Clause 24.—(Dividend increases etc. in 1965–66; exclusion of surtax elief under S. 238 of Act of 1952.)
Mrs. Thatcher
I beg to move, Amendment No. 17, in page 25, line 29, at the end to insert:
“or dividends which by virtue of section 83 of the Finance Act 1965 are treated as paid by the company on the first day of the year 1966–67” .
This is a comparatively short point. The Clause withdraws Surtax relief on bunched dividends. During his Budget speech James Callaghanthe Chancellor gave the reason why he was withdrawing this Surtax relief, and a similar reason was given by J. Diamondthe Chief Secretary when we debated a similar matter in Committee.
The point is shortly that because a number of companies declared more dividends than usual last year, thereby escaping Schedule F tax, the Chancellor apparently thought that he ought not to give Surtax relief in respect of these same dividends when they came to be taxed in the hands of the shareholder.
On 20th June the Chief Secretary reinforced this reasoning as being that behind the withdrawal of Surtax relief. He said:
“A company is owned by its shareholders jointly and the shareholders jointly therefore enjoy the benefit in the form of 8s. 3d. in [column 1399]the £ for every £'s worth of dividend which was declared in the year 1965–66 as opposed to the following year.”
Later he said:
“The shareholders of this company are benefiting to the extent of 8s. 3d. in the £ and the Chancellor sees no good reason why in addition they should get Surtax relief …” —[Official Report, 20th June, 1966; Vol. 730, c. 164.]
For reasons which I have expressed previously, I do not wholly go along with either the Chancellor's or the Chief Secretary's reasoning because a company and its shareholders are entirely different legal entities.
The point that I wish to make is that if one accepts the reasoning that because the dividends have not borne Schedule F, Surtax relief should be withdrawn, it follows that the Chief Secretary must accept the Amendment, because it excludes from the operation of the Clause those dividends which have borne Schedule F tax, and from the right hon. Gentleman's own reasoning, therefore, it would seem that if a dividend has borne Schedule F tax, it should still rank for Surtax relief under the old Section 238 of the Income Tax Act, 1952.
The Amendment is designed to see that such dividends are excluded from the operation of this Clause, that is to say, they will get Surtax relief, and I hope that the right hon. Gentleman will speedily accept it.
Mr. Diamond
I can deal with this matter with the brevity with which I was asked to deal with it and explain to the House that the hon. Lady is right in saying that there is no case for claiming that those who saved 8s. 3d. in the £ by additional dividends should feel in any way hurt or unfairly treated if they have to incur possibly 6d. in the £, possibly 1s. in the £ Surtax which might not otherwise arise because they go from one rate into another.
But with regard to those cases with which the hon. Lady is now dealing, where there has been an attempted forestalling of the dividend, and where it has been demonstrated that this has failed in the sense that clearly the dividend has been in excess of what could properly be paid out that year in order to avoid tax, and Schedule F tax is subsequently levied, it cannot possibly be said [column 1400]that one should go out of one's way to treat that category with any more sympathy than that with which it was treated when the hon. Lady moved her previous Amendment in Committee. The Amendment is a complete volte face as compared with the Amendments moved in Committee. That is one reason why we cannot accept it—because there is no justice behind it. The other reason is that it is not practicable because it is not possible to work the relieving Section so far as part of the income of an asset is concerned.
As the hon. Lady will recollect, what is provided for in this forestalling provision is that the excess dividend is made liable to Schedule F tax, but the provision for spreading Surtax does not deal with excess income; it deals with the whole income of an asset, and that is the essential point. It cannot be worked out if only part of an asset is taken. Because there is neither justice nor practicability in the Amendment I am sorry to say that I cannot recommend the House to accept it.
Mrs. Thatcher
If I may speak again with the leave of the House, Mr. Deputy Speaker, J. Diamondthe Chief Secretary is talking absolute nonsense. I deliberately framed my Amendment on his reasoning.
Mr. Deputy Speaker (Sir Eric Fletcher)
I am sorry, but I am afraid that the rule is strict. Second speeches are not allowed.
Sir D. Glover
On a point of order Mr. Deputy Speaker. It is a long tradition in the House, particularly on Report, that if an hon. Member rises in his or her place and asks the leave of the House to address the House for a second time if the House does not object leave is invariably granted.
Several Hon. Members
rose——
Mr. Deputy Speaker
Order. It may save time if I reply to the point of order which has been put to me. The position in this matter is quite clear. It is laid down in Erskine May, on page 445, that.
“Except on occasions when a reply is permitted, or in a committee, it is a rule, strictly observed in both Houses, that no Members shall speak twice to the same question, unless he speaks to explain some part of his speech which has been misunderstood.”[column 1401]
Sir Harmar Nicholls
It is within the recollection of the House that within the last hour and a quarter Mr. Speaker, in the Chair, ruled that my hon. Friend the Member for Yeovil (Mr. Peyton) could speak for a second time with the permission of the House, and there were certainly no conditions attached—nor did he reply in a vein which would import any conditions being attached. I should have thought that as that Ruling has been given within the last hour and a quarter my hon. Friend, with the leave of the House, ought to be allowed to address the House for a second time.
Mr. John Hall
There is a second example, also in that debate: I was allowed to speak for a second time with the permission of the House.
Mr. Burden
There was a third occasion, when my hon. Friend the Member for Shipley (Mr. Hirst) was allowed to speak for a second time.
Mr. Deputy Speaker
It may be that there have been departures from the rules of the House, as laid down quite authoritatively in Erskine May, but I am bound by the rules of the House. I will read the words of Erskine May again:
“Except on occasions when a reply is permitted, or in a committee, it is a rule, strictly observed in both Houses, that no Member shall speak twice to the same question, unless he speaks to explain some part of his speech which has been misunderstood.”
I would add that I am a servant of the House in these matters. It is open to the House, if it wishes, to change the rule, but until the rule has been changed I conceive it to be my duty to observe the rules of the House, which are obviously for the convenience of the House.
Several Hon. Members
rose——
Mr. Iain Macleod
Further to that point of order. While accepting entirely what you have said, Mr. Deputy Speaker, may I say that there have been half a dozen instances—I have done it twice myself in this Report stage—a number of them with the agreement of Mr. Speaker himself, of hon. Members asking leave of the House to speak again. I have always understood that the quotation from Erskine May is strict unless the House gives permission and the House is the final authority. It is for [column 1402]that reason that hon. Members sometimes rise, as my hon. Friend rose, and ask the leave of the House. If any hon. Member says, “No,” that is the end of the matter. That is understood. But there have been many examples and I think that when leave is given by the House, it follows automatically that that provision is overruled, as it has been on many occasions.
I think that my hon. Friend got out the second speech which she wished to make, that she found the answer unsatisfactory and advised that we should divide.
Sir D. Glover
Further to that point of order. This is a very important matter. We may be reaching a Ruling which we shall all regret. When you read out that quotation from Erskine May, Mr. Deputy Speaker, did you not read out at the beginning, “… except with the permission of the House …” ?—[Hon. Members: “No.” ] With permission——
Mr. Deputy Speaker
Order. On that point, there is nothing in the rules, as laid down in Erskine May, about entitling an hon. Member to speak again with the permission of the House. If I may say so, from my own experience, I agree that there have been a number of departures from the rule, but I thought it right, in the interests of order, to remind the House of what the strict rules of the House are in this respect.
Sir D. Glover
Further to that point of order. In the time that I have been in the House, I have never yet known the House, when it wanted to hear an hon. Member, refuse permission: the House has always granted permission. There have been many occasions when I have risen and the House has objected. I do not blame them a bit: that is the end of the matter. The House has objected and the hon. Member who has risen, wishing to address the House, immediately resumes his seat, or he should. But when an hon. Member has risen with the permission of the House, I have never yet known the Chair to draw him to order and not allow him to speak.
Mr. Ronald Bell (Buckinghamshire, South)
In everything except brevity, I found the reply of the Chief Secretary disappointing. A distinction between [column 1403]the members of a company and the company itself comes very ill from a Government who, in 1965, introduced the Corporation Tax, a tax which is based entirely upon the alleged and, I think, false distinction between a company and its members. The second reason why I found the reply disappointing—I see that the Chief Secretary himself finds it disappointing: he is looking very unhappy about it—is that this is a shameless example of retrospective legislation.
It is true, of course, that the higher rates of Income Tax, as they are called in Finance Bills, are imposed one year later than the standard rate of tax, but the spreading provisions of Surtax are quite independent of the rate of higher charge of tax. They are a permanent feature. What the Chief Secretary and his Government are proposing in this Finance Bill and what my hon. Friend has been trying to remedy is in effect the suspension of the regularly established spreading provisions simply in respect of these payments which have been made in March of this year to take advantage of the Corporation Tax concessions. If the Chief Secretary wants to address himself to that point, I am quite sure that we on this side would be most willing to give him leave to reply more adequately to this Amendment.
This is a vindictive, retrospective and wholly unjustified attempt to suspend the operation of the law, well established over many years, in respect of an entirely legitimate process which arises under the 1965 Finance Act. The right hon. Gentleman's reply was obfuscatory and absurd, and my hon. Friend when she was interrupted on the matter of order, was quite rightly saying that his reply was absolute nonsense.
The existing provisions of the law have been applied successfully for years, and I am puzzled to know how the Chief Secretary could say without laughing that they could not be applied to the extra payment of dividends made primarily in March, 1966, to take advantage of a concession in the 1965 Finance Act. There is not the slightest difficulty about it at all. The one reason the Government have is to pacify some of their supporters by a rather mean, retrospective and envious provision, because they feel that some people who [column 1404]have received dividends will claim the established concession for separate Surtax.
It is nothing more than playing to the gallery of the worst elements in the Government party, and I hope that the Chief Secretary will now be a little more worthy of his better self, make a generous reply to my hon. Friend, and bring the first night's proceedings on the Report stage of the Finance Bill to a much happier conclusion than otherwise might be the case by saying that he has the authority of the Chancellor of the Exchequer—who is not here—[Hon. Members: “Where is he?” ]—yes, where is the Chancellor of the Exchequer? What is the good of having this Amendment debated and argued if the Financial Secretary has no authority to do anything? It is quite useless to have him here—although we are glad to have him here, of course, and he at least has my leave to address the House again.
Mr. R. J. Maxwell-Hyslop (Tiverton)
There is another reason why the Chief Secretary should be more sympathetic about this Amendment. I understand that before he became a Minister he was a tax consultant—that is to say, someone to whom individuals or firms go who wish to reduce their tax liability to the minimum. It may well be because of the vicissitudes and fortunes of politics, the right hon. Gentleman will find himself at some future date back in the position of a professional tax consultant. It is well known that the job of being a tax consultant is particularly difficult if one is overtaken by retrospective legislation and the Chief Secretary may well be laying a snare for himself as a tax consultant when he ceases to be in office.
There have been occasions when the Chief Secretary has appeared to be censorious about those who seek to so arrange their affairs that they attract the minimum tax liability, although this is presumably what he spent his time advising people to do when he was a tax consultant. I would have expected him to show greater objection to retrospective legislation of this kind, because if it becomes the order of the day there is little reason for anybody to employ either the Chief Secretary or anybody else as a tax consultant.
[column 1405]Mr. Deputy Speaker
The Question is——
Mr. Victor Goodhew (St. Albans)
Before we vote, Mr. Deputy Speaker, I had hoped that the House would have heard the views of my hon. Friend the Member for Finchley (Mrs. Thatcher). It seems that a mistake has crept in here. I understand that you read from Erskine May a sentence which began “Except when permitted” . Surely, in this case, it must be permitted by the House. This is what “leave of the House” means.
I would have thought, in view of Mr. Speaker's previous Rulings on a number [column 1406]of occasions this evening, that she would have been entitled to ask leave to speak again; that is to say, this was a case where it was permissible for her to make a second contribution. [Hon. Members: “Order.” ] Despite the grumblings from hon. Members opposite, who no doubt are anxious to get to bed, I would very much like to hear her and I hope that you will rule that we can before we vote.
Question put, That those, words be there inserted in the Bill:—
The House divided: Ayes 115, Noes 167.