not believe that this effect is really necessary.

So far as I can see, there is no need to lump portfoHo investments with direct investments, investment with an export potential and wi-thout export potential, investment in underdeveloped countries and rich countries.

O.T.C.s and non-0.T.C.s, oil and the rest.


They are all going to be affected by this pro posal.

The Financial Secretary gave us a medical metaphor in his diagnosis on oil.

He must surely realise that the essence of makiing a good diagnosis on one patient is that it does not necessarily apply to all patients.

There are various ways of resolving this problem.

There can be permanent over spill arrangements, or a higher Corpora tion Tax for overseas companies alone.
in Perhaps The Economist article has already been referred to.

It saw it as being one of the merits of a higher Corporation Tax, but it could possibly be a restriction only to overseas companies.

the Chancellor will consider allowing com panies which operate, partly this country and partly overseas, to have all their results and all their accounting treated as income in this country.
This happens in Germany and I have figures which will show that whereas at present there is roughly comparable treatment between German companies operating partly in Germany and partly overseas, and British companies opera-ting half in Britain and half overseas, there will, under the new proposals, be a very con siderable bias against the British Com pany in this category.

Perhaps my right hon.

Friend could possibly look into this.


I think that best of all would be some permanent overspill for some categories of company- perhaps non-oil, pe!

"haps those who can prove tha-t they have an export potentiaI-and, finally, controls for major new investment in ·the sterling area as a whole.

I think that the Financial Secretary should tell us a little more clearly why the existing controls which apply to the non-sterling area cannot I know that apply to the sterling area.
it will be more difficult, but I think thait we should look into this matter more carefully.

I t-hink, too, ·:::at we should d1stinguish between portfolio investment and the rest.

Dur.ing ihis speech on 12th April I thought that ~he OhanceHor half indicated that he might be willing to consider some distinc tion between portfolio investment and the If something like this is not done, rest.

there will be not merely the permanent correction af an existing high outflow of capital, for wihioh I t-hink hon.
Members on this side of !

!he House see the need, but the permanent erosion of existing assets overseas.

It is not only a question of a cut-back in new addi,toional investment or in wha t I call replenis,hment investment--invest ment wihich keeps the exisrting outfit going- but, because investment by these companies in businesses of this kind wm be so much less attractive, there wiH be a gradual selling off of existing inves-t mernts at less ~han asset value.
One of the ironies of the situation is that we 111 Finance Bill- 10 MAY 1965 Second Reading 112 [MR.

ROWLAND.]

could get a better price for existing invest ments iii' we did not have this kind of ·tax proposal.

M tihe Ohancellor wants Britain to sell off part of our £11,000 mill.ion worth of assets because there is a des perate need to do so, leit us do 1lhat ; but do not let us end up by selling them at less than the £11,000 million value.
I am prepared to agree that a brief or temporary period of disinves:tment-I am not prepared to say how brief-might be justified, as it was during the war, but under vhese proposals, whose fuH inci dence will gradually get tougher and tougher until in five years' time their effect is total, the disinvestment will go I do not believe in cannibalism as a on.

long-term policy of nourishment.

The Chancellor said that he would listen.


He has queried The Times reporting once today, but he is quoted as saying, "I shall listen."

It may be that this has become an un-Parliamentary expression, but I believe ,that be would show his own strength of character, and that of ,the Government, if he were to admit the possibility that Corporation Tax will, in the incidence to which I have been referring, have a long--term un desired, and in the case of exports un foreseen, result.

Mr. Callaghan: My hon.


Friend has talked about the need for facts.

Will he give the House the slightest tittle of facts on which he says that this is going to harm exports, and tbait we need large overseas investments of capital to get ex ports?

I am waiting to hear the argu ment in support of that view.

Mr. Rowland: What I have been say ing is that we need to know more facts on this.

I am asserting that in the view of many people there is a correlation be tween ownership or involvement in over-.
seas investment, and the continuation of British exports.

This is being stated, and the facts are now being coralled.

Not enough facts are known, but the Chan cellor has given the impression that he knows that this is factually unimportant.

I believe that factually it may be highly important.

If the facts show that owner ship produces exports, I should like the Chancellor to agree to consider again the incidence of this tax.
If I might disgress for a moment, I be lieve the Chancellor thinks that if British exporters are efficient enough they will be able to export anywhere in the world, on their own merits, regardless of who owns the importing enterprise.

I do not believe that that is the way the world works.

It may be wrong, but I think he will find that in many cases- LC.I.
has been quoted, and I could refer to many other companies-when companies own overseas enterprises they give their busi ness to Britain, and possibly to one of their own subsidiary companies.

Let us not deny that there is self-interest in this.

They give their export orders to this country, because this country is Britain, or because they have other subsidiary companies here.

They do not shop around looking for what the Dutch, the Germans, or ,the Americans can do.
Mr. Grimond: I intervene only to help the hon.

Gentleman.

In the Financial Times of Friday, 2nd April there was a statement by Mr. Paul Chambers of LC.I.

that that firm had carried out the type of inquiry for which the hon.

Gentle man is asking, and the firm had con cluded that the direct benefit to exports from its overseas investment was double the amount of its investments.

Mr. Rowland : I am aware of that, and I thank the right hon ..

Gentleman for reminding me of it.


I think he will find that the experience of LC.I.

is paral leled by that of many other companies, but, as I said earlier, this is the kind of statistic which we as a nation have been slightly reluctant to publish because it has consequences for other countries overseas.

If these facts can be got to gether, and, if not published, at least conveyed to the ChanceMor of the Ex chequer, I think that he should take note of them.
I think that if the Chancellor was pre pared to look at the facts on the export factor, he would lose no political face by doing so.

Let us be frank with each other.

As politics go, this is a compara tively esoteric subject.

We are not ask ing him to withdraw the Capital Gains Tax, or the disallowance of business expenses, in which there is a high politi cal content, and rightly so.

The matter we are discussing now is a technical probUem.
If the Chancellor could look of this again, no one on either side of the House, would feel that the Government had suffered any political defeat.

~ 113 Finance Bill- 10 MAY 1965 Second Reading 114 Mr. Callaghan : My hon.

Friend has not been here long enough yet.

Mr. Rowland : I hope that when I have been here as long as the Chancellor has I shall be as open-minded as I believe I am at the moment.
I think that we are a great trading nation, perhaps by absolute terms not as great as we were, but in relation to our ow,n internal economics overseas trade is of great importance to us.

In a plethora of anniversaries being cele brated this year, it may be worth record ing that it was on this day 25 years ago that Winston Churchill became Prime Minister, and that he subsequently said that he was not going to be the King's First Minister to preside over the liquida tion of the British Empire.
As a deliberate act of policy both the British Empire parties liquidated after the Second World War.

I take no issue with that, but it would be a sad footnote if this transformation into a Commonwealth were to be followed, as a by-product of policy- not a deliberate act of policy-by the liquidation of Britain's commercial empire on which our long-term interest to a large extent still depends.
7.0 p.m. Mr. R. H. Turton (Thirsk and Malton) : This is the longest Finance Bill that I have seen since I became a Member, and in my view it is certainly I would describe it as a the worst.

Hungarian rhapsody.

If one looks at that a Nuttall's Dictionary one finds rhapsody is "a rambling composition composed in an excited or confused state of mind".

My intention tonight is to restrict myself entirely, as did the hon.
Member for Meriden (Mr. Rowland), to the Corporation Tax, and to its effect on overseas investment.

This matter is absolutely vital not only to British com panies but to our Commonwealth rela tions.

Until we clear this matter up, not by having a party battle about it but trying to put it right, severe damage will be done to our economy and to our Commonwealth relations.
The Chancellor, in his Budget Speech, and the Financial Secretary today, both agreed that there was some connection between exports and investment.

They said, "We do not quite know what it is.

Vol.

712 We shall put this tax on until it is clearly defined for us."

Knowing his previous history, it appears to me, that the Chancellor is adopting a very curious attitude towards the Commonwealth.
He seems to regard it as a matter of mis fortune that in the last year for which we have invested records-1963-we £250 million overseas, of which £150 in the overseas million was sterling area.

I regard that as a great buttress to our economy, and evidence of the fact that Britain was then helping progress in the world, and especially in the Commonwealth.
invested This part of the Finance Bill shows that we are running away from our responsibilities as the leader of the over seas sterling area, by reducing our invest ments in that area.

I warn the Chan cellor that this will certainly have very serious repercussions on our relations with leading Commonwealth countries.

I believe that it will also stimulate retaliation, which will be very damaging to our export trade.
those investments were, If we consider the £250 million worth of investments that I have mentioned, we find that the three leading destinations for first, Australia, to the extent of £65 million ; secondly, the European Economic Com munity-£36 million, and thirdly, South Africa-£34 million.
It is more than a coincidence that in that same year's trading the three countries, or groups of countries, where we had a favourable balance of trade, were, first, Australia, where we bad a favourable balance of £31 million ; secondly, the European Economic Community, where the balance in respect of the countries at large was £124 million, and, thirdly, South Africa, where we had a favourable balance of £88 million.

That is evidence of investment's effect on exports.

It is a two-way influence.


The mere fact that we are investing in a cer tain country tends to excite that country to buy goods from us.

Equa1ly, the mere fact that we are exporting to a certain country leads investment following to upon those exports.

I am surprised at the Chancellor's attitude to this investment, bearing in mind what the Prime Minister said when he was in the United States and also the Table in the Bank of England's Quarterly C 10 MAY 1965 115 Finance Bill- [MR.

TURTON.]
TURTON.]

Bulletin for March, 1964, which shows bow the whole of our economy and reserves were greatly helped by the £1,300 million investments, of which these form a part.

The right hon.

Member for Orkney and Shetland (Mr. Grimond) referred to the poor return on overseas investment, and I heard the Chancellor interrupt him -if it was not an interruption, it was a remark made from a sitting posture saying, "A damned bad investment."
That is entirely the wrong attitude for a British Chancellor of the Exchequer to adopt in addressing himself to investment in the Commonwealth.

These are good investments, because they help to strengthen our balance of payments position and help us to dis charge our duties in the world.

The Chancellor's judgment is, "What will be the rate of return? "
If he sees one which has a higher rate of return than another -because an overseas investment or a Commonwealth investment is having to pay the overseas tax-be regards it as an undesirable investment.

Let us take as an illustration two com panies-one investing £10,000 in gambling machines on Biighton Pier and the other investing £10,000 either in the mining industry in Australia or in launching a cement industry in Nigeria.
It may be that there will be a higher return on the gambling machines, but there will be far less moral value in that investment, and it will do far less good for the stability of Britain.

This is the great fallacy that I hope will be corrected when the Finance Bill goes to Committee.

At the moment it will reduce the incentive to invest in the Commonwealth and will therefore weaken our influence in the world, and damage our future balance of payments position.
that I hope the Government will radicaH.y alter Clauses 46, 60 and 79.

They will be a permanent handicap.

I can conceive the Government's saying, "Here is a temporary balance of pay ments problem.

We shall have to intro duce a short-term measure in order to bold this investment position."

But that is not what they are doing.

Clause 79 will make it less and less attractive to invest in the Commonwealth.

It bas caused a great shock all round the Com In the Financial Times of monwealth.
24th April, its Melbourne correspondent Second Reading 116 pointed out that the First Secretary's letter to the 300 companies had caused it consternation clearly contained the adjuration to comb out their investments and to do away with any which did not bring in a good return.

This is insular and reactionary and it will have grave effects on this country.
in Australia, because I t is surprising that the Chancellor of a Socialist Government is today telling us not to invest overseas or in the Common I remind him that the Socialist wealth.

Party manifesto said, on page 19, "We shall ensure that development and capi·tal investment programmes are geared to Commonwealth needs."

If the Finance Bill goes through in its present form that will be a completely broken pledge.
(Mr. Heath) at The provisions in Clause 60 will prevent British companies overseas from plough ing back profits or retaining them in reserves.

Clearly this will damage the whole of Britain's external position.

It is m very strong contrast with the speech made by my right hon.

Friend the Mem ber for Bexley the U.N.T.A.D.

Geneva Conference last June.


The effect of that speech on Common wealth leaders, as I have seen in my capacity as Chairman of the Common wealth Industries Association was that they thought it an enlightened speech, indicating that the attitude of Britain was very different from the attitude of many countries in Europe ; that Britain was helping them to develop.
Now we have the position that under this Clause there will be an end of the whole policy, which the Conservative Party has been trying to encourage, of helping developing countries- [lnterruption.]

I did not catch that interruption.

I like interruptions, but if they are to be made, it is much better that they should be made from a standing rather than from a sitting posture.

That enables everyone to hear what is said.

The policy announced by my right hoo.


Friend the Member for Bexley was for helping dev,eloping countries, and I thought it was a policy which had been agreed by the wbol,e nation.

We must all realise that the great problem in the world today is the division between the rich countries and the poor countries, or between North and South.

I regard this Budget as doing a great deal of damage to the policy-which I had believed was 117 Finance Bill- 10 MAY 1965 Second Reading 118 last out.
In ~he their ~tan~ard_ of three weeks since ~ aH--party policy-of helping to deal much aid is given, if we cannot raise or w1th uhe J?roblem created by tlhe division maintain the price of their primary com modities and if at the same time we between nch and poor countries.

c~r_mot keep living the Budget I have received letters and repre- rnmg,.
all t~at we give ill aid to these sentatioos from leaders of Commonwealth courl!tnes will very shortly be cancalled countries and the underdeveloped coun- tries, in whiah the wriiters ask what has I should like to remind the House of an article written in the Financial Times happened to BriJtain that this Govern- ment should be doing all they can to by Mr. ~arold Wincott.

He warned that preve1J11t overseas to we are m danger, because of the provi sions in the ~ill.
-~f getting close to a d~age investment in developing coun- tnes.

From the speech of the Financial world economic cns1s such as we had in ~ecretary I gather tha,t •he envisages that 1931. .

I_t happens that at a time when rt may well be we can do more by aid, the Bnt1sh Gove~n_ment are putting for that by Government loans and aid we ward these prov1s10ns America also is reactionary can repair some of the damage which would be oaused by implementing the m~asures ~ the same direction.

Mr.
Mr.

I beg him to Wmcott PO:mts o~t thart:_ it _is just that pro~isions in_ t~is Bill.

type of aot10n which, with its effect on realise that 1t 1s trade and investment !he primary producing countries, resulted whiah can be of lasting value to the m the world economic crisis of 1931. developing countries.

s~me dangerously investment and taking Mr. Edmund Dell (Birkenhead): I am sure that the right hon.
Gentleman is trying to be fak but I think he should address himself to the fact that priva te investment in the less-developed countries has been falling seriously over the years, and was recently shown in a Board of Trade Report to have fallen from £91 million in 1961 to £52 million in 1962.

If we count only new money, the fall was from £72 million to £19 million.

This process has been going on for some years.

Mr. Turton : Exactly, that is the point 1 am making.
If there is this difficulty, of course irt is more encouraging to invest in the European Economic Communtty or irr1 America.

That is why the British Government and people should be encouraged to invest in the developing colllllrtries.

That was the whole po1int of introducing the provisions for overseas It was in order to trade corporations.

steer these under-.

into developed countries where the profit has to be ploughed back into the country.

The hon.
The hon.

Gentleman's intervention seems to me to be helpful to my argument.

investment I warn the Government that we cannot replace trade and investment by loans and It is damaging to the receiving aid.

countries, which would far rather, from the point of view of dignity, have trade and investment than loans and aid.

Apart from thart:, we shall find that, however Vol.

712 In a short time we are inviting the Commonwealth Prime Ministers to this country.
Are the three Clauses which l have mentioned the message we propose I hope that hon.

Mem to give to them?

bers, irrespective of party, will realise that a major mistake as being made and will repair it by amending the provisions in this Finance Bill.

7.17 p.m. Mi-.

William Hamling (Woolwich, West): Having listened to the right hon.
Member for Thirsk and Malton (Mr. Turton), I could not help reflecting that a couple of years ago when the Common Market was being debated in ,this House one heard from Conservative speakers a different sort of speech from the one we have just beard.

I was not then a Member of the House, but I have read It the OFFICIAL REPORT of the debates.

may well be that the right hon.

Gentle man himself was making that sort of speech.

Mr. Turton : I did make exactly the same sort of speech then.
Mr. Hamling : That is my point.

The right hon.

Gentleman spoke for himself.

Is ,the He did not speak for this party.

right hon.

Member for Bexley (Mr. Heath) saying he supported that?

Mr. Heath : I am saying that in the negotiations in Brussels the arrangements we made for the developing countries to enable them to have capital aid and to C2 ,-------------- 119 Finance Bill- 10 MAY 1965 Second Reading 120 [MR.

HEATH.]

develop were even better than anything we have been able to do ourselves.
Mr. Hamling: May I remind the right hon.

Gentleman of other speeches in this House-made repeatedly by Conservative Members who advocated entry into the Common Market-to the effect that we must no longer think in terms of trade with the Commonwealth but rather in terms of trade with Europe.

That is the point of view of many Conservatives, and it can be documented.

The rest of the speech of the right hon.


Member for Thirsk and Malton seemed to me rather more a speech for the Committee stage on the Question, That the Clause stand part of the Bill, than a contribution to a general debate on the Finance Bill in which we are concerned to discuss not only the provisions but the principles of taxation which lie behind the Bill.

I should like to refer to one or two of the right hon.

the p()lints made by I was not clear Member for Bexley.
whether he was trying to argue on general economic policy there was no that balance of trade crisis in the autumn of last year, but that it was something that happened after this Government were If so, it contrasted with the elected.

speech of his right hon.

Friend the Member for Barnet (Mr. Maudling), who was of opinion that there was a crisis and what was done by the Government in November was exactly what he would have done had he been a member of the Government.

Mr. Heath: This is all so silly.


Mr. Hamling: That is exactly what the right hon.

Gentleman said, and I hope tihat when he reads HANSARD tomorrow he will see it.

He was saying that the crisis of last autumn was a crisis of con fidence rin this Government.

That is not what the right hon.

Member for Barnet said last November.

Mr. Heath: With great respect, I think that the hon.
Member for Woolwich, West (Mr. Hamling) must distinguish between the trade problems which were emphasised all through the last Govern them myself on ment-I emphasised innumerable occasions at the Board of Trade, as did my right hon.

Friend the Member for Barnet at the Exchequer- and the crisis of confidence in November which was a financial crisis.

It has been very carefully analysed and documented and the Prime Minister himself said that it was a lack of confidence in the Govern ment.
Mr. Hamling : Let us look at the record before the right hon.

Gentleman congratulates himself too much.

The facts are that on previous occasions when we have had balance of trade problems, they have been followed by a crisis of confidence in the £.
If the right hon., Gentleman takes his mind back to 1961 he will remember that there was a Conservative Government in power and that we had precisely the same sort of run on the £ as we had last autumn, despite the fact that the balance _of payments problem was nothing Uike as serious as it was last autumn.

from Another point which he made was to refer to increases in wages.
I was not sure, that part of his speech whether he thought it wrong that post men should have had the increase in wages which they have had.

I know that it is the duty of Oppositions to oppose and criticise without necessarily saying what they think should be done.

I am sure that the House and the nation would have been interested to find out from the right hon.

Gentleman whether he thought that this was a wage award which should have been stopped by Her Majesty's Government.
May I remind him again of 1961, and the award to Government industrial workers, which was suspended by Her Majesty's Govern ment despite the fact that there had been an arbitration award.

I am sure that the nation is entitled to know whether the pay pause of 1961 reflects the in comes policy of the Conservative Party of 1965.

We have not heard that this afternoon.

(Mr. Grimond), The right hon.

Member for Orkney and Shetlands the Leader of the Liberal Party, referred to I am sorry Government expenditure.
that he is no longer in the House and that no other Member of the Liberal Party is here.

It wouJd have been quite interesting to find out from the Liberals what Government they think should have been cut.

They cer tainly voted for the increase in Income expenditure IO MAY 1965 Second Reading 122 --~~-1 l Finance Bill- 121 Tax last autumn.

That was an increase in Govemment expenditure.

Admittedly, it was related to the payment of pen sions.
They also voted again Govern ment decisions to look very closely at Government commitments in the air craft industry, which was part of the Budget Statement made by the Chan cellor of the Exchequer.

It is very easy for people to make general statements that Government expenditure should be cut.

Hon.

and right hon.

Gentlemen opposite were always doing that between 1945 and 1950.

They did not do much about it when they were in power.
This is simply part of the stock i.-i trade of Conservative and Liberal Oppositions.

My right hon.

Friend preselllted this Finance Bill against a background of long discussions about the need to reform our taxation.

I would congratulate him, partioularly, on introducing into the Bill the Capital Gains Tax and the Corpora tion Tax.

Again, if I may refer ito the comments of the right hon.
Member for Bexley on this, I hope that I have not got his words wrong, but he said that talk of modernising our tax system is illusory, that it is becoming a myth.

I should have thought, judging from the conduct of his own party when in power, that they set out to modernise the tax system and ·to reform it, but did very little about it.

I refer, of course, to the Royal Commission, 1952 to 1955.
Very little was done by the previous Govern ment in implementing the recommenda tions of that Royal Commission and very little was done about looking at alterna tive means of taxation.

It seems that they have adopted the attitude in Opposition, as they adopted it in Government, that the present system seems to work, so why bother to change it.

We have had examples of inaction on this.


We have had, for example, the refusal to do anything about the very serious disfigurement of our fiscal system in the last fifteen years in the shape of the tremendous increase in fortunes made out of capital gains.

Professor Titmuss, in that section of his book where he refers to this, quotes the Daily Express Ci,ty Ediitor as saying that nine men had made capital gains of £40 million since the war.

That was, of course, in pro perty.


There have been many cases in the last five years of immense fortunes being made out of speculation in pro- Vol.

712 It is no use perty, out of capital gains.

any Government appealing to wage earners or salary earners for restraint when those people see vast fortunes being made which not only do not have a very moral connotation themselves but which are not taxed.
in No aotion was taken, either, in respect of ,the recommendation of the Royal Com mission to limit the use of covenants for tax avoidance.

I know that my right hon.

Friend has not put this into this Finance Bill, but I am sure that it is very much in his mind.

In looking at taxation policy, one is entitled to draw into question the policies of previous Administrations.
The last Government were in power for a long period and, although ~hey may not have implemented taxation reforms they gave certain twists to .the tax system.

The abolition of subsidies, way back in 1952, was an example of that.

This made the taxaition system slightly more regressive.

The diminution in the value of Income Tax allowance due to the fall in the value of money had exactly the same result.
The Royal Commission on the Taxation of Profits and Income, especially the minority Report, drew attention to this.

As I have said earlier, we had the effect of capital gains.

One of the troubles with the statistics of the national income and expenditure is ·that there is no evidence whatever there of the effect on personal consumption of capital gains.

Another very important twist to fiscal policy was given in the years 1951 to 1964.
That is that the previous Govern ment repeatedly introduced taxation pro posals outside the Finance Bill and out side the Budget.

I refer to changes in the social in surance contributions and charges.

These were changes in the tax system.

Every one knows that contributions were in creased and that this was a grossly unfair method of taxation because contributions are a poll tax not related to one's ability to pay.

In 1951 the Exchequer paid 27 per cent.


of the cost of social security and It was in 1960 it paid 20 per cent.

estimated in 1961 that by 1964-65 it would be 16·4 per cent.

I looked this morning at the Blue Book on National Income and Expenditure and found _that in 1962 the Exchequer contribution was only 15·8 per cent.

That was a change in taxation policy of a most regressive C3 123 Finance Bill- 10 MAY 1965 Second Reading 124 [MR.

HAMLING.]

character initiated by the last Govern ment.


I am not surprised that they do not want to discuss taxation policy very much today.

National Health Insurance contribu tions rose from £26 million in 1957 to £165 million in 1963.

This was a form of taxation to finance the Health Service imposed on National Health Service contributions.
When the Leader of the OJ?position talked about Socialist Budgets bemg taxing Budgets, be might have men tioned the fact that in 1963, although the Conservatives reduced Income Tax, they also increased the contributions so that the £1,000-a-year man, who got an Income Tax relief of £4 9s., paid an increase of £2 16s.

in bis social insurance contribu tions.

These are examples of a regressive twist to taxation which was introduced by the Conservative Party when they were in power.
I need not refer to the charges for the National H ealth Service which were in themselves a form of tax.

T he present Government intend to reform the tax system and they have made a brave start.

I wish them well.

It is most rema rkable tha t in this business of taxa tion, as indeed in so many other fields, the tasks which were not accepted by the Conservative Party when in power for 13 years have had, after these long years, to be undertaken by my right hon.

Friend.
Friend.

7.33 p.m. Mr. Hugh Fraser (Stafford and Stone): The whole House would like to congratu late the hon.

Member for Woolwich, West (Mr. Hamling) on having come to the support of the Government, for be is the first hon.

Member to have made a speeoh in their favour this afternoon.

Having listened to the speeches of the hon.

Members for Manchester, Cheetham (Mr. Harold Lever) and Meriden (Mr. Rowland), I understand why right hon.

and hon.
and hon.

Members on the Government Front Bench should look but not listen.

I believe that in the next 20 or 30 days and nights we shall have a debate of con siderable interest and many of fue points which have been raised will be gone into in immense detail.

I therefore do not want to weary the House for too long today when so many other hon.

Members would like to state what is wrong with the Budget.
The imporitant point whiah 1has emerged is that this is the great weapon of che ChanceUor of the Exchequer whioh bas been wiheded out to atJtempt to dominate tlhe economy.

One Budget was wheel,ed out in November and a second Budget has been wheeled out in the last few late Damon Runyon weeks.

described the Gatling gun as an equaliser, and there is a good deal of equaliser l:t will make a mash about the Budget.

of the taller poppies so as to provide sufficient opium for the people.
The In spite of the two new barrels which have been skilfully fitted to this great cannon-Corporation Tax and Capital Gains Tax-I fear that by the end of our deliberations, after 30 days, we may well find that this great cannon, which the Government will have moved into position possibly over the dead bodies of several hon.

Members opposite, serves no purpose whatever in aid to tthe economy.

That is why I wish to address the House for a the irrelevance of the Budget to the mam problems which face us.
few minutes to discuss The Chancellor, recalling his gallant naval days, must remember that hideous sensation when the wheel no longer controls the movement of tihe ship.

This is happening today ; ev,enits seem to be more in control of the finances of this country than are any of the steps taken by the Government.

As my right hon.
As my right hon.

Friend tJbe Member for Bexley (Mr. Heath) made clear, it was a humiliation that within a few weeks of the Chancellor producing bis Budge,t the Bank of England was asked to take furit:her steps about special deposits and further letters were sent out by the Bank to the clearing banks.

The truth is that the Government have throughout under-estimated the difficul ties which face us.
They still base their the first so -called Brown actions on Paper which suggested tha t the economy was in no way overheated.

It is clear to anyone connected with industry, any one travelling on a public bus or public tube, or anyone connected with a hos pital service, that the position is pre cisely that the economy is overheated.

The Government may be suffering from cold feet, but the economy is suffering from a considerable dose of overheat I believe that in the Chancellor ing.
we have a man who came to office JO MAY 1965 Second Reading 126 is totally Finance Bill- inappropriate at 125 determined to carry through a series of fiscal reforms, but I also believe that this this moment.

If I may mix history a little, it is just as though Savonarola, the good reformer, had become attached to the court of the Borgias when Rome was actually burning.

This would have about as practical an effect as some of the things which the right hon.

Gentle man is putting forward.


Had he foreseen some of the problems which would face him in the summer of this year, I believe that the Chancellor would have been wiser to turn to quite different forms of taxes which could have had some effect on the economic prob lems which face us- the problems of maintaining the £ sterling and seeing I suggest that that our exports rise.

he could have considered a pay-roll tax.

the predictions of When one reads N.E.D.C.


on what the employment prob lems will be in the next three or four years, there must be something in this proposal.

Possibly he could have con sidered the introduction o.f a turnover tax.

At least it might have had some impact on our export industries.

But the right hon.

Gentleman and his colleagues were committed from the first to embark on the Capital Gains Tax and the Corporation Tax.

My right hon.
My right hon.

Friend and others have shown many of the dangers of such taxes to the con structive economy of the country.

Two particularly important points should be stressed.

First, in the clearly overheated economy which exists, there in the Bill to is no step whatever encourage savings.

Secondly, there is absolutely no step to carry out what the Prime Minister on countless occasions has promised to encourage import-saving industries.
the agricultural As the House will recall, whatever attitude one takes about the aircraft industry or industry, these two industries, which have been so gravely affected by the Government, were undoubtedly import saving indus tries.

One can consider the precise agricultural implications.

industry, the damage is spelt out in greater detail.

Consider forestry.

The problem of timber is becoming world wide, yet no steps at all have been taken in the Bill to help our timber industry.
Consider mineral exploitation For the Vol.

712 in this country.

Absolutely no steps, despite the promises of hon.

Gentlemen opposite, to see that the Cornish mining industry, for example, is helped.

The same goes for mining in Scotland and Wales.

We find absolutely no change whatever from what has been done before.

Consider t•he small and growing ind,us tries, along wi<th ~hose I have mentioned -indusitries wihioh are by ~heir nature expansionist and which could be import saving.

What do we find?
What do we find?

Precisely the same didhotomy, with t>he enormous amount of time, ~abour and effort being spent by the Government in trying to drive them down by -tJhe use of Clause 70 in their desire t o see •that the small closed company is harder hit.
When we con sider what is or is not being done for these industries, along with the trap which was so carefully ba1ted by t·he Prime Minister dur-ing Vhe election-all that business of 1Jhe great surge forward of the find vhat not a darn thing is done to assist t>hem.

industries-we import-saving It was promised during the Budget speech of tihe Ohancellor vhat the Post master-General, that egregious and lavish figure, woufd be introducing a new savings scheme.

Where is it ?
Where is it ?

There is absolutely n;o question but tihat great damage is be•ing done ,to the savings movement by the type of action which the Government are undertaking.

T,he right hon.

Gentleman 1Jhe Leader of t•he Liberal Party drew attention to the grave danger inherent in public men, pa·11ticularly public figures such as those on -the benches opposite, offering bogus pros pectuses about national savings to tlbe un fortunate people of this country.

What steps have been taken in the gilt-edged market?
Tihis ye•ar the Govern ment must redeem about £1,700 million wor•tih of stock.

Judging by bheir pro gramme, it seems grossly inflationary, as the right hon.

Gentleman t1he Leader of uhe Liberal Party pointed out, that the Government must go to '!

!he market for that amount of money this year.

That is wihy I ask what tlhe Government are doing about tihe gilt-edged market, ex cept ca-rrying out a betrayal.
All those unforrunate creatures who indulged in or were induced to buy Dalton's are forced to suffer from tlbe Capital Gains tax.

1 C4 127 Finance Bill- 10 MAY 1965 Second Reading 128 [MR.

FRASER.)

the admirable hope tha1 some hon.

Gentlemen opposite letter written by read Maurice Macmillan in The Times this It should be recognised that morning.

four million people are involved in this matrter.

Hon.

Gentlemen opposite should also consider unit trusts and investment trus,ts.
If the computations under Olause 34 are taken and if the whole matrter is analysed it is absolutely clear to anyone who has anyohing to do wi,~h the unit trust move ment tJhat not only the incomes of the unit trusts are being diminished but the administration of is becoming almost impossible.

tJhem Hon.

Gentlemen opposite pride them selves on their sense of fairness.

They pride themselves that this is a just Bud get and that it will remove many anoma lies.
Of course anomalies exist and should be removed, but consider the degree of fairness today in our fight for our lives as a trading nation, the fairness towards one citizen in this country who is engaged in the same sort of work as the citizen doing a rival job in another country and the level of tax imposed on those who are carrying the burden of industry.
It is clear that the people of this country are receiving unfair treat ment at the hands of the Government compared with their rivals in Sweden, the United States, Germany, F rance and elsewhere in Western Europe.

These are the facts and the House and the country must realise them.

We will fight the Bill every inch of the way.

We will first it for 20 days and 20 nights.

Hon.


Gentlemen opposite will be dragged from hospital and, with the final achieve ment of possibly the Ayes having it, then, over the piles of the dead, many hon.

Gentlemen opposite will come to realise that this has been wasted time for a Budget and a Bill which are totally irrelevant to the facts which face us today.
7.47 p.m. Mr. A. E. P. Duffy (Colne Valley): I have been surprised at the tone adopted by most contributors to the debate so far in their attitude towards new instru ments of taxation, particularly instru ments such as the new Corporation Tax.

I say that because of the tremendous implications far-reaching scope and which such new instruments must have.
Without wishing to sound pious, it would be wise for us to approach the possible consequences of such a new device as the Corporation Tax with a great deal more humility than has been shown.

So far hon.

Members on both sides of the H ouse have made predictions about the working of the Corporation Tax based on nothing more substantial than !lsser tions, as my right hon.

Friend the Chan cellor pointed out.

I hope that hon.
I hope that hon.

Gentlemen opposite will not jeer when I say that I am not uncritical of the Finance Bill, especially that part of it, the Corporation Tax, on which I will concentrate this afternoon.

I am mindful of what the right hon.

Member for Stafford and Stone (Mr. Hugh Fraser) said-that little support for the Chancellor has been shown in the debate today.
Although I will make some tenta tive criticisms of the Corporation 'Iax in respect of its possible effect on invest ment, I thought that the balance of argu ment-and I have thought of little else because, as I said, this will be the main point of my speech-by last weekend appeared to lie with the Chancellor, cer tainly from the investment point of view.

However, look again, from a slightly different angle, at the Finance Bill.
let us Had not the time arrived when Britain was entitled to look a,t the possible use of a new instrument of taxation, not only because of foreign experience but be cause a corporation tax was absent, leav ing this country perhaps the only one of its kind without such a tax, although I agree that this is not a particularly powerful argument?

Because of possible flexibility, wouJd not hon.


Gentlemen opposite agree that here was a weapon which might prove very useful in stimulat ing investment with a view to modernisa tion?

This is my main interest and I hope that it will be agreed that in the short time I have been an hon.

Member I have never shirked the implications of modernisation.

I thought that, all in all, the Corpora tion Tax looks as though it might measure up to the country's requirements.
It is likely to play a positive role in incomes policy, something that most of us agree is needed.

It is likely to be an instrument in the modernisation of our economy, especially in regard to investment, and it 10 MAY 1965 Second R eading 130 Finance Bill- 129 is to that that I wish to confine my remarks.

It is also the cornerstone of the Finance Bill, so I shall look principally at Clauses 42, 44 and 46 in Part IV.

Most hon.
Most hon.

Members will agree that there is an overwhelming need to stimu late home investment, because Britain is stiH handicapped by an inefficient produc tive asset structure.

At the present time, Britain is investing one of the smallest percentages of all developed countries, notwithstanding a liberal tax rate for investment.

I must say that I am not as much moved as some hon.
Members by the possible effect of the Corporation Tax on the existing investment allowances, be cause we all know that the Report of the R ichardson Committee as well as the recent Report provided to the National Economic Development Corporation by the Management Consultants' Associa tion- as well as certain private pieces of research with which I am familiar, and about which I know many hon.

Members are also aware- point investment allowances as having been far from an efficient incentive in recent years.
I therefore think that, on the most moderate and objective showing, the Chancellor is entitled to look at the position again.

to We must remember, after all, that £300 million of public money are involved, and there is no, or little, evidence-and no one in this House can go further than thaJt-that those £300 million were acting as very much of an incentive to business men.
We know that a recent report suggests that many business men look at investment before taxation, so tbaJt these investment allowances were really coming to them as nothing more than tax relief.

Those are not my findings, but the find ings of others-and findings, incidentally, that have not yet been knocked about.

So I say that, on the most moderate showing, my right hon.

F riend was entitled to look at the matter again.

That is all be bas said- that be will look at it again.
He invi,ted comment on this subject, pre sumably from both sides, in his Budget speech-- Mr. Heath : But what is happening is that these allowances are being slashed .

If the hon.

Gentleman could argue that his right hon.

Friend the Chancellor of the Exchequer had done this with fore thought, after examining the situation, and had said that these should be reduced by way of Corporation Tax, one could say that this was a policy that could be examined on its merits.
But what bas happened is that it is now seen that the Corporation T ax is having this effect, and his right hon.

Friend is saying, " I am quite happy to have another review of it."

Mr. Duffy : I beard my right hon.

Friend's Budget speech, and have read it closely since.

My right hon.

Friend said that he would make an announcement in the next Budget speech.

I think that that is reasonable.

As I say, a lot of public money is involved, and there is little evidence that it is having the right effect.
I want the Chancellor of the Exchequer next year, if be will, to go beyond exist ing arrangements if he can point them in a positive direction.

I want him to look at research and development for example ; here there are real grounds for credit enticement.

I should not like the right hon.

Gentleman to think that I am cynical of these arrangements.

No, it is just that I think, if the right hon.

Gentle man will forgive my using the phrase, that they must be pointed more purposively.

Many hon.
Many hon.

Members recognise now that the bulk of firms get the bulk of their additional capital for necessary growth out of retained profits.
Despite the prophecies of woe that we have heard from both sides in this debate, whether we look to the period before the ending of the two-tier Profits Tax in 1958 or sub sequently, or whether we look at German practice-and this is an interesting case to take, because the Germans have not a capital market comparable to ours, and we know the measures they take to com pensate for that- they lightly tax dis tributed profits-as my hon.
Friend the Chief Secretary said on the last night of the Budget debate, the lesson is t he same; financing equity has the pattern of remained virtually unaltered.

In other words, generally speaking, companies grow out of their own resources.

I found it difficult to get round that conclusion of my hon.

Friend the Chief Secretary.

Nevertheless, I hope he will accept my concern for certain companies that may not be covered by this conclu sion.
Generally speaking, wha t he said is possibly true of most companies, but there are two categories of companies of which exceptions could be made.

One 131 Finance Bill- 10 MAY 1965 Second Reading 132 [MR.

DUFFY.]

the hon.

category was mentioned by Member for Belfast, North (Mr. Stratton Mills)-the company which is heavily involved in automation.

There is Elliot Automation, for example-I have that I have in mind, the category in mind.
really fast-growing company that will need to go to the market, will need out side financing.

Another category of company that may have to be looked at again is just the opposite kind of company-the slow moving company, of which we may have too many, the company that may be superficially covered by what my hon.

Friend said.

We all know of some such companies, companies that are content to finance their own expansion out of their own resources.

We cannot be complacent about their continued existence.
Those two categories that may not be are' covered by the kind of experience on which the Chief Secretary based his own view that evening, when he said that, generally speaking, most companies grow out of their own resources, presumably do so satisfactorily, and will therefore not be hurt by the Corporation Tax.

But what about another possible effect of the Corporation Tax?
I grant that what has so far been said from this side of the Chamber is true, and that, in theory, the Corporation Tax will encourage retentions.

How far those retentions will amount to plough back is another matter, and I will not go into that now.

But I am apprehensive that things will work out slightly differently in practice.
I think that it is true that the Corpora tion Tax gives a company director an incentive to retain rather than to distri bute profits to shareholders, since those shareholders will now have to pay an additional tax on such income.

But there is a widely held belief that the average company will have had to enjoy at least double cover for its dividend under the old system if it is to preserve both its distribution and its retentions under the that new arrangements.
That means many companies, given similar gross profits, will have to decide whether to cut dividends or retentions.

So we shall have a psychological element to consider.

We know, and some hon.

Members opposite know better than we do, how many directors are so concerned for their standing in the markets that they will be tempted to cut back retentions to preserve dividends.

Hon.
Hon.

Members on both sides of the House know that man agement and men in highest authority in the business world are moved by such uneconomic considerations.

What I have said about home investment has been ten tative, and deliberately intended to be tentative.

I do not think one can go further at this stage.

That is why I am appalled at the slightly dogmatic way in which hon.

Members have addressed themselves to this debate.

I turn to overseas investment.


It is widely held that it will be seriously affected by Corporation Tax.

That has been said almost more than anything else from both sides of the House.

I have been looking to those hon.

Members to produce by way of argument something more substantial than they have proauced.

I wonder how many of them have looked at the article in the autumn review, "Moorga,te and Wall Street," by Profes sor John Dunning on " Does Foreign Investment Pay? "
I am not suggesting that this is the last word that can be said on the subject, but it is something which cannot be easily overlooked.

I think that Professor Dunning speaks on this matter with a little more authority than do some hon.

Members He concludes that it can not be said with any precision that foreign investment does pay.

Hon.

Members may wish to know the basis for this final conclusion.
He takes the view that the social rate of return on capital at home is higher than that on overseas investment and there are rather significant benefits, particularly in feed back of technical knowledge for strategic uses of raw materials and the increase in exports, all of which accrue to the domes tic economy.

Thirdly, there is evidence to suggest that United Kingdom invest ment overseas is not as profitable as it might be.
Finally, it is not clear whether the net effect of overseas investment on the balance of payments is to improve or to worsen it.

Up to ~hat point Professor Dunning has ignored the terms of trade.

Mr. John Harvey (Walthamstow, East) : I am interested in what the hon.

Member I take it that he realises that is saying.


Professor Dunning specifically excludes invisible earnings, such as insurance and banking, and also excludes oil from the 10 MAY 1965 Second Reading 134 Finance Bill- 133 purview of his report?

The assets w~re given in terms of book values which may have, and probably did have in most cases, an appreciable under-value.

M1·.

Duffy : I was about to say those things.


I said that Professor Dunning ignored the tenns of trade and I agree about the other things mentioned by the hon.

Member for Wa-lthamstow, East (Mr. John Harvey).

Even when one makes those allowances one is entitled to be impressed by the Professor's open mindedness on the matter by his own conclusions, which contrast with dog matic utterances on this subject which we heard in this debate.
Putting aside the argument, I have not heard anyone say in this debate that the Government were not obliged to correct the bias in favour of overseas taxation in order to correct a position whereby the outflow of capital had come to be responsible for half our balance of payments deficit in a current year.

I do not believe that the former Gov ernment could have avoided taking some such action.

This does not mean that I am complacent about the implications.
I recognise that short-term matters may I involve think the Chancellor was obliged to move here, I hope he wiill watch this position because this is a view which again has been put forward by Professor Dun ning who said: long-term hurts.

Although "The justification of overseas investment will vary according to priorities of policy.
If the primary aim is to protect the balance of pay ments in the short run the attitude to foreign investment may be quite different than its long term growth is the first priority."

The recent N.E.D.C.

Report said almost the same: restrictions on private "Severe investment abroad could hardly be mainta ined indefinitely and, in an case, would worsen the current account of the balance of payments in the longer run."

The risk here is of taking short-term steps which will run counter to long term aims.
I hope that my right hon.

Friend will watch carefully the effect of the Corporation Tax on both overseas as well as home investment.

The Budget and the Finance Bill are in many ways reminiscent of the great Lloyd George Budget of 1909.

The right hon.

Member for Stafford and Stone spoke about fighting the Finance Bill for 20 days and 20 nights.

That reminded me of the great debates of 1909.


With the benefit of hindsight we all know that what Lloyd George was trying to do was to make possible the first finan cial instalment on the Welfare State.

This Finance Bill is, equally, a water shed in ta xation and the things which taxation makes possible, such as the Welfare State, and steps towards the modernisation of our economy, without which we could not have expansion of the Welfare State.
8.8 p.m. Sir Alexander Spearman (Scarborough and Whitby) : I do not think the Govern ment can be very happy about today's deba>te.

We have had four back-bench speeches, two criticising the Government and two supporting them.

With all respect to the hon.

Member for Colne Valley (Mr. Duffy), I do not think there can be very much doubt about which were the most effeotive.

I hope it will not damage the hon.

Member for Meri den (Mr. Rowland) too much when I say tha,t he made a most remarkable speech.
It appeared to me to be a robust and radical attack on a doctrinaire Socialist Bill.

if Before coming to the critical things l wish to say, I want to pay a tribute to the Government-if they will accept it from this side of the House-for standing firm against devaluation.

I suspect that they must have been under a great deal of pressure from some of their newer ad I believe that devaluation today visers.

is quite unnecessary.


Our prices are not now so out of li·ne with those of our competitors although, the Govern ment do not do the right thing soon, they may become so.

Devaluation would be only a temporary respite.

I think we it, by can get that, and are getting borrowing-with far less harm both to ourselves and to those from whom we borrow.

The consequences of devalua tion would be that later we would have to have much more drastic deflation than is necessary today.
We would create a tremendous distrust cf sterling which might last for a very long time.

We might do considerable damage to inter national trade, especially to West Euro pean trade, which would have serious repercussions on us.

135 Finance Bill- 10 MAY 1965 Secon.d Reading 136 [SIR A.

SPEARMAN.]

My criticism of the Government in this respect, and many others, is not con cerned with what they want to do, but with the effeot which their measures are likely to ,have.
We have to face the hard fact that we have to spend a great deal less or earn a great deal more.

For several years now on and off, but most particularly during t he last few months, this country has been suffering from a serious but curable disease of excess de I believe that the balance of mand.

payment troubles are a symptom of that It is never any good attacking disease.

a symptom.

It is the disease itself which must be attacked.


Many Ministers-I most particularly include the Prime Minister in this-have given the impression by many of their speeches that, if only by some clever gimmick we could export more or import less, our problems would be solved.

Of course we must export more ; but, if we do that and nothing else, we shall not solve our problems .

We shall get into a raging inflation.

There will be more money chasing fewer goods.


We have either to slow down the expenditure or to modernise.

Right hon.

and hon.

Members opposite in theory support modernisation.

They did so in their election speeches.

They are not doing it in practice, because it means change, and change hurts.

For example, it means employing two people where three people are employed today.
I believe that we as a nation must choose between present comfort and only a little rise in the standard of living, and drastic and often painful change and a rapid rise in the standard of living.

We cannot have progress and a quiet life.

If we try to get both, we shall get neither.

I profoundly hope that we shall come down on the side of modernisation, but I do not underrate the difficulties.

We must adapt ourselves to a changing world.


That means doing all sorts of things that will upset many people a great deal.

I must today confine myself to those changes which are relevant to this Bill.

Primarily we must have much better planning and I have always believed that the Budget is the prime Government instrument for planning.
By planning I do not mean, with all respect to the First Secretary of State, making plans as to what we shall produce, bow I the in 1951 we shall produce it, and how much we shall produce.

All that would be all right if planners were infallible, but we know that they are not.

To take an example, last Socialist Government set up a very high-powered Committee called the Ridley Committee to estimate what fuel consumption would be IO years later.

How wrong that Com mittee was.


It estimated that gas con sumption would be substantially up, and it was down.

It estimated that coke and manufactured fuel consumption would be substantially up, and it was down.

It estimated that oil consumption would be up by 82 per cent.

It was up by 249 per cent.

Totalitarian Governments do not have to bother about thi~.

because they do not have to bother about what the con sumer will want.
They do not have to foresee changes in demand, because they force people to take what is produced.

The planning which I believe is abso lutely essential is regulating the pace of the economy.

If demand is too little, we get unemployment and waste.

If it is too great, we get diversion of exports, we get imports sucked in, and, most particu larly, we do not get enough competition, and therefore we get waste.
If by tihose much abused words " stop and go " we mean " slow down and speed up", I am sure that "stop aind go " is essential.

The only alternative is either to run the economy very slow ilildeed, which is unthinkable because it means massive unemployment, or to have a series of oontrols, which I do not believe a democratic Government could possibly acquire in time of peace.
I can remember the late Ernie Bevin, who was heild in such respect and affec tion by most of us who were in the House wiJtih him, wherever we sat, saying just about 20 years ago, " The Labour Gov,ernment are very fortunate They have mhea:iited war-time controls they could never get in peace time ".

I do not claim that tihe former Govern ment 1earned at all perfeotly how to regul,aJte the pace.
What we have leamed is that these measures take much longer to operate than had been realised and, because of the multiplier, they have a muoh greater effect when they do operate.

Therefore, _when the Govern ment tum the knob in one direction they must at once be thinking about turning 137 Finance Bill- 10 MAY 1965 Second Reading 138 1t m the opposite ·direotion for effeot in a few months' time.
I believe that It is a widespread view on both sides of the House that the way to get maxi mum growth must be to run the eoonomy full out ; that there is a choice between growth at the price of some inflation and stahiHty at the price of no growth.

I believe that this is an absolute and most damaging mytih.

the opposite is tme.

I believe that inflation slows down real growth, because it leads to inefficiency, it leads to waste, and it leads to the wrong sort of industrial i.nves,tment.
A study of company reports shows that time and time again when compat11ies have very long order books they are concerned with the sort of in vestment that will give them t:he maxi mum return per unit of capital.

Winen t!heir order books get shor,ter, they are concerned wi11h costs, with how much tihey can get per unit of labour, which means maximising our resources.

The Economic Report for 1963 defined the maximum output that the existing labou[ force could produce as the pro ductive potootial.
I believe that, when eve,r actual output approaches closely to t,he productive potential, we then get con ditions of excess demand ; we then get balance of payment troubles ; we get imports sucked in, exports diverted, and costs risiing.

That happened in 1951, 1955, 1960 and now.

T hese were the years of tibe worst balance of paymoots in the 1950s and the 1960s.

figures These were the years of the smallest margin of unused capacity.
I have taken my estimate of that from Professor Paish's article in Lloyds Bank Review, Table II.

It is very largely borne out in that admirable book by Dow, "The Management of the British Economy 1945-1960" and, indeed, by Shepherd and Godley in the issue last August of the National Institute.

Unless there is a margin of unused capacity of between 5 per cent.

and 6 per cent., there cannot be enough competition.

If everyone can make their profits too easily, they will not exert themselves.
Unless there is adequate competition in a free state, I am absolutely convinced that there is inefficiency and waste.

The Government's job is to make profits hard to make and well worth making.

The surest way to slow down real growth is to preserve inefficiency.

in Therefore, I maintain that maximum growth the economy depends on planning that is regulating accurately the pace of the economy so as to get the maximum of enterprise and effort and the right type of industrial investment.
object should obviously Then I believe that the Government must be realistic in their tax changes.

be Their efficiency.

I was glad that my right hon.

Friend the Member for Birmingham, Handsworth (Sir E. Boyle) in the Budget debate quoted the speech of Lord Franks, in which he said that one of the greatest handicaps this country suffered was that it always made the test of a policy-is it fair?
The parable of the vineyard is a very hard one to master, but I am sure that it is a true one and worth remember ing.

The test has been "Is it fair?

", whereas it ought to be " Will it lead to efficiency? "

I agree with my right hon.

is Friend when he said that absolutely no inconsistency between efficiency and idealism because the more efficient we are the greater are the resources and, therefore, the more we can spend on education, health, housing and so on.
Tax changes by which some, in the cause of fairness, are made less rich and the rest poorer must be bad taxes.

Is a man to be reproached because he wishes.

and strives to do better than his neigh bour?

there I have, perhaps at too great a length, given the reasons why I believe we ought to have a deflationary Budget.

I now want briefly to examine the Budget.


I remember being told that when the present ruler of France came to office for the second time and when he found a very serious financial crisis in his country he had three different policies put before him by his advisers.

They said, " T he first is really no good ; it will be quite ineffective.

T he second you cannot do ; it will be politically impossible.

Therefore, we must recom mend you to acoept the third, a com promise."
I understand that the General said, " If you can persuade me that the second policy is the right one, the second is what we will do", and they did it.

I do not want to belittle what the Chancellor has done.

I quite accept that It his Budget has done something.

has given sterling a respite.

But it is a compromise.

It is not a courageous Budget.

My criticism of it would be, IO MAY 1965 139 Finance Bill- [SIR A.

SPEARMAN.]
SPEARMAN.]

first, that a great deal of it is irrelevant and some of it damaging ; second, it has not done nearly enough for the right hon.

Gentleman's purpose ; and third, it depends on the incomes policy succeeding.

The First Secretary is a very contro versial figure, and I do not want to belittle what he has done.

I think he has worked very hard.

He has made a first-rate appointment in Mr. Aubrey I think it is quite possible-I Jones.
will not say more-that the Incomes Board may make some contribution towards getting rid of these damaging restrictive practices.

imagine I can a measure of circumstances when exhortation will be useful ; but I am sure that it is madly unwise to depend upon an incomes policy at a time when unemployment is under 1 per cent.

in areas of the country where two-thirds of the working population live.

I think my real difference with the right hon.

Gentleman would be this.


I do not believe that wages go up because of trade union pressure.

I believe they go up because of competi tion between employers.

I have tried, with the aid of those who have been extraordinarily right in their forecasts in the past, to make some calculations.
I will not burden the House with my figures, but I believe that this year the increase in spending by public authori ties and by consumers, allowing some thing to make room for exports, will considerably exceed the increase in pro duction.

Therefore, this year we are going to have a consumption inflation.
It is quite likely that because of the credit squeeze, so much more severe than any of the monetary policies which were so much under attack during the past 13 years, and because of prospects for profits, that next year we may see a sharp decline in industrial investment.

This year we shall have a consumption inflation.

Next year perhaps we shall have an investment deflation.
Inflation of consumption and deflation of invest ment must be the exact opposite to what the Government want, as occurs in so many of the things that they are doing.

The Chancellor estimated that his measures would cut back demand by Seeond Reading 140 £250 million.

I believe that a good deal of that will come out of savings and profits which, at any rate, in the current year will have no effect whatever on consumption.
The cut-back in actual consumption may be not much more than half the figure that he has suggested.

What the Government ought to be doing is, here and now, preparing vigorous plans for an expansion of investment next year and sharply cutting back present con sumption or Government expenditure, or both.
The truth is that the Conservative Government in the last few years have spent up to the hilt of what we could afford, but all the time that they were doing that they were under the most bitter and abusive attack from hon.

Members opposite who continually asked the Gov ernment to spend more.

The Prime Minister said that last year.

The present Chancellor of the Exchequer spoke about the Budget being too cautious, and the right hon.
Gentleman the President of the Board of Trade described the 1963 Budget as a timid Budget.

All the time that they were making those attacks they were also making the most lavish promises of what they would do.

No doubt, those promises served their purpose ; no doubt they got votes.

But now the day of reckoning is approaching.


If they can survive the next few months I think they will find that they will have to break their promises and their pledges on a scale that will shock the country, hardened though it may be by its experi ence of the last six months.

I oppose this Budget not primarily because it will hurt certain interests but because it fails to promote growth.

I recommend the Chief Secretary to read an the article by Mr. Rees-Mogg Sunday Times of 11th April.
I do not always find myself in agreement with Mr. Rees-Mogg, but I thought that this was a the formidable article showing most striking contrast between the Prime Minister's promises and bis performances.

I will quote the last sentence of this article, because it sums up the Budget more concisely than I could do : in "It is a Budget which will make Britain Jess efficient, less modern, less prosperous and less well able to earn her living abroad."
What we needed was a Budget which would provide a stick to give more com petition, a carrot to give more incentive.

T hat is the way to get a dynamic economy.

141 Finance Bill- 10 MAY 1965 Second Reading 142 What we got was a drab Budget which will make no one richer but most people I shall have no hesitation in poorer.

voting against the Bill.

8.29 p.m. Mr. Edmund Dell (Birkenhead) : I was relieved to bear the hon.
Member for Scarborough (Sir A. Spearman) say that be does not always agree with Mr. Rees-Mogg, whose opinions on the leader of the Conservative Parity are well known.

and Whitby The matter on which I wish to address the House seems to be becoming a very large part of the substance of the attack It is the subject on the Government.

of overseas investment.


We are seeing launched on the Government what appears to me quite an undiscriminating attack, particularly on the Corporation Tax as it affects overseas investment.

This is a pity, because our aittitude to overseas investment should be highly discriminat ing between different My criticism of the Government is that their present measures possibly are not suffi ciently discriminating, although the infor mation which is available for formulating policy is sadly lacking.

forms.
forms.

It is a severe criticism of the previous Government that over a long period of time, when for many years vast sums were being invested abroad, no attempt what ever was made to study the implications of that enormous investment for our balance of payments or for our economic progress.

They ignored one of the main features of t:bis country's economic development-the fact that it was invest ing abroad to a larger extent than any of its tracling competitors with the excep tion of the United States.
Let me deal first with the matter of developing countries.

Many hon.

Mem bers have referred to this subjeot.

I do not think that hon.

Members opposite can put forward this aspect in defence of their attitude.

The fact is that for many years the rate of investment by this coun try in developing countries has been falling, quite independent of the Corpora tion Tax.
It bas been happening year by year, very likely because it has been found thait investment in developing coun tries is less profitable than investment in Another reason developed countries.

may be the political risks involved in investment in developing countries.

What- ever the reason, this type of investment has been falling, and there is no denying that this is a most serious matter.

To say that the Government are in any way responsible for this is complete nonsense.
I am afraid that the effect of the Corporation Tax may be to re-emphasise this situation.

I should like to see, if possible, the Government exempting developing countries from the impact of Corporation Tax.

The Americans have exempted developing countries from their own measures against foreign investment.

Nevertheless, our Government have no responsibility for this situation.

It is a situation which the world faces and which the developed world will have to concern itself with very seriously.
Mr. John Harvey : Does the hon.

Gentleman seriously suggest that over seas investment has been falling year by year?

If so, I should like him to quote bis authority · for to know whether his Front Bench agrees with it.

that and Mr. Dell : The hon.

Gentleman must inform himself on this subject.

On, I think, 2nd April, there was a Board of Trade report in the Board of Trade Journal on the subject of over seas investment in developing countries.
It said that in 1961 the amount of our investment in less developed overseas countries was £91 million and in 1963 £52 million.

If we take out of those figures the amount of profits reinvested, we find that the fall in new money from 1961 to 1963 was from £72 million to £19 million.

This is a well-known fact and it bas been the subject of frequent comment by those who make it their business to discuss these matters.
It is suspected, although I cannot quote figures for this, that a process of disinves tment by all the developed countries is going on in the Jess developed countries.

I wish to consider the problem of over seas investment in its most general aspect and the sorts of information which the Government can have in mind in deciding their policy.

We have to consider the advantages which it is believed accrue as a result of overseas investment.
What we want, as far as it is possible to get them, is facts, not passions.

What are the forms of return which we receive as a result of overseas investment?

First, there is the direct return in the form of dividends, royalties, technical fees, and ,-� 143 Finance Bi/1- 10 MAY 1965 Second Reading 144 [MR.

DELL.]

of the to make points in these markets in their overseas so forth.

There are two about that.


The first is that the results investment of our own overseas terms are,· unfortunately, rather poor.

much less satis­ They are, unfortunately, than the achievements factory in this direction United States a return reason very likely seas investments an extent been defensive is that our own over­ have to far too great in securing investment.

The in character.
The in character.

with is instead of have done, What we have been concerned loss of the possible as the Americans considering, what are the best forms of rinvestment which are most likely overseas attitude there, that there will that we will be shut out and that, there­ fore, we must go in first.

The Americans have not taken considered wished to invest its merits what form be most profitable.

of our overseas respect important management.


and have considered on of investment would failure The relative in this most They have that attitude.

the market in which they made will be be a tariff and to be profitable development is a criticism of British in markets.

We have taken the that manufactures these we have the whole time' to that there are many different investment.

will go on to say, in this field also the On all is all too sparse.
information we suffer from a considerable these points upon which policy lack of information can be based, and in considering matters remember forms of overseas Therefore, when I say to my right hon.

Friend the that he should go carefully in Chancellor it is not investment, cutting that he is necessarily in because all cases wrong, but that it is impossible at the moment to determine cases he would be right and in which he would be wrong .

foreign I believe in which One case in which my right hon.
Friend of overseas We have an over­ valued at £4,000 million.

sum.

Even the population, than ourselves portfolio a country overseas of America, right is in respect investment.

of the United much more and wiith a much is valued at only £6,300 is clearly portfolio seas portfolio This is an enormous private States wealthy larger million.
this country justifies overseas investment Tax is to bring if the effect of Corporation some of that money back into the United where it could be invested, Kingdom, would be all to the good.

The main question I cannot see that the return to of this enormous that portfolio it.

Certainly, to which I wish to in overseas investment Certainly, to this country their production The second advantage of the charge that this attack from that in raw investment of raw materials.
are is, again, which should is in the investment accrue from overseas How extensive control subject to these advantages that doubt.

I do not know.

for example.

any more we get our raw materials as a result than other countries cheaply in certain of controlling it is at least likely countries.
that the return type of overseas materials, if only because to fall in profitability trend is that that the long-term appears the prices of raw materials falling factured about how far this trend lot of argument and level of can be taken as being established, but for overseas certainly and Japan as the two most example, Germany in relation examples, notable over the last decade.
That argument and I do not think there is any particular might lead us to consider critically correlation value to this country overseas vested seas investment.

-[OFFICIAL REPORT.

12th April, 1965; Vol.

.

710, C.

1082.)

devote myself is what has become the gravamen on overseas investment or a possible reduction affect our exports.

which I have great sympathy, which, in fact, I largely will affect our exports because reduce the number of overseas I turing say it will reduce our exports.
refer to what the Chancellor said in a very brilliant Budget debate. "

I have looked it will manufac­ in which we can engage.

I would speech winding up the He said : at the nature will with and with is that it are to the prices of manu­ the of that sort of over­ in mines, and so on, is likely it seems to have been the trend goods.

I know that there is a by other countries, the amount directly and the quantity to their exports, of exports."
The argument investment relative projects between agree, it in­ The third advantage which is said to here is much the argument accrue-and that overseas stronger-is assist in the promotion Kingdom exports.

investments of United as I hon.

Friend was using.

All I can say is that what he said is certainly in It accordance with my own exnerience.
Unfortunately, I do not know what figures my right --i information, and raw materials, Finance Bill-10 MAY 1965 Second Reading 146 according for past periods " Figures .

.

.

in the development Western Europe has an important effect on equip­ United Kingdom exports of capital ment."
of private show that investment to my experience, in exports, inde­ of the amount of their overseas It is true also of one year for which I have bad the 14� is certainly, true that the Germans and the Japanese have had their successes pendently investment.

particular for me, 1962, the last figures produced year for which these figures are avail­ able, and which compare the flow of with exports.

investment overseas figures show that in that year the Americans' was about 15 per cent.
of the value of ; the United Kingdom flow their exports was about 5 per of overseas ; the cent.

of the total value of exports Japanese 2 per cent.

; in other words, substantially less than our own.


and German flows were about investments investments flow of oversea These I think it is probable that this estab­ our enormous over­ the truth of what the Chancellor and many other notable that this merely of our ex­ the inadequacy lishes said, but I am afraid re-emphasises despite port effort, seas investment which we have.
In spite of advantages the enormous advantage we get from our overseas investment and from our manu­ overseas, facturing our exports they should have done, and certainly comparably Japan.

It is not probably taking the support not with those of Germany and a reason for out from under our export effort have not developed projects at the rate nevertheless We know that the oil companies spent in the United Kingdom the form of exports for, and that is, what is the likely which examples we are on our My hon.
Friend the (Mr. Rowland), £115 million last year on equipment but all these are specific do not take us to the final result looking return in overseas investment?

Member for Meriden what I considered to a Question referred down to the President for this sort of Trade asking and the fact that he was told that this That is, was not available.

information when I perhaps, Question to myself put down a similar Board of Trade I the President also was told that the information was not available.
an excellent which he had put of the Board of in speech, not surprising, because of the Recently we have bad two further on this subject.

Industries Industry, items of information first is the report by the Federation British British have also got such information can indirectly lished the subject The of of and we as we glean from what was pub­ on in the Board of Trade Journal trade credit.

of international in a recent of 30th April, edition they are totally inconclusive.

on and exports.

The F.B.I.


is to be com­ them.

They d before.

Un­ They are very interesting these F.B.I.

and carried is that far too little I would like to examine manufacturing project which it apparently has.

figures.

the real trouble As I am saying, very valuable.

is known this subject mended for coUecting what is about �t.

If I try to summarise might have been collecte First of it is as follows.
known I suppose fortunately of anyone all, there is the impression First of all they are a very limited through an who has planned sample, and it is interesting to know that that it overseas approached out of 45 companies to the United King­ does bring a return the information to provide failed dom in the form of additional form which could be used.
The figures That has recently been confirmed show no direct figures which have been referred seas investment the debate today and which have been -I hope not typical by the Chairman produced the argument go against of the Bri,tish Chairman deploy-that tion and by the Managing is the company second highest Leyland's.

most rapidly which has been disinvesting evidence overseas.
seas investment not net of any imports increase Kingdom from British statements project turing Economic lack of capacity article on " Short-Term Economic Fore­ which might not have existed if the casting money had been invested that there has been a marked We have such official as that which appeared Trends in August, manufac­ overseas s as a result, perhaps, of in the United Kingdom and exports.
because s I am trying of LC.I., the Motor Corpora­ Director over­ It is curious of is clearly in the United Kingdom".

The export figures shown are in 1964, in an In these cases ,there the company with the that as one return in exports.

into the United in the United in to in on our over­ exports it would It said ten in a to relation between 147 Finance Bill- 10 MAY 1965 Second Reading 148 [MR.

DELL.]

Kingdom rather than overseas.


The ex port figures again are not net of any exports to third countries made from British manufacturing projects overseas which might otherwise have been made from the United Kingdom.

Anyone who has been engaged in this business of overseas investment knows perfectly well that many overseas Gov ernments very properly say to a com pany that wants to invest in their country, " All right, this plant if you build here you must export from this plant."
These exports may very well cut our own exports.

They may replace our own exports, and no consideration is given to this in the F.B.I.

figures.

The Indian Government are an important example of the Indian Government are this and entirely justified in doing it, but it does affect the F.B.I.

implication of figures.

the Lastly, and this is not a criticism of the F.B.I.
figures, I think it is a pity that the F.B.I., in asking companies for this sort of information, did not also ask them what proportion of the imports of their overseas manufacturing companies come from the United Kingdom.

My hon.

Friend the Member for Meriden that British manufacturing com said panies overseas do not shop around, they buy from the United Kingdom.

accordance That with his experience, but it happens to differ from mine.
In fact, I find that they do shop around and the implications of overseas the United Kingdom.

investments for economy and for the United Kingdom balance of payments might be a great deal more favourable than they are if there was this concentration on United Kingdom sources of supply by British manufacturers overseas.

is no doubt substantially somewhat in Perhaps the most interesting point about the F .B.I.
figures is that companies investing overseas seem never before to have investigated what the total return to tihe United Kingdom from their invest ment was.

Some of them have confessed to being surprised by ~he results.

T hose who have been surprised have fortunately been favourably surprised.

It would be a pity if they had tu rned out to be un If my right hon.

favourably surprised.

Friend the Chancellor has done a nything he has ce,rtainly provoked thought on the subject of overseas investments.
international To come to the figures recently pub lished in the Board of Trade Journal on the subject of trade credit.

I have tried to use as much ingenuity as I have to seeing whether I can derive from these figures any lesson for the amount of our exports which go to Briitish overseas manufacturing pro I am sure the House will agree jects.

that will require a considerable that amount of ingenuity.
It has always been known tJhat tihere was no direct relation ship between annual increases in exports and investment In fact, new private investment abroad.

abroad is always much greater than the aooual increase in exports.

One would no doubt wish that ~t was the other way round, but it is not, so at any rate it looks probable that only a part, and it may be quite a small part, of this annual increase in overseas investment returns to this country in the form of exports.
in private increases What do the Board of Trade figures I remind the House that what show?

I am tryi.ng to find out, and what I hope the Governmen,t will try to find out, with the far greater resources available to them, is what proportion of British exports goes to British overseas manu facturing projects, and, secondly, what part of that is in the character of raw materials, capital goods, and so on, for further processing.
The Board of Trade figures show that one-tihird or Uni,ted Kingdom exports are sold oo credit, and tha:t about one third of the total credits outstanding at the end of 1963-£895 million-was between United Kingdom companies and their overseas branches and subsidiaries.

In my judgment, and I tJhink.

that this is coofirmed by the figures, credit is more lik•ely to be granted by a British firm to its overseas associate or subsidiary than ~t is to a non-related company.
There fore I tihink we can guess that United Kingdom exports to overseas subsidiaries and associaites, as a percentage of total exports, cannot be less than 10 per cent., could be 30 per ceint.- I think that that is ratiher unlikely-and is probably about 20 per cent.

Now I want to find out what propor tion of that 20 per cent.

is material going to overseas manufacturing projects.

Here the only aid that I have are the American figures.
The House will remember-I referred to this in my speech on the that the Americans have found Budget- 10 MAY 1965 Finance Bill- 149 that about 40 per cent.

of their exports going 1:o American subsidiaries overseas were of this charaoter-raw materials, capi1:al goods, and so on.

I doubt whether the United Kingdom figure is anything like 40 per cent., if only because tbe value of our overseas investment is so much less than that of the United States.

But even if we take that figure, 40 per cent.


of 20 per cent.

is 8 per cent., which is about £350 million.

I cannot see how our exports of raw materials, capital goods, and so on, to overseas sub sidiaries of British manufacturing firms can be greater than £350 million per annum.

One has to confess that, compared wirth the total value of our overseas invest ments, that is quite a small figure.
Even if one adds to it goods supplied by other United Kingdom firms, and if one adds to it exports that result from the presence of a British manufacturing interest over seas, the total is not, unfortunately large, not perhaps as large as it should be.

But equally-and this is the point that I want to make-although these figures are not large, they are not negligible.

In conclusion, I have three specific and one general point to make.

Mr. Terence L. Higgins (Worthing) : Perhaps the hon.
Gentleman would deal with this matter before he concludes bis speeoh.

Is it not possible tha:t people export from •this country because they have the prospect of building up a market overseas and then investing there?

If we take away the possibility of such investment in future, or diminish the in centive to do so, people may be less in clined to export.

Mr. Dell : I do not believe that people export from this country with the object of building up manufacturing projects.
In certain cases when they already have the specific intention of manufacturing to build up in order they export the market.

that I do not believe many companies have long-term vision of building up exports to a market and then, perhaps having reached a cer tain level of exports, buildi11g up a manu facturing projeot in that market.

I sus pect that if they do this may be one of the reasons why the return on British in vestment of this sor,t is so low.
I would have 1:hought it better for a firm to look at the market first and to say, "Ours this will be a profitable project this in Second Reading 150 market ", and proceed on that basis.

Having got the intention, the firm would then do what many firms do, namely, build up the market 011 the basis of ex ports, having first established the inten tion.

than tough credit.

Secondly, sufficiently I have three specific points and one general point to put to the Chancellor.
The first specific point is that far less credit is being granted to the United Kingdom the United Kingdom grants its customers.

This raises the question whether United Kingdom importers are in demanding there would be some savings to the United Kingdom balance of payments if United Kingdom parent companies granted less credit to their overseas subsidiaries.

That point could well be discussed with British firms investing overseas.

Thirdly, despite what my hon.


Friend the Mem ber for Meriden said, there would be great benefit to the United Kingdom balance of payments if overseas sub sidiaries of British firms bought a higher proportion of their impo·rts from the United Kingdom.

As the F.B.I.

has not done this I suggest that the Chancellor should ask parent firms in the United Kingdom what percentage of the imports of their overseas companies comes from the United Kingdom.
The general point I want to make is that the control of overseas invest ment is a matter for discriminating and not blanket techniques.

The effect on exports must be taken into account, and good pmjects should be encouraged.

I do not dissent from the criteria laid down in the Chancellor's Budget speech.

There should be control of direct invest ment outside the sterling area, but I see no reason why this control should not be extended within the sterling area.

There is a strong case for this.


The figures show that although over seas investment may be only a relatively small aid to exports it is an aid, and we are not in a position to dispense with any aid to our exports at the moment.

I therefore ask my right hon.

Friend to reconsider whether, for taxation pur poses, there is some way of discriminat ing in favour of British overseas manu facturing projects.
If the Government's attention could be directed to this ques tion-at any rate to cover the period 151 Finance Bill- 10 MAY 1965 Second Reading 152 [MR.

DELL.]

when a necessary investigation into the whole problem of the implications for British economy of overseas investment is being undertaken-it would be an advantage.

We must make sure that we do not lose anything by actions which may later turn out to have been ill advised.
8.57 p.m. Sir John Barlow (Middleton and Prest wioh) : I am glad to follow the hon.

Member for Birkenhead (Mr. Dell), be cause ihe was speaking on very interesting Hnes about overseas investments and their e:ffeot on exports, and how the two things are correlated.

I agree with a great deal, althougih not all, of what the hon.

Mem ber said.

He thought that foreign coun tries which had fewer overseas invest ments than we have had ample access to raw materials.

He mentioned Germany and Japan.


I happen to know ,that both those countries have quite recently paid far more than the present ma-rket price- in fact, a very substantial premium-for long-1:erm deliveries of certain raw materials in t1he future, so that they can secure the position.

We have a great advantage, in ithat in many cases we con trol raw materia•ls through our overseas investments.

'Dhe hon.

Gen'l:leman then urged the Government to go very carefully in I entirely cutting overseas investments.
In various agree with !him about that.

ways the value to us of overseas invest men1s through tihe last half-century has been immense, some of whioh I hope to mention.

Trhe hon.

Member.

was asked by the hon.

Member for Worthing (Mr. H iggins) about a long-1erm policy of exports to ce11tain oountries with a view subse quently to manufacturing in tlhose coun 'Dhe hon.

Member said that he did tries.

not :think there was anything substantial In some cases it has worked, in tihat.
aolt-hougih originalily it might not have heen the intention.

Those who come from Lancaslh,ire are only too well aware of the great diminUJtion in exports of cotton textiles over the last 20 years.

Because it was so much cheaper to produce in tbe overseas countries many Lancashire firms built cotton factories in large those countries and produced In any case, amounts of goods there.
importing Lanca~hire could not have kept that busi ness for 1lhe textile mills, but it had the advantage of utilising valuable Lanca shire cotton expertise and, in many cases, Lancas'11fre provided the machinery for vhe overseas mills.

lt seems to me that by his Budget ;tJhe Chancellor is trying to aohieve far too muoh far too quicki!y.

As has been pointed out by severnl hon.

Members, it is 1!he longest and most intrica,te Budget for a great many years.

The right hon.
The right hon.

GenTleman is trying to impose a Corpora tion Tax and a Capital Gains Tax a-t the same time.

Those are botJh tremendous measures, and I suggest tlb.at he is unwise to try to do too muoh too quickly.

It was interesting to see that commentators in the learned journals which some of us read every week were full of congratula tions for immediaitely the Ohancellor after he had produced his Budget.
It was also interesting to see how those con gratulations turned ~o criticisms in the last -few weeks.

I ·1:lhink ~hat as time goes on criticisms orf the Budget will grow.

In his Budget speech the Chancellor suggested that he wished to modernise British taxaition.

He certainly has made a change of direction, but by adopting these methods I suggest that he is not going forward but backwards.

He has adopted methods which were adopted years ago by other countries.
France, par ticularly, has recently changed to our previous way of thinking and the French were astonished that the Chancellor should introduce his Budget in the way he did.

I know that other hon.

Members wish to speak and so I shall be brief, but perhaps I had better declare an interest in case I have not done so already.

Through out my life I have been interested in rubber in Malaya and I wish to say some thing about the overseas trading com panies and their prospects.
The rubber indus,try in Malaya was started substan tially before the First World War.

About 200 companies were registered in London to produce rubber in Malaya and they had a paid-up capital of about £70 million in 1920.

Curiously enough, four-fifths of the shares were held by small investors who had probably not more than £200 invested.

That contribution in helping to develop Malaya has created one of the finest colonial ventures which this country or the world has ever seen.
The Gov ernment built roads and amenities and left 10 MAY 1965 Second Reading 154 Finance Bill- 153 it to private enterprise to develop, first of all, rubber and, subsequently, tin, with the result that in recent years Malaya has had the highest standard of living of any country in South-East Asia.

The rubber states, which developed between the two wars, had a welfare state, at that time quite unknown in this country.
Each of the larger estates had schools, hospitals, creches, maternity benefits and so forth.

They, in their small way, were far ahead of this country.

The estimated annual profits corning back to this country-there bas been no new capital put into Malaya at all in the rubber industry in the last 30 years-are about £15 million.

The estimated value of exports from this country to Malaya is thought to be between £10 million and £15 million.
It is a difficult figure to assess, but that has been the estimated figure.

It is because those companies are British controlled and have British engineers, British technicians and British advice that a great many exports go from England to Malaya which would other wise go to the Continent or to America.

So that influence has been very valuable indeed.

Before the O.T.C.

legislaJtion of 1957, the tax position penalised British share holders in this country.
For that reason we were all very grateful for the 1957 tax help.

By the abolition of this O.T.C.

concession, the values of these shares have already fallen to about two-thirds of what they were the day before the Budget.

T,hait will mean faat, because British shareholders are so much worse off than local shareholders or foreign shareholders who might buy the estates and register the companies in M alaya, we are likely, in the near future, to get take-over bids at ridiculously low prices.
I appreciate that the Government may think that we are investing too much over seas, with which I do not agree.

I think that we have a responsibility and we have helped to develop many of these emergent countries to our mutuai benefit.

The faot that, by legislation, we shall have ito selil these estates at ,two-thirds of the price at which they stood just before the Budget seems to me to be quite ridiculous.
We must also remember that, immediately after the war, the rubber in dustry made a great contribution in secur ing all-important American dollars.

In the six years between 1946 and 1951, rubber alone produced 1,500 million American dollars, more than all the British exports to the United States in those years.

That was useful at that time and it may have its uses again.

Perhaps I may give a more personal illu5tration of how these things work.
I am associated with a group of companies whioh, in 1920, had a capital of just over £2 million.

Out of thalt capital, the estates have been planted and replanted and modernised, and the output per acre is probably three times the output of the original seedling rubber planted 50 years ago.

I am glad to say that in the last 16 years the average dividend has been just over 25 per cent.

The company has not only modernised itself but has con tributed substantially to British dividends.
Since the Budget the value of the shares has fallen to two-thirds of the previous value, and I shall be surprised if there are not take-over bids coming forward very shortly.

In addition, insurance shipping and banking have all been British.

As the rubber industry was largely in British hands in the early days, the wol'ld market in rubber in Mincing Lane was estab lished and it has contributed a great deal to the Mincing Lane wealth of London, which over the years bas been consider able.
Is it suggested that that is a bad thing and that the Government wish to It would be a very serious destroy it?

trung if rthey did so.

It is not a matter of sending out new capital but a matter of not penalising an existing profitable investment.

We know the present problems of Malaysia, and we are spending vast amounts of money to help her in her problems with Indonesia.

If the Govern ment abolish O.T.C.

it will undoubtedly have political repercussions in Malaysia.
It may well be that they have already made representations, because I know that they feel keenly on the subject.

This is merely one instance of an industry long-established and profitable to this country over the years.

There are other industries concerned, such as tin and other mining industries in other parts of the world, with which I am not familiar in detail.

I urge the Government to be most careful before they penalise these overseas companies in this way.
155 Finance Bill- 10 MAY 1965 Second Reading 156 [SIR J.

BARLOW.]

It has been that suggested the Government are to continue with their overseas loans.

That is not the same thing.

The results of these loans are not nearly as beneficial or as useful to this country as the natural development which has taken place over the years.

Only the other day the Prime Minister bragged to the New York economists, quite rightly, of our immense overseas investments.
He said that we were rich and need not devalue because we had this enormous backing-which was quite true.

If that is the case, why does he want to destroy it so soon afterwards?

We have tremendous good will and enormous riches abroad which influence a vast amount of exports, although no one can say exactly how many.

For goodness' sake, do not fritter this away for political motives.

9.14 p.m. Mr. Robert Sheldon (Ashton-under Lyne): I am sure that the hon.

Member for Middleton and Prestwich (Sir J.


Bar low) will forgive me if I do not follow him too closely in what he said .

A great deal of it was of a specialist nature.

from I wish to make two points, and they the both deal with omissions F inance Bill.

Because one draws atten tion to omissions, that is not to say that one disagrees with the Bill.
There are 90 Clauses and 19 Schedules in the Bill, and the fact that I draw attention to two omissions does not mean, I hope, that my support for the general purposes of the Bill is questioned.

to keep the economy The first of the two omissions to which I draw attention concerns the responsi bility and the great burden on the Chan in obtaining cellor of the Exchequer It is bis main steady economic growth.
burden fully engaged and, at the same t ime, to ensure that the pressure on resources does not cause excess,ive inflation.

This is one of his great difficulties.

It is a feat which is made more difficult because of the paucity of controls he has available.

The con trols which he can use are basically four in number-the Budget, the regulator, the Bank Rate and special deposits.
The difficulty with all four is that they are not sufficiently discriminating in order to keep expansion running at a steady level.

The desirable characteristics for controlling In past years the economy are that such controls should have immediate effect and, at the same time, be capable of fine adjustment.

information on the economy has frequently come too late and, because information about what was happening in the country has come too late, the reaction has consequently been too violent.
What we have had, there fore, is a break and an accelerator operating once a year.

And because of the infrequent use of such powerful con trols, the economy has been subject to jars and jolts and the consequent ineffi cient use of our resources.

What we want it not stop-go but a frequent, gentle use of the accelerator.

What we really need is a broad, continuous control of the day-to-day movements within the economy.
The difficulty about using the Finance Bill to control the economy is that the changes do not work through to the economy quickJy enough.

Many of the measures taken in the Bill will, of neces sity, involve very complex processes and it is extremely difficult to estimate the final effect.

Indeed, so much taxation has its effect months and years after the Finance Bill bas gone through.

Its use for controlliing the economy is, therefore, somewhat limited.
There is a further defect in the Finance Bill for such close control, which is that, in times of economic change, action by the Chancellor may be suspended until the Budget and the situation may get so far out of band that a certain amount of over-correction will be necessary.

We know from too much past experience how hard it is to slow down a boom and how difficult it also is to start a recovery.
Consequently, in times of inflation too much deflation will be found to be neces sary and, six or nine months afterwards, we will find ourselves having to cure the deflation itself.

Real control must be introduced to suit the situation and not to suit the calendar.

Such controls must be cap able of immediate effect.

The regulator was one such attempt to control the day-to-day workings of the economy.
It had the great advantage that it was capable of immediate effect and I con sider that it was admirable that some such been attempted.

However, the difficulty was solution should have 10 MAY 1965 Second Reading 158 Finance Bill- 157 the unfairness in selecting the industries concerned-selected not because they were the right industries to control but because they were easily controlled.
Consequently, the investment and sales of those industries were distorted and we had a limited stop-go ; limited only because the Revenue-coUecting system made it easier to collect from certain industries than from others.

The main weapons we have today over our day-to-day controls-the Bank Rate and special deposits-have the dis advantages of all monetary controls ; they also are in9iscriminate.
Although appeals can be made at various times to spare certain industries, this works only- to a limited extent and for a limited time.

What we really need to accept is that a Finance Bill cannot determine the entire pattern of the next 12 months in controlling the economy.

What it can do is to set out the broad picture, and within that broad picture regulation by means of some form of continuous control is necessary so that economic growth can continue without excessive inflation.
The kind of continuous control I wish to see is one that will permit fine and variable adjustments as frequently as the situation demands.

These adjustments to the economy need to be immediately effective, must be capable of small changes, and must permit of frequent use.

Some means of broad continuous control might well be provided by hav ing a National Insurance contribution variable both in amount and in regions of the country.
Another method might be a payroll tax, and a third method, and one of which I am particularly fond, is the substitution of investment allow ances by investment grants.

Whatever methods are .

chosen, such broad con tinuous control can provide corrections to the economy before a situation gets out of hand- in fact, almost as soon as the change itself is observed.
In order to observe such changes, such continuous control will require some improvements in the statistical service, because with this type of control the statistics themselves can be out of date almost before they are available, and knowledge of the present situat ion can be obtained only by means of certain sample statistics.

I do not wish to pursue this particular matter of sample statistics, although I think that they will be neces sary.
I have tried to show how necessary for continuous control they are ; and to show thait this form of continuous contwl can maintain a high rate of steady economic growth.

I accept quite fully The other omission from the Finance Bill is the insufficiency of incentives for investment.

that managements have frequently not taken oorreot decisions for investments.

At the same time, I should like to add in parenthesis that anyone clever enough to programme their investments on the basis of the N.E .D.C.
Report would have been confounded by the vast changes that are being introduced.

Nevertheless.

whichever way we look at it, £320 million of investment allowances are spelllt, and the benefit is obviously uncertain.

The Report on investment in machine tools has been only one recent event which has made many people examine afresh the advantages existing in the present form of incentives for investment.
in invest In studying the reasons for giving in vestment incentives at all, we should consider four main -:riteria.

The first 1s that the investment must naturally be of the right kind.

Incentives to investment must be beneficial to the whole com munity.

For example, it is more desirable to technologically advanced machinery and equipment than in con ventional replacements.
Beca\ll,,e of this, there should be greater incentives to in vestment in such advanced machinery and equipmen,t, with benefit the industry and tlle machine manufacturers, and also to the nation, whioh will be acquiring new ideas, new skills and new It is for this reason that in products.

vestmoot incentives in machinery and equipment are really the mos>t important kind of incentives.
to If we wish to get full value for the investment incentives it will be necessary to rhe specify much more closely categories for which investment incentives are given.

Mr. Julian Ridsdale (Harwich): Will the hon.

Gentleman say what incentive to the individual to invest is given in this Finance Bill?

Mr. Sheldon : The hon.

Member has got the point quite wrong.

He is confus ing investing on the Stock Exchange and investing in actual machinery and plant 10 MAY 1965 159 Finance Bill- [MR.

SHELDON.]
SHELDON.]

which produce goods.

This is a confu sion which is prevalent among hon.

Mem bers opposiite, the confusion between genuine inveSrtment which benefits the whole community and financial ex changes which sometimes do and some times do not benefit the community.

The second reason for giving incentives to investments depends very largely on the financial return obtained by such in vestments.
WiJthout such incentives the return on the investment would be com mensurate with the risk and the capital Investment allowances distort involved.

the investment decision.

To allow invest ment on this basis would distort the investment decision and allow investment which would not be made on the basis of risk and capiital employed.

Although such investment might be thought a waste of national resources, there are occasions when it is thought advisable to give such an incentive.
Over a period as a country we have probably been investing rather less than we should have been doing, especially in certain industries.

It is possible that a higher degree of investment generally would have been preferable.

Because of this there is a case for investment assist ance to be given to all kinds of invest ments, but this naturally would form a minor part of the total assistance given to inve~tment.
The third reason for investment incen tives involves the capacity that capital goods manufacturers have available for utilisation.

An important part of invest ment incentives is to make use fully of the capacity of the plant and equipment.

According to the categories and the un used capacity of the plant manufacturer, purposeful assistance can be given to in vestment.
There is obviously a fomth category which would cover the rather special cases where Government assist ance is required and special projects are involved.

Mr. Geoffrey Wilson (Truro): I am following what the hon.

Member is say I gather that he does not want ing.

to assist individual investors, but how does he suppose that rthey get money for invesitmeint and choose to invest?

Does he suggest that one should stick a pin in the Financial Times and decide the 111atter in that way?
Second Reading 160 Mr. Sheldon : I am trying ito point out the difference between mvestmeints which hon.

Members opposite are considering and those which I am considering.

I have pointed ou:t that there is a relation ship, bwt it is an indireot relationship.

When a person buys a share in X, Y Z Company Limited he is nort investing in a machine but in a company with a quoted value.
What tha:t oompany does with that machine has noth~ng whatever to do with •the person who buys that share, except in a very indirect way.

This is too obvious even to be stated, because rtbat company can do all sor-ts of things other than invest that money.

· The connection is indirect and I am concerned w~th direct connections.

There are large advantages in replacing the present system of investment allow a:nces by investment grants.
Such grants, if paid at certain intervals, need be no more costly but muoh more easily under stood by those who make investment decisions than is the present system.

A further advantage is that an investment grant would permit of more frequent changes in the level of such grants and consequently the encouragement to invest as demand varies and other factors vary also.

There is at present a delay between investing and receiving the investment allowance.
T,he reaction to changes in the investment allowances is fairly slow, but the reaotion to changes in investment grants can be much more direct and immediate.

There is the further advan tage of investment grants tbait changes in the levels of grants can lead directly to changes in rthe level of investments, and the this can be closely allied with capacity of machinery and plant manu facture.

Sir D. Glover : I am grateful to the hon.


Gentleman for giving way, because I go a long way with -the argument which he is deploying, until it comes to the prac tical application of bis suggestion.

Wbo is to decide, apart from -the individual company, whether to invest in A, B, C, D or X, Y, Z?

This is the fundamental problem.

Mr. Sheldon: If I were drawing up a blueprint for precise forms of investment, I should be a fool.

There is no case whatever for precise investment.


All that I am saying is that categorisation can be 161 Finance Bill- 10 MAY 1965 Second Reading 162 more refined than it is at present.

As has been said, investment grants for one armed bandits should be rather different from investment grants for machine toO'ls.
My point is that there can be very much greater attempts at degrees of categorisa tion, which will show that certain kinds of investment are preferable to others, that these can be controlled in the very broad sense, and that such a form of control can be of immense value in controlling the country's economy, again in a broad sense, and consequently in maintaining a high uniform in economic increase growth.
Finally, whatever industry may have understood about investment allowances and how very wrong it might have been in not understanding the sophisticated calculations they made necessary, mana gers generally speaking understand today that allowances have been effectively re duced by the introduction of Corporation Tax.

Unfortunately, the propaganda has worked only too late.
Had the attempt been made to make them understand how the Government were trying to assist in dustry in the many years before, perhaps some of the wrongs that have happened in industry might not have happened.

Because of this, I think that serious thought will have to be given to invest ment incentives before the end of the year.

I believe that categorisation of certain investment grants could be the most profitable field for further investi gation.
Such purposeful encouragement to benefit the whole of the community will be desirable and eventually will be necessary.

9.32 p.m. Mr. Peter Hordem (Horsham): The hon.

Member for Ashton-under-Lyne (Mr. Sheldon) has dealt most eloquently with the faults of the monetary mechan ism and the need to encourage invest ment.

Whether that investment was through the Stock Exchange or through industry, I hope that he will forgive me if I do not follow his remarks too closely.
Clause 1 deals with the increase of duties on spirits, beer and tobacco.

It is worth recalling what the Chancellor of the Exchequer said when speaking on the Budget introduced by my right hon.

Friend the Member for Barnet (Mr. Maudling) on 15th April of last year.

He said: " The tax on beer and cigarettes is basically irrelevant to the balance of payments prob lem .

.

.

.
.

.

.

Yesterday's increases in the taxation on tobacco and alcohol shift the burden against the wage earner, against the man at the bot tom end of the scale.

.

.

.

They depart, once again, from the basic principle behind which, we on this side of the Committee are firmly united, that taxation should be based on the to pay.

"-[OFFICIAL REPORT, 15th ability April, 1964; Vol.

693, cc.

431-35.]
693, cc.

431-35.]

The Chancellor said on 6th April: "As I am anxious to avoid taxing neces sities, I have decided that tobacco and alco holic drinks should make a further contribu tion.

"-[OFFICIAL REPORT, 6th April, 1965 ; Vol.

709, c.

294.]

What a contribution-6d.

on a packet of cigarettes, 4s.

on a bottle of whisky, ld.

on a pint of beer.


Yet all these are, or were, irrelevant, apparently, to the balance of payments problem brought about by the developments arising from confidence factors so aptly described by the Prime Minister in his speech on 23rd November last.

The responsibility for this part of the Bill rests fairly and squarely on the shoulders of the Government.
It is perti nent to ask the Chancellor why he did not announce the extent of our reserves -that is to say, the value of our invest ments-amounting to £1_1,000 million last November.

He said, in the Budget debate, that this news should make very good hearing on foreign bourses.

It would have made much better hearing last November.

Every step that the Govern ment took last November and have taken since has been calculated to weaken con fidence in sterling.
The imposition of the surcharge, the subsequent E.F.T.A.

meet ing, the leaks to the Press-all these were signs of a Government either determined to play politics first or else ignorant of the way to deal with the problems of the country's economy.

and everybody The situation was exemplified by blaming everything If it was not the except themselves.

fault of the gnomes of Zurich, it was the fault of the Governor of the Bank of E ngland, and if it was not his fault it is now that of the Chairman of B.P.
The impression bas now got around that not only does the Chancellor not know his business but that his advisers are equally ignorant.

So unrealistic are the arguments used to defend the measures in this Bill, so careless of the real inter ests of our economy, that it seems to the 10 MAY 1965 Second Reading 164 163 Finance Bill- [MR.

HORDERN.]

outside observer as if the Treasury is an exotic hothouse full of kinky economists jabbering in different languages and with unintelligible signs.
The Treasury ~eems to have become the Passionflower Hotel of the Civil Service in which a man with business experience is a total stranger.

Never can so many expert representa tions have been made and never so many totally ignored.

[HON.

MEMBERS : " The hon.

Member is reading."]

I am making use of my copious notes.


Fortunately for the country, the Bank of England is still able to command the confidence of bankers overseas, and I think the Chancellor can thank his lucky stars that the Governor of the Bank of England has still sufficient independence and the character to express it.

If he had not, it is doubtful whether we should have been able to negotiate the 3,000 million dollar credit for which he was responsible.
Instead of criticising, the Chancellor should recognise the value of the Governor's advice and the debt the country owes him for preserving the stability of sterling.

The Governor was drawing attention to the increasing cost of expenditure in the public sector.

It is designed to increase this year, by a fur ther 8·9 per cent.

It is surely not surpris ing that European holders of sterling who are confining themselves to an in crease in expenditure of 5 per cent.
com mensurate with the increase in their pro ductivity should object to be expected to finance our social expenditure as well when they could have been doing more of their own.

In this context the kind of argument used by the Minister of Defence in the debate on the TSR2 is more damaging to confidence in sterling than anything else.

He said that the saving of £600 million represents the cost of 200,000 houses.
But to equate what was the spearhead of technology in aircraft in dustry with the construction of houses is the most u~ter economic nonsense.

If there is to be any saving at all, which has yet to be proved, let us at least be clear that that money should properly be devoted to technological advance in industry, from which it was taken.

and not to the construction of houses, how ever socially desirable that may be.

I turn to Part IV of the Bill dealing with Corporation Tax.
There is the argu ment that the Chancellor has adopted that investment at home is much to be preferred because of the employment it gives and the revenue it attracts.

We would have like this argument to have been produced in the debate on the TSR2.

It is a strong argument, but there are very strong arguments, and indeed stronger arguments on the other side.

One cannot suppose that companies in vest abroad for any other reason than to earn as high a return on their capital as they can.
Here I should like to mention in par ticular the case of British Petroleum be cause it is an example which the House recognises as a very good one.

In reply to a Question from the right hon.

Mem ber for Easington (Mr. Shinwell) last week, the Prime Minister said something to the effect that the Chairman of B.P.

had a dual responsibility, to the country and to the shareholders.
I do not be lieve that there has ever been any attempt by the Government to interfere with the commercial freedom of the board of B.P.

until now, and as a result the Govern ment's investment in B.P.

has proved to be one of their most successful.

But the publication of this Bill has changed the whole situation.

The argu ments which have been adduced in favour of the Corporation Tax appear to be two.
The first is that it is hoped that the level of investment will rise, and the second is that such is the magnitude of our balance of payments problem that it is essential to curb the outflow of funds for investment abroad, and that, in any case, we treated investment abroad more favourably than some other countries from the tax angle.

I wish to deal with the first point later.


On the second point, it would have been defensible to curb investment abroad to help the balance of payments problem as a purely temporary measure.

Even then, it would have been more fitting, in my view, to cut the foreign travel allowance.

But the Corporation Tax is not a purely temporary measure.

It is designed to be a modern tax suitable for the Britain of the 1960s and 1970s.
It could hardly be less suitable, for in order to remain competi tive with industrialised countries our major companies are already the advanced 165 Finance Bill- 10 MAY 1965 Second Reading 166 finding out, as bas been pointed out several times today, that the United King dom, as a market, is too small and that to achieve economies of scale it is necessary to expand production both at home and abroad.

The Chairman of LC.I.

bas recently been making just this point.


But in the case of B.P., its assets and raw materials lie abroad, and the effect of this proposal, if carried through, would be very serious indeed.

To keep its present position, B.P.

should at least be allowed to compete with its international rivals on level terms.

The weighted average, I am informed, of taxes appears likely to be over 60 per cent.

of taxable profit for B.P., whereas it1- American competitors pay well under 50 per cent.
I hope that the Chancellor of the Exchequer will answer this point later.

This state of affairs will clearly affect B.P.

's capital expenditure programme, its ability to attract further capital and its ability to gain further oil concessions in the !-,fiddle East.

By their proposal the Government are jeopardising a very con siderable investment in which the nation has a 51 per cent.

interest.

B.P.
interest.

B.P.

's assets overseas amount to about £450 million, and this figure does not include the real value of "oil in the ground ".

On revenue account, B.P.

earns approximately £100 million per annum from overseas trading as a contribution to the United Kingdom's balance of payments.

It is no wonder that the chairman of the company voiced his comments in such forthright terms.

It is all very well for the Pri[)]e Minister to say that the chairman has an obligation to the Government.
The Government have also an obligation to the nation, for which they are holding the stock as a trustee-and a very temporary trustee at that.

In considering the Corporation Tax, tihere are other points which I should like rto touah on shortly.

In many cases, Britisib companies have deliberately in vested abroad in order to burrow under It is particularly neatih ~he tariff wal•ls.
unfortunate, when trade wit,h the Com mon Market is becoming increasingly difficu1it, that this tax should be intro duced art this moment.

But tihe fundamental objection to this aHitude to foreign investment is that it is contrary 10 the bes,t long-term interests of this country.

The Chancellor of the Exohequer complained that there was in our tax system a bias towards investing overseas.

I hope that t•here is.


But we have still a long way ~o go to reach any thing Hke our pre-war position whrn 70 per cent.

of our trade gap was paid for by net invisibles compared wibh 32 per cent.

•today.
•today.

But, in total, as the Chan cellor observed, £11,000 million repre sents a formidable amount, and i-t is all the more unfortunaite that be is only just now mentioning tJhis sum in order to impress on foreign holders of sterling the extent of assets he is proposing to run down by means of the Corporation Tax.

This is an easy tJhing to do.

It would be much more difficuH to cut the travel allowance from £250 to £100 and yet the yield would be tlhe same as the Corpora tion Tax is designed to bring in.
That tax, however, would have been levied on expenditure and investment.

That is what the Chancellor should have done.

Mr. Geoffrey Hirst (Shipley) : I follow my hon.

Friend's argument, but he must bear in mind that during the last few years we have received enormous advan It tages from tmvel to this country.

must be reciprocal.

Mr. Hordem : I agree.


At the ~ame time, if this is a crisis the Government have chosen to meet it by other means, including ~he introduction of the sur oharge, whiob bas had a much more serious effeot.

As it is, the effect of the Cofporation Tax will be to some extent to mortgage our future and to dis courage foreign investment in this coun international try and 1:Jhe growth of investment generally.

I want to say a word about the effect of Corporation Tax on domestic invest ment.
The Chancellor is aware o;f the work of Professors Dow and Paish in this fieid demonstrating ·the relationship between the level of employment on in comes and productive capacity.

I do not wrsh to dwell upon the present high pres sure on resources, but I submit that this most str~ngen1 of credit squeezes has had little effect so far upon total demand, despite the faot tiha:t more than £600 million will be taken out of the economy.
That is more tlhan twice what any Con servative Chancellor has ever taken out of it.

10 MAY 1965 Second Reading 172 That is all that he said on this important subject.

171 Finance Bill- [MR.

BARNETT.]

issues.


This was answered very properly and has cePtainly not been answered today on the other side when it was pointed ourt that after 1958 the Profits Tax level changed considerably so as to encourage dividend distribution ; in fact in the five years after 1958 dividends doubled, but the amount of new issues from outside capital grew from only 8 per cent.

to 9 per cent.

Still the Opposition continue to argue this must encourage distribution.
that The Opposition have not proved their case that distribution helps in this sense, but equally I believe that the Govern ment's case is a somewhat negative one.

It shows conclusively to my satisfaction that the distributionists' case has not been proved, but there is not enough evidence to prove that the retentionists are entirely perfect in every sense.
One can argue from the tax collecting view that it would be better to encourage distribution, but I hope that we look rather from a purely national point of view which will help to achieve the rate of growth we all want to see if we are to find the the resources we need for hospitals, hou.s,es, schools and the rest.

lt is this aspect of the Corporation Tax, whether it encourages growth or not, I would like to examine.
Comments inside and outside of this House, particularly from outside, by those who should know better have shown that they have been so blinded by the pain of increased taxa tion as not to allow themselves to examine the case dispassionately.

The arguments were really exposed in the opening sen tence of a recent letter in the Financial Times: real "The the proposed trouble with Corporation Tax is not its detailed provisions but the indicated rate."
I think that this really does go some way to understanding the arguments of hon.

and right hon.

Gentlemen opposite.

Another example of the criticism that we have heard is contained in a speech by the former President of my Association.

On 27th April, in a speech which was described in the Financial Times as a sweeping attack on the Budget, when referring to the intention to encourage retention, he said: " This, too.

seems hardly calculated to pro duce a dynamic economy."
L It being Ten o'clock, the debate stood adjourned.

BUSINESS OF THE HOUSE Ordered, That the Proceedings on the Museum of London Bill [Lords] a nd of the Committee of Ways and Means may be entered upon and proceeded with at this day's Sitting at any hour, though opposed.-[Mr.

Callaghan.]

FINANCE (No.

2) BILL Question again proposed, That the Bil!

be now read a Second time.


Mr. Barnett : As I was saying, in referring to the intention to encourage retention, the former President of my Association put forward no argument, but simply made a statement without giving any examples to prove it.

He and others may be right, but, to put it mildly, the case was presented both by him and by right hon.

and hon.

Gentlemen opposite in a most superficial way.


I might add that on that occasion the President of my association was not speaking for at least one of his members.

It is important to understand that the effect of the Corporation Tax is not the same on all companies, and this is what I meant when I talked about the blanket criticism that is made, and which is so totally wrong and totally indiscriminatory.

Let us consider first the small companies.


The Leader of the Liberal Party said this afternoon that the Corporation Tax would affect the largest possible number of com panies.

This is untrue.

The last avail able information, that for the year ending 31st March, 1962, shows that nearly 200,000 companies did not pay Profits Tax.

That means that those companies had profits of less than £2,000, and clearly the Corporation Tax as such will have none or very little effect on that type of company.
The only effect it will have is that tax will be chargeable at the rate of 8s.

instead of the present Income Tax rate of 8s.

3d., or the previous one of 7s.

9d.

Now I come to the important close companies as defined in the Bill, and as formerly defined in Section 245 of the 173 Finance Bill- 10 MAY 1965 Second Reading 174 Income Tax Act, 1952.
Most of the 200,000 companies to which I have re ferred would be classed as close com panies, but I should like to refer to close companies with profits large enough to pay Profits Tax.

Again, in the year to 31st March, 1962, there were about 73,800 companies which paid Profits Tax.

Far and away the largest number of those companies were not public quoted com panies, and would almost certainly have been close companies as defined by the Bill.
Under Clause 72(5), if a company shows that it is ploughing back, or if distribution could prejudice requirements, as the clause puts it, it will pay 40 per cent.

Corporation Tax instead of the 56¼ per cent.

Income Tax and Profits 'fax which it was paying before, or would have paid under the old arrangement, a reduction of more than 25 per cent.

in the tax liability of the company.


The greatest number of companies, al though not the greatest in profits-I shall come to profits in a moment-will thus have a tremendous incentive, by way of reduction of tax, to plough back.

This argument has never been stated by right hon.

and hon.

Gentlemen opposite.

They do themselves an injustice by not under taking some examination of this type of company.

I propose to consider now the com panies making the bulk of profits.
These are the smallest in number, but they make the bulk of the profits.

My hon.

Friend the Chief Secretary proved that the major part of capital for this type of company comes from retaining profits.

These com panies would be under intense pressure to maintain and increase dividends.

In the first year after the Corporation Tax comes into force they will be likely to maintain dividends even without sufficient cover.

This will reduce retentions, and will not achieve the objective of the Government.
Later, this may be rectified.

In later years, with higher profits, they may not increase dividends.

But there is no clear evidence on the matter.

Hon.

Members opposite are screaming before they are hurt; but equally the Government should not sit back com placently and delude themselves into be lieving that their objective has been achieved.

They should keep an open mind and if changes need to be made they should not be afraid to make them.
But in respect of the majority of com panies-the close companies-there is a tremendous encouragement to growth.

T hese companies are often new, small companies, with young dynamic owner ship and management.

Hon.

Members opposite have said that this type of company derives no encouragement from the Corporation Tax.

I can only believe that they have been listening to the right hon.

Member for Bexley (Mr. Heath), who has shown he really does not under stand the workings of the Corporation Tax [HON.
MEMBERS : " Really! "]

Hon.

Members opposite should have listened to the right hon.

Gentleman's speech.

However much growth may be desired, it can only be expressed in real terms either in increased mechanisation or an increase in or the full use of a company's labour force- or both.

recently announced In the short term this is the tough problem.

The Machine Tool Traders' that Association there was a nine-months gap between order and delivery.
With the best will in the world, expansion, through in creased mechanisation, is therefore diffi cult in the short term-and it is in res pect of the short term that we face our greatest battle.

In war, when we were faced with a powerful enemy, we worked long hours without question and gained ,a great victory.
We have a war on our hands now-a tough, economic war--and I would tell trade union leaders that their members will respond to the great chal lenge if it is put to them squarely that the time for greater leisure will come, but it is not now.

First we have to defeat our economic enemy.

10.7 p.m. Mr. John Harvey (Walthamstow, East): I wish the right hon.
Gentleman the Chancellor of the Exchequer no ill at all in expressing the hope that he will undertake to listen to the points which have been put to him by his own back benchers today.

I have no doubt that it will be reported to him that from his own benches there has been only one speech in unstinted praise of his Finance Bill, and that was the speech of the hon.

Member (Mr. Hamling).

for Woolwich.

West · 175 Finance Bill- 10 MAY 1965 Second Reading 176 [MR.

HARVEY.]
HARVEY.]

From every other speaker opposite, let alone speakers from this side of the House, there has been a variety of criti cisms and suggestions.

If the Chan cellor prefers to close his ears to those that have emanated from this side of the House, we could be reasonably satis field-certainly we should be a great deal happier about the Bill-if he were at least to read what his h on.

Friends the Member for Manchester, Cheetham (Mr. Harold Lever) and the hon.
Mem ber for Meriden (Mr. Rowland) in par ticular had.

to say.

In commending the speech of the hon.

Member for Cheetham I will not follow him in the glowing tributes that he paid I am thinking of to the Chancellor.

the meat in the middle of the sandwich -not the beginning, when he praised the Chancellor, or the end, when he castigated the Opposition.

It is the middle part of his speech, which con tained some valuable suggestions, I hope will commend itself to the Chancellor.
In a long debate it is natural that the House should concern itself mainly with I am sure that the Corporation Tax.

hon.

Members opposite will not object if I quote from the Economist.

After all, it did recommend the British elec torate to vote for the Labour Party last October.
Last week the Economist had this to say : " The awful truth is that the most compli• cated tax change in recent British fiscal history is being introduced under an air of half• expectation, even among some of its god• fathers, that it may conceivably prove to be the most almighty clanger."
In the same edition, having asked the Chancellor to reconsider the position even at this late stage, the Economist said: "Immediately after the budget this news paper said that Mr. Callaghan had imposed a higher prospective burden of business taxation for 1966-67 than was likely to be wise, and urged tax itself was too high.

Do we now contradict ourselves by saying that corporation tax should actually go up to 45 per cent.

if necessary, if that is the price of bringing the rate of withholding tax down?
Very well, then, we must say with Walt Whitman, we contradict ourselves: in the light of the evidence of tax oddities that has poured in on us since the budget"- it must have poured in on the Treasury too- " no reasonably pragmatic analyst could do the otherwise.

It would be greatly the corporation that in national interest if Mr. Callaghan, who must have received the same weight of evidence and more, were now to contradict himself too."
It may be too much to hope for such repentance, but if the right hon.

Gentle man would listen to some of the con structive criticism from hon.

Members on his own side, he could yet do a great dealt to improve this Finance Bill and much mo.re to improve the economic prospects facing the Government in the vital 12 months ahead.
Again to quote the Economist just after the Budget : "There was no shadow of an extra incen tive for exports in this budget ; that is one of the main criticisms to be levelled against it: And there was much less than any shadow of encouragement to keep up business invest ment in the crucial year of 1966.

On the contrary, business taxation is then to be most unseasonably increased."
It is this concern for exports and for our overseas trade which bas dominated the debate and on that I should like to spend a few moments myself.

It is, I think, very important to realise that over seas investment is complementary to aid, and a number of hon.

Members have dwelt on the importance of the aid which we have to go on finding for the less fortunate countries of the world.
It is complementary to aid and if we have less overseas investments there will be more calls on the central Government for aid.

But investment in long-term projects is more valuable than sums given in aid by central Government, because invest ment of that type tends to multiply in value to a much greater extent than the original cost.

A great deal of the invest ment is, of course, ploughed back in the country, to serve further to benefit the economy.
It must be borne in mind-this point bas been mentioned by hon.

Members that less on both sides of the House- investment does not auto overseas matically mean that we shall get more investment at home.

It does not auto matically follow that we shall get more people investing at home because it bas been made more difficult for them to invest overseas.
It bas been pointed out that one has increasingly to invest over seas today to keep some of one's own industries going in their private markets, to get under tariff barriers in one case, to meet with national considerations and 177 Finance Bill- 10 MAY 1965 Second Reading 178 interests in others, bearing in mind the developing countries and the problems with which they are faced.
If, Linder duress of the Corporation Tax, our com panies have to bow out of some of these markets, they will bow out to com petitors only too ready to move in where we ha ve been forced out.

that lt is relevant to consider, when we are considering the need, to the extent tha t it exists, to cut down on overseas invest ment, that the bulk of overseas invest• ment-the bulk of overseas expenditure -- tends to be still that of the central Gov ernment.

The figures issued in Cmnd.


Paper 2629 show the combined official deficit of £551 million was almost as large as the visible deficit of £553 million and more than twice as large as the net private investment of £251 million.

Put another way, the Govern ment accounted for nearly three-quarters of the total deficit of £745 million in its overseas expenditure of this type.
The Government, therefore, have to consider their own position as much as they are seeking in this way to force private in vestors to reconsider theirs.

is We must also think about the effect which all this is likely to have on our invisible exports, on shipping, insurance and banking, all of which are adversely affected if the flow of trade derived from investment overseas itself adversely affected.
Then there is the fact that so much investment has the effect of stimu lating the export of capital goods and, in the creation of further sources of raw material supplies.

generating the food im ports which we need.

T here is, there fore, a strategic effect which has to be considered when one is cutting back on foreign investment.
Not least is the fact that the party opposite, which has talked so much over the last year or two of the importance is surely the of Commonwealth Jinks, party which has in decency today to think ngain about any steps which are likely Lo be damaging to the interests of the Commonwealth.

It must be rather stag gering for some hon.

Gentlemen opposite to reflect that the effect of the Budget will be to make i1t more attractive to invest in South Africa, than in India.
When one is thinking of social purpose, let the Government ask themselves whether this is really part of the intention of their policies.

Vol.

7 12 I should like to turn for a moment to another aspect of what the Financial Secretary had to say, when he seemed to be suggesting tha,t the oil industry could and should be more heavily taxed than it is now.

He argued that it tends to pay very little tax, if any, in the United King I have tried -to inform myself a dom.
little more about B.P., our great national company in which I have no sort of per It is worth sonal interest to declare.

thinking about that B.P.

earns overseas about £100 million a year.

From its resources overseas and its investments, B.P.

imports oil which would cost us half as much again if we had to import it from foreign o il companies.

B.P.

buys equipment at a rate of about £10 million a year in Britain.
For its overseas investment, it employs British contractors who, in tum, buy more equipment to service these investments.

It has spent £17 million in the last 10 years in Britain's shipbuilding yards-and some hon.

Members opposite should be interested in that.

It has spent £20 million prospecting the United Kingdom.

The vast bulk of its financial resources are held in this country.
for oil in It has in this country an elaborate machinery of research organisation which furthers technological understanding not only in the oil industry but also in allied industries.

This research work could be penalised by the Corporation Tax because there is no virtue left to a company such as B.P.

in carrying it on if financial criteria are the only criteria which the company is to use, for the simple reason that there is no way of offsetting this expenditure in terms of taxation.

B.P.
B.P.

has assets overseas worth £450 million.

This is the catalogue of what B.P.

is wonth to the United Kingdom economy.

It is not to be dismissed in the Financial Secretary's words this after· noon.

The United States oil companies enjoy a better taxation position than will our own companies und er the Corporation Tax.

Mr. CalJaghan: Oil companies?

Mr. Harvey : Yes.

Sir Kenneth Pickthom (Carlton) : On a point of order.
Would it not be possible to persuade the Chancellor of the Ex chequer either to talk less or to get up and talk audibly.

D _, 179 FinanceBill- 10 MAY 1965 SecondReading 180 Mr. Deputy-Speaker penalising existing investments, particu (Dr. Horace King): Order.

From t ime to time I have lartly those in vital resources such as asked hon.
Members on both Front oil, minerals and rubber, which mean so Benches to set an example to the House much to our economy and to the econ and, if they want to interrupt, to do so in a conventional manner.

omies of the producing countries.

Mr. Callaghan : Further to that point of order.

I do not mind very much whether I offended the hon.

Member for Carlton (Sir K. Pickthorn) whose good manners are well known, but if I offended the hon.

Member for Walthamstow, East (Mr. John Harvey) I apologise.
I thought thaJt ~t was a quick exchange at which he took no offence, and I certainly intended none.

Mr. Harvey : American oil companies enjoy better terms of double taxation relief and depletion allowances than our own companies will enjoy in future.

It has been estimated that our companies are likely to have to pay more than 60 per cent.

in tax out of their taxable profits compared with under 50 per cent.

in the case of American companies.


Furthermore, the American shareholder is in a better position vis-a-vis the Ameri can oil industry or any other industry because the personal rates of tax are appreciably lower in the United States than in this country.

We must warn the Chancellor that there are American oil companies-we have seen this before in recent years ready to move in only too quickly if British companies are unable to stay the pace.
Recently we had an argument in the House about the effect of a Govern ment economic decision on the British aircraft industry which, we said, was to the great benefit of the American air craft industry.

It would be a tragedy if a similar economic decision were to have a similar effect on a great British oil company to the benefit of the Ameri can oil industry.

The Chancellor is charged to remember that the Govern ment act as trustees to the British nation for their 51 per cent.

share in B.P.
share in B.P.

In making these points I urge the Chancellor to think again about the ill effects which this tax will have on exist ing investment unless he reconsiders the position.

It may be desirable, in present circum stances, to reconsider the position for new investments which will take place in the future.

There is no excuse for B.P.


will not find it easy to explain to the Middle Eastern host countries, it has only recently had with which major negotiations, as a result of which the company agreed to pay £10 million more in royalties, that having found that difficult to afford, it will now be able to find several more millions of pounds forced from it by the Govern ment.

This is likely to have the effect of bringing new demands from the host countries, to the detriment to this great industry.
I appeal to the Chancellor to think again on this issue.

Although there were other points which I had intended to make, time is running out and I will merely remind hon.

Members that Abraham Lincoln once said: "You cannot bring about prosperity by dis couraging thrift, You cannot strengthen the weak by weak ening the strong, Xou can not help the poor by destroying the rich, You cannot establish sound security on borrowed money .

.

.

. "
.

.

. "

I believe that the Chancellor knows that and that some of his colleagues on the Front Bench opposite understand it.

Unfortunately, not all hon.

Gentlemen opposite understand it.


In a report in the Economist on the Budget debate, referring to the point at which the Chancellor spoke of business expenses, it was stated : ·· Nobody who sat in the House of Commons on Tuesday could doubt that these proposals on business expenses were intended solely to please Labour back benchers at a critical political point in the speech ; and very horrid they looked as they yelled their exultation."

Now we have this formula.


No doubt it is all part of a deal in which the First Secretary is involved.

I say to the Chan cellor that if he must bring in this formula we will have to look at it care fully in Committee because, apart alto the question of overseas gether from buyers, which -is a somewhat narrow definition, let us think of all the delega tions which come to this country, in many instances invited here by Her Majesty's Government.
Has the Treasury spoken to the Central Office of Information about l I I - -~ --- • .

- - - -~, - -T-- - - - • - ----..- 1'81 Finance Bill- 10 MAY 1965 Second Reading 182 to British this?

What about the requests that are made industry to entertain visiting Parliamentary delegations and visiting parties of journalists, remember ing those people can be ambassadors of British trade when they go home?
that all things The Chancellor will have to think about altering some of these the interests of exports alone, if he cannot be big enough to realise that this was a silly thing to introduce and that be should withdraw it and leave it to the normal workings of the Inland Revenue.
in I suppose that it is too late to hope that the Chancellor will the advice given to him last week by the Economist, which stated: take " It would, therefore, be much better not to bulldoze this rushed job of a Corporation Tax through to the statute book this year.

It would be a sign of strength, not of weakness, for Mr. Callaghan to withdraw it even now ; and the Opposition will be quite right to vote against it in the House."
That very publication, which is of inter national repute, made the terrible mistake of advising the electors to vote for the right hon.

Gentleman's party last October.

Vol.

712 D2 - 183 Finance Bill- 10 MAY 1965 Second Reading 184 10.29 p.m. Mr. William Clark (Nottingham, Soubh): We are coming to ohe end of the Second Reading of a very complicated Finaince Bill- one of longest on record and certainly the most expensive I believe tihat it cosits vhe on record.

taxpayer 14s.
taxpayer 14s.

for 226 pages containing 90 Clauses and 19 Schedules.

the Mr. Robert Maxwell (Buckin~am): Very good value, too.

Mr. Clark: It depends who is printing It is very complicated and long and, it.

I suggest, sometimes incomprehensible.

Some unkind critics say thail: iit would be easier to unders.tand in Hungarian than it is in the 1,anguage in which it is printed.

We noit only have to look at this Finance Bill.


It is allied to t-he previous Finance Bill, and the Chancellor of the Exchequer has made it clear all the way through that one of his objects is to improve our balance of payments through improving our exports.

I know that therr are certain side effects to that, but I very much agree with my right hon.

Friend the Member for Bexley (Mr. Heaith).


who earl.ier today asked whether if we are trying to show the world bhat they should have confidence in this country, it would not have been much better to have boasted of our overseas investments last November rather than to wait until a week or so ago.

I know that hon.

Members opposite do not like to be continually reminded of that matter.
The Prime Minister is pleased to boast of our £11 ,000 million investments abroad, but I think it fair to point out that not one penny of that huge investment was ever built up by ,1ny policy of a Socialist Government in t-his country.

the The Chancellor E xchequer and his right hon.

Frienrls should take that to heart.

of In this Finance Bill we have again, as my hon.

Friend tihe Member for Horsham (Mr. Hordern) pointed out, the two whip ping boys of taxation- beer and tobacco.
I should like to quote a man of consider able experience in this connection who.

on 7th May, 1964, said, referring to this increase in taxation on beer and tobacco : "I should be wrong to say that this £100 million has no relevance to an incomes policy, because it puts up the cost of living by 1 per cent.

and will stimulate a whole series of wage claims.

But it has no other effect."


The same person went on to say: "As the Chancellor of the Exchequer has provided for £100 million exclu_sively from drink and tobacco, and a s this provision has no relevance whatsoever to all the major issues, it is not surprising that his Budget is being called an irrelevant one, and it is not surpris· ing, therefore, that the Finance Bill does very little [OFFICIAL the REPORT, 7th May, 1964 ; Vol.

694, c.

1477.]
694, c.

1477.]

I wonder what the Chief Secretary thinks now of what he said a year ago about these two whipping boys?

situation.

"- help lo Does he think it wrong for a Conserva tive Administration to use these two taxes witJh, of course, all the bad effeots that will flow from them but that if a Socialist Government uses them ~bey will not have the same effeot?

It will be interesting to know and pePhaps vhe Chancellor of tlhe Exohequer will tell us about these two taxes.
I ohin:k he will be fair enough to admit t1hat tJhe effect of his swingeing tax on beer and spirits, particularly on spirits, has been partially aHeviated by the operation of Vhe Resale Prices Act, a Measure last Administrat ion.

That, to a certain extent, has cushiioned the effect, particularly of the huge increase in -the whisky tax.
initroduced by rtJhe We have also to look at what might be termed •0he various minor points of tihis Finance Bill, but this Bill $hould be looked at with the previous one, in which the Government increased tihe petrol ta x, put 6d.

on Income Tax, gave us tibe surobarge and increased National Insur ance contributions.

Now we have the increase in vehicle duty.

H is raither extraordinary to list en to the First Secre tary saying on 7:bh April : "The taxes that we have imposed do not hit industrial costs.
"-[OFFICIAL REPORT, 7th April, 1965 ; Vol.

710, c.

521.]

He must be tJhe only man in the country who really believes t•hat, because all these rhings increase our industrial cosits.

As everyone save the First Secretary knows, one cannot increase taxation in this way withQIUt hitting indµ strial costs.

And not only wiU it hit industrial costs, but it should not be forgotten that it will also hit agricultural and horticultural costs.
This is something to whiob the Govern ment should pay particular aittention.

The Ohancellor of the Exohequer, of course, in bis Budget speech and in the Finance Bill, bas brought forward his entertainment expenses bogy.

Possibly JO MAY 1965 Second Reading 186 Finance Bill- 185 ohere may be some abuse on entertaining -the hon.

Membe,r for Mancihester, Oheerham (Mr. Harold Lever) made a very good poin,t on t,his question--bu1 ohe Revenue already has powers under Form P.l lB.
It is all right for the Financial Secre1ary to say this afternoon tha,t ohe Revenue cannot really find out ; all vhey need do is to make Form P .11 B a liDtle more stringent.

This tax on entertaining will hit the It will hit small man, not the tycoon.

the commercial traveller and the semi professional man.

It will affect the estate agent who employs five or six salesmen to sell houses.

The agent has to pay for the entertaining that ~hose salesmen incur.
If the expense is disallowed for tax purposes it will not penalise the per son enjoying a lunch but the owner of a business who pays at the highest rate.

I beg the Chancellor to look at this pro posal again because the small man will suffer under it.

We well remember the Chancellor's speech when he introduced this part of his Budget.

He spoke of penthouses, grouse moors and yachts.

Today my hon.
Today my hon.

Friend the Member for Abingdon (Mr. Neave) asked a Question of the Treasury about what percentage was allowed by the Inland Revenue for these grouse moors, yachts and so on.

It is extraordinary that when the Government have placed such great emphasis on en tertaining by such things as grouse moors.

yachts and so on that my ·hon.

Friend should get such a dusty answer- ..

I regret that this information is not avail able."


How can the aboli tion of such allowance for expenses be justified if it is not known what expense' is involved?

When he introduced the proposal, the Chancellor said that at least he would have the satisfaction of knowing that any one who had a business luncheon would not be " heavily subsidised by the Ex chequer."

Why is this not applied to Government entertaining?
That is not heavily but wholly subsidised by the tax I was interested when I listened payer.

to the right hon.

Member for Easington (Mr. Shinwell), whose comment is re ported in col. 599 of the OFFICIAL REPORT for 7th April.

Regarding business ex penses, he said that he would like the to Government hos provision applied pitality.

He went on to say that he had Vol.

712 not been invited to some of this enter tainment.
I feel sure that if an Amend ment is moved to include Government entertainment expenses we shall welcome him in the Lobby to vote against the Chancellor, unless he changes his mind.

f he main part of the Bill, the Capital Gains Tax, is hailed as a great social measure, but will it achieve the object we are led to believe to be behind it?

All my hon.

Friends agree, as do some hon.

Members opposite, that tihis will hit I accept that life insur the small man.
ance policies are exempt from the tax, but one has to look beyond an insur ance policy to see how its value is made up.

Premiums are received by an insur ance company, which invests the money and receives dividends which eventually go to aid millions of policy holders.

Any hon.

Member who has had experience of investing knows that investments have to be switched.
The Capital Gains Tax will be employed and the money going into the pool eventually to be distributed to the millions of policy holders will be reduced.

Eventually this will affect the small man as it will in the case of un it and investmernt trusts.

It is all very well the Chancellor of the Exchequer saying that we could have a franked dividend voucher showing what Capital Gains Tax the investment trust and the unit trust will pay, but in fact they will be paying at the rate of 35 per cent.
As one of my hon.

Friends pointed out.

a direct investor who makes .a capital gain pays at the rate of 30 per cent.

But take the case of the small man who has not got the income that will justify him paying 30 per cent.

He can have the one-third exemption and the rest of it added to his income.

Possibly he will be paying at the rate of 15 per cent.

or 20 per cent., and in many cases he will not be paying anything.
So what is the effect of this franked Capital Gains Tax on the small man who owns any unit trust shares?

One could go on with many of the anomalies that this system throws up.

One thing we should remember is that the Capital Gains Tax will be paid by anybody who owns a small business and retires.

Why will not the Chancellor give some exemption?

Then there is the difficulty of valuation.


I would remind the Chancellor-this is an example that, no doubt, has been brought to his attention already-that last week 03 187 Fi11ance Bill- [MR.

CLARK.]

10 MAY 1965 Seco11d Readi11g 188 at Christies a set of plates was sold for they were very £5,000.

Apparently special plates.

A similar set was sold later in the same sale for £4,000.

I am sure the hon.
I am sure the hon.

Member for Manchester, Cheetham will support me when I ask, how is it possible to get a straight valua tion on 6th April this year when we have a variance of £5,000 and £4,000 for two identical sets of plates?

As many of my hon.

Friends have pointed out, Capital Gains Tax is at the swingeing rate of 30 per cent.

But if it is paid by a company it will be 35 per cent., whereas in America, which is constantly quoted, the maximum rate is 25 per cent.
and the average rate paid is about 9 per cent.

Hon.

Members opposite are great ad mirers of Sweden, that sort of Socialist paradise.

Sweden also bas a capital gains tax, and even in that country they have obviated the necessity to tax inflation.

In ·sweden, as I think the Chancellor knows, the rate of capital gains tax is tapered off so that eventually it becomes nil.

Why is it right to tax at 30 per cept.?

Surely there must be some taper ing off in inflation.
One other matter- and this was brought out forcibly by my right hon.

Friend the Member for Flint, West (Mr. Birch) in a previous debate and by my hon.

Friend the Member for Horsham is that of gilt-edged securities.

The failure to keep faith with people who in vested in gilt-edged below par could have a serious effect on the future work ings of the gilt-edged market.

The Chan cellor must take this into consideration.

He knows that be bas got to find by If the borrowing £700 million this year.
Government of the day are going to issue gilt-edged securities below par, as my bon.

Friend the Member for Horsham pointed out, one does not just work out the rate of interest ; one adds on the capital value of the redemption.

If the Chan cellor does not accept this, he has got to increase the rate payable for the £700 million that he has got to raise.

Surely this is a short-sighted policy.

I do not suppose it would be right to let the Second Reading go without men tioning Corporation Tax.
I would com mend to the Chancellor- I hope be has the debate in another place last read it- week which the noble Lord, Lord Aldington, initiated on overseas invest ment.

There one can get an overall and, if I may say so, a fairly non-party approach to this problem.

[Laughter.]

Hon.

Members opposite may laugh, but the imposition of Corporation Tax is bound to affect our exports.

There is not an industrialist or a financial jour nalist who will not say this, knowing that it is true.

It is no good hon.
It is no good hon.

M em bers opposite laughing when we say that it will affect exports.

Of course it will affect them.

If we want to get exports, there is no point in trying to discourage people from investing overseas.

T here has been great argument on both sides today about whether exports flow from overseas investment.

The recent Federation of British Industries study shows that there is a connection between exports from this country and overseas investment.

Of course there is a con nection.


Last year, from our overseas in vestment-the £11,000 million-we got net, after the foreign tax had been paid, £860 million.

To discourage this invest ment means that eventually that £860 million will diminish, and if it diminishes we must somehow replace it by actual exports.

As my hon.

Friend the Member for Middleton and Prestwich (Sir J. Barlow) said, many overseas companies must re duce their dividends because of the im position of Corporation Tax.
On 12th April, as reported at c. 969 of the OFFI CIAL REPORT, the Chief Secretary to the Treasury pointed out the danger of pay ing low dividends.

He said that when a company pays low dividends, there will be a depreciation in the value of the shares.

That is obvious.

The hon.

Gentleman went on to say that such a company was ripe for take-over bids.

This was precisely the point made by my hon.

Friend the Member for Middle ton and Prestwich concerning the rubber companies in Malaysia.
That is not the only sort of company which is affected.

been importance a,ttached to t,he effect t hat the Corpora tion Tax will have on insura nce com panies which insure overseas.

On many occasions they have to invest <tbeiI" money overseas, because oE statutory require If the Govern ments, to pay claims.
ment penalise insurance companies over seas by this Corporation Tax, we may Lnsuffioient has 189 Finance Bill- 10 MAY 1965 Second ReadinR 190 lose a large invisible export tbait we enjoy and from whioh last year we got £60 million.

These items are exitremel•; rele vant to our balance of payments.

· The Chancellor accepts that J here is hardship with the imposiJtion of Corpora tion Tax.

He must agree, o1Jherwise be would not have introduced the transi tional periods.
Accepting that hardship will be caused, he has a,JJowed the five years.

the two years and then uhe tapering off.

This is merely pu1t,tiing off the evil day.

It is small comfort to t,best: over seas companies to realise tha,t they have five years' grace before the full effects of this tax hit them.

We should certainlv control new investment, but I do not see why, in the Bill , the Govennment should hit out blindly.

Many hon.
Many hon.

Members opposite have said that the United States has cut clown in its overseas investmeort.s.

T he United States, however, has been careful not to act to the detriment of its existing over seas investments.

It is only in the case of mew investments that it is taking action.

We would agree with tJhis, but we cer tainly would not agree with hitting out blindly and, to cut down investment this year, hitting all our existing inves-tment.

T his is short-sighted policy.


The other thing on Corporation Tax is the question of the Neumark Commi ttee's Report.

Here again the Financial Secre tary to the T reasury, on &th April, 1965, really got himself into a sligh t jam and then got out of it- when it was pointed out to him that the German system on retained profiits was 51 per cerit.

and on disitributed profit 15 per cent.


; the exact opposite of what we are doing- -by saying: " I said that t his new tax would bring o ur tax system into closer approximation with theirs.

That is true.

but I was not talking about the rate of taxation but the system of taxation.

"- [OFFICIAL REPORT, 8th April, 1965; Vol.

710, c.

802.]

We are talking about the rate of taxation.

We say why, if in Germany they pay 51 per cent.

on retained profits and 15 per cent.


on distributed, are we in this coun try doing the complete reverse?

This really is short-sighted policy and it shows quite illogical thinking.

As my right hon.

Friend the Member for Bexley quite rightly sa1d , it is nonsense for the Gov ernment of ~he day to be saying on the Vol.

71 2 one hand, "We will give you 1 per cent., 2 per cent.

or 3 per cent., if you export", when at the same time they are taking away exports by the imposition of the Corporation Tax.
I hope that the Chancellor and his right hon.

Friend are realising the folly or their actions, because the doubts about the Corporation Tax are not restricttd to this side of the House.

Most hon.

Mem bers opposite who spoke- a nd, with the great est respect, Dhose who spoke w;th any authority or experienoe-all agreed that there were many doubts on the imposition of the Corporation Tax and how it will hit the export trade.

I know rtJhe Chancellor has not yet closed ihis mind .
I presume that he has not, because I think be will remember at a May Day rally a few days ago in Manchester he said that he would "listen It seems to be the sort of to ct!hem."

nrung to do.

At one time it was the reviewing Government.

Now we have got the listening Government.

I hope t'hat very soon we will be able to say the defeated Government.
At home ·the Corpora tion Tax is sup posed to be a great measure, a clarion call ito modernise, to do ~his and to do tihat, to put s-ome dyna mic force into our economy.

What does it do?

Because of the imposition of 1Jhe Corporation Tax, and wirth the same amount of profit passed, every small investor in this coun try is going to have a decrease in his dividend of nearly 20 per cenit.

11his is not going to please the 4,000,000-odd small investors in this country.

This is ~he effect.
This is ~he effect.

Jt is all very well for the Chief Secretary to nod his head.

He knows, as I do, that if one takes £100 of profit passed to dividend, one would have got a gross of £74 under the old system.

Under the new system one will get a gross of £60 and the difference between £60 and £74, to my reckoning is 19.43 per cent.

It is the small man who is going to be hit.

'Ilhe 60 per cent.

compulsory distri bu,tion is going to affect tJhe closed com pany and the small company.
At the moment, wiitlh a di rector-controlled com pany the Revenue insists on 20 per cent.

to 40 per cent.

distribution.

The Oha ncellor is saying tJhai small companies mus-t dist·ribute 60 per cent.

of their income after Corporation Tax has D4 191 Finance Bill- 10 MAY 1965 Second Reading 192 [MR.

CLARK.]

been paid.

This is quite obviously hit ting ~he smaH man.


Many of our com panies have been built up over the past 8, lO or 15 years from small beginnings, and the people who srtarted them ploughed back their profits and worked 24 hours a day.

Now they will not be able to do tJbis.

This is crippling private errteirprise and killing the smaH man.

One could go through many classes of industry and show how they are going ,to be affected.
I know that the Chancellor is serious about tihis, even ·tlhough some of his hon.

Friends are not.

I should like him to answer the question about tihe diminut,ion of dividends to the small investor.

I am s·ure he will agree that there must be a diminution.

I know that in some parts of bis party the profit motive, or the dividend motive, is not entirely in tune with the party's philosophy.

In fact, on 7th April of this year the right hon.


Member for Easington (Mr. Shinwell) said that be was rather surprised that the Govern ment were still paying homage to the pro fit motive.

I should have thought that the profit motive bad served vhis coun try, and many others, too, extremely well, and this nonsensical philosophy that there is something wrong wirtlh profit cannot do anything but damage to our stan dard of living.

Everybody knows that.


One could speak for a long time on this topic, but time is short.

I come back to the main theme of the Bill, which is balance of payments vis-a vis exports.

I was astounded, as I ex pect all hon.

Members were, last week when the F irst Secretary, when talking the steel about exports, said during debate: •' .. .

if the argument is that one does not export in the nation's interests but only when one makes money, one is doing a very un [OFFICIAL REPORT, 6th May, patriotic thing.
"- 1965 ; Vol.

711, c.

1688.)

Can we, as an international industrial nation, dependent as we are on exports for our standard of living, possibly sub scribe to the theory that one can export without making money?

Are we really going back to the 1945 days- to the will o'-the-wisp of exports?

Are we going back to unrequiited exports?

That, par tially, was the reason why we had to borrow nearly £2,000 million from the Americans.

We do not want to go back to that position.

We want to progress.


The Chancellor and many Govern ment spokesmen have pleaded that the purpose, of the Corporation Tax is to simplify the tax system.

I should have thought that it made it more compli cated, and I could not understand why the Chief Secretary said this about the Corporation Tax : thought " lt is ther.efore a great privilege for me to be associated in a minor way with my right hon.

Friend in giving shape to this reform."

~[OFFICIAL REPORT, 12th April, 1964; Vol.

710, C.

972.]
710, C.

972.]

He and I are accountants, and I should have reason why that one accountants welcome -~he Bill is that it is an accountants' paradise.

It is so com plicated, and in many instances so in comprehensible, that it is an accoun tants' and lawyers' paradise.

I am sure that the hon.

Member for Heywood and Royton (Mr. Barnett) will agree that irt: is difficult to interpret the Bill.

Talking about interpretation, it took a Socialist Government to define a con nected person.
I should have thought that 'llhis was a little infantile, burt: there it is, boldly printed in Schedule 6, para graph 21(2) on page 156, where it says : " A person is connected with an individual if that person is the individual's husband or wife .

.. " I cannot think how, even in a Finance Bill of this magnitude, anyone could stoop to defining the connection between husband and wife.

During the debate hon.

Gentlemen opposite have spoken about the Tory record.
I do not think that they have been very kind about it, but the cold fact of the matter is that during 13 years of Tory Government the standard of living in this country went up by 40 per cent., and that is no mean achieve ment.

From the benches opposite in those days the cry went up about a candy-floss economy.

At least we bad candy.

We have no candy now.

All we have is a floss economy.

The Bill shows antagonism towards the capitalist system.

[HON MEMBERS : "Hear, hear."]


Here we have the Left wing of the Government, who are their Achilles heel.

I hope that they wil1 not become the heel of the Achilles that capitalism economy.

They think 193 Finance Bill- 10 MAY 1965 Second Reading 194 does not work.

but it has worked ex tremely well up to now.

Sir Frederic Bennett (Torquay): On the contrary.

Mr. Hamling : For you.

Mr. Clark : The hon.


Member cannot say "For you," if be accepts the fact that the standard of living of everybody in this country rose by 40 per cent.

It was not all for the benefit of my hon.

and right hon.

Friends ; some of the hon.

Member's hon.

and right hon.

Friends also benefited.

This Socialist sophism is not the answer to our prob lem.
The Government are not capable of solving any of our problems, and l recommend that they move out or move over and let somebody else take over who knows how to deal with these mat I am convinced that my hon.

and ters.

right hon.

Friends, in the past 13 years.

the have proved finances of this country, and it is because we have no confidence in the Govern ment's handling of our finances that my hon.

and right hon.

Friends will divide the House this evening.


they can run that 11.2 p.m. in The Chancellor of the Exchequer (Mr. James Callaghan) : I acknowledge the peroration of the hon.

Member for Nottingham, South (Mr. William Clark), who spoke in his usual convincing and I was not altogether sur lucid way.

prised to hear him say that he did not have any particular confidence this Government.

I would have been sur prised if he had.


But he was hedging his bets a little unnecessarily ; he need not have put the matter in the general way he did when he invited us to move over, to let someone take over.

Some one!

Does he have to hedge as much I agree that as that?

the level is now such that almost any body would be better.

I have seen the claims of the right hon.


and learned Member for Wirral (Mr. Selwyn Lloyd) advanced in the Press, and in certain circumstances I would find myself very strongly behind him ; there is a great I deal to be said for his candidature.

do not want to provoke hon.

Members.

but they seemed to be hedging their bets a little too much.

[!nterruption.J It has been a very interesting debate.

[Interruption.]

The hon.

Member for Torquay (Sir F .


Bennett) has not been here earlier, but now comes to join in-- It has been interesting to note Mr. Callaghan: If he does not want to join in perhaps be will kindly keep quiet.

the that has been great depth of feeling aroused on the one issue of overseas in vestment.

I certainly take this issue very seriously, and shall attempt to answer the points made as fully and fairly as I can, although-and I hope that hon.
Members will not shout their heads off-I have heard more exaggeration and inaccu racies on this subject tonight than I can the course of a remember hearing in single debate for a long time.

I must try to demonstrate that later on ; I merely ask hon.

Members to accept that that is my view now.

The right hon.

Member for Bexley (Mr. Heath) made the speech today that he should have made on the Budget Resolu tions but did not, because the Opposition did not divide on them.
He said a lot of things that rather hurt me.

He asked me, in particular, why the special deposits have been called for only three weeks after the Budget and whether I had mis calculated the situation in the period be tween 6th April and 29th April when they were called for.

If the right hon.
If the right hon.

Gentle man will remember, I said in my Budget speech that although I had made the best judgment which was possible in the situa tion at that time, if the situation should show any signs of needing action either way I was quite ready to take that action.

I think the right hon.

Gentleman will agree that when the April bank advances showed an increase of £98 million this was of a size which we could not ignore.
Without rubbing salt into old wounds, there were, of course, two months last year when the increase in bank advances exceeded that level and when the right hon.

Gentleman opposite held power.

In my view, they should have taken action then.

One of the reasons that we have to use the monetary machine in the way which we are doing now is that the right hon.

Gentleman did not take action at that time.


I think it is important that we should be ready to move on special de posits now that it looks as though bank advances are going ahead faster than the estimates on which I based my calcula tion in the Budget of April.

- - ' 195 Fina/lee Bill- 10 MAY 1965 Second Reading 196 [MR.

CALLAGHAN.]

I said that I would take further measures if they were shown to be neces sary.

I took them.

That is perhaps a new and prompt method of behaviour.
It may be a little unusual after previous experience, but I hope that it will com mend itself to the House.

I shall not hesitate to move either way in this or other respects promptly and quickly in order to try to keep the economy on as even a keel as we can.

There is a great deal of room for argument-we heard some in today's debate-between those who believe, as the right hon.

Member for Bexley and his hon.


Friend the Member for Nottingham, South seemed to believe, that the economy is now turning down, and those like the hon.

Member for Horsham (Mr. Hordern), who, in the course of a very well informed speech, expressed the view that my principal trouble over the next few months is that the economy is overheated and is likely so to remain.

It is not for me to judge between his wisdom and ~bat of rtibe right hon.

Mem ber for Bexley.
Mem ber for Bexley.

At least, it is for me to judge : it is my job, and that is why it is such a difficulrt job.

I think that, in circumstances l·ike these, which were described by Mr. Harold Macmillan as trying to run the economy by looking up last year's Bradshaw-we are now trying to ensure that the trains run on time one must use the best judgment of which one is capable at any momenit.

The right hon.
The right hon.

Member for Bexley made great play wiitih what he alleged to be 1:Jhe absence of any detarled analysis in my Budget speeoh to jus-t-ify reducing home demand by £250 minion at an annual rnte.

His hon.

Friend thought that I should have done more, while the r ight hon.

Genrtleman, I assumed, tihought thait I Slhould have done les·s.

Art any rate, he asked why I did not justify I made it clear in my sit:atement that it.

this is a very difficult judgmenrt to make.


I said then, and I repeat now, rtihat tihis is a field in which there are many uncer tainties and where there are risks on ei-tber side.

If I take uhat view now, at least I find myself in good company, because <the right hon.

Member for Barnett: (Mr. Maudling) said in his Budget statement in 1963 : ·• ... we must regard all calculations to which l have referred as no more than pointers; the fina l decision must be an act of judgment."
[OFFICIAL REPORT, 3rd April, 1963; Vol.

675, C.

472.]

He said much tihe same thing last year : " My decision as to the size of the change I must make is clearly a matter of judgment, not of exact calculation.

"-[OFFICIAL REPORT, 14th April, 1964 ; Vol.

693, c.

267.]

I tibink ·tha-t the right hon.

Member for Barnet sums it up perifeotly fairly.

This is, I think the most difficult task which I have ever had ,to pertorm, and I can now understand the dilemma of some of my predecessors in these matters.
Because i,t is a matter of judgment, one must be prepared to move quickly in 1lh1s respect WJhere one tihinks that it is necessary.

In a s-~tuation in whiob we expect bank advances to increase by 5 per cent.

over the whole year-this was t>he sort of estimate on whiioh we were working-and in faot tJhey increased by £98 million in one month, it would have been irresponsible on my part not to have t•aken action as soon as the April figures showed that up.

The right hon.
The right hon.

Member for Bexley asked me also whether I would not pub lish the detailed communications which had passed with the International Mone tary Fund and the Group of Ten.

I should like to repeat what I said when I intervened in his speech, for which I apologise.

Those communications which have previously passed between Govern ments-like those between his Adminis tration and the International Monetary Fund-are regarded as confidential be tween the members of the Fund.
That would not prevent me from proposing an alteration ; but I think, on balance, that it is best left that way.

Unless the right hon.

Gentleman has some argu ments to advance, I should prefer to retain the normal practice which has existed certainly since 1959 in this way, that communications between Govern ments should be regarded as confidential.

I therefore propose not to publish the details.

The right hon.

Gentleman asked me about investment.


In our opinion, there is as yet no evidence of a down-turn in investment.

The Board of Trade survey of investment intentions still shows a high level of investment in 1965 and a substantial increase over 1964.
Despite all the prophecies of woe, it looks as though industrialists are looking more to 197 Finance Bill- 10 MAY 1965 Second R eading 198 ·7 Indeed, their p.l'esent attitude is rather the future of their markets and Jess to the a reversion, because they used to be in incidence of taxation upon their profits.

favour, and now they have ceased to be This is a very interesting phenomenon, in favour, of these reforms.

They are which goes part of the way to explain in.


favour of a Corl?oration Tax but not why they do not take as much notice of investment allowances as some of us this ome.

They are rn favour of a Capital thought they did.

They measure their Gains Tax buit not this one.

Thai is the new investment by the capacity of the traditionaI role of an Opposition.

But certainly the new taxes which I have market to absorb it and that is probably the best test of all.
introduced are to promote healthy growth, and I think ~hat I can show that they will do that.

They are certainly based on fairness and equity.

They will, I hope, cause tax:ition to cease ,to operate in a way which rewards the speculator more than productive industry.

If there is a down-turn in investment next year-the right hon.
Gentleman asked me particularly about this- we must deal with it as far in advance as we can see it coming, especially in the light of the very difficult task which I have I have explained the dilemma in the past, and I need not explain it again, because it is well known to anybody who has studied the matter.

We have a difficult and delicate balance to strike.

in strengthening the reserves.

intended In this connection, as the right hon.


Gentleman truly said- I am sorry that be poured some scorn on it- the graduai progress which is being made towards an incomes policy is of the highest import ance and significance.

I repeat again that the judgment which I make must be par tially based, if we are to avoid a serious down-turn in the economy, upon a relative I measure of success in incomes policy.

do not expect it to be perfect.

I imagine that nobody here does.


But we must try to make this incomes policy successful, and the energies and devotion which my right hon.

F riend the First Secretary has put into this cause are worthy of support I ,vould from everybody in the House.

only say to right hon.

and hon.

Gentle men opposite who scoff at it that at least he has gone a good deal further along the way than previous Administrations have done.
Having attempted to ainswer some, but not all, of the questions put to me by the right hon.

Gentleman, I will turn more I do particula rly to the Finance Bill.

not quibble because great tax reforms such as these are queried in the firs t place, closely analysed, closely questioned and perhaps not immediately obvious to everybody who studies them.

That is the purpose of the debates in the House.


I think tihat as the unfoldimg of the argu ment becomes clear there will be more of a general acceptance on the other side of the House than there has been so far.

Although hon.

Members opposite do not believe this, they are simplifying the company taxation processes.

There is no I do not want to go doubt about this.


lyrics of praise of Parliamentary into Counsel but they have compre5St:XI in to a mere 40 Clauses the whole of the i3 a taxation on companies, which remarkable achievemeint.

There is no doubt about that.

Perhaps hon.

Members have not yet noticed that in Parts IV and V of Schedule 19, ten Schedules have been entirely repealed and 80 Sections.

The whole of the new tax is compressed into a 40-Clause passage in the Bill.

I ask hon.
I ask hon.

Members opposite to consider this seriously.

It is quite an achievement, and whatever the pains of the transition -and there are bound to be difficulties there is little in t!he tmns,ition period- doubt tax has the attracted----at any rate the theory, if not the act ual proposal-so much support ; it is because it will result in simplification of effort in the long run.

is why that this I will return to the Corporation Tax later.
On the Capital Gains Tax, I must point out that although some hon.

Members think that the rate is high it is still lower than the tax rate on earnings.

Earnings are taxed, at the standard rate, at 41¼ per cent.

Capital gains will be taxed at 30 per cent., and because there is no retrospection in the legislation, for many years assets acquired before 6th April last are not likely to pay 30 per cent.
I do not think that it can be claimed, at any rate in the initial years of this new tax, that the rate of 30 per cent.

is high.

199 Finance Bi/1-- 10 MAY 1965 Second Reading 200 [MR.

CALLAGHAN.]

The right hon.

Gentleman and others asked me whether there should not be an allowance for inflation in the taxation If we were to start doing prov1S1ons.

that in our taxation system, it would lead to some very odd results in other fields apart from capital gains.
In this case-unusually so-I can i,ely on the combined wisdom of both the majority and the minority Reports of the Royal Commission on Taxation.

All signatories to the Royal Commission Report were of the opinion that no allowance should be made for the inflationary consequences of a country's policy.

I therefore do not think that I can make that allow I cannot hear the ance.

[Interruption.]

hon.

Member for Shipley (Mr. Hirst), but if be cares to rise I will gladly give way to him.
Mr. Hirst : l appreciate the Chancellor's kindness in giving way.

I was asking whether in his opinion the Royal Com mission were in favour of a Capital Gains Tax.

Mr. Callaghan : No, they were not.

The minority were and the majority were not.

If the hon.

Member had listened I said that whatever their views on the Capital Gains Tax, both the majority and the minority were against giving an allowance for to inflation- other kinds of taxation.

Hon.
Hon.

Gentle men opposite will have plenty of time to read the Royal Commission's Report in the weeks and months ahead.

in relation I come to the subject of the gilt-edged market.

The flexibility of the gilt-edged market is an argument that is certainly seriously held by a number of people and I would think that there will be perhaps a little less switching, at any rate im mediately, than there bas been in the past.
But, whatever importance one attaches to this , I think that the degree of switching will undoubtedly increase again as people find opportunities for profitably doing so, especially the institu I think that the institutions will tions.

be quick to seize their opportunities.

When one considers the gilt-edged market and analyses the holdings in it, one sees that about £20,000 million, or a substantial percentage o.f total stock, will not have their tax position changed by the Capital Gains Tax.
This will be so for a number of technical the reasons, into which I need not go now.

[ am sure that they are well known to many hon.

Members.

Thus, I do not think that the degree of flexibility, which many people seem to think is required, will be impaired to anything like the degree written about.

Moreover, there are other ways in which the gilt-edged market acts, into which I need not go now.
I would not myself regard this as a serious obstacle to the introduction of the Capital Gains Tax on gilt-edged securities.

Then it is suggested that we are making a breach of faith here.

The right hon.

Gentleman the Member for Flint, West (Mr. Birch) wrote one of his famous letters in The Times in which he said that the proposal to tax capital gains on gilt-edged made him feel sick.

It is an astonishing phenomenon.

The last time he felt sick was when he was talking to Mr. Harold Macmillan.
He gets sick about the oddest things.

I do not follow that sort of argument and-[Interruption.

]-in any case, it was a fairly cheap letter, to be truthful.

I do not follow the argument that when a Government decide to change taxation arrangements they must except gilt edged from their taxation changes.

This argument has been used about nothing else.

Of course we are entitled to change the taxation arrangements.

Any Gover'r'i ment are and many Governments have.


There is simply nothing in the argument that this is a breach of faith.

[Interrup tion.]

I have expressed my point of view.

Hon.

Gentlemen opposite are entitled to hold a contrary view if they wish.

Mr. Stratton Mills (Belfast, North): Does the Chancellor accept the argument that the inclusion of gilt-edged stock in the Capital Gains Tax will have the effect, at least marginally, of pushing up the the cost of borrowing against Government?
Mr. Callaghan : J have seen that argu ment, but I do not acceot it for the long run.

· the Member for My hon.

Friend (Mr. Harold Manchester, Cheetham Lever) asked why there should be double taxation in the Capital Gains I was clear about this in Tax sphere.

my Budget Statement and I see no reason to depart from it.

This arises from the 201 Finance Bill- lO MAY 1965 Second Reading 202 separation of taxation-the separation of tax on the company from tax on the shareholder.
Both in the Corporation Tax and in the Capital Gains Tax, there is this separation and, as far as I am concerned, I think that we should carry the logic of this separation the whole way through.

Thus, if one is separating the taxation of one from the taxation of the other, I do not think that one can use the tax of one to offset the tax of the other.

to I return briefly the Corporation Tax.

I now particularly address my hon.

Friends, although I hope that hon.

Gentlemen opposite will bear this in mind.


One of the advantages of the Corporation Tax.

apart from its simpli city and the fact that in my view it acts as an incentive to growth, is that it enables trade unions to take what I would regard as a rational view towards profitability.

industry.

That Nobody hkes to work for an unprofit is why one can able always get employees to work for, say.

LC.I.

in preference to Briitish Railways.

[HON.

MEMBERS: "Hear, bear."]


They prefer to work for an industry in whiob profits are to be made.

Since I carry hon.

Gentlemen opposite with me so far, let us see if tihey will come with me It on 1lhe next stage of t he argument.

has always been tihe case that whenever we.

former Labour Administrations or hon.

Gentlemen opposite have asked the wage earner-the man who has nothing to sell but his skill and labour-to res-train wha'l he gets from indus,try, he inevitably replies.
"If I do ,that, those other ohaps later on are going ~o get it all back in the shape of some kind of capit·al gain, capital distribution or what ever ~t may be, whereas I never get back pay".

How of.ten have the trade union shop tha,t argument advanced against having a rational policy on wages?
stewards heard One of tihe important points in this connection-I am not saying 1lhat i,t is nhe only virtue of the Corpora-tion Tax is tha,t it enables one to separate the tax on the company from tJhe tax on rthe shareholder.

Ttbis is a very imporitant It means •that one can, element in it.

as I am proposing here, have a relatively low rate o.f tax on the profitabilrty of the company.
so encouraging ir to plough back its retentions into new machinery and plant, whereas there will be a higher rate of tax on the shareholder.

'I1h1s is, in itself, a very substantia1 advance on the old sys·tem, for reasons whiah will be apparent to many people.

I was asked-remembering that the old system was fuH of anomalies-how muoh tax was being lost under the old I would ·remind him that the system.
Public Accounts Commi-t·tee-in iits Four~h Report for 1963-64-had some thing to say wihiob certain,ly influenced my thinking, in paragraphs 6 and 7, in relation to taxation which was not paid by companies although normal people might think iit: had been paid.
The Com mi trtee took a specimen group and said : "Some of the companies had paid the whole of their dividends to parent companies, and in these cases the Comptroller and Auditor General was able to establish that the gross dividends used by the parent companies for repayment claims exceeded by £32 million the total of profits on which the subsid iaries had paid tax.
few examples- ., therefore, there had been repayment ot tax of £32 million (equivalent to tax of £12 mil lion at the current standard rate) which had not been received by the Revenue and which, the Department confirmed, never would be received."

When we get in the tax system to that state where we "repay "- I put it in quotation marks-tax which has never then used to been paid and which make dividends I say it is high time the system was changed.
Everybody knows that through a variety of devices which we can go into in Committee a great deal of this sort of thing and other arrangements have been going on.

ln these few examples- is My hon.

Friend the Financial Secre tary put the argument on investment allowances and I shall not go into that again now as it is getting late, except tha t from some of the to emphasise exaggerated comments of hon.

Mem bers opposite one might think that in vestment being were destroyed.

Nothing of the sort.


In fact, as my hon.

Friend pointed out, they are costing something over £300 million a year and as a result of the introduction of Corporation Tax that cost will be come roughly about £220 million which industry will still be getting.

allowances I thought that the right hon.

Gentle man's thinking was moving along very interesting lines, because he, like a great 203 Finance Bil/- 10 MAY 1965 Second Reading 204 [MR.

CALLAGHAN.)
CALLAGHAN.)

many other people, is now beginning to regard investment allowances not so much as a tax relief as a subsidy.

That was the way be was framing it, as be will see if he reads his remarks, and I invite him to do so.

If these things are being regarded more and more as subsidies rather than tax relief then it is the duty of the Government to con sider whether this is the best method in which relief between £220 million and £320 million should be given.
That is what I propose to look into during this year.

that additional I The hon.

Member for Nottingham, South and other hon.

Members opposite have claimed that there will be uncer tainty.

But if we are to operate on that basis we shall never make any changes at all.

think companies are suffi ciently well versed in investment allow ances over many years as not to be affected by this consideration too much.

In any case I must point out that one of the consequences, as my hon.
Friend the Financial Secretary reminded the it places more free House, reserves in the hands of companies.

Be cause there is a lower tax on profits, they have more free reserves which they devote to investment.

that is Sir T. Brinton: I should like to ask the ChancelJor to answer this question which the Financial Secretary dodged : why, when he has argued so cogently for the Corporation Tax that it would en courage investment in public companies, he a Clause that close companies should pay at 60 per cent.
on the total available for distribution?

should deliberately introduce insisting Mr. Callaghan: I hope that the hon.

Member will not say that my hon.

Friend dodged the question.

He gave way a number of times and did not give way to the hon.

Member, and that was the reason I gave way to him.

[HON.

MEM· BERS: "He did give way.")

The hon.

Member then tried to get up again and I will come to close companies.

failed.

Indeed I will come to that straightaway.

Am I going on too long?

[HON.


MEM· I have a lot of candid BERS: "No."]

friends .

I will deal with close com panies and the question of overseas in vestment.

and then, perhaps, we can move to a vote.

My hon.

Friend the Member for Hey wood and Royton (Mr. Barnett) made the classic case, to which, unfortunately, the hon.

Member for Nottingham, South did not listen.

I must therefore repeat it.


There are provisions in the existing law to deal with avoidance of Surtax through the retention of the profits of very closely controlled companies.

As L explained in my Budget speech, the temptation there is to withhold profits from distribution unnecessarily will be far greater under the new system because Income Tax as well as Surtax would be avoided.
Having paid Corporation Tax at a rate to be fixed, those in control of the company could accumulate their savings free of all personal tax until they needed them.

The need to prevent avoidance in this way leads to provisions that may seem at variance with the general objective of encouraging retentions.
But the same problem existed when distributed profits were taxed at a rate higher than undis tributed profits ; and all parties have always accepted that whatever might be suitable for the public company had to be modified in its application to the private company.

I am surprised, never theless, that we have not been given any credit for the substantial change we have made in the law about closely con trolled companies.
Under the present law, if a company does not make a reasonable distribution, all of its profits can be made liable to Surtax.

This provision was long criticised as too severe.

Under my provision, only 60 per cent.

of its net trading profits have to be distributed, and it is open to the company to show that it could not make a distribution up to that standard without prejudice to the requirements of its business.

If hon.
If hon.

Members will look at paragraph 10 of Schedule 17 they will find that this requirement has been de fined in a way that links it up with the existing law.

The position is that we are proposing to repeal the existing provision, and the new language is supposed to have, and, I trust, will have, exactly the same effect.

r think that 60 per cent.

of net trading profits to be distributed is not a severe It amounts to 39 per cent.

of the test.
of the test.

gross profit under Corporation Tax at 205 Finance Bill- 10 MAY 1965 Second Reading 206 35 per cent., and 36 per cent.

under Cor poration Tax at 40 per cent.

This is below the general level of distributions It is no use the for public companies.

hon.

Member for Kidderminster (Sir T. Brinton) shaking his head- - Sir T. Brinton rose-- Hon.

Members : Sit down.
Members : Sit down.

to distribute even the Finance Bill will Mr. Callaghan: Having set this very reasonable standard, it is not unreason able to expect the company to show that it ought not that modest amount.

If these companies are ploughing back their profits into new equipment and plant, nobody will require them to distribute them ; it is where they are just sitting on them that we act.

[Interruption.]

Let us see how its gets written into the Bill.

Hon.
Hon.

Gentlemen will know that what is said at this Dispatch Box cannot be translated into law ; translate broadly what I say into Statute in due time.

I invest ment.

This will go on.

Listening to some of the Jeremiahs on the other side, one would think that overseas investment was to come to a full stop.

It will go on at a very substantial pace.

The United States has had this system of taxation for years.

Overseas investment by the United States has gone up by leaps and bounds.
In the last 12 years from 1951 to 1963 there has been 40,000 million dollars of private direct invest ment by the United States in other coun tries.

If they have managed to do that under this system that I am now pro posing to introduce, why is it suggested that overseas investment by British com panies will wilt and die?
to overseas finally tum the margin investment at It will only wilt and die if the invest ment itself is unprofitable-that will be the test-and there is a certain amount of today which is relatively unprofitable, and only kept alive by very favourable tax treat ment.
Those who talk about dynamic investment will not claim that we should go on propping up that kind of irn;titu tion which, in some cases, is not even marginally profitable at the present time but will surely agree that the capital in it could be better employed.

I should like to explain the position.

I have to explain it to myself twice a day, and I will put it as I understand it.

There has been a lot of exaggera tion, so I will try once again to get it over.
Today a company in this country gets relief from Income Tax and Profits Tax for all the overseas tax it pays.

It gets relief up to, but not beyond, its full United Kingdom liability.

Shareholders are regarded as satisfying their Income Tax liability even though the company has been relieved of all its Income Tax payments.

Let us turn to the future.

This is an odd position which certainly is not shared by other countries.
Companies will continue to get relief from Corpora tion Tax on overseas tax on direct in vestment.

There will be no change in that up rate, but there will be no relief beyond the Corporation Tax rate.

Where the rub comes is that Corporation Tax will be lower than the United Kingdom Income Tax and Profit Tax rate.

to Corporation Tax There will be a larger chunk not set off than there is at present.

although even today there are chunks which are not set off.
There will be a larger chunk which will arise in those countries where indigenous rates of tax are astonishingly high.

Although we hear that we are over-taxed in this country, it is astonish ing to hear of countries where the rate is higher than it is here.

I leave that on one side.

Should the shareholder get the benefit of the tax which is not set off by having it set off against tax on his dividend?
The principle of tJhe Cor poration Tax is that United Kingdom tax on a United Kingdom company will not be regarded in future as discharging the liability of the shareholder.

The same logic must apply to the overseas company.

We cannot expect that tax which is paid by the company to an overseas country should be re garded as discharging tJhe United King dom liability of tihe shareholder.

It would make a monstrosity of the system to do so.
Because they have had what undoubtedly is almost uniquely favour able treatment throughout the world-I do not swear that there are not one or two countries which have something like this-this would cause a certain amount of hardship.

Therefore I have proposed this transitional relief for a period of five years, in the first two years of which the -shareholder will be compensated.

207 Finance Bi/1- 10 MAY 1965 Second Reading 208 [MR.

CALLAGHAN.]

Some of my hon.


Friends may think that I am being too generous in this respect.

The shareholder will be very fully com pensated for the first two years, but then the relief will tail off in the following three years.

Sir D. Glover: Would the Chancellor accept that the hon.

Member for Meriden (Mr. Rowland) was right in his very interesting speech when he clearly showed that the difference was that under the present system the amount is 55 per cent., going up to 69½ per cent.?
Mr. Callaghan: I shall come back to that in Committee if the hon.

Member will allow me to do so.

Mr. Selwyn Lloyd : This is a very serious point.

In India the rate of taxa tion is about 60 per cent.

ThaJt leaves 40 per cent.

Under the arrangements the right hon.

Gentleman proposes, if shareholders in this country are to be given the same yield on ~heir investment, the amount left for development in India will be reduced from 20 per cent.

to, say, 6 per cent.

If the right hon.


Gentleman puts it the other way round, there will be a savage cut in income here.

Which is the choice?

I turn to the position of B.P.

Mr. Callaghan : The choice is for the company to make.

That is the only way to do this.

If the system is being altered, the company must choose either to plough back or to maintain dividends.

There is nothing sacrosanct about the present I shall come back to level of dividends.

the question of developing countries.


These companies have five years in which to make a choice.

If they are growing at a normal rate, many will find that they are not even faced with a cut in dividend.

I will disregard Shell and deal with B.P.

as time is going O[l. Looking at the B.P.

balance sheet for the last 10 years the simple truth is tha,t the tax whiah that com pany has paid to the United Kingdom has gone down year by year.
Whereas in 1958 the company was paying £10 million of tax to this country, it has now reached the stage where it is paying just unde,r £500,000 in taxation.

Irts dividends have praotically doubled in the same period, from £17·7 million to £31·3 million.
It has appropriated to general reserve a very great deal more every year, and the inter- esting t!hing is that in the case of Lbe large oil companies, whether it be Shell or B.P.-1 will not go into the figures now-the shareholder as a means of supplying capital is really as redundant as the rhinoceros.

These companies have raised all their capital from their retentions, except to the In the case extent of 1 or 2 per cent.
of Shell, out of a total investment of £3,300 million, the shareholder in eight or 10 years has provided about £100 million, but his dividend has gone up by three times in the same period.

He is :10t providing the capital.

The company i~ providing it out of its own reter.tions.
lf, neglecting my Lransitional arrange ments, Shell were to say, "We are goi ng to bear all of this on the dividends as from now and we shall go a,head with ou~ retention", it would mean that the divi dend would be a.t the same level now as it was in 1960.

Mr. George Y. Mackie (Caithness and Sutherland) rose-- Mr. Callaghan : I think I had bBtter get 0111.

We shall have plenty of time in I promise the hon.

Gentle Com,,.1ittee.

man that we shall deal with in Committee.


this I wish to say two further things, one I must point on developing countries.

out that the level of private investment in the developing countries has regret tably been declining year by year.

In 1960 it was as muoh as £90 million a year.

By 1964 it had gone down to £45 million a year.

Part of it is a reflection of the high rates of taxation .

That again we must pursue later.

One final point on exports.


I am told that it is necessary to invest large sums I do of capital overseas to get exports.

not deny the connection.

There is a connection, but a great deal too much has been made of this point.

I will quote six figures to the House and hon.

Mem bers can consider them between now and Committee.

O ur exports in the last five years have gone up by less than 30 per cent.

The Germans have increased their exports by about 60 per cent.
The Japan ese exports have gone up by about 90 per cent.

As regards overseas investment of capi tal, the Japanese have invested overseas " ~ - - -~ r - - - - - - - - - - - - -~ - - - - - - - - - - 209 Finance Bill- 10 MAY 1965 Second R eadi11g 210 in in the same period £160 million ; the Germans have invested overseas in the same period £230 million, and Britain has invested the same period overseas £1,270 million.
Of course, there is a con nection be tween exports and overseas capital, but if Germany and Japan can push up their exports like that with mini scule a mounts of capital investment over seas, surely it is ridiculous to suggest that we have to go on pouring out overseas capital that we can ill afford in order to achieve a result that is nothing like as good.
Whatever may have been the reception on the benches opposite, there is no doubt tha t in the country this B udget, a nd the Finance Bill generally, has had a good It marks a new stage in the reception.

progress of this country and as such it is accepted by our people.

Question put, T hat the Bill be now read a Second time : - The House divided: Ayes 299, Noes 296.

Division No.
Division No.

104. l AYES Abse, Leo Albu, Austen Allaun, Frank (Salford, E.) Alldritt, Walter Armstrong, Ernest Atkinson, Norman Bacon, Miss Alice Barnett, Joel Baxter, William Reaney , Alan Bellenger, Rt.

Hn.

F. J. Bence, Cyril Benn, Rt.

Hn.

Anthony Wedgwood Bennett, J.

( Glasgow, BricJgeton) Binns, John Bishop, E. S. Blackburn, F. Blenkinsop, Arthur Boardman, H. Boston, T. G. Bottomley, Rt.

Hn.

Arthur Bowden, Rt.

Hn.

H. W. (Leics S. W .)


Boyden, James Braddock, Mrs. E. M. Bradley, Tom Bray, Dr. Jeremy Broughton, Dr. A. D. D. Brown, Rt .

Hn.

George (Belper) Brown, Hugh D. (Glasgow, Provan)· Brown, R. W. (S!lorcditch & Fbury) Buchan, Norman (Renfrewshire, W .)

Buchanan, Richard Butler, Herbert (Hackney, C. ) Butler, Mrs. Jorce (Wood Green) Callaghan, Rt.

Hn.

J;lmes Carmichael, NeH Ca rter~Jones, Lewis Chapman, Donald Coleman, Donald Conlan, Bernard Corbet, Mrs. Freda Cousins, Rt .

Hn.
Hn.

Frank Craddock, George (Bradford, S.) Crawshaw, Richard Cronin, John Crosland, Anthony Crossman, Rt.

Hn.

R, H. s. Cullen, Mrs. Alice Dalyell, Tatn Darling, George Davies, G. Elfed (Rhonl.lda , E.) Davies, Harold ( Leek) Davies, lfor (Gower) Davies, S. 0 .

(Merthyr) de Freitas, Sir Geoffrey Del argy, Hugh Dell, Edmund Dempsey, James Diamond, John Dodds, Norman Doig, Peter Donnefly, Desmond Dril.>erg, Tom Du ffy , D r, A. E. P. Dunn, James A.

D unnett, Jack Edelman, Maurice Edwarcls, Rt.

Hn.


Ness (Caerphilly) Edwards, Robert (Bilston) English, Michael Ennals, David Ensor, David Evans, Albert (Islington, S. W .)

Evans , loan (Birmi ngham, Yardley) Fcrnyhough, E. Finch, Harold (Bedwellty) Fitch, Alan (W igan) Fletcher, Sir Eric (Islington, E.) Fletche r, Te!l ( Darlington) Fletcher, Raymond (llkeston) Floud, Bernard Foley, Maurice Foot, Sir Ding le (Ipswich) Foot, Michael (Ebbw Vale) Ford, Ben Fraser, Rt.

Hn.
Hn.

Tom (Hamilton) Freeson, Reginald Galpern, Sir Myer Garrett, W. E. Garrow, A. George, Lady Megan Lloyd Ginsburg, Davicl Gom·lay , Harry Greenwood, Rt.

Hn.

AnthOny Gregory, Arnold Grey , Charles Griffiths, Davi!l ( Ro ther Valley) Gl'iffi ths, Rt.

Hn.

James ( Llanelly) Griffiths, Will ( M 1 chester, Exchange) Gunter, Rt.

Hn.

R. J. Hale, Leslie Hamilton , J ames (Bothwell) Hamilton , William (West Fife) Haml:ng, William (Woolwich, W .)
Hannan, William Harpe r, Joseph Harrison , Walter (Wakefield) Hart, Mrs. Judith Hattersley, Roy Hazell, Bert Healey, Rt .

Hn.

Denis Hefler, Eric S. Henderson, Rt.

Hn.

Arthur Herbison, Rt.

Hn .

Margaret Hill, J.

(Midlothian) Hobden, Dennis (Brig hton, K'town) Holman, Percy Horner, John [ll.45p.m.

Houghton, Rt.

Hn.
Houghton, Rt.

Hn.

Douglas Howarth, Harry (Wellingborough) Howarth, Robert L. (Bolton, E.) Howell, Denis ( Small Heath) Howie, w. Hoy, James Hughes, Cledwyn (Anglesey) Hughes, Emrys (S. Ayrshire) Hughes, Hector (Aberdeen, N.) Hunter, Adam (Dun fe rmline) Hunter, A. E. (Feltham) Hynd, H. (Accrington) Hynd, John (Attercliffe) Irvine, A. J.

(Edge Hill) Jackson, Colin Janner, Sir Barnett Jay, Rt.

Hn.

Douglas Jeger, George (Goole) Jeger, Mrs. Lena(H 'b'n&St.P'cras ,S .)

Jenkins, Hugh (Putney) J enkins, Rt.


Hn.

Roy (Stechfor<I) Johnson, Carol (Lewisham, S.) Johnson,James(K 'ston-on-Hull, I'/.)

Jones, Dan (Burnley) J ones,Rt .

Hn.Sir Elwyn(w .

Ham,S.)

Jones, J. l dwal (Wrexham) Jones, T. W. (Merioneth) Kelley, Richard Kenyon, Clifford Kerr, Mrs. Anne (R'ter & Chatham) Kerr, Dr. David (W'wor th, Central) Lawson, George Leadbitter, Ted Ledger, Ron L~e, Rt.

Hn.
Hn.

Frederick (Newton) Lee, Miss Jennie (Cannock) Lever, Harold ( Cheetham) Lever, L. M. (Ardwick) Lewis, Arthur (West Ham, N.} Lewis, Ron (Carlisl e) Lipton, Marcus Lomas, Kenneth Loughlin , Charles Mabon, D r. J .

Did•son McBride, Neil Mccann, J .


Maccoll, James Ma cDermot, Niall McGuire , Michael Mc i nnes, James McKay, Mrs. Margaret Mackenzie , Gregor (Rutherglen) Mackie, John (Enfield, E.) McLeavy, Frank MacMillan, Malcolm MacPherson, Malcolm Mahon, Peter ( Preston, S.) Mahon, Simon ( Bootle) Mallalieu, E. L. (Brigg) 211 Finance Bill- 10 MAY 1965 Second Reading 212 Mallalieu,J.P.

W ,(Huddersfield,E.)


Manuel, Archie Mapp, Charles Marsh, Richard Mason, Roy Maxwell, Robert Mayhew, Christopher Mellish, Robert Mendelson, J .

J. Mikardo, Ian 'Millan, Bruce Miller, Dr. M. S. Milne, E<lward (Blyth) Molloy, William Monslow, Walter Morris, Charles (Openshaw) Morris, John (Abcr .. von) Malley , Rt.

Hn.

Freder ick(Shefficl<1P k) Murray, Albert Neal , Harold Newens, Stan N ocl-Baker ,Rt.
Hn.Philip( Derby ,s.) Norwood, Christopher Oakes, Gordon Ogden, Eric O'Mafley, Brian Oram, Albert E. ( E. Ham, S.) Orbach, Maurice Orme, Stanley Oswald, Thomas Owen, wm Padley, w alter Page, Derek (King's Lynn) Page t, R .

T. Palmer, Arthur Pannell, Rt.

Hn.

Charles Pargiter, G. A .

Park, Trevor (Derbyshire, S.E.)

Parker, dohn Parkin, B. T. Pavitt, Laurence Pearson, Arthur (Pontypridd) Peart, Rt.

Hn.
Hn.

Fred Pentland, Norman Perry, Ernest G. Popplewell, Ernest Prentice, R. E. Price, J. T. (Westhoughton) Probert, Arthur Pursey, Cmdr.

Harry Rankin, John Redhead, Edward Rees, Merlyn Reynolds, G. w. Rhodes, Geoffrey Richard, Ivor Roberts, Albert (Normanton) Roberts, Goronwy (Caernarvon) Robertson, John (Paisley) Rodgers, William (Stockton) Rose, Paul B, Ross, Rt.

Hn.

William Rowtand1 Christopher Sheldon, Robert Shinwell, Rt.

Hn.

E. Shore, Peter (Stepney) Short, Rt.

Hn.


E. (N 'c' tie-on-Tyne, C.) Short, Mrs.

Renee(W'hampton,N.E.)

Silkin, John (Deptford) Silverman, J ulius (Aston) Silverman, Sydney (Nelson) Skeffington, Arthur Slater, M rs.

Harriet (Stoke, N .)

Small, William Smith, Ellis (Stoke, S.) Snow, Julian Solomons, Henry Sosk ice, Rt.

Hn.

Sir Frank Steele, Thomas (Dunbartonshire, W .)

Stonehouse, John Stones, William Strauss, Rt.

Hn.


G. R. (Vauxhall) Summerskill, Dr. Shirley Swain, Thomas Swingler, Stephen Symonds, J .

8 .

Tavernc, Dick T aylor, Bernard (Mansfield) Thomas, George (Cardiff, W .)

Thomas, lorwerth (Rhondcla, W.) Thornton, Ernest Tinn, James Tomney, Frank Tuel<, Raphael Urwin, T. W. Varley, Eric G .
Wainwright, i::dwin Walden, Brian (All Saints) Walker, Harold (Doncaster) Wallace, George Warbey, William Watkins, Tudor Weitzman, David Wells, William (Walsall, N.) White, Mrs. Eirene Whitlock, William Wigg, Rt.

Hn.

George Wilkins, w. A. Willey, Rt.

Hn.

Frederick Williams, Alan (Swansea, W .)

Williams, Albert (Abertillery) w illiams, Mrs. Shirley (Hitchin) Williams, W. T. (Warrington) Willis, George ( Edinburgh, E .)

Wilson, Rt.

Hn.
Wilson, Rt.

Hn.

Harold (Huyton) Wilson, William (Coventry, S.) Winterbottom, R. E. Woodburn, Rt.

Hn.

A. Woof, Robert Wyatt, Woodrow Yates, Victor ( Ladywood) Zilliacus, K. TELLERS FOR THE AYES: M r. Syduey Irving and Mr. George Rogers.

NOES Agnew, Commander Sir Peter Alison, Michael (Barkston Ash) Allan, Robert (Paddington, S.) Allason, James (H em~I Hempstead) Amery, Rt.

Hn.

Julian Anstru ther•Gray, R t .

Hn.


Sir W , Astor, John Atkins, Humphrey Awdry, Daniel Baker, W. H. K. Balniel, Lon.I Barber, R t .

Hn.

Anthony Barlow, Sir John Batsford, Brian Beamish, Col .

Sir Tufton Bell, Ronald Bennett, Sir Frederic ( Torquay) Bennett, Dr .

Reginald (Gos & Fhm) Berkeley, Humphry Berry, Hn.

Anthony Bessell, Peter Biggs-Davison, John Birch, Rt.

Hn.

Nigel Black, Sir Cyril Blal1er, Peter Bossom, Hn .

Clive Bowen, Rotleric (Cardigan) Box, Donald Boyd-Carpenter, Rt.

Hn.
Hn.

J. Boyle, Rt.

Hn.

Sir Edward Brewis, John Brinton, Sir T atton Bromley•Davenport,Lt-Col -Sir Walter Brooke, Rt.

Hn.

Henry Brown, Sir Edward (Bath) Bruce-Gardyne, J. Bryan, Paul Buchanan-Smith, Alicl, Buc k1 Antony Bullus, Sir Eri~ B~rden, F .

A. Butcher-, S ir H erbert Buxton, Ronald Campbell, Gordon Carlisle, Mark Ca rr, Rt.

Hn.

Robert Cary, Sir Robert Channon, H. P. G. Chichester-Clark, R .

Clark, Henry (Antrim, N . )

Cla rk, William (Nottingham , S.) Clarke, Brig.

Terence (Portsmth, W .)


Cole, Norman Cooke, Robe rt Cooper, A. E. Cooper-Key, Sir Neill Cordlt, John Corfield, F. V. Costain, A. P .

Courtney, Cdr.

Anthony Craddock, Sir Bc,esford (Spclthorne) Crawley, Aidan Crosthwaite-Eyre, Col. Sir Oliver Crowder, F. P .

Cunningham, Sir Knox Curran, Charles Daikeith, Earl of Dance, James· Davies, Dr. Wyndham (Perry Barr) d ' Avigdor-Goldsmid, Sir Henry Dean, Paul Deedes, Rt.

Hn.

W. F. Digby, Simon Wingfield Dodds-Parker, Douglas Doughty, Charles Douglas-Honie, Rt.
Hn .

Sir Alec Drayson, G. B .

du Cann, Rt.

Hn.

Edward Eden, Sir John Elliot, Capt.

Walter ( Carshalton) Emery, Pe ter Erring ton, Sir Eric Eyre, Reginald Farr, John Fell, Anthony Fisher, Nigel Fletcher-CookeJ Charles (Darwen) Fletche•-Cooke, Sir John ( S'pton) Foster , Sir John Fraser,Rt.

Hn.

Hugh(St'flord & Stone) Fraser, Ian (Plymouth, Sutton) Galbraith, Hn.

T .
T .

G. D. Gammans, Lady Gardner, Edward Gibson -Watt, David Giles, Rear-Admiral Morgan Gilmour, Ian (Norfolk, Central) Gilmour, Sir John (East Fife) Glover, Sir Douglas Glyn, Sir Ri chard Godber, Rt.

Hn.

J .

8.

Goodhart, Philip C.oodhew, Victor Gower, R aymond Grant, Anthony Grant-Ferris, R .

Gresham -Cooke, R. Grieve, P ercy Griffiths, Eldon (Bury St. Edmunds) Griffiths, Peter (Smethwick) Grirnond , Rt.

Hn.
Hn.

J. Gurden, Harold Han, John (Wycombe) Hall-Davis, A. G. F. 213 I' inance Bill- 10 MAY 1965 Second Readi11g 214 Hamilton, Marquess of (Fermanagh) Hamilton, M. (Salisbury) Harris, Frederic (Croydon, N. W .)

Harris, Reader (Heston) Harrison, Brian (Maldon) Harrison, Col. Sir Harwood (Eye) Har vey, Sir Arthur Vere (Maccles'd) Harvey, John (Walthamstow, E.) Harvie Anderson, Miss Hastings, Stephen Hawkins, Paul Hay, John Heald, Rt.

Hn.

Sir Lionel Heath, Rt.

Hn.


Edward Hendry, Forbes Higgins, Terence L. Hiley, Joseph Hill, J. E. B.

(S .

Norfolk) Hirst, Geoffrey Hobson, Rt.

Hn.

Sir John Hogg, Rt.

Hn.

Quintin Hooson, H. E. Hopkins, Alan Hordern.

Peter Hornby, Richard Hornsby•Smith, Rt.

Hn.

Dame P .

Howard, Hn.

G. R. (St. Ives) Howe, Geoffrey (Bebington) Hun t, John (Bromley) Hutchison, Michael Clark l remonger, T .

L. Irvine, Bryant Godman (Rye) Jenkin, Patrick (Woodford) Jennings, J. C. Johnson Smith, G .
(East Grinstead) Jones, Arthur (Northants, S.) Jopling, Michael Jo scph 1 Rt.

Hn.

Sir Keith Kaberry, Sir Donald Kerby, Capt.

Henry Kei"'r, Sir Hamilton (Cambridge) Kershaw, Anthony Kilfedder, James A. Kimball, Marcus King, Evelyn (Dorset, S.) Kirk, Peter Kitson, Timothy Lagden, Godfrey Lambton, Viscount Lancaster, Col. c. C. Langford- Holt, Sir John Legge- Bourke, Sir Harry Lewis, Kenneth (Rutland) Litchfield, Capt.

John Lloyd, Rt.

Hn.


Geoffrey (Sul ' nC 'dfield) Lloyd, Ian (P'tsm'th, Langstone) Lloyd, RI.

Hn.

Selwyn (Wirral) Longbottom, Charles Longden, Gilbert Loveys, Walter H. Lubbock, Eric Lucas, Sir Jocelyn McAdden, Sir Stephen Mackenzie, Alasdair(Ross&Cromarty) Mackie, George Y.

(C' ness & S'land) Maclean, Sir Fitzroy Macleod, Rt.

Hn.

Iain McMaster, Stanley McNair-W ilson, Patrick Maitland, Sir John Marples, Rt.

Hn.

Ernest Marten, Neil Mathew, Robert Maude, Angus Maudling, Rt.

Hn.
Hn.

Reginald Mawby, Ray Maxwell-Hyslop, R. J. Maydon, Lt.-Cmdr.

S. L. C. Meyer, Sir Anthony Mills, Peter (Torrington) Mills, Stratton (Belfast, N.) Miscampbell, Norman Mitchell, David Monro, Hector More, Jasper Morgan, W. G. Morrison, Charles (Devizes) Mott•Radclyffe, S ir Charles Munro-Lucas-Tooth, Sir Hugh Murton, Oscar Neave, Airey Nicholls, Sir Harmar Nicholson, Sir Godfrey Noble, Rt.

Hn.

Michael Nugent, Rt.

Hn.

Sir Richard Onslow, CranJey Orr, Capt.

L .

P .


s. Orr-Ewing, Sir Ian Osborn, John ( Hallam) Osborne, Sir Cyril (Louth) Page, John (Harrow, W .)

Page, R. Graham (Crosby) Pearson, S ir Frank -~Clitheroe) Peel, John Percival, Ian Peyton, John Pickthorn, Rt.

Hn.

Sir Kenneth Pike, Miss Mervyn Pitt, Dame Edith Pounder, Rafton Powell, Rt.

Hn .

J. Enoch Price, David (Eastleigh) Prior, J. M. L .

Py m, Francis Qucnnell, Miss J. M. Ramsden, Rt.

Hn.

James Rawlinson, Rt.

Hn.

Sir Peter Redmayne, Rt.

Hn.


Sir Martin Rees•Davies, W. R .

Renton, Rt.

Hn.

Sir David Ridsdale1 Julian Roberts, Sir Peter (Heeley) Ro bs on Brown, Sir W imam Rodgers, Sir John (Sevenoaks) Roots, William Russell, Sir Ronald St. John•Stevas, Norman Sandys, Rt.

Hn.

D. Scott•Hopkins, James Sharples1 Richard Shepherd, William Sinclair, Sir Ceorge Smith, Dudley(Br'ntf'rd & Chiswick) Smyth, Rt.

Hn.

Brig.

Sir ~ohn Soames, Rt.

Hn.


Christopher Spearman, Sir Alexander Speir, Sir Rupert Stainton, Keith Stanley, Hn.

Richard Steel, David (Roxburgh) Stodart, Anthony Stoddart-Scott, Col. Sir Malcolm Studholme, Sir Henry Summers, Sir Spencer Talbot, John E. Taylor, Sir Charles (Eastbourne) Taylor, Edward M .

(G'gow, Cathcart) Taylor, Frank (Moss Side) Temple, John M. Thatcher, Mrs. Margaret Thomas, Sir Leslie (Canterbury) Thomas, Rt.

Hn.

Peter (Conway) Thompson, S.ir Richard (Croydon,S.)


Thorneycroft, Rt.

Hn.

Peter Thorpe, Jeremy T iley, Arthur (Bradford, W .)

Tilney, John (Wavcrtree) Turton, Rt.

Hn.

R. H. "fweectsmuir, Lally van Straubenzce, W. R. Vaughan-Morgan, Ill. I-In.

Sir John Vickers, Dame :Je an Walder, David (High Peal<) Walker, Peter (Worcester) Walker.smith, Rt .
H n. Sir D eTek Walters, Dennis Ward, Dame Irene Weatherill, Bernard Webster, David Wells, John (Maidstone) Whitelaw, William Williams, Sir Rolf Dudley (Exeter), Wills, Sir Gerald (Bridgwater) Wilson, Ceotfrey (Truro) Wise, A. R. Wolrigc-Gonlon, Patrick Wood, Rt.

Hn.

Richard Woodhouse, Hn.

Christopher Woodnutt, Mark Wylie, N. R. Yates, William (The Wrekin) Younger, Hn.

George TELLERS FOR THE NOES: Mr. Martin McLaren and Mr. fan MacArthur.
Bill accordingly read a Second time and committed to a Com mittee of the whole House.

Committee Tomorrow.

215 Museum of London Bill 10 MAY 1965 [Lords]-Report Stage 216 MUSEUM OF LONDON BILL [Lords] As amended (in the Standing Com mittee), considered.

Clause 2.-(TRANSFER TO BOARD OF COL LECTIONS OF LONDON AND GUILD HALL MUSEUMS AND BENEFIT OF CERTAIN FUNDS.)

11.58 p.rn.
11.58 p.rn.

The Financial Secretary to the Treasury (Mr. Niall MacDermot) : I beg to move, in page 2, line 3, to leave out" Treasury", and to insert "Secretary of State".

Mr. Speaker : Order.

The House must I hope that be able to bear its business.

hon.

Members will bear that in mind.

Mr. MacDermot: Mr. Speaker, would it be convenient to discuss with that Amendment all the remaining Amend ments standing in my name?

They ail deal with virtually the same point.


Mr. Speaker : Yes, if the House so the Chair later o,J pleases.

might think fit to include them in one Question in so far as they group.

Possibly for Mr. MacDermot : T hese Amendments arise from the decision that Ministerial the arts should be responsibility transferred from the Treasury to the De partment of Education and Science.

That Department will undertake the functions which under the Bill as at present drafted would be undertaken by the Treasury.
In Committee I canvassed the possi bility that certain of these functions might be retained by the Treasury, but after considering the matter further it seemed better that they should all be transferred.

The one we had in mind that might be retained were those dealing with the con trol of salaries of staff, but, as the staff are not to be civil servants, and the new museum, as the House knows, will bl:!
jointly controlled by three authorities, the central Government, the Greater London the City of London, it Council, and seemed to us on the whole preferable that all the functions should be transferred.

T he Amendments therefore substitute for the words " Secretary of State " throughout, except in the "Treasury " case of one Amendment, where it is more convenient to rephrase the reference to the National Gallery and Tate Galkry Act, 1954.
There is no Amendment to Clause 1, which provides for six of the governors of the new museum to be appointed by the Prime Minister.

That power of appointment will remain, as in the case of other national museums and galleries.

In Committee I said that it was the in tention that the Amendment should be dealt with by the Transfer of F unctions Order, but in the event the time factor made this impossible, because the Order had to come forward before the Bill could get through its remaining stages.
12 m. Mr. James Ramsden (Harrogate): Neither my hon.

Friends nor I would wish to question the need for the Amend ment, but we might try to elicit a little more the Financial Secretary as to why the way in which he is seeking to amend the Bill differs from his intentions-as we understood them as expressed to us in Committee.

information from In Committee I asked the F inancial Secretary what would be the effect upon the Bill of the creation of the new post of Minister for the Arts.
I asked how it was proposed to give effect to the transfer of functions.

The hon.

and learned Member told the Committee that the Transfer of F unctions Order would take care of that, although at the time this matter was dis cussed in Committee the Order had not In the event the Transfer of been laid.

Functions Order had no reference to the matters with which the Bill is concerned, and the hon.
and learned Member was good enough to write me a letter to ex plain why he intended to proceed by way of amending the Bill rather than do what it was necessary to do through the Order.
I admit that when I got his letter-and it was courteous of him to wri te to me-- T wondered whether the reason for his change of plan was that it would not be as easy as he ait one time thought, in Committee, to do through the Order some of the things that he wished to do_ I asked him whether it would be possible, had he used the Transfer of Functions Order, <to retain in the Bill some of the functions with the Treasury and to allow others to pass to the Ministry of E duca tion.
He assured me that this would be quite possible, although it was a liHle difficult to see how effect could possibly 217 Museum of London Bill 10 MAY 1965 [Lords]- Reporl S!age 218 be given to that intention through the Order.

However, in the event-as I understand the Amendments-the Government seek to transfer all the functions.

I thought that the hon.

and learned Gentleman could have given the House a little more information why i,t had been decided to do this.
It struck all of us in Committee that it was his intention at that time to keep some of the functions with the Treasury.

He mentioned the interests of the Greater London Council and those of the Corporation of the City of London and said that they might be concerned about the method by which this was eventually to be done.

He gave us reason to think that they might also be con cerned about the desirability of some of remaining with the the I think that the House would Treasury.
like to know why it is that the hon.

and learned Gentleman has decided to make a clean sweep and transfer them all.

We should be obliged the Financial Secretary if he could clear this up.

functions to stage I have seen, in a previous incarnation, some of the politics which lie behind these museums, and they are very intriguing.

One might even go so far as to say that rhe politics of a museum are sometimes as intriguing as the exhibits on its shelves.
J am probably not very wide of the mark when I deduce in the Financial Secre tary's change of mind since the Com amount ot mittee manoeuvring behind the scenes and a certain amount of disagreement and, per haps, eventual compromise.
I think that the House would like to know what has happened, and whether all the parties concerned are satisfied with the outcome, and are satisfied with what will be the final result if we pass these Amendments - that is, the complete transfer to the Secretary of State for Education and Science of the functions concerned.

certain a a very large Vote.


It is something over £100 million- perhaps the Financial Sec retary could tell us exactly- and it is one which, in the normal course of events, comes under very close scrutiny year by year in the Treasury.

There are even occasions-there was a recent controver sial occasion-when the Vote is reduced.

I refer to the minor works expenditure.


What the House would like to be assured about-I am sure that this also applies to the Greater L ondon Council and the Cor poration of the City of London-is that this expenditure will not be prejudiced by being transferred to the Vote of the Secre tary of State for Education and Science.
I think that the House and those con cerned with the museum would like a very clear and explicit assurance that this expenditure, when the estimate has been made under Clause J 5, will be held and the global considered separately from total of the Vote of the Secretary of State.

I think that the House should have that assurance.

This next question may display my ignorance, but I am sure that the hon.

and learned Gentleman can enlighten me.


How is it that we know when we amend the Bill to read " Secretary of State " ins,tead of "Treasury " that the Secretary of State will be the Secretary of State for Education and Science?

I have beard it held constitutionally that all Secretaries of State are one and the same person, and the answer may be connected with that fact.
But as it is the Government's clear intention to make this matter the respon sibility of one specific Ministry, it would be interesting to know why that could not have been stated in so many words.

With those few words I sit down, and as far as I am concerned the hon.

and learned Member has leave to reply if he wishes to do so.

The hon.
The hon.

and learned Gentleman also owes the House an assurance over the financing of expenditure by this museum now that the Treasury's functions have I take passed to the Secretary of State.

it that, if these Amendments are passed, the Government's responsibility for find ing their share of the various expenses of the museum will no longer be borne on the Treasury Vote, but will have to be borne on the Vote of the Secretary of State.
The Secretary of State already has Mr. MacDermot: With your leave, Mr. Deputy-Speaker, and that of the House, I will seek to answer the ques for tions of the right hon.

Member Harrogate (Mr. Ramsden).

I sought to answer the first two in my few earlier remarks, but perhaps too brief.

I was asked, why are we doing the transfer by the Amendment rather than by the Transfer of Functions Order?

There is no mystery about it.

they were f 219 Museum of London Bill 10 MAY 1965 [Lords]- Report Stage 220 [MR.
MACDERMOT.]

It is simply that the Transfer of Func tions Order can bite only on existing legislation and, as this had not become an Act o.f Parliament, as we had hoped it might, before the Transfer of Func tions Order was laid before the House, it was impossible to make the transfer in that way.

I was asked why none of the func tions has been retained by the Treasury but all have been transferred when, as I indicated, we had been canvassing the possibility of retaining some under the Treasury.
Again, there is no mystery.

There may be dark politics behind museum matters, but if there are, they are so dark that in this case they have never come to light to me.

This decision is one to which the Treasury give whole hearted approval.

We thought that it would not be right for us to seek to retain the powers.

The Treasury have responsibilities for the control of the civil servants, and th is applies also to the pay and conditions of service of people in some national museums who are civil servants.
these cases were parallel we thought that we ought to retain the oowers in this case, but in fact it is not analogous.

The museum will be under tripartite control, and to show that this is tripartite control, it is probably better that we do not try to retain Treasury control of the staff.

Because I was asked about the financing of The hon.

Member for this museum.


Harrogate expressed the hope that it would not suffer in any way by being transferred to the Deoartment of Educa tion and Science in- the immensity of that Department's Votes.

He hoped that the needs of this museum would in no way suffer.

that assurance, apart from anything else for the simple reason that it is the intention that the Vote which covers this museum and other national museums will remain as a separate Vote.
They will not be confused with requirements and demands from education, and they will be submitted for consideration by the Treasury quite separately.

I can give him the The hon.

Member's final question was on the mystical unity of the Secretary I confess that this took me of State.
by surprise when I first encountered it, but it is happy to think that our con- stitution recognises this close unity which blends all Secretaries of State together into one person so that each can perform the functions of all.

In fact, it will be that incarnation of this united person which presides over the Department of Education and Science which will exer cise these functions, but as a matter of draftsmanship this is the right way to describe it.
12.15 a.m. for HarrogMe l Mr. Robert Cooke (Bristol, West): have one or two brief observations to make.

The hon.

and learned Mern ber for Deirby, Norlth (Mr. MacDermot) replied wiitib.

great charm to my right hon.


Friend (Mr. the Member Ramsden), but despite the oharm with wh ich •he replied, I hope he will agree tha!l, under the Amendments to Clause 15, it will be the Secretary of State for Educa tion and Science who will be disbursing a capital sum of £580,000 sought by the Museum of London and £100,000 per armum.

These seem to us to be very large sums of money indeed.

We support the proposal, but it will be part of the Arts F und and I hope the hon.
and learned Gentleman will be able to assure t,he House that it will not in any way mitigate against the proposals fo r increased funds for the arts, and indeed that the Gove,rnment have committed themselves in advance to this sum and ~hat any additional sums they find will be addi,tional to any sums mentioned in this Bill.

Amendment agreed to.

Clause 5 .-(POWER OF BOARD TO ACQUIR E AND DISPOSE OF OBJECTS.)
Mr. Robert Cooke : I beg to move, in page 3, line 45, to leave out from "col lections " to the end of line 2 on page 4.

Mr. Speaker : I think it would be con venient to discuss with this Amendment the next Amendment, in page 4, line 7 to leave out subsection ( 4).

Mr. Cooke: The object of this Amend ment really is to explore the Govern ment's mind and to see whether or not in fact the words that I am proposfog to leave out are superfluous.
It would appear that if, according to the word i11g of the Clause, the Board decided to dis pose of an object it is hardly necessary to include all t,hese words about the reasons 221 Museum of London Bill 10 MAY 1965 [Lords]-Report Stage 222 for so doing.

I hope the hon.

and learned Gentleman will see tha;t tihe Amendment which we propose makes a much tidier job of it.
to left The purpose of the second Amend- 1i1ent is to help the museum where it might find itself in a difficulrty if it had been left an object, perhaps long ago, which had no particular relevance in 1Jbe museum but which was tJhe museum or its predecessor on certain con ditions.

H might have been left an excel lent pair of sui,tes o.f Japanese armour, or something of that kind, on oondition that they were permanently displayed to bhe public.
While I would on every normal occasion defend the wishes of any bene factor, and say that they should be carried forward into the future, there are some benefactions which could i·n tihe future become an incubus.

Perhaps the Gov ernment had not thought a:bout this diffi culty when they prepared the Bill.

I hope that the hon.

and learned Gentleman will have something to say on the proposal that we should om~t sub section (4).

Mr. MacDermot: We have considered the matters which the hon.
Gentleman has raised, and I must advise the House to reject the Amendments.

I think there is quite an important point involved.

Tbe Clause as it stands is modelled on, though slightly wider than, the corre sponding provision of the British Museum Act of 1963-Section 5.

The powers which we conferred in the Clause as drafted are ones with which the present interim Board of Governors of the Museum of London are well satisfied, and they would not wish to see them widened.
The point at issue is whether the power of the Board to ·· sell , exchange, give away or otherwise dis pose of" any of the objects forming part of the collection should be an unrestricted, un limited power, or whether it shl ould be restricted in the words which the hon.

Gentleman suggests should be left out.

There are two restrictions.


The first is that they can dispose of them only if the object is either duplicated or is, for any other reason, in their opinion, not required for retention to collections ; and secondly if they have accepted the object subject to a trust or in relation condition, then they cannot dispose of it in a way which would conflict with the terms of that trust or condition.
The important point is ,that it might severely restrict the number of people who would be prepared to make gifts to the museum in the form of trusts or bequests, as is frequently done, if they felt that any condition which they wi:shed to impose might be disregarded at will by the Board.

There is no obligation on the museum to accept a donation if it thinks the conditions subject to which it is offered are too restriotive or too onerous.
that Once it is decided to accept them subject to the terms of a trust I think it would be regarded as a serious breach of faith if ,the museum did not adhere to the terms of the gift.

It This is a normal provision.

is modelled on that of the British Museum Act and is one which we should adhere to.
I respectfully suggest that, as drafted, the Board has got very wide powers to dispose of objects quite sufficient to its needs, namely that it is not required to retain unnecessarily duplicates or any thing which for any reason, it thinks is not the collections.

I suggest to the House that it is better to leave the matter as originally drafted.

retention required for in Amendment negatived.

Clause 7 .-(TRANSFER OF OBJECTS TO AND FROM OTHER ORGANISATIONS.)
Amendment made: In page 4, line 26, leave out from " which " to first " that " in line 27 and insert : " it may be directed, under section 3(1) of that Act,".-[Mr.

MacDermot.]

Mr. Robert Cooke : I beg to move, in page 4, line 32, at the end to insert: " or any other institution with the approval of the Secretary of State for Education and Science".
T:he first subsection of Clause 7 is long and complicated, and it seemed to me that it might help the London Museum if it had the power ,to lend to other in stitutions with the approval of the Secre tary of State for Education and Science.

This may seem a strange course of reasoning, having said some rather un kind things about the museum having been transferred to irts Department at all.

223 Museum of London Bill 10 MAY 1965 Ways and Means 224 [MR.

COOKE.]
COOKE.]

at an earlier stage in t!he Bill ; but if the Secretary of State for Education and Science is to take considerable responsi bilities, and we have arranged for his name to appear in a number of places, it would seem that if there is any difficulty or any loan whioh the Museum of London would not be empowered to mal<e by the Bill as drafted, perhaps this Amendment would be worth while.
I have not been able to discover in the Act mentioned in subsection (1) that the museum does have the power to lend to any other institution, and I hope that the right hon.

and learned Gentleman will be able to explain the position to our satisfaction or, if he cannot, that he will accept the Amendment.

Mr. MacDermot : The purpose of the Oause is to give to the Museum of London the power to transfer objects to other national museums or galleries.
The proposed Amendment would enable the museum to make transfers to any other institution if the Secretary of State ap I do not know if the hon.

proved.

Gentleman has any specific types of in stitution in mind.

His wording is ex ceedingly wide and would allow transfer to a lunatic asylum, or a fire brigade, or a Conservative club, or all sorts of in stitutions.

However, I imagine that what he has in mind is more likely to be a provincial museum or something of that character.
The practice up to now has been for national museums to confine their power of permanent transfer to other national I do not think there is any collections.

good reason, really, to depart from that in this case.
It might be that one could envisage circumstances in which, cer tainly for a time, even a long time, the museum might want to loan an object to a provincial museum, but it will have complete power to do that under Clause 6, under which the power to Joan is under no restriotion as to time, and ohe museum could make a loan of indefinite I think length to a provincial museum.

that <that is sufficiently elastic, and it is probably better to leave the power as it is.

Amendment negatived.


out and Clause 9.-(EMPLOYMENT OF STAFF.)

Amendments made: In page 5, line 22, leave insert "Treasury" " Secretary of State " ; line 25, leave insert "Treasury " " Secretary of State " ; line 41, leave insert "Treasury " "Secretary of State" ; in page 6, line 9, leave insert "Treasury" "Secretary of State ".-[Mr.

MacDermot.]

and and and out out out in in Clause 13.-(POWER OF TREASURY TO MAKE GRANTS FOR FURNITURE AND EQUIPMENT.)
Amendment made: In page 8, line 28, leave insert "Secretary of State ".-[Mr.

MacDermot.]

out "Treasury " and Clause 14.-(APPLICATION OF MONEYS RECEIVED BY THE BOARD.)

Amendments made: In page 8, line 40, leave insert "Treasury" "Secretary of State"; in page 9, line 5, leave insert "Treasury" "Secretary of State ".-[Mr.

MacDermot.]

and and out out Clause 15.-(FINANClNG OF EXPENDITURE OF BOARD BY CORPORATION AND REIMBURSEMENT BY TREASURY AND GREATER LONDON COUNCIL.)
in out out and Amendments made: In page 9, line 17, insert leave "Treasury" " Secretary of State" ; line 28, leave insert "Treasury " line 38, "Secretary of State " ; leave insert "Treasury " " Secretary of State " ; line 42, leave insert "Treasury" "Secretary of State ".- [Mr.

MacDermot.]

Bill read the Third time and passed, and and and out out in in with Amendments.

WAYS AND MEANS Considered in Committee.


[Sir SAMUEL STOREY in the Chair] ANCHORS AND CHAIN CABLES Resolved, That it is expedient to authorise the payment into the Exchequer of any fees required to be so paid by any Act of the present Session to make new provision in the Anchors and Chain substitution Cables Act 1899.-[Mr.

Mason.]

Resolution to be reported.

Report to be received this day : for Committee to sit again this day.
225 Scotland (Dairy Farmers) 10 MAY 1965 Seo/land (Dairy Farmers) 226 SCOTLAND (DAIRY FARMERS) of the falling incomes of dairy farmers, and in page 18 the Report states: Motion made, and Question proposed, That this House do now adjourn.-[Mrs. Harriet Slater.]

11.29 p.m. to Mr. Hector Monro (Dumfries): It is an early hour to be doing the milking, and T am grateful the Minister of State for coming here to reply to this l welcome this opportunity to debate.
discuss the problem of dairy farms in Scotland, a section comprising a quarter of the total agricultural output of the country and in which profits and con fidence have been declining rapidly.

This problem vitally affects my consti tuency of Dumfries.

It has the third largest number of dairy farms in Scot land, and, with GaHoway, is the largest mi,lk producing area in Scotland, both in numbers of farms and in output in gallons.
Naturally, and very correctly, there is grave concern at the fu1ure of milk, and this is shared by farmers, farm workers, merchants and the creameries.

Neither must it be forgetten that a profitable agriculture- and please note that I say " profitable" and not "prosperous ", because all that farmers expect is a fair return on their capital-is of vital impor tance to a rural community.
The shop keepers in the towns, the engineers and tradesmen who supply the goods and services, soon feel the pinch if agricul ture falls on hard times, and that moment is coming now.

There is no need to overstate the case - the strength and honesty of it are obvious to all, except, perhaps, to the I want to bring out two party opposite.

themes ; the trend of production and the falling number of producers and the very serious loss of profitability.
I shall use a few facts from the Soottif;h Milk Marketing Board, the National Farmers' Union of Scotland, and the West of Scot land Agricultural College.

The Minister may well say that these are interested parties and, of course, they are, but it is difficult to find anyone who knows any thing about milk who is not an interested party.

One exception might be the Depart ment of Agriculture, and its Report pub lished last month gives two interesting In page 10 we read points about milk.
little to sales continued "Total production of milk showed liquid change, while increase."

This is surely a climate which should enable the Government to help the dairy farmer.

Both the Chairman of the Scottish Milk Marketing Board and the Chairman of the Milk Committee of the N.F.U.

of Scotland-two men who have done an immense amount for agriculture in Scot land and who are certainly acknowledged experts on milk production-have con stantly given the Government warning about the future output of milk.
Only last week, the Chairman of the Milk Committee of the N.F.U.

of Scotland said: "The Minister might have to listen to an the public far more clamant frus trated dairy outcry from than any yet hea rd farmers."

from What are the trends?

The Ministei may make much of the fact that there has been a slight increase in milk pro duction during recent months, but last year was a poor production year, with a bad harvest and a bad hay time, so it is not surprising that the figures are slightly better this year.
But it is im portant to note that the rate of increase is declining sharply.

This is particularly so in Scotland.

Production in the Scottish Milk Marketing Board area in March, 1965, was 4 per cent.

up on March, 1964, but in April the increase was only 2 per cent., and the Board is anticipating no increase at all in May.

With the cold and wet weather we have been having in the last week or so in Scotland, I think that their forecast is likely to be correct.
There seems to be no justification for the optimism shown by the Minister of Agriculture.

This falling trend will do nothing to correct the disappointing share of the United Kingdom butter and cheese market which producers command, and may eventually cause unemployment in the creameries of Scotland.

The un settled conditions of manufacturing are serious.

Scottish butter and cheese has sometimes been unobtainable, and brand names lose their impact.
At the same British products has substantially creased dairy time, this scarcity of in This cannot imports.

227 Scotland (Dairy Farmers) IO MAY 1965 Scotland (Dairy Farmers) 228 [MR.

MONRO.]

please the Chancellor.

There are now 68,000 tons of dairy products in store, compared with 39,000 tons a year ago.

Perhaps the Minister will tell us why manufactured products are being cur tailed through insufficient milk, yet im ports that affect our balance of payments are being encouraged?
I hope that the Minister will now accept that the trend is now downwards, and that, coupled with the rising population, it must cause It will be rectified only by a concern.

fairer financial return and a restoration of confidence.

Let us take profits over the last six years.

As I have been critical of my own party from time to time regarding its milk and hill farming policies, I am entitled to say what I want to say now on these problems.

loss to dairy farming.


On The latest figures from the West of Scotland College show a steadily increas ing the smaller farms where the average herd is 30, allowing for the value of the work done by the farmer and his wife, in the last six years net results from carefully costed farms show these figures: a profit of £158, a profit of £230, a profit of £31, a loss of £12, a loss of £267 and a loss of £150 per annum.

That is a most dis tressing state of affairs for the smaller farmers of Scotland.
T his year with the wage award-all farmers would gladly pay as much as they can afford to their increases for fuel tax, Bank loyal staffs- Rate, National Health contributions, In come Tax-if a profit is made on which tax is paid- electricity charges and the savage increase in tax for farm vans of 1 ton, which has gone up under the Bud get by £6 15s.

compared with only £2 15s.

for private cars, there will be greater losses for the small and m edium farms.
T he Price Review White Paper brings out the fact that Scotland is adversely affected in comparison with England and Wales.

In England and Wales farms of under 150 acres showed a profit in 1962-3 of £902 and in 1963-4 a profit of £964.

This was before the allowance for the farmer and his wife.

In the same years in Scotland the profit was £527 and £482, about half that of England and Wales.

The differential deteriorated by £100 a year in those two years.
Can the Minis ter explain why Scotland is in a worse position and lags behind England and Wales?

T he Price Review shows that dairy farm incomes are falling a nd in Scotland they are falling much faster than in Eng land and Wales.

Why is this?

All dairy farmers in Scotland would like to know why they are falling behind.

Milk pro ducers were, I believe, like the National Farmers' Union, hoping for 3d.

a gallon this year.
a gallon this year.

It is quite wrong for the Minister or the Under Secretary to say I should like that they expected 6d.

the Minister to confirm that the National Farmers' Union did not ask for 6d.

The award of ld., or 0·6ld.

in fact, will pro duce only £70 to £75 on each farm.

The financial squeeze is inevitably reflected in the number of dairy herds in Scotland.

In the year ended March, 1965, the Scot tish Milk Marketing Board had a loss of 300 herds- nearly 5 per cent.

compared with 3·8 per cent.


in 1964 and 2.5 per cent.

in I 963.

T his indicated an increas ing trend away from milk production.

During the first three months of 1965 no fewer than 61 herds disappeared com pared with 45 and 40 in the previous two I grant that existing farms are years.
putting on more cows in an effort to halt diminishing returns, but the rate of decline is increasing, particularly among smaller farmers and most markedly in the east of Scotland where there is a slightly greater alternative.

T his rate would be quicker still but for the fact that the Government encourage no alter native.

Hill men are equally hard up, and pigs, potatoes and grain receive dis incentives.

Where is the farmer to turn for profit if he leaves milk production?
Dairymen are reluctant to dispose of valuable capital equipment.

A pipeline milking system, a bulk tank or a parlour installation, may cost £2,000, and one third of the Scottish Milk Marketing Board farms have bulk tanks.

T his is, I think, an example of how Scottish dairy farmers are prepared to provide the best possible equipment to produce the highest quality milk.

But the incentive to install this new equipment is receding very fast indeed.
Another point tha t uhe Minister might clarify is the prominence that the Minis teir of Agriculture has given to the £ 11 million that milk producers will receive tlh:is year.

One penny on milk equals £9 million.


Anything extra will derive 229 Scotland ( Dairy Farmers) 10 MAY 1965 Scotland (Dairy Farmers) 230 from 'an incr,ease in the standard quantity carrying the full guara:nteed price and the farmers' pocke-ts only can reaoh through increased liquid sales, which will be done only by efforts through the Milk Marketing Boards in tihe three countries.

I now want to say a word on winter keep.


Many farmers in various parts of Scotland, in the south-west, the north east, the east and in Lanarkshire, have been unable to obtain winter keep because their dairy enterprise provides more than I know 40 per cent.

of the farm ourtput.

that the Department of Agriculture and the Ministers themselves have bent over b ackwards to help these farmers.
But one suggestion that I have heard-and which I pass on to the Minister to help him to allow the upland dairy farmers into the win.ter keep scheme-is chat the dairy farme,r should put all his dairy cows to a beef bull to produce beef stores which are so urgently wanted.

Tf that were done.

there might be some compromise to aHow these upland dairy farmers, often producing milk in areas wh0re it is needed for the liquid market.

in small towns and so on, into the winter keep scheme.
To sum up, we have had a steadily fall ing Exchequer grant to agriculture.

In 1962 it was £342 million .

in 1963 £309 million.

in I 964 £293 mi]lion.

and this year we expeot £269 million.

Milk pays for itself; yet the Governmernt are doing their best to cause irreparable damage to the dairy i,ndus,try.

We have a situat ion in which milk costs less than lemonade.

Farmers are going out of produotion fast a-nd ·the GovernmeOlt are hammering agriculture with taxation and rising costs.
~here is a complete lack of desire to see the farmers' and farm workers' point of view either at meetings or, as far as I can see, at dinner parties at No.

10.

What is the Minister going to do to help Scottish dairy farmers?

Can we have a special review?

We hear not, but I hope tihat the Minis>ter of Staite might give us a little hope tonight.

The guaranteed price is utterly inadequate to match the Government pledges under the 1947 Aot and at the election.
In short, the Government are like a wheelbarrow.

It is a useful implement but it has to be pushed, and I should like to start the pushing tonight.

12.44 a.m.

The Minister of State, Scottish Office (Mr. George Willis): The hon.

Member for Dumfries (Mr. Monro) has made his case in not too moderate terms, and we ought to get the picture right to begin with.

I certainly do not accept the hon.

Member's accusations that we have done irreparable damage and that we are hammering agriculture.
This might read quite well in the hon.

Member's local Press, bUJt it simply is not true.

the When we consider the dairy industry, we have to remember that its problems are not new.

They existed for many years during the previous lifetime of Government.

The present Government have been in office for only six months.

During 12 years of Tory Government, up to last year, as both my right hon.

Friend the Minister of Agriculture and my right hon.
Friend the Secretary of State for Scotland have told the House, and the Secretary of State has the hon.

Member, the increase in the guaranteed price was only 2d.

told Mr. Anthony Stodart (Edinburgh, West): For the sake of the record, surely the hon.

Gentleman is not claiming that in the last 12 years the price of the guarantee increased by only 2d.
Mr. Willis: According to my figures, that is roughly correct, so that the present Government have done half as much in six months to help the dairy industry, at least with the guaranteed price, as the previous Government did in 12 years.

I have some of the figures, but I do not want to weary the House by quoting them.

They have been given in the House before and what I have said is roughly correct.

I cannot altogether accept the hon.


Member's picture of an industry suddenly changing from a prosperous industry to one th31t is in the midst of a grim de pression.

Of course there have been problems in the dairy industry, and they are not of recent creation.

They have been going on for some time.

Previous Governments-and the hon.

Member for Edinburgh, West (Mr. Stodart) had some the thing problems in the way they thought fit.

I will probably say something about that presently.
I do not want simply to score political poin,ts, but I thought that I had better say that in view of what the hon.

to do with this-tackled 231 Scotland (Dairy Farmers) 10 MAY 1965 Scotland (Dairy Farmers) 232 [MR.

WILLIS.]

Member for Dumfries has said, so that we may get the picture right.

Mr. Alick Buchanan-Smith (North Angus and Mearns): Was it not my hon.

Friend's case that costs have risen in relation to price and that any change in price must be related to costs?
The figures quoted from recent college cost ings indicate that costs have risen at a greatly increased rate in recent years, and particularly over the last six months.

That was my hon.

Friend's whole case.

Mr. Willis : They also went up during the previous 12 years.

I have already given the figure of what hon.

Members opposite did during those 12 years to meet that.

However, raither than score points, I should like to look at the present state of the industry and try to assess its future prospects.
Clearly, the most important factor by which to judge the viability of the industry is the overall level of pro duction.

After the short-term decline in production during the past two years, all the evidence seems to indicate that production bas again taken an upward turn.

Production in Scotland during the first four months of tlhis year shows a fairly significant improvement on last year and this conforms to the pattern of produc tion throughout the United Kingdom as a whole.
Certainly, iit: does not suggest that the industry is falling away in grim I understand that in their pro decline.

visional pricing arrangements for the current year, the boards have allowed for a further increase in production.

Much has been made of the decline in the number of producers over recent years.

This creates difficulties, particu larly for the smaller producers.
The burden of small-scale milk production, wirth all that it entails in times of long working hours, is bound to bear increas ingly heavily upon this type of producer.

Nevertheless, we believe tba,t the help that we have given under the Small Farmer Scheme and which we will be giving by way of improved credit facili ties and more co-operation will do much to assist.

In ·the last few years rthere has been rationalisation and greater speciali sation of production.
By and large, dairy farmers are now operating in a much larger way of business, with all the economic advantages that go with that.

The average size of the dairy herd in Scotland has been increasing steadily for some time, although there are, of course, fairly wide variations from one parit of the country to another.

In 1955 the aver age size was only about 35 cows.

Today it is nearly 45 cows per herd.


Yields per cow have also been increasing as the result of improved management tech niques, subject to seasonal factors.

Last year the increase was substantial.

Tak ing these factors together, we have the position where, despite the decline in the number of producers and a small , but probably temporary, fall in the size of the total milk herd, the general level of production is being maintained.
Most dairy farmers are, of course, much more interested in the size of their monthly milk cheques than in abstract forecasts of production levels.

The in dustry is now in a healthier state in this respect t han it was a few years ago, when production was expanding at a much faster rate.

Taking the last two Review awards together, the guaranteed price has been increased by 10 per cent.

Sir John Gilmour (Fife, East) : Why does the hon.

Gentleman want to take the last two Reviews together?
Is it not true that since the last Price Review costs to the dairy farmer have increased, including the licence duty for vehicles'l Why does he want to take the two Reviews together?

Mr. Willis : We are looking at the picture over t,he past years.

Sir J. Gilmour: Answer my question.

Mr. Willis : We are raking a number of factors concerning the industry in the lal'>t year or so, so tihat we get a picture of whait: is taking place within the in dustry.
One cannot get a picture of bhe industry by saying, " This is happen ing today".

Only by looking at a period of time can one get a clear picture.

!

said, taking into account the prices in vhe industry, tihat the guaranteed price has been increased by IO per cent.
in the fall Last year the increase in tJhe guaranteed price, combined wi0tih the amount of milk going into the less re munerative manufacturing market and a,Jso some improvement in manufactur ing prices generaMy, resulted in a sig nificant increase in the producer's price and a recovery in dairy farm incomes.

233 Scotland (Dairy Farmers) 10 MAY 1965 Scotland (Dairy Farmers) 234 For example, producers in t:he area of the main Scottish Board received, on l¼d.

average over uhe year, about 3.s.


a gallon, compared wiit!h 2s.

1 Id.

in tJhe preceding year and 2s.

10d.

in 1962-63.

I regret having to go back to previous years, but tlhis is t!he only way to geit: a picture of what is h appening.

Last year's price was the highest producer price yet paid by t•he board.

Although the board ,has provided for some further increase in produotfon this year, which means some dilution of the Review award of ld.
a gaHon, tthe pro dlucer's return slhould be still higher t>han J,ast year.

Ml :this demonstrates· the advantages to ·!

:he producer of a more s1aible rate of growth in the industry.

Mr. Buchanan-Smith : Would tJhe hon.

Gentleman relate those stMistics and prices to 1lhe increases in prices whioh producers have had to bear in the same period?

Mr. Willis : I said that the producer's return sihould be sttll higher bhan last I am trying to answer some of the year.

ques,tions I was asked.


I do not know wihetiher or not hon.

Gentlemen opposite want to hear my answers.

Since they raised r~his ma-tter I imagine t.lhat they If they will just hold want a reply.

t:hei r horses I wiM do my best to ans•wer the,i,r ques,tions.

I had just said that all that demon strates the advantages to the producer of a more stable rate of growth in the in I understand that the boards dustry.

themselves do not want to see a ny dramatic increase in production.
We for our part have to try to fix the guaranteed price on a level which will achieve broadly the proper balance of produc tion.

The hon.

Gentleman may not agree but the evidence seems to suggest that we seem to be getting this just about right.

Again, if one looks at dairy cow prices, there does not seem to be any evidence of any serious sense of frustration in the industry.
Both Ayrshire and Friesian cow prices are buoyant, and were a good deal higher last month than they were in the corresponding period of last year, so those who bought last month did not apparently take the view of the industry which has been expressed by hon.

Gentlemen opposite tonight.

Mr. Monro : Because there were fewer dairy heifers for sale.

J Mr. Willis : Prices were much higher.

They were not marginally higher, but substantially higher.
We must continue to look to the dairy herd to fulfil its subsidiary function of supplementing our beef supply.

What seemed to be one of the rather more depressing statistics contained in the ex cellent survey of the milk industry carried out by the Scottish board was the num ber of calves sold slink-100,000 a year - and I hope the hon.
Gentleman will agree that the measures we have intro duced at the recent review, including the alterations the Calf Subsidy Scheme, will serve as some incentive to producers to rear more calves for beef production.

to the remember The hon.

Gentleman asked about the I do not want to Winter Keep Scheme.

convey the impression that there is any In ready-made answer to this problem.

fact, I remember a speech made by the hon.


Member for Edinburgh, West, when he was Joint Under-Secretary of State for Scotland, when he vigorously defended the exclusion of upland dairy farmers from the Winter Keep Scheme.

I long reports in the I read them, as I always Scotsman.

the hon.

Gentleman read whatever says or writes, with avid interest.
The Government announced, however, in the Annual Review, their intention to conduct an urgent review of the more fundamental problems of the hill and upland areas, and this review is going on at the moment.

The question of the position of the upland dairies under the Winter Keep Scheme is bound to come up, but we cannot at the moment say what the outcome of our consideration will be.

The Scottish N.F.U.

will, of course, be consulted about this for its views in due course.

The hon.
The hon.

Gentleman raised the ques tion of the possible risk of a shortage of milk for the liquid market in the autumn and winter months when production tends to be at its lowest level.

These fears are not justified by the facts.

T aking Scot tish production by itself-and that is what the actual we are talking about tonight- " 235 Scotland (Dairy Farmers) JO MAY 1965 Scotland (Dairy Farmers) [MR.

WILLIS.)
WILLIS.)

reserve of milk available for the liquid market is of the order of 100 million gallons, or about 70 per cent.

of liquid requirements.

Even in the months of lowest production the reserve did not fall below about 35 per cent.

at any dme during the last two years when production was running at a rather lower level than in earlier years.
Even if one talks in terms of market-- the United Kingdom The Question having been proposed after Ten o'clock on Monday evening and the debate having continued for half an hour, Mr. DEPUTY-SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at one minute o'clock.

to One 236 liquid ~-~.....,.._.

____ : - .T - r~ -~~~ .


- - ; , "r---:- l WRITTEN ANSWERS TO QUESTIONS 2 Monday, 10th May, 1965 LAND AND NATURAL RESOURCES Forestry Commission (Estimates Committee's Report) 2.

Mr. Wingfield Digby asked the Minister of Land and Natural R esources if he has considered the Seventh Report the the Estimates Committee on of Forestry Com.mission ; and if he will make a statement.

· and I have taking accoun t of Mr. Willey : My right hon.
Friends the Secretaries of State for Scotland and Wales comprehensively reviewed the organisation of the Forestry Commission, the recommendations made by the Estimates Commitiee.

We found ourselves in wide agreement witb the Committee.

We pro pose a number of changes which are set out in full in our Observations on the Report of the Committee, which are, .

I understand, being published today.


Among other changes, we have decided that the Commission should be reconsti tuted so that in future fo ur of the statutory Commissioners should be full-time mem bers ; and that there should be a func tional reorganisation of the staff and work under these full-time members, with greater delegation from Headquarters.

The Chairman of the Commission, Lord Waldegrave, is in full agreement with our proposals.
To facilitate the reorganisa tion, be and also the other Commissioners have placed their offices at our disposal, and we are grateful to them.

I t I ~ I should like to take this opportunity of paying tribute to Lord Waldegrave, to whose work the development of the Com mission h as owed a great deal.

My right hon.

Friends and I hope to be able to announce the names of his successor and of the other Commissioners very soon.
Mr. Skeffington : This report on Land Use in Forestry and Agriculture is well advanced but no date can yet be given for its completion.

The i:eport will be made to my right hon.

· Friend the Secretary of State for Education and Science, but it will of course be available the Natural Resources Advisory Committee which bas been set up under Sir Dudley Stamp and which bas taken over the work of the Zuckerman Committee.

to Estuarial Barrage Schemes 11.


Mr. Chapman asked the Minister of Land and Natural Resources bow he pro poses to evaluate conflicting considera tions such as those of cheap and abundant water and amenity values for the purpose of reaching decisions about estuarial barrage schemes.
Mr. Willey : The evaluation of amenity and other social considerations, as against economic considerations, is a crucial qu·estion for contemporary society, and Sir Dudley · Stamp's Committee have agreed at my request to study this.

I shall be taking their advice into account wben, in consultation with my colleagues con cerned, I consider in due course the reports of the Water Resources Board on the feasibility of the Morecambe Bay and Solway Firth barrage schemes.

Land Prices 12.
Land Prices 12.

Mr. William Hamilton asked the Minister of Land and Natural Resources if he will make a s-tatement on the con tinued rise in land prices; and what steps he is taking to protect tJhe public interest in this matter pending legislation.

Natural Resources Technical Committee (Sub-Committee's Report) Mr. Skeffington : Over recent years very considerable profits have been made from rising land prices.
Between 1959 and 1964, the co~t of a site for a typical ~ew hous~ rose by at least 40 per cent.

m the mam " pressure areas " where the the housing shortage is mos,t acute.

The rise Minister of ~I:;and and Natural-Resources--in-tli.e-London area-and-parts of-the West when be expects the report from the Sub- Midlands is of course even greater.
The only way to deal with this grave social Committee of the Natural Resources, introduce as soon as problem Technical , Committee which is supple- menting the work of the Z uckerman possible our legislation to establish a Committee.

Land Commission.

5.


Mr. Wingfield Digby asked to is 3 Written Answers 10 MAY 1965 Local Authorities (Purchase of Land) Mrs. Renee Short asked the Minister of Lrund and Naitural Resources if he will introduce local authorities to purchase land at lower prices education pll["pOSes.

to enable legislation housing and for Mr. Willey : I shall be introducing legislation to set up a Land Commission a,nd to deal wi,llh the problem of land prices as soon as possible.
Water Resources (Desalination) Mr. Chapman asked the Minister of Land and Naitural Resources what are his plans for augmenting water resources by treating salt or brackish water.

Mr. Willey : Though desalination will not subst antially contribute for some time, I intend to see tha,t its potential for augmenting our water resources is fully investiigated.

As announced by my right hon.


friend llhe Minister of Tecbpology the Atomic Energy on 27t!h April, AuthoriJty are embarking on a programme of researah ood developmerut into methods of desru.ina:tion.

At the same time the Water Resources Board will be working on the problems associated with the dis tribution, and method and extent of use, of desalted water.
Their work, and 1lhat of the Auvbority and others in this fieJd, will be co-ordinated by a Committee which has been established for that purpose under the chairmanship of the Director of the Board.

PUBLIC BUILDING AND WORKS Official Cars 30.

Mr. Peel asked the Minister of Public Building and Works what were the numbers and makes of pool cars available to members of the Government during March 1964 and March 1965, respectively.
Mr. Boyden: In March 1964 out of a total fleet of 149 cars in London and 222 in the provinces, 34 cars were allocated to individual Ministers, and 10 were shared by Parliamentary Secretaries (and also Permanent Secretaries).

The makes of car were Austin Princesses and Humber Pullmans, Super Snipes, and Hawks.

Tn Written Answers 4 March 1965 the figures were 163, 218, 41, and 12, respectively.
House of Commons (Clocks) Mr. Costain asked the Minister of Public Building and Works if he is aware that the clocks in the various Committee Rooms and in public corridors in the House of Commons on Monday, 3rd May varied in the time indicated by as much as one minute ; and what steps be is taking to have this rectified.

Mr. Pannell: To the first part, No; to the second, the usual ones.

HOUSE OF COMMONS CATERING 36.

Mr. Rankin asked the hon.


Mem ber for Liverpool, Exchange, as Chairman of the Kitchen Committee, how many measures are obtained from a five-gill bottle of whisky in each of the various bars under the control of her Committee.

Mrs. Braddock : 32 measures are ob tained from the bottle of whisky which contains 26¾ fluid ounces.

37.

Mr. Rankin asked the hon.


Mem ber for Liverpool, Exchange, as Chairman of the Kitchen Committee, how many measures are obtained from a five-gill bottle of sherry in each of the various bars under the control of her Committee.

Mrs. Braddock : Sherry is bottled at six bottles to the gallon and is sold by the glass.

As it is customary to pour, rather than measure the wine, the contents of the glass must vary slightly.

On the average, 14 glasses to the bottle are obtained.

MINISTRY OF HEALTH Drugs 41.


Mr. Fisher asked the Minister of Health if he will publish the latest in formation on drugs which is being collected by the Dunlop Committee.

Mr. K. Robinson : Information as first received by the Committee from doctors relates to suspected adverse reactions to drugs and without further investigation is not a reliable indicator of risk.
Where the Committee considers it necessary to draw attention to any such risk they pre pare a considered statement for issue ; 10 MAY 1965 Written Answers 6 Written Answers s should such a statment recommend a warning to the public I would ensure that it was given the widest publicity.

Opticians Register (Corporate Bodies) Mr. Pavitt asked the Minister of Health bow many corporate bodies are included on the Opticians Register established under the Opticia11,s Act 1958.
Mr. K. Robinson : I understand from the General Optical Council, which has statutory responsibility for the Register, that the figure is 1,131.

Ophthalmic Practices (Corporate Bodies) Mr. Pavitt asked the Minister of Health how many ophthalmic practices providing National Health Service facili ties are operated by corporate bodies ; and what proportion of the total number of such practices this figure represents.

Mr. K. Robinson : 2,499 and 36 per the establishments at which cent.
of ophthalmic and dispensing opticians prac tice, at 31st December, 1964.

General Optical Council (Corporate Bodies) Mr. Pavitt asked the Minister of Health what representation is provided for corporate bodies on the General Optical Council.

Mr. K. Robinson : A person with an interest in a corporate body may be elected to the Council and the Companies Committee of the Council must include five persons appearing to the Council to represent the interests of corporate bodies.
Water Supplies (Fluoridation) Dr. Summerskill asked the Minister of Health what steps he is taking to encourage those local authorities, which have not already done so, to authorise the fluoridation of their water supplies where this is necessary.

Mr. K. Robinson : In January local health authorities were sent an up-to date edition of my Department's booklet setting out the main facts on fluoridation.
I am very anxious to see fluoridation extended, and I am considering bow and when further encouragement can best be given.

Joint Consultative Committees Mr. Lomas asked the Minister of Health if he will instruct hospital manage ment committees to set up joint consul tative committees inside each hospital.
Mr. K. Robinson : Hospital manage ment committees are aware of the recom mendation of the General Whitley Coun cil that joint consultative committees should be set up in all hospitals of suffi cient size, and I support the recommenda tion.

HOSPITALS New Hospital, Manchester asked 44.


Mr. Will Griffiths the Minister of Health whether he will give an assurance that in all new hospital building now under construction in the Manchester area, adequate provision will be made for refrigeration units to be attached to the operating theatres.

Mr. K. Robinson: Yes, where this is medically indicated.

Maternity Beds, Willesden 45.

Sir C. Osborne asked the Minister of Health if he is aware that 70 per cent.
of the maternity beds in Willesden were recently occupied by immigrant mothers ; if be will give an assurance that adequate facilities were available for indigenous mothers ; and if he will make a state ment.

Mr. Loughlin: No, figures are not kept of the numbers of beds occupied by immigrant mothers.

The admission arrangements seek to ensure that every mother who requires a maternity bed on medical or social grounds obtains one.
Hutted Hospitals Mr. Wallace asked the Minister of Health how many hutted hospitals are still in use in England and Wales; and where they are located.

Mr. K. Robinson : The term " butted hospital " is commonly used to describe a hospital in which the accommodation is of a simple form of construction, though The location of seventy such hospitals in • England and · Wales is shown below and there are about one hundred others in in brick.
frequently 7 Written Answers IO MAY 1965 Written Answers 8 Sidcup which a substantial part of the accom modation takes this form.

The con struction of many of these hospitals is such as will provide satisfactory accom modation for a number of years.
Ashington Brandon Durham Gateshead Hemlington Hexham (2) Newfield Northallerton North Shields Ormside Sedgfield Threlkeld Burford Oxford Stoke Mandeville Chertsey Horley Hydestile Bubwith Hull Mirfield Ripon Tad caster York Grimsby Immingham Laceby Lincoln Mansfield Market Rasen Nottingham Sheffield Abbots Langley Ashford, Middlesex.
Bedford Brentwood Ware Dartford (2) Maidstone Orpington Hayling Island Ringwood Salisbury (2) Sherbome Southampton Weyhill Weymouth Liskeard Birmingham Bromsgrove Malvern Shrewsbury Sutton Coldfield Manchester Aberbargoed Barry Bryncethin Chepstow (2) Ha verfordwest Llangefni Morriston Penley Pontygwaith Rhydlafar Ystrad Mynach RIVER JORDAN WATERS 49.
Mr. Fisher asked the Secretary of if he will State for Foreign Affairs initiate in the United Nations a proposal to end the River Jordan water dispute on the lines of the irrigation works which solved the Indus problem between India and Pakistan.

Mr. Padley : I do not think any useful purpose would be served by Her Majesty's Government an taking initiative of this kind at this stage.

SOMALIA (DIPLOMATIC RELATIONS) 50.


Mr. Brian Harrison asked the Secretary of State for Foreign Affairs what official approaches have now been made for restoring diplomatic relations Vol.

712 between the Republic of Somalia and Her Majesty's Government; and if he will make a statement.

Mr. Padley: No official approaches have been made by either Government.

For our part, we are prepared to resume relations without preconditions whenever the Somali Government are ready to do so.

MR. HEINZ HOMBURG 51.


Mr. Arthur Lewis asked the Secre tary of State for Foreign Affairs whether he is aware that Mr. Heinz Homburg has been officially invited by the White Fish Authority to attend this country for lectures ; and whether he will ensure that this man is granted the necessary travel documents.

Mr. Padley: I understand that Mr. Homburg has not been officially invited by the White Fish Authority to this country.
The issuing of temporary travel documents is the responsibility of the Allied Travel Office in Berlin and it would not be proper for me to anticipate their decision in any particular case.

DR. KLAUS GYSI 52.
DR. KLAUS GYSI 52.

Mr. Arthur Lewis asked the Sec retary of State for Foreign Affairs why Dr. Klaus Gysi was refused a travel docu ment to a,t,tend the International Book Fair in London ; and whether he wiH give an assurance ~hat no person will be re fused entry into Great Britain because of ~he objections of rhe West German Government.

Mr. Padley : J,t is contrary to prac,tice to disclose the reasons why a temporary travel document is refused by uhe Allied Travel Office in Berlin in any particular case.
Wirh regard to Vhe second part of tlhe question, the issue of travel docu ments to East Germans by the Allied Travel Office is governed by rules agreed by aH the North ktlantic Treaty Organi sation Allies, and a document would not be reifused s•imply as a result of objections by any one member Government.

CHINA (EXCHANGE OF AMBASSADORS) 53.


Mr. Freeson asked the Secretary of State for Foreign Affairs what steps have been taken by Her Majesty's Government 2K ~ ~ l ~ 9 Written Answers IO MAY 1965 to seek an exCihange of ambassadors between tibe United Kingdom and the People's Republic of China.

Mr. Padley: When my right hon.

Friend the President of the Board of Trade was in Peking in November, 1964, he told '!

!he Chinese that we wanted this exchange to be made, but rhe Chinese are stiM opposed.
U.S.S.R. (MR. GERALD BROOKE) 54.

Mr. Brooke asked t1he Secretary of State for Foreign Affairs what furbher action he has taken to bring assistance to Mr. Gerald Brooke, held prisoner by t>he Russians on no stated grounds ; and whether he will make a statement.

Mr. Padley: In response to representa tions from Her Majesty's Government the Soviet authorities permitted Her Majesty's Consul in Moscow to visit Mr. Bmoke on 7th May.
The Consul learned that the formal indictment against Mr. Brooke had not yet been formulated but bhe interview confirmed that the allega tions against Mr. Brooke related to in volvement in subversive activi,ties.

Mr. Brooke indicated ·fae pre- 1,iminary investigation was still in pro gress tJbe question of legal defence bad not arisen.

If this stage is reached Her Majesty's Consul will do what she can to advise and assis,t Mr. Brooke in making a'!

'rangements for his defence.


She has also arranged ito send reading matter and toilet articles to the Soviet authorities for transmission to him.

The House may be assured t>hat Her Majesty's Govern ment will continue to do everytihing they properly can to assisit Mr. Brooke.
that, since MANILA TREATY (REQUESTS FOR ASSISTANCE) Mr. Warbey asked the Secretary of State for Foreign Affairs if he will give an assurance that, in considering any request for assistance under the South East Asia Treaty, he will have regard to the extent to which the government to be assisted is upholding the principles of democracy, individual liberty and the rule of law, and is strengthening its free insti tutions in accordance with the Preamble and Article III of ·the Treaty.
Written Answers 10 Mr. George Thomson : Any request for assistance under the Manila Treaty would, of course, have to be considered in bhe light of the provisions of the Treaty and of the circumstances prevailing at the time.

DOMINICAN REPUBLIC (BRITISH SUBJECTS) Mr. Biggs-Davison asked the Secretary of State for Foreign Affairs whether he will make a further statement about the safety the of British Dominican Republic.
subjects in Mr. George Thomson : There have been no reports of any casualties among the British community in the Dominican Republic.

All British subjects who wished to leave have been evacuated.

The airport was opened on 5th May and any fur•bher evacuation can be by air.

Her Majesty's Charge d'Affaires reported yesterday that about 60 had left.
NOXIOUS GASES Mr. Biggs-Davison asked the Secretary of State for Foreign Affairs whether Her Majesty's Government will invite the sig na,tories of the 1923 Protocol to the Geneva Convention on the use of noxious gases to a conference in London in order to secure the full implementation of the Protocol, in view of the use of gas by Egyptian forces in the Yemen, contrary to international conventions.

Mr. Padley: No.

I do not believe this would serve any useful purpose.
NATIONAL FINANCE International Monetary Fund (Loan) Sir C. Osborne asked the Chancellor of the Exchequer what assurances he gave to the Finance Ministers of the six Euro pean Economic Community nations to secure their agreement to co-operate with the International Monetary Fund to meet Great Britain's demand for a further £500 million Joan ; if he will publish the plans of Her Majesty's Government submitted to International Monetary Fund, giving details of the British Government's objectives and figures, and the calendar for their achievement ; when he expects the 11 Written Answers 10 MAY 1965 Written Answers 12 these proposals will make Great Britain solvent ; what other measures he bas promised the foreign Finance Ministers he will take ; and if he will make a state ment.
Mr. Callaghan: I have not been in touch with the Finance Ministers of the Six E.E.C.

nations.

In the course of our approach to the I.M.F., and as partici pants in the General Arrangements to Borrow upon which the I.M.F.

is likely to call in order to raise some of the neces sary currencies we have had full discus sions with the I.M.F.

and with the mem bers of the G.A.B.


Following previous practice these discussions have covered the Government's economic policies as announced to the House in the Budget statement and subsequently ; and we have reiterated our aim to get most of the way towards closing the balance of payments gap this year and to complete the process in the course of 1966, as well as our readiness to modify the measures an nounced, one way or another, should the need arise.

It would be .
It would be .

contrary to the normal practice to publish details of these I have promised no other exchanges.

specific measures to anybody.

Export Rebate Scheme 55.

Mr. William Hamilton asked the Chancellor of the Exchequer what esti mate be has made of the effect of the export rebate scheme over the last few months.

Mr. MacDermot: No quantitative esti mate can be made.
I would expect that the rebate has already had an encour aging effect on our export trade, but that the full effect has not yet been felt.

Income Tax Mr. Neave asked the Chancellor of the Exchequer what percentage of total expenses under Schedule E allowed by the Commissioners of Inland Revenue for the Income Tax years 1959-60, 1960-61, 1961-62, and 1962-63 was attributable to the upkeep of yachts and the rents of fishing rights or grouse moors.

Mr. MacDermot: I regret this infor mation is not available.
convenient period allowed m respect of mortgage repayments.

Mr. MacDermot : About £125 million for 1964-65.

Mrs. Lena Jeger asked the Chancellor of ohe Exchequer if he will give the total amount of Income Tax relief in the last convenient period allowed in respect of resident house-keepers employed by widows or widowers.

Mr. MacDermot: About £3½ million for 1964-65.


Hire-Purchase Finance Companies · (Tax-free Loan Schemes) Mr. John Wells asked the Chancellor the Exohequer how many hire of purchase finance companies are operating tax-free loan schemes ; and what loss to the revenue he anticipates these schemes will cause in the last and current financial years, respectively.

Mr. Diamond : I regret ~hat this in formation is not available.
Erskine May Mr. Robert Cooke asked the Secretary to the Treasury whether he will make available to hon_.

Members on demand at latest the Vote Office copies of edition of Erskine May.

the Mr. MacDennot: No.

This is a matter in tJhe first plaoe for tlhe House authori ties, but I undersitand that copies are available for reference in the Library.

RAILWAYS Dumfries-Stranraer Line (Closme) 56.


Mr. Monro asked the Minister of Transport if he will give an assurance that all the alternative arrangements con tained in the order to close the Durnfries Stranraer railway line will be fulfilled before the closure of the line.

Mr. Tom Fraser : The responsibility for complying with the conditions of consent to closure rests with the Railways Board.
I understand that they are completing the relevant arrangements and I am confident that in this case, as in previous closures, the conditions will be strictly fulfilled.

Mrs. Lena Jeger asked the Ohancellor of the Exohequer if he will give the total amounit of Income Tax relief in the last Mr. Brewis asked the Minister of Trans port whether he will give an assurance that all the conditions laid down by his Vol.
712 2K2 /3 Wri1te11 Answers 10 MAY 1965 Written Answers 14 predecessor, when givmg his consent to the closure of the Stranraer- Durnfries railway, are being complied with.

Mr. Tom Fraser: I have nothing to add to the Answer I gave today to the hon.

Member for Dumfries (Mr. Monro).
TRANSPORT Divisional Road Engineer, Birmingham Mr. Talbot asked the Minister of Trans port whether he will state the names of the highway authorities within the juris diction of the Divisional Road Engineer, Birmingham ; what staff, technical and clerical, respectively, are contained in this office ; whether be is aware that authori ties throughout the Midlands are com plaining of the delays in this office in dealing with urgent traffic problems ; and if be will take action to divide the area, increase the staff, and generally to relax the detailed control of unimportant matter~ to highway authorities.
Mr. Tom Fraser: The area of the Divisional Road Engineer, Birmingham, comprises the highway authorities listed below.

The Divisional Road Engineer bas under his control a complement of 26 professional and technical staff and 27 executive, clerical and similar grades.

The main difficulty at present is shortage of technical staff.

Steps are being taken to increase numbers where necessary and possible.
The areas covered by our Divi sional Road Engineers are kept under review, as is the division of responsibility between the Divisional Road Engineers I see no and the highway authorities.

need to make any change in these two respects at present.

I have no evidence of widespread complaint about delays in this office, but I am having the position checked.

The following is the information:- County Councils Herefordshire.

Shropshire.

Staffordshire.

Warwickshire.

Worcestershire.


County Borough Councils Birmingham.

Burton-upon-Trent.

Coventry.

Dudley.

Smethwick.

Solihull.

Stoke on Trent.

Walsall.

West Bromwich.

Wolverhampton.

Worcester.

I ~- t Borough Councils Bewdley.

Bilston.

Bishop's Castle.

Bridgnorth.

Droitwich.

Evesham.

Halesowen.

Hereford.

Kidderminster.

Leamington Spa.

Leominster.

Lichfield.

Ludlow.

Newcastle-under- Nuneaton.

Lyme.

Urban D istrict Councils Aldridge.

Amblecote.

Bedworth.

Biddulph.


Brierley Hill.

Bromsgrove.

Brom yard.

BrownhiJls.

Cannock.

Church Stretton.

Coseley.

Dalaston.

Dawley.

Ellesmere.

Kenilworth.

Kidsgrove.

Kington.

Led bury.

Leek.

Oldbury.

Oswestry.

Rowley Regis.

Rugby.

Shrewsbury.

Staffora.

Straford-upon- Avon.

Stourbridge.

Sutton Coldleld.

Tamworth.

Tipton.

Warwick.

Wednesbury.

Wenlock.

Malvern.

Market Drayton.

Newport.

Oakengates.

Redditch.

Ross-on-Wye.

Rugeley.

Sedgley.

Stone.

Stourport-on- Severn.


Tettenhall.

Uttoxeter.

Wednesfield.

Wellington.

Wern.

Wbitechurch.

Willen hall.

ROADS Motorways (Anti-Dazzle Barriers) 57.

Sir B. Janner asked the Minister of Transport whether, in view of the failure of central barriers on the M. l and elsewhere, he will now arrange for the use of rosa multiflora Japonica bushes to prevent accidents on the motorways ; and if he will make a statement of the progress made so far in relation to central barriers.
Mr. Tom Fraser: The Road Research Laboratory is experimentiing with the shrub, but the standard central reserva tion is not wide enough to accommodate an adequate thickness to act as a crash barrier.

Experiments with the use of shrubs as anti-dazzle barriers are at present taking place on M.2.

Present evidence on the value of barriers on central reservations is inconclusive, but it seems possible that at certain levels of to mo.re traffic accidents than they prevent.

Experiments are therefore continuing.
they contribute flow 15 Written Answers 10 MAY 1965 Written Answers 16 Motorways (Reflecting Road Studs) Mr. Howe asked the Minister of Trans port how many miles of the M.1 motor way are now without cat's-eyes between the lanes ; whether parts of other motor ways are sin1ilarly unprovided ; whether he is aware that the absence of cat's-eyes from such places substantially increases the danger and difficulty of using motor ways in fog and after dark ; and what steps he is taking to ensure that all motor ways are fully equipped with cat's-eyes between lanes throughout their length.
Mr. Tom Fraser : It is standard prac tice to provide these reflecting road studs as part of the lane markings on all motor It has been necessary to remove ways.

them from parts of M. l during the recon s,truction work now in progress, and at present about 8½ miles of carriageway they will be are without studs, but is replaced as soon as reconstruction complete.

Meanwhile I have arranged for temporary lane markings in reflec torised paint to be laid wherever possible.
HOUSING Industl"ialised Building the 58.

Mr. Kenneth Lewis asked Minister of Housing and Local Govern ment what s•teps he is now taking to secure the co-operation of local authori ties in providing orders for industrialised building through council building pro jects.

Mr. Crossman : In a circular of which I am sending the hon.

Member a copy I have set out a number of means by which I expect to secure more indus trialised building by local housing autho ri-ties.
More than one in five of all dweHings started in tJhe first quarter ot this year by locaJ authorities and new town corporations are being built by industrialised methods.

New Houses (Size and Cost) Mr. John Robertson asked the Minister of Housing and Local Government (1) what was the average floor area per house of houses built by local authorities in each of the years from 1959 ; (2) what was the average cost per house of houses built by local authorities in each of the years from 1959.

Vol.
Vol.

712 Mr. Mellish: The average floor area and tender price of three-bedroomed houses in tenders approved in England and Wales in each year was: Year 1959 1960 1961 1962 1963 1964 Average floor area per house including out-buildings sq.
feet 897 897 898 907 917 920 Average tender price £ 1,515 1,611 1,786 1,967 2,129 2,303 LOCAL GOVERNMENT South-Eastern Lancashire Special Review Area Mr. Walder asked the Minister of Housing and Loca~ Government what consultations he had, and when, with the Whaley Bridge Urban District Council, the Chapel-en-le-Frith Rural Dis,trict Council, and the Glossop Borough Coun cil, respectively, before be made his recommendations to the Local Govern ment Commission with regard the South-Eastern Lancas•hire Special Review Area.
to Mr. Crossman : The three councils were consulted in December, 1963, and again in January, 1965, on the application by the Local Government Commission for extension of the Special Review Area.

MINISTRY OF DEFENCE Overseas Units (Key Personnel) Mr. Hamling asked the Secretary of State for Defence what steps he is taking to overcome the shortage of key per sonnel in units serving overseas.
Mr. MuHey: We are not at present considering any further steps beyond the call-out of the Territorial Army Emer gency Reserve announced on 14th April.

The deployment of our Regular man power resources is continually adjusted to meet changing circumstances.

R.A.F.

Station, Chigwell Mr. Biggs-Davison asked the Secretary of State for Defence what is to be the future of the Royal Air Force station, Chigwell.
2K 3 i 17 Written Answers 10 MAY 1965 Written Answers 18 Mr. Mulley : Apart from the accom modation at present occupied by No.

2324 (Chigwell) Air Training Corps Squadron, the station, which is in the Metropolitan Green Belt, is to be offered for sale for agricultural use.

There are two former owners, one of whom, who previously owned the greater part of the land, is interested in repurchase and we shall open negotiations with him as soon as possible.
Recruiting Mr. Hamling asked the Secretary of State for Defence whether he is satisfied that the present level of recruiting is sufficient to meet present military com mitments; and if he will make a state ment.

Mr. Mayhew : Recruiting is only one factor ; wastage and re-engagement also the play strength of the Forces at any particular time.

Our commitments are being met, despite shortages in particular categories.
in determining their part Overseas Engagements Mr. Hamling asked the Secretary of State for Defence whether he is aware of the disparity in overseas engagements between members of the various services; and what steps he is taking to provide for parity.

Mr. Mayhew : Separation of families is a problem which affects all three Ser vices, and in particular, it has always been an inevitable condition of life m the Navy.
For practical reasons we can not ensure identical treatment between the three Services, or even within each Ser vice, but our aim and our interest is to make the arrangements as fair as our resources allow.

EDUCATION AND SCIENCE Sports Council Mr. Deedes asked the Secretary of State for Education and Science what salaries are being paid to members and officials of the Sports Council.
Mr. Cros]and : The members of the Sports Council are unpaid but the Deputy Chairman also advises the Deoartment on a part-time basis and for this receives a salary of £2,800 p.a.

The Council is serviced by officers of the Department.

The Director, who has been seconded from the Central Council of Physical Recreation, receives a salary of £3,725 a year for full-time services ; the Deputy Director seconded for part-time service from Birmingham University has a salary of £1,760 p.a.

from the Department.


Educationa] Facilities, Whitworth Mr. Barnett asked the Secretary of State for Education and Science, in view of the fact that in the Urban District of Whit worth only 13 per cent.

of children con sidered were allooated grammar school places, if he is satisfied that the educa tional facilities available are adequate to provide full opportunities for these child ren ; what informa-tion he has on the reasons for the disparity ; and what action he proposes to take.
Mr. Crosland: I have no reason to believe that educational facilities avail able to children of Whitworth are inade quate in any way which would affect the results of the 11 plus.

It is unfortunately quite usual for the proportion of child ren qualifying for a grammar school place to vary from one area to another inside a single local education authority.
Action for the future lies in the implementation of the Government's policy to reorganise secondary education on comprehensive lines and the Lancashire Education Authority is already considering how best to achieve this in the County.
Queen's Park Secondary School, Brighton Mr. Hobden asked the Secretary of State for Education and Science what projects in the minor works allocation of the Brighton Education Department programme are taking precedence over the provision of adequate accommoda tion at Queen's Park Secondary School ; and what is the cost of such projects.
Mr. Crosland : I understand that the projects to be included in the current minor works programme are still under consideration by the authority, but main tenance to the value of £18,000 is to be carried out at Queen's Park School.

Mr. Hobden asked the Secretary of State for Education and Science when to improve the taken action will be accommodation conditions at Queen's Park Secondary School, Brighton.
/9 Written Answers 10 MAY 1965 Written Answers 20 authority is making Mr. Crosland : I understand that the Brighton some improvements to the school but the date of replacement of the present buildings depends on tbe capital resources avail able when future school building pro grammes are under consideration.

Mr. Hobden asked the Secretary of State for Education a nd Science if he will make available to the public the report of Her Majesty's Inspector in regard to Queen's Park Secondary School, Brighton.
Mr. Crosland: No.

T hese reports are confidential documents.

Museums and Galleries (Minister's Visits) Mr. Robert Cooke asked the Secretary of State for Education and Science to how many and which museums and galleries he made official visits between 15th October, 1964 and 6th May, 1965.

Mr. Crosland: On Wednesday, 21st October, my predecessor paid an official visit to the Victoria and Albert Museum on the occasion of the Anglo-Netherlands exhibition "The Orange and the Rose".
On T hursday, 1st April, I also paid an official visit to the Victoria and Albert Museum on the occasion of the Czecho-.

slovak exhibition of Bohemian Glass.

ECONOMIC AFFAIRS B.O.A.C.


Staff (Salary Increase) Mr. Peter Walker asked the First Sec retary of State and Secretary of State for Economic Affairs into which category of exceptions to Her Majesty's Government's Incomes Policy, as outlined in paragraph 15 in the White Paper on P rices and Incomes Policy, the increase in salary announced by the British Overseas Airways Corporation on 2nd May, 1965, which averages 8 per cent.

for 1,000 of its administrative staff, comes.


Mr. Roy Jenkins: I have been asked to reply.

This settlement was in an advanced stage of negotiation before the publication of the White Paper.

I understand that its effect the salaries of the employees concerned in line with those paid for comparable work elsewhere.

is to keep Vol.
is to keep Vol.

712 HOME DEPARTMENT Prisoners (Long Sentences) Mr. Carlisle asked the Secretary of State for the Home Department bow many people at present imprisoned, have been in prison for a continuous period of over 10 years ; how many of them are serving determinate sentences ; and how many are serving sentences of life imprison ment.

Sir F. Soskice: I gave this information, as at 8th December, 1964, in answer to a Question by the hon.

Member for Uxbridge (Mr. Curran) on 14th December.


I am having the information brought up to date and will inform the hon.

Member if there has been any change.

EMPLOYMENT Factory Accidents Mr. Dell asked tlbe Minister of Labour how many firms were prosecuted for failure to report factory accidents in eaoh of the years 1959-64, inclusive.
Mr. Thornton : The same statistical code number is used to classify the three offences of failure to notify accidents, dangerous occurreinoes and oases of industrial disease.

Separate figures for each offence are not available.
The number of firms prosecuted for all three offences in the years 1959-64 were : 1959 1960 1961 1962 1963 1964 38 72 78 65 72 219 Tihe increase in the 1964 fig ure (only now available) is partly due to prosecu tions undertaken as a result of the April, 1964, Survey on Reporting Standards.
Foreign Artistes Mr. Lomas asked the Minister ot Labour if, in view of the fact that British artistes, such as Wayne Fontana and the Mindbenders, the Zombies, the Animals, and Freddie and the Dreamers, have been tlbe United States of America or issued only wi~h H(ii) visas.

he will restrict work permi,ts to American singers and groups to work in this country.
refused admission to 2K4 21 Written Answers 10 MAY 1965 Written Answers 22 industry, which Mr. Gunter: I do not contemplate any ohange · in our present arrangements.

Permits for foreign variety artistes to accept professional engagements in this country are issued in consultation with the is guided by a Control Agreement of the Variety and Allied Entertainment Council of Great Britain.
This Council represents both sides of the industry and the Agreement approved by them and reviewed as recently as August, 1963, contains the conditions under which foreign artistes may be employed here.

Groups consist ing exclusively of instrumentalists are subject to reciprocal exchange arrange ments.

Permits are issued aNer con sultation with the Musicians Union.
POST OFFICE Postmen (Salary Increase) Mr. Ian Gilmour asked the First Secn: tary of State and Secretary of State for Economic Affairs into which category of exceptions to Her Majesty's Government's Incomes Policy, as outlined in paragraph 15 of the White Paper on Prices and Incomes Policy, the increase in salary announced on 15th April for 120,000 postmen, which represents increases of 5·4 per cent.

from January, 1964, 4·2 per cent.

from January, 1965, and 3·6 per cent.

from January, 1966, comes.


Mr. Benn: I have been asked to reply.

The increases in 1964 and 1965 fall under Ca,tegory (iv) of that paragraph.

The increase in 1966 is in line with the general policy.

Newspaper Post Mr. Ian MacArthur asked 1lhe Post master-General when he will reply to a letter sent to him last monoh by the hon.
Member for Peroh and East Perthshire proposing ,tibat a rural newspaper delivery charge s1bould be introduced to assist people living in country districts ; and if be wiB make a statement before 17th May.

Mr. Benn : I have today replied to the hon.

Member's lebter.

I shall be answering on 12th May further Questions on the newspaper post which the hon.

Member and otiher hon.

Members have down.


WIRELESS AND TELEVISION Reception, North Wales Mr. Morgan asked the Postmaster General what aotion he proposes to take to counteract interference by Irish tele vision broadcasts with the reception of British Broadcasting Corporation and independent television services in certain parts of Nor~h Wales.

Mr. Benn: No cases of in,teriference this souTce have been referred from ei~her to my Department, or to t!he broad casting authorities, but if rhe hon.
Mem ber would care to let me have details I wiH gladly have them investigated.

TELEPHONE SERVICE Belfast-London Calls Marquess of Hamilton asked tihe Post master-General what steps he is taking to eliminate delays in obtaining telephone calls between Belfast and London ; and whether he wilil make a statement.

Mr. Benn : I am sorry tha,t these delays have arisen between Belfast and London.
Twenty-four circuits have been provided in the last s,ix montlb.s and more circuits are being added as quickly as possible to keep pace with the rising traffic.

Northern Ireland Exchanges Mr. Chichester-Clark asked the Post telephone master-General how many exchanges in Northern Ireland are under staffed.

Mr. Benn: None.

All exchanges in Northern Ireland are fully staffed to give a good service under average traffic condi tions.
PENSIONS AND NATIONAL INSURANCE Widows Mr. Evelyn King asked the Minister of Pensions and National Insurance if she will now take steps to provide relief for elderly widows whose husbands died un insured.

Miss Herbison: National Assistance on standards which have recently been sub stantially improved is, of course, already available for such widows ; as the hon.
JO MAY 1965 Written A nswers 24 Writte11 Answers 23 Gentleman will be aware, the Govern ment are now working on their plans for an income guarantee scheme.

Old-age Pensioners (Coal Allowances) Mr. Delargy asked the Minister of Pen sions and National Insurance whether she will arrange that old-age pensioners have coal allowances all the year round, so that they may have what warmth they need in summer and build up small re serves of coal for winter.
Mr. Pentland : The standard scale rates of assistance include provision for normal fuel requirements throughout the year.

The Board is prepared to make special fuel allowances even in summer in the exceptional case when there is a current need for extra fuel.
WALES Interdepartmental Consultation Mr. Morgan asked the Secretary of State for Wales whether he will state the nature of the machinery of liaison be tween his own and other Departments on matters of joint interest to Wales and adjoining regions of England.

Mr. James Griffiths : Close liaison is ensured by the use of the normal pro cesses of interdepartmental consultation and the new regional planning machinery.
SCOTLAND Houses (Average Number of Rooms) Mr. John Robertson asked the Secre tary of State for Scotland (1) what was the number of rooms per 1,000 inhabi tants provided by houses built during each of the years from 1957 to 1963, inclusive, in Scotland ; (2) what was the average number of rooms in houses built during each of the yea·rs from 1957 to 1963, inclusive, in Scotland.

Mr. Ross : I regret that I have no information about the number of occu pants of houses built in these years.
The follow-ing table gives tlbe best available particulars of numbers of rooms: Average Number of Rooms per House Public Authorities and Housing Associations (Tenders approved) 3·2 3·2 3 ·1 3·0 3 ·1 3 · l 3 · 0 Private Owners (Houses started) 4·0 4 ·0 4·0 4·0 4·1 4·1 4· l 1957 1958 1959 1960 1961 1962 1963 Artificial Limbs Mr. Buchanan-Smith asked the Secre tary of State for Scotland what facilities there are in Scotland for the making, repairing and fitting of artificial limbs ; where these facilities are situated ; what is the the average period between measurement for and the fitting of such limbs; and what is the average time taken for repairs.
Mr. Ross: Artificial limbs are made by private manufacturers who ar e in con tract with the Health Ministers ; there are two factories in Scotland, at Irvine (for arms) and at Dundee (for legs) ; most of the component parts are made in England.

The fitting of artificial limbs and run ning repairs are canied out at centres attached to the hospital service in Aber deen, Dundee, Edinburgh, Glasgow and Inverness.
The average periods between the measurement and the final fitting are 13 and 11 weeks for arms and legs respec tiveily.

The average time for major repairs is eight weeks for arms and six weeks for legs but during these periods the patient has a duplicate limb avail able.

Running repairs may be done without delay.