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Orders Of The Day

Volume 155: debated on Wednesday 21 June 1922

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Finance Bill

Considered in Committee. [Third Day.]

[Mr. JAMES HOPE in the Chair.]

May I ask the Chancellor of the Exchequer or the Leader of the House if he will give the committee now, before we start discussing the Bill, some idea as to how far he proposes to proceed with the Committee stage to-day?

After the two late sittings that we have had, I should be very reluctant to ask the House to sit late again, and, if we can make reasonable progress, I think we must try and rise as near to Eleven o'clock as possible to-night. I am not making any pledge, but I do not want to fix a particular point to which we should go, because, if we make reasonable progress, I think the House is entitled to expect to rise early on one night.

Is the right hon. Gentleman aware that last night we wanted to continue the Debate, but, unfortunately, some of the Government supporters who had Amendments down were not present, and, therefore, Progress was reported, in order that those Amendments might be discussed fully today? Is he, further, aware that we desire to get a discussion and a Vote on certain new Clauses that we have put on the Paper? It was perfectly well understood, when we came to our arrangement as to how far we should go last night and to-day, that those Clauses would be reached, but if we rise at Eleven we shall not reach them, unless the Government closure their friends instead of closuring us, as they were doing last night. Can the right hon. Gentleman make any arrangement—

I simply wanted to ask a question. Can the right hon. Gentleman make any arrangement whereby, if we rise at Eleven without reaching the Amendments to which we attach great importance, we shall be able to have our next day, or two days, on the Finance Bill, not next week, but the week after, so that they may be discussed?

No, Sir. I certainly do not want to initiate a discussion, but it is a little difficult to know how far I can answer the hon. and gallant Member's question.

I think it would be better to move to report Progress.

Motion made, and Question proposed, "That the Chairman do report Progress, and ask leave to sit again."—[Mr. Hogge.]

The hon. and gallant Member's question—and in putting it he made a good many statements which, if he will permit me to say so, were of doubtful accuracy—was whether I would arrange that the fourth day, granted at his request for the Committee stage of the Bill, should be, not next week, but the week after. That is a request with which I am sorry to say I cannot concur. It is very desirable, when we deal with a Bill of this kind, that we should, as far as the Rules of the House and the necessities of Supply permit, deal with it consecutively, at any rate as regards a particular stage. As at present advised, I propose to take the fourth day, which, in response to the hon. and gallant. Member's request, we agreed to give for the consideration of the Committee stage of this Measure, on Monday. As regards what happened last night and the night before, I was in the precincts of the House on both occasions, and was in the House itself last night. The night before last an appeal was made, as I understand, publicly, across the Table, for an extra day, and my right hon. Friend the Chancellor of the Exchequer said that. he would give a fourth day, on the understanding that the Committee stage would be finished in those four days—he will correct me if I am wrong—without sitting beyond a reasonable hour. We sat last night till past three o'clock before the Motion to report Progress was made. I make no sort of complaint or suggestion that there was any kind of breach of faith.

I am sorry the hon. and gallant Gentleman says he does, but, at any rate, it will not alter what I am going to say. My right hon. Friend, making one of those bargains which are customary across the Table of the House of Commons, and are always honoured when so made, said ho would give an extra day on the understanding that the business was finished within those four days, within reasonable hours. I think that hon. Members might have expected that we should not have sat as late as three o'clock in those circum- stances, but portions of the Bill were more contentious, perhaps, or gave rise to greater difficulty than one would have expected, and we had this late sitting. At, I think, something near half-past three, my right hon. Friend moved to report Progress, and stop the business for the night.

Because we had already sat past a reasonable hour, for which my right hon. Friend had himself stipulated as a condition on which he gave his assent to the fourth day. I say again that I am not charging any section, or suggesting against any section of the Committee, that there was any breach of the arrangement made. I think circumstances were too strong. The Amendments took longer than any of us anticipated. But to suggest, as the hon. and gallant Member said he did, that on the part of the Government there was a breach of faith because they did not try to sit after four o'clock, or after half-past three, is to suggest that which is palpably incorrect on the facts which are known to the Committee. I am very sorry the hon. and gallant Gentleman should for a moment have made such a suggestion. I think, having regard to the two late nights we have had, we ought not to ask the House to sit late to-night, if that can, by any possibility, be avoided and if there is a fair prospect that we can finish on Monday, and unless it be necessary to sit late to-night in order to be sure of finishing on Monday—

That is all right, If you can sit to-night sufficiently late to divide the work there is to be done equally between to-day and Monday, we shall be satisfied. The difficulty at present is that if you rise at Eleven o'clock to-night, you cannot finish on Monday without sitting till Five o'clock.

I cannot undertake to say what exactly is the time likely to be taken by any particular stage of the Bill or any particular Clause or Amendment or new Clause. I feel that, in the interests of hon. Members who have made sacrifices these last two nights in order to get on with the business, we ought not to ask them, unless it be absolutely necessary, to sit late to-night. A considerable portion of the time yesterday was taken by supporters of the Government, but, after all, they are in a considerable majority and, perhaps, may sometimes be allowed to express their views and to raise points of interest to themselves or to their constituents. But if there was waste of time or if the discussions were needlessly prolonged, it was not so much yesterday, when we were discussing for the most part new matter of considerable complication, but rather the day before.

When we made no complaint, though we might have done, at the repetition of Amendments, speeches and arguments which have been familiar to the House for several years past on every stage of the Financial Resolutions and of the Bill in Committee and on Report.

May I be allowed to explain what I meant when I said I thought there had been a breach of faith on the part of the Government? When the Government gave us an additional day for discussing the Finance Bill in Committee, an arrangement was come to whereby they were to get certain stages on the two days. Last night they were to get to Clause 26. [Interruption.] The point was that we were dividing up the three days that remained into equal sections so that every section of the Bill should be adequately discussed.

The hon. and gallant Gentleman omits an essential part of the statement my right hon. Friend made, that he consented to this on the understanding that we finished at a reasonable hour each night. When we speak of a reasonable hour in Parliamentary phraseology we do not mean 4 o'clock in the morning.

We were trying to divide up the work so that each part of the Bill would be adequately discussed, and we were to get to the end of Clause 26 last night and to the end of the new Clause dealing with the Beer Duty to-night. I will not say that was an absolute pledge, but it was an agreement come to with the Chief Whip and the Chancellor of the Exchequer. The Labour party last night took no part whatever in obstruction. As a matter of fact, the real reason why we sat till half-past three was that the Government were forced by their own followers, after a Debate lasting nearly two hours, to withdraw Clause 14, and, after continuing to sit in order to take the very serious Amendments on Clause 16 till three o'clock in the morning, the moment that was over the Government reported Progress, because the next Amendments were down in the name of their own followers who were not present. If they had gone on last night for 10 minutes they would have got through the next seven Clauses and got down to the stage at which they promised to get in order to complete that section of the Bill. They did not go on for the very sufficient reason that their supporters were not here to move their Amendments.

The hon. Member was here, but he was the only one. Therefore to-day we are to go through a short day, dealing with a small amount, and then on Monday, the last day for discussion of the Bill, the Committee will have to sit till five or six in the morning to do all the rest of the work. That is not fair to the House of Commons. The arrangement come to to divide the remaining portion of the Bill into equal sections was a right arrangement, and should have been stuck to by the Government.

The hon. and gallant Gentleman says an arrangement come to across the Floor between his representatives and the Patronage Secretary and the Chancellor of the Exchequer has been broken. My right hon. Friend entered into no arrangement for the partition of the Bill.

Motion, by leave, withdrawn.

Clause 17—(Amendment As To Allowance For Repairs)

  • (1) The following paragraphs shall be substituted for paragraphs (i) and (ii) of paragraph (1) (b) of Rule 7 of No. V in Schedule A (which relates to the allowance for repairs):
  • "(i) where the owner is occupier or chargeable as landlord, or where a tenant is occupier and the landlord has undertaken to bear the cost of repairs, by a sum equal, where the amount of the assessment does not exceed twenty pounds, to one-fourth part of that amount, and, where the amount of the assessment exceeds twenty pounds but does not exceed forty pounds, to one-fifth part of that amount, and where the amount of the assessment exceeds forty pounds, to one-sixth part of that amount; and
  • (ii) where a tenant is occupier and has undertaken to bear the cost of repairs, by such a sum, not exceeding one-fourth, one-fifth or one-sixth part of the amount of the assessment, as the case may be, as may be necessary to reduce the amount of rent payable by him:
  • Provided that the amount by which an assessment is reduced shall not, in the case of an assessment exceeding the amount of twenty pounds but not exceeding the amount of forty pounds, or of an assessment exceeding the amount of forty pounds, be less than it would have been if the amount of the assessment had been twenty pounds or forty pounds, as the case may be."
  • (2) In paragraph (2) of the said Rule 7, for the words "one-sixth" there shall be substituted the words "one-fourth, one-fifth or one-sixth, as the case may be," and in paragraph (1) of Rule 8 of the said Number V in Schedule A for the words "one-sixth part" there shall be substituted the words "one-fourth, one-fifth or one-sixth part, as the case may be."
  • (3) This Section shall not have effect as respects Income Tax for the year 1922–23 and shall, unless Parliament otherwise determines, cease to have effect on the fifth day of April, nineteen hundred and twenty-eight.
  • I beg to move, in Sub-section (3), to leave out the word "not" ["This Section shall not have effect"].

    This Clause deals with an additional allowance for repairs.

    The Committee stage came on rather unexpectedly soon. I called the hon. and gallant Gentleman, but he was not then present. I am afraid it is not possible to go back.

    4.0 P.M.

    The additional allowance is not going to be made for this year. The right hon. Member for Chelmsford (Mr. Pretyman) is a great authority on these questions, and I do not know whether he is going to agree with me that it ought to be allowed. I do not really see why the Government has introduced a provision saying that it shall only take effect next year and onwards for the following seven years. It is possible the Government will argue that the reason they are not giving it for the coming year is that the present assessment is very low indeed and that it is not necessary to give this additional allowance until a re-assessment has been made, but he may have forgotten that the cost of repairs has been perfectly enormous during the last few years. This increased cost of repairs entirely neutralises the existing low assessment, if the existing assessment be really too low. I should also like to point out that not only have the repairs been excessively and abnormally costly during the last few years, but landlords have been under the Rent Restrictions Acts and have not been able to meet the higher cost of repairs out of increased rents. Therefore, I feel that this additional allowance ought not to be postponed till next year, but ought to be allowed in the present year and the following eight years. I should very much like the Chancellor of the Exchequer to consider this question and to tell us exactly why it is that the allowance is not going to be made this year.

    I feel that this Clause and the next Clause do not cover quite the same ground. The point raised by my hon. Friend is material and important to this Clause, because it is one which increases the statutory allowance of one-sixth to one-fifth and one-fourth for small houses. The reason, I understand, is that owing to the greatly increased cost of repairs, in practically all eases where owners or occupiers of small property have to carry out the work, the cost exceeds the one-sixth allowance, which is, on the old rent, restricted under the Rent Restrictions Acts. This is not principally a question of equity and fairness. The question of equity and fairness can be dealt with under the provisions of Section 69, which are being extended by the next Clause, and any overpayment can be recovered. Under the present law, if a man spends, instead of one-sixth, one-fifth or one-third, he can by a reclaim get his money back, and therefore there is no actual loss. It is thought better during the present emergency—this is not a permanent Clause like the next one; it is a temporary Clause to deal with an emergency—to save the great amount of waste of time and tissue due to the presentation of innumerable claims for repairs on small property. Therefore, although the same considerations do not refer to the next Clause because you get your repairs under the five years' average, what I said on the Second Reading applies to this Clause. If I am right in supposing that the main object of this Clause is to save expense, time, and trouble, there does not seem any very good reason for postponing it for a year. The Chancellor of the Exchequer has met us very fairly and sees the thing over the whole ground, so I do not wish to do more than put the point before him and ask if he and his Department have given it full consideration. I am aware that the assessments are going to be increased, and that may make some difference in future years, but the new assessments will not apply this year, and the fact that it will be possible to make reclaims which the alterations, when they do come in, will not affect is a special reason for making this Clause operative at once.

    The situation is really as described by my hon. Friend the Member for Wood Green (Mr. G. Locker-Lampson). The proposal to make an increased allowance for repairs is due to the fact that in recent years there have been difficulties experienced in connection with these allowances, and it has been made plain that, so far as the properties with which the Clause deals are concerned, the allowances ought to be raised. There are, as my right hon. Friend the Member for Chelmsford (Mr. Pretyman) has said, means by which the hardship to which the hon. Member referred—those cases where the actual expense is shown to be greater than the allowance and where a claim can always be made on sufficient cause being shown—can be met. The reason we have postponed the actual operation of these increased allowances till next year is this. It is recognised, I think, that at the present time the assessments do not represent actual values. There have been no re-valuations for a long period, and I do not think that anybody can question the fact that the present assessments are not adequate. Accordingly, we are going to make a revaluation, and we propose to bring the two things—the new valuation and the increased allowance for repairs—into operation at the same time.

    I would like to point out that the right hon. Gentleman's Department have made a reassessment since the War. An increased valuation was made in 1919.

    I would also like to point out to the right hon. Gentleman that the assessments in Bradford have recently been increased by something over 30 per cent., amounting in actual figures to between £500,000 and £600,000. It would be grossly unfair, therefore, when ratepayers or property owners are being assessed at that higher valuation, that this Clause should not operate for another 12 months.

    Amendment negatived.

    Motion made, and Question proposed, "That the Clause stand part of the Bill."

    May I take this opportunity of suggesting to the Chancellor of the Exchequer that, before the Report stage, he might look into an apparently small question to which I have already drawn the attention of the learned Solicitor-General. It is a matter which affects the London area particularly. Under the Metropolis Valuation Act, 1869, certain deductions in respect of repairs may be made from the assessment for the payment of rates. This Clause provides for deductions in respect of repairs from the assessment for the payment of Income Tax. It is desirable that the range of deductions for rates and Income Tax should be the same, and they are the same excepting for two very small items in this Clause. The deduction for rates is in regard to sums below £20 and below £40. In this Clause, the words are "not exceeding £20" and "not exceeding £40." The result is that in regard to the deduction for rates it will be one-fifth on £20, and in regard to the deduction for Income Tax it will be one-quarter on £20. The same difficulty will arise when the next figure of £40 is reached. It will be a somewhat larger deduction for Income Tax than for rates.

    I am advised by the Local Government Committee of the London County Council that this will lead to considerable administrative inconvenience. A man will never be able to understand why he pays on a certain amount of assessment for rates and on a different amount of assessment for Income Tax. The Chancellor of the Exchequer should so arrange the Clause that it should read "up to £20" and "up to £40," in-accordance with the Amendments which I have upon the Paper and which I apologise for not being in my place to move. I can assure him that the financial experts on the London County Council advise me that it would be a very substantial concession to the payers of rates and of taxes in the Metropolitan area. As he will recognise, the alteration cannot be made in regard to the payment of rates, because that is already fixed by the Metropolis Valuation Act, 1869, which we cannot to-day amend, but a slight Amendment of this Clause would bring the rating procedure and the taxing procedure in the London area into harmony, which, I take it, is very desirable from an administrative point of view. Incidentally, the Exchequer would lose nothing, because, whatever difference there might be, it would be a slight gain to the Exchequer, because it would alter by one unit the scale upon which the payment would be made. It is a comparatively small point, although one of importance in the Metropolitan area, and I hope that, when the Clause comes up on the Report stage, the right hon. Gentleman will be able to see his way to make this small concession.

    I have studied the Amendments of the hon. and gallant Member as closely as I can, and, after very carefully reading them with the original words, I have come to the conclusion that, in substance, there is no difference between his proposal and that contained in the Clause. I am not quite sure that my hon. and gallant Friend has adverted sufficiently to the proviso in the Clause, which really prevents the very kind of effects that he seeks to deprecate. I am not aware of the precise form that the London rating takes, and it may be that there is some technical element which might make it easier if our Clause were expressed in the same language as the London Clause, but it seems to me plain that it has the same effect. The wording is different, and it might be an advantage to have the wording expressed in the same form, but as to that I express no opinion. I suggest that my hon. and gallant Friend might get into touch with the Inland Revenue authorities on this matter, and, if he can make plain to them a difference which is not plain to me, I shall be pleased to give it consideration.

    Question, "That the Clause stand part of the Bill," put, and agreed to.

    Clause 18—(Amendment As To Allowance For Maintenance, Repairs, Etc)

    (1) The following paragraphs shall be substituted for paragraph (3) of Rule 8 of No. V in Schedule A (which grants relief in certain cases in respect of the cost of maintenance, repairs, etc.):—
    "(3) This Rule shall apply to any land (inclusive of farmhouses and other buildings, if any) or house, the assessment on which is reduced for the purpose of collection:
    Provided that no repayment of tax shall be made under this Rule in respect of the cost of maintenance repairs, insurance or management, if or to such extent as that cost has been otherwise allowed as a deduction in computing income for the purposes of Income Tax."
    (2) This Section shall not have effect as respects Income Tax for the year 1922–23.

    I beg to move in Subsection (1) to leave out the words "paragraph (3)," and to insert instead thereof the words "paragraphs (2) and (3)."

    I take it that the hon. and gallant Member is moving this Amendment, in order to get his second Amendment discussed. They hang together.

    Yes. My second Amendment reads as follows:

    "For the purpose of this Rule the term 'maintenance' shall include the replacement of farmhouses, farm buildings, cottages, fences, and other works, if and to the extent to which the replacement is necessary to maintain the existing rent; and the term 'replacement' shall include replacement according to an improved standard necessary to meet modern requirements, or to comply with any Act of Parliament or any regulations or bye-laws of a local authority."

    I suggest that the hon. and gallant Member should argue both together.

    I am moving the Amendment mainly in order to give assistance in the improvement of agricultural housing, especially in Scotland. It is a well-known fact, especially in Scotland, that agricultural housing conditions are far from good. That has been confirmed by the Royal Commission on Housing, and is an acknowledged fact amongst Members of this House. It is also agreed that though a good deal has been done for housing in urban areas, little or nothing has been done since the Armistice to give public assistance in the improvement of housing in agricultural areas. In agricultural areas owners are doing their best to improve the conditions, which are far from satisfactory. A certain minimum standard is laid down by this House in regard to housing, such, for instance, as the condition that there should be a water closet or an earth closet in every house, that there should be a decent water supply to the houses occupied by agricultural labourers or other labourers, and that there should be a coal place, a larder, and a scullery. Owners, where opportunities arise, are anxious to put those houses which do not comply with these conditions into the required condition, and in some cases the inspectors of Income Tax have allowed the money expended with this object as a legitimate charge in the maintenance claim for repairs. But this is not always allowed. Some inspectors question the putting in, for instance, of a decent water supply into an agricultural labourer's house as being an improvement, a capital expenditure, which cannot be charged in the maintenance claim.

    My Amendment would ensure that such sums expended could only be charged in the maintenance claim where there is no increase of rent. This seems to me to be an absolute safeguard. Further, the Amendment would provide that the charge could not be made in the maintenance claim if the improvement of the house goes above the standard laid down by Parliament—the minimum standard of decency and comfort. On these grounds there is no danger of any illegitimate charges being put into the maintenance claim. I hope the Chancellor of the Exchequer can see his way to accept the Amendment. If he thinks, or if his advisers are afraid, that my Amendment might open too wide a door, I trust he will give us an assurance that he will instruct the collectors of Income Tax throughout the country that where money has been expended on the improvement of houses in order to bring them up to, but not above the minimum standard laid down by this House, for decency and comfort, and where there has been no increase of rent, that expenditure shall be allowed as a charge in the maintenance claim. This is a reasonable proposition. I only ask that where the money is spent on bringing the house up to the present-day statutory standard of decency and comfort, the money so expended shall not be taxed by the Central Government.

    So far as I can follow the purpose of the Amendment, it falls under two heads, a part which is not necessary, because it is already the law, and a part which cannot be acceded to because it proposes to allow deductions for Income Tax purposes in respect of expenditure that is essentially capital expenditure in character. This maintenance deduction, historically, was introduced as an additional allowance in regard to houses of low rental in the year 1909. At different dates since then it has been raised by various Acts to houses of higher rental, differing in different districts. The object of the Clause is to remove the money limit in regard to the rental of houses. The broad effect of the Amendment would seem to be to ask for the recognition to some extent of the Rule as it is to-day under Schedule A of the Income Tax, but to go beyond that and to make a loophole in the Rule for allowing deductions for what is really capital expenditure. The phraseology of the Amendment in so far as it differs from the phraseology of the Rule is this. The Rule says:

    "(2) For the purposes of this Rule the term 'maintenance' shall include the replacement of farmhouses, farm buildings, cottages, fences, and other works where the replacement is necessary to maintain the existing rent."
    The Amendment says:
    "For the purpose of this Rule the term 'maintenance' shall include the replacement of farmhouses, farm buildings, cottages, fences, and other works, if and to the extent to which the replacement is necessary to maintain the existing rent; and the term 'replacement' shall include replacement according to an improved standard necessary to meet modern requirements, or to comply with any Act of Parliament or any regulations or bye-laws of a local authority."
    In so far as the Mover of the Amendment has in mind expenditure which the landlord is bound to incur in order to meet the minimum requirement of the health authorities, or in order to maintain the existing rent, the Amendment is not needed, because he can get that allowance under the law as it stands to-day. In so far as he contemplates expenditure made by the landlord on improvements on his estate, the Amendment cannot be accepted. The one fundamental principle in Income Tax law is that expenditure in the nature of capital expenditure can never be deducted. The comment on the Amendment is that partly it is unnecessary and partly it is objectionable for the, reasons I have given. For these reasons, I regret that we are not in a position to accept the Amendment.

    I am anxious to understand this matter. I may have misunderstood the Solicitor-General, but I can only go by the Amendment as I read it. As I read the Amendment, the first part is a repetition of the existing Rule, and the second part deals with a case where you are replacing an existing farmhouse or an existing building, and where you primâ facie come under the Rule with regard to charges for capital improvements not being allowed in the maintenance claim, but where, owing to various building laws or other statutory requirements, you have to provide certain things, and you cannot replace that building exactly in the same way as it existed before. You have to put back something better. You cannot replace it at all unless you replace it according to the building laws, and the Mover of the Amendment suggests that in that case, you ought to be entitled to deduct the cost of doing that as part of the cost of replacement. I understood the Solicitor-General to say that in consequence of the building laws where you make an improvement, which might well be, you are not to be entitled to deduct, the cost of so much of the replacement as is in fact an improvement. That seems to me to be rather hard.

    A landlord or an owner finds it necessary to replace a building. So far as he is concerned he would be quite ready to replace it exactly as it was before. Then comes in the statutory requirements which say, "You must not do that, You must put back an improved building." The standard of building has been raised since the original building was erected. That happens in the vast majority of cases where an old building has to be replaced, and you have to put in something better. It seems hard that a man is not entitled to charge in the maintenance claim so much of that expenditure as is to be attributed to the demand for improvement, although the improvement is not necessarily attributable to what he wishes, but to what he is compelled to do. I understand from the Mover of the Amendment that some Income Tax officials allow the whole of that replacement cost as maintenance, but others take a narrower and stricter view and say that in so far as it is a replacement of what was existing you can charge it as a maintenance, but if there is an improvement you are not so entitled.

    I thank the Noble Lord for the way in which he has put the case. The question largely turns on what is an improvement. I do not move this Amendment with any idea of suggesting that Income Tax should not be paid on real improvements. What is an improvement? Take an agricultural cottage in which there is no water laid on, and the cottagers have to fetch the water a distance of 100 yards or so. There may be an indifferent earth closet, and no water closet. There may be no building of any sort in which to store coal. In replacing the house you put in a proper water supply, so that the housewife has not to go out in the snow to fetch the water, or you provide decent sanitary arrangements, and a proper place in which to store coal. All these things are demanded in regard to the building of new houses. Some inspectors say that because the house has been improved in the course of being replaced by the introduction of modern sanitary and necessary conditions, the charges for putting in a water closet, or water supply, or a coal house constitute an improvement which is not a legitimate charge as maintenance.

    I hope that the Chancellor of Exchequer and the Solicitor-General will consider this matter before the Report stage, and see if something cannot be devised to meet what is the wish of everybody concerned and-grant this allowance where the replacement is really a replacement under modern conditions and there is no increase of rent. Trouble arises through the difficulty of interpreting the words which the Solicitor-General read out from the Rule. What exactly does a replacement amount to? It seems to be quite obvious to the Committee that you cannot in replacing a house replace something that is worn out by something that is also worn out. The fact is, that in some districts the inspectors of taxes interpret the Rule fairly liberally, and no difficulty arises. In another district an inspector of taxes interprets the Clause very strictly. Several cases have come under notice in which an allowance has been refused because some simple fitting in a house or some part of a house has been replaced with something a little different or better than before. Surely, that kind of interpretation is not desired.

    It was recognised when this Rule was made, when it was discussed in Debate—and I believe that. if the Solicitor-General refers to the Debate he will find that it was understood—that there would be some little difficulty about interpreting this, and that there was a distinct understanding that it should be liberally interpreted so as to give an encouragement to replacement on better lines than before. I would suggest that the Chancellor of the Exchequer should give an assurance that inspectors of taxes will be instructed to interpret liberally. The existing words themselves must be rather stricter than it is necessary to interpret them, because a large capital expenditure on something entirely new could not be treated as expenditure of income with a deduction for Income Tax purposes. We do not want so much to get an extension of language, which might give rise to litigation, as to get a re-assurance that if this Clause cannot be amended—that is a matter of terminology on which the Inland Revenue Department would have to be consulted—a liberal interpretation shall be given and that these replace- ments by something a little better in the matter of housing shall not be penalised. If a man who replaces something by an, expenditure of £20 is going to get off the whole of that, while if he expends £25 he is not going to get anything at all, that is putting a premium on replacement with something worse, which I am sure there is no desire to do.

    The position has been accurately stated and is well recognised by the Government, and there is no difference of view whatever between the Inland Revenue Authorities and hon. Members who have addressed the Committee. The truth is that we all want to see replacement done not of the old identical thing that was there serving its purpose for 100 years, but of something that serves the same purpose, and no mere than the same purpose, but of a standard suitable to modern progress. In practice the question is a question of fact as to whether the thing you see there is replacement of the thing that was there before, though of a better quality, or whether in point of quantity it is something larger and more expensive.

    I am afraid that I could not conceive that that is the real measure. It is a limiting condition in the sense that, if as a result of what is called replacement, there is a substantial rise in rent it is a fair inference that it is something more than replacement, but I do not think that the converse applies. One may conceive the case of a substantial addition being made in the way of replacement which was, though possibly economically, there might be a justification for the alteration, replacement from capital expenditure. For instance, there might be a farmhouse with four or five rooms replaced with a farmhouse of eight or ten rooms. Obviously there is capital expenditure in addition to replacement. Probably a higher rent would be demanded, but it might not be. You cannot take the actual rent as the criterion of the particular replacement, because there are all sorts of other conditions affecting the rent of the whole farm which may intervene and upset the criterion. The truth is that the only way to give effect to what is the intention of the rule, and of the Committee, and of the Government, is that those officers of the Inland Revenue who have to interpret the rules should have administrative instructions as to the way in which to approach the question, and on behalf of the Government I am authorised by the Chancellor of the Exchequer to say that instructions of that character will be given, the rule remaining as it is, if the Amendment be withdrawn.

    With that assurance of the Solicitor-General, I ask leave to withdraw my Amendment.

    Amendment, by leave, withdrawn.

    Clause ordered to stand part of the Bill.

    Clause 19 (Relief from Income Tax in respect of National Savings Certificates and Ulster Savings Certificates) ordered to stand part of the Bill.

    Clause 20—(Interest Paid On Arrears Of Excess Profits Duty Not To Be Allowed As A Deduction)

    In the computation of any profits or income for the purposes of assessment to Income Tax no deduction shall be allowed in respect of any interest paid on arrears of Excess Profits Duty or Munitions Exchequer payments.

    The Amendment of the hon. Member for North-East Derby-hire (Mr. Holmes), to leave out the word "no," is out of order, as it amounts to a negation of the Clause.

    Motion made, and Question proposed, "That the Clause stand part of the Bill."

    May I point out the effect of this Clause as it stands? If an ordinary single individual carrying on business takes advantage of the arrangement to pay arrears of Excess Profits Duty in instalments, he pays 5 per cent. without deduction of tax, which is equal to 6, per cent. He cannot deduct the interest from the profits of business, whatever the interest may be, before he is assessed to Income Tax. But assume that he is a partner in a firm, or even a single individual making large profits, he cannot deduct the interest before he pays Income Tax, and he cannot deduct it from his income before he pays Super-tax, so in his case he loses also on the Super-tax, and the interest which he pays would be about 9 per cent. or, perhaps, even 10 per cent. In the case of a limited company it is not allowed to deduct for Income Tax or Super-tax or Corporation Profits Tax. I may ignore for the time being the private company when it pays Super-tax, having regard to the fact that Clause 14 has been taken out of the Bill. The limited company loses 5s. in the £ Income Tax. It also loses the Corporation Profits Tax, so that the figure might amount to 7 or 8 per cent. Therefore people who were led by the circular and by the announcement in the Press to think that the Chancellor of the Exchequer was going to allow them to pay their Income Tax by instalments at the rate of 5 per cent., will find that the actual rate varies, according to whether it is the case of a private firm, a partnership whether successful or not, or a limited company, from 6⅔ per cent. to about 10 per cent. The Chancellor of the Exchequer should be able to find a method by which in every case, whether that of a limited company, a well-to-do firm or a small individual trader, the same rate of interest should be paid to the Exchequer.

    I am in agreement with what my hon. Friend has said with regard to the effect of the non-allowance of interest on Excess Profits Duty for Income Tax purposes on the amount of interest charged. I believe that the Chancellor is more or less actuated by fear in fixing the rate of interest that he may get the interest and may not get the principal, but I can assure him that this is a very serious matter, and many companies which want to take advantage of the deferred payments system entered into obligations some years ago and during the past year, and they were intensely relieved when they saw that the Chancellor of the Exchequer intended to give time for payment and charge only 5 per cent. But when they come to examine the rate of interest and see that it is 6⅔ per cent., as my hon. Friend has pointed out, and in some eases may go up to 10 per cent., it is a very serious matter indeed, and I would suggest to the right hon. Gentleman that he should make the rate of interest 5 per cent. and let it stay at that, and that that would be equitable for all parties concerned.

    I would add my opinion in support of what the hon. Member has said as to the importance of this question of the arrears of Excess Profits Duty. It is a very serious matter for a large number of trading companies. The interest which they pay on these arrears is very severe. Seeing that the general rate of interest has fallen very much, even since this Clause was drafted, I hope that the Chancellor may be able to make some concession in this respect, which I would like to assure him is an admirable one.

    I take the same view as the hon. Member for Lime-house (Sir W. Pearce). A body with which I am connected think that a flat rate of 3½ per cent, will be sufficient. As the Clause stands it is not a reasonable one. By prohibiting deduction in respect of interest paid on arrears of Excess Profits Duty, the rate of interest charged is brought up to 6⅔ per cent., and even more, instead of 5 per cent. Six and two-thirds per cent. is an unreasonable price to charge for the accommodation which is given. The Treasury have given this concession of deferred payments—I believe in order to give a direct incentive to people to raise this money as quickly as they can—but many people are not in a position to borrow at all, and for that reason I add my voice to that of those who seek to induce the Chancellor of the Exchequer to reduce what we consider a burden which is unduly severe.

    The hon. Member for North-East Derbyshire (Mr. Holmes) was not quite accurate in stating what was the announcement I made in December last with regard to this matter. I made it perfectly plain then that the charge of 5 per cent. interest upon the unpaid instalments was to be without deduction of tax. There need have been absolutely no misapprehension in the minds of the industrial people of this country as to what precisely the proposal was. I understood my hon. Friend to suggest that I had created in the minds of the public, by what I had said, an impression that they were to pay 5 per cent. with a deduction of Income Tax upon that.

    I did not make that statement, because I knew it was not the ease. The Chancellor of the Exchequer answered a question of mine on 20th February, and cleared away any doubt on the subject.

    Evidently then I have been on a false point. The reasons which led me to make the proposal which I made were, of course, that the business community was finding itself very much hampered by the large arrears of Excess Profits Duty still to be paid. I had various suggestions made to me by representative bodies of business people, and the proposal, 'I afterwards made was based upon some of the suggestions put before me. Those who saw me did not suggest any particular rate of interest, but when I came to deal with the proposal, it seemed to me that if the arrears of Excess Profits Duty were to be allowed to stand for a period of years, necessarily some arrangement would have to be made with regard to interest. What then was an appropriate rate to charge? It is true that to-day the rate of 5 per cent., plus the Income Tax upon it, looks a high rate. At the time when I first made the proposal it did not look so high, and business men at that time were, no doubt, finding a great difficulty in borrowing at less than 5 per cent. To-day they are in a position in which, I understand, they can borrow at something less than the 6⅔ per cent. at which my proposal worked out. That is a good thing.

    The criticism was levelled at me that the capitalists of the country were being allowed a latitude which was unnecessary, and that this was an example of the ordinary methods of the Government in granting concessions to people who were rich and doing very little for the rest of the people of the country, and I was asked what assurance I had that the instalments of Excess Profits Duty would be paid in the end, or that the course I was pursuing would be any benefit to the State and the taxpayer. I pointed out what seemed to me to be the very obvious consideration connected with the matter. If the rate of interest is higher than that at which the trader is able to borrow from his bank, obviously my chance of getting the arrears of Excess Profits Duty paid quickly is very much greater. The trader would prefer to go to his bank, to borrow the money, and to pay off the arrears rather than have imposed upon him the burden of paying the higher rate of interest upon the arrears. It is equally obvious that if the rate of interest were reduced to too low a point, the trader, instead of paying off the instalments, would have every inducement to allow the arrears to stand and to pay interest on the overdue instalments rather than to pay them off. Accordingly, the Exchequer would necessarily suffer. My returns in the present year would, under such circumstances, turn out to be less than I had estimated.

    The point raised by the hon. Member for Central Cardiff (Mr. Gould) was, no doubt, a symptom of the difficulties and troubles in which the commercial community find themselves. He says that the difficulty is for people whose credit otherwise might be regarded as good, to borrow at all if the banks are aware that a large sum of arrears of Excess Profits Duty is still due. If that be so, I am willing to give some consideration to the argument. I quite appreciate that the difficulties of raising the necessary finance might be such that some companies would find themselves seriously embarrassed or hampered. The problem is to discover what is the best way in which I can at once serve the interests of the taxpayer and preserve the trading community from these difficulties. The proposal which the hon. Member for North-East Derbyshire made is one which I do not think I can accept. If I read his two Amendments together, that on Clause 20 and the other on Clause 24, the result would be that we should have a rate of interest, not of 5 per cent., but of £3 15s. per cent. ultimately as the flat rate of tax. To that I cannot assent. I am willing to make some concession. Obviously, I must not make a concession which will result in giving the trader a clear inducement not to pay the instalments of Excess Profits Duty. I must have a rate at which there will be some encouragement to the trader to pay the instalment rather than to rest upon his present position and to pay the interest. What I suggest is this: I shall reduce the rate from 5 per cent. to 4½ per cent. There will still be no deduction for Income Tax. As the Committee will see, that will work out at a rate of 6 per cent. over all. The reason why I do not fix the rate at 6 per cent. and make a deduction for Income Tax is that administratively the scheme is much more easily worked in the way I suggest. That is the greatest concession which in the circumstances I am able to make.

    There is one point which the right hon. Gentleman has not men- tioned and which is of very great concern to us. That is in relation to the private concern liable for Excess Profits Duty. Although he has made a concession to corporations we have not received any material benefit. For even under the 4½ per cent. arrangement, the rate of interest will amount now approximately to 9 per cent. For that reason I hope it is possible for him to make some special allowance to the concerns mentioned. If, for instance, he could give authority for the extension of the time of payment, it would help. There is a great desire on the part of companies to maintain credit and faith and to pay off as quickly as possible their liabilities. I refer particularly to the engineering and shipbuilding industries. The time allowed by the Chancellor of the Exchequer is all too short for the arrears to be wiped off. I accept with grateful thanks the reduction of the interest to 4½ per cent., provided it is understood that the arrangement is not to be altered from time to time. If we accept it, we must be in the position of knowing that if next year this time the rate is raised again, we have a right to review our determination to pay off the instalments. I wish the right hon. Gentleman would consider an extension of the time for payment in certain cases to a period of—

    The Chancellor of the Exchequer has missed the whole point that I was trying to make. He says that the rate he is charging people is 6⅔ per cent. The only person to whom this statement applies is the individual who has an income of less than £2,000 a year and does not pay Super-tax. The man who pays Super-tax pays, not 6⅔ per cent., but 7, 8, and even 9 per cent. interest on his arrears. As far as a limited company is concerned, it cannot deduct the interest on Excess Profits Duty arrears either for Income Tax or Corporation Profits Tax. A limited company must always be paying more than 6⅔ per cent. Corporation Profits Tax varies in its incidence, and a company may pay anything up to 8 per cent. or more. It cannot pay as little as 6⅔ per cent., unless it is carried on at a loss and is not paying Corporation Profits Tax at all. The reason given by the Chancellor of the Exchequer for his proposal is an administrative reason. He is charging everybody a different rate, and is proposing a sliding scale according to the size of a man's income and whether or not it is a company that is concerned. That hardly seems to be an equitable arrangement. Surely, whether it is a private company, a public company, an individual or a partnership, everyone ought to pay interest at exactly the same rate.

    Question, "That the Clause stand part of the Bill,'' put, and agreed to.

    5.0 P.M.

    Clauses 21 ( Allocation of income to charity where residue is not paid to charity until after one year of death of testator), 22 (Determination of annual values for purposes of Income Tax under Schedule A and Inhabited House Duty for 1923–24), and 23 (Parishes for purposes of assessment, 1923–24), ordered to stand part of the Bill.

    Clause 24—(Payment Of Excess Profits Duty By Instalments)

  • (1) Subject to the provisions of this Section the Commissioners of Inland Revenue may, on an application made in that behalf by any person by whom any Excess Profits Duty under the Finance (No. 2) Act, 1915 (in this part of this Act referred to as "the principal Act"), is payable, authorise the payment of the duty by means of quarterly instalments within the period of five years ending on the thirty-first day of December, nineteen hundred and twenty-six.
  • (2) The Commissioners of Inland Revenue may as a condition of granting an application under this Section require the applicant to give such security for the due payment of the instalments as they think fit, and may at their discretion at any time revoke any authorisation granted under this Section.
  • (3) If any person is aggrieved by the refusal of the Commissioners of Inland Revenue to grant an application made by him under this Section or by the revocation of an authorisation granted to him under this Section, he may at any time within fourteen days after the date on which notice is given to him by the Commissioners of the refusal or revocation, as the case may be, appeal against the refusal or revocation to the Special Commissioners of Income Tax and the decision of the Special Commissioners on the appeal shall be final. Any person intending to appeal to the Special Commissioners under the foregoing provision shall give notice of his intention to the Commissioners of Inland Revenue.
  • (4) Simple interest at the rate of five per cent. per annum, without deduction for Income Tax, shall be chargeable on Excess Profits Duty as from the date on which the duty becomes payable or in the case of duty which became payable on or before the first day of January, nineteen hundred and twenty-two, as from that date. Any such interest shall be payable in money and shall be recoverable as a debt due to His Majesty from the person by whom the duty in respect of which the interest is charged is payable.
  • (5) Any instalments of Excess Profits Duty and any interest on arrears of Excess Profits Duty payable by any person under this Section shall be paid on such dates as the Commissioners of Inland Revenue may fix.
  • (6) For the purposes of this Section, any reduction made after the first day of January, nineteen hundred and twenty-two, in the amount of an assessment to Excess Profits Duty shall, subject as hereinafter provided, be deemed to have been made as on that date or as on the date on which the duty under that assessment became payable, whichever date is the later: Provided that any reduction of the amount of duty payable, made in pursuance of the provisions of Part II or Part III of the Second Schedule to the Finance Act. 1921, shall have effect as from the thirty-first clay of August, nineteen hundred and twenty-three, and the thirty-first day of August, nineteen hundred and twenty-five, respectively, or from the date at which the claim under those provisions could have been proved, whichever is the earlier.
  • (7) In valuing any stock or bonds transferred in satisfaction of Excess Profits Duty under Section thirty-four of the Finance Act, 1917, no account shall be taken for the purpose of the deduction to be made under proviso (a) of Sub-section (4) of the said Section of any interest accruing due after the thirty-first day of December, nineteen hundred and twenty-one.
  • (8) For the purposes of this Section, Excess Profits Duty shall be deemed to become payable on the expiration of two months from the date on which the assessment to duty is made.
  • (9) This Section shall, subject to the necessary modifications, apply to munitions exchequer payments as it applies to Excess Profits Duty.
  • (10) This Section shall be deemed to have had effect as from the first day of January, nineteen hundred and twenty-two.
  • I beg to move, in Sub-section (1), to leave out the word "five" ["within the period of five years"], and to insert instead thereof the word "ten."

    This Amendment and the Amendment which follows it on the Paper go together, and, in effect, ask the Chancellor to give ten years for the payment of instalments instead of five. I am in entire sympathy and agreement with him in regard to fixing the rate of interest on arrears at such a rate as will encourage payment, and when I spoke in Committee of Ways and Means, I said I thought he would, as a result of the rate of interest, get more duty paid this year. But there are undoubtedly a large number of people who have so locked up their profits in new plant and machinery that they are finding difficulty now when trade is not going well. They cannot possibly pay the full amount that is due, and if trade revives they will be still more unable to pay, because they will require all the money they have got for the payment of wages and the purchase of raw material in order to get started again. Having regard to the fact that the Inland Revenue have the right to ask for security in such cases, I suggest that the right hon. Gentleman should allow the instalments to be spread over 10 years for the purpose of assisting businesses such as those to which I have referred.

    I am heartily in agreement with the last speaker. When I was ruled out of order just now, I was particularly concerned about mentioning the difficulties with which certain industries are faced. I am quite certain that in some trades and businesses there may be large sums of money in hand and it may be felt by the Inland Revenue Department that such money should be used for the purpose of paying taxation arrears, but the real trouble is that at the present moment many of these industries have nothing to do and every penny of their funds is required for the ordinary current running of the business. The matter is one which has come up at various boards in which I am interested, and we felt that, even with a higher rate of interest, it was better for us to take advantage of the deferred scheme than to put ourselves in such a position that when we get a revival of trade—as we hope to shortly—we should not be able to utilise all the money we have in the creation of employment. My right hon. Friend is anxious to assist us as much as possible. He will confer great benefit upon industry and give us something in the nature of encouragement if he accepts this Amendment and extends the period for 10 years. It means a great deal, because at present it requires a lot of courage to face even the ordinary business risks, and if we can get the sympathetic consideration of the Inland Revenue and the Chancellor, I am certain that industry as a whole will do everything possible to repay such consideration.

    I cordially support the Amendment. In the Midlands we have a very large number of small firms who have been very bard hit by the War and by circumstances arising out of the War. It would be a distinct advantage to those firms in connection with any development of trade which may take place in the near future, and it would help in extending and increasing their business efforts if this concession were made. I think the arguments submitted, à propos as they are of the whole country, ought to convince the Chancellor that he will do a very great service to industry if he meets us in this way. We know how much the Chancellor desires to help trade in this country. Every business man and business organisation is agreed that no Chancellor has been so willing to listen to practical and helpful suggestions from business men as the present Chancellor. Here is a case in which, by making a comparatively small concession, he can confer a great advantage on a very large number of small firms throughout the country.

    I could not altogether follow the last speaker in his remarks. He said he was particularly interested in the advancement of certain firms of small size in the Midlands which have been extremely hard hit by the War. I submit if firms have been hard hit by the War, there is very little Excess Profits Duty for them to pay. It is only those people who have benefited greatly out of the War who are called upon to pay this duty.

    I did not catch that, but I accept the statement of my hon. Friend. I hope in this matter the Chancellor will show his "Government whip," and will not give way to the cry which has been raised from the various vested interests so well represented in this House. From one's ordinary observation it would appear that the only concessions which the Chancellor has made during the Debate have been to those people who are always clamouring for some benefit. 1f the Chancellor were to stick to his ground on this occasion it would be for some succeeding Chancellor to review the position in a few years' time, and then, if it were found that the position fore- shadowed by the previous speakers existed in absolute fact, I am sure everyone would be prepared to support efforts for the relief of the industries to which these hon. Members have referred. At the present time, however, I hope the Chancellor will stand firm and retain the period of five years. At the expiration of five years the matter can be reviewed, and if the hardship really applies we will then be able to see what is the best thing to do.

    I hope the Chancellor will listen to those who are speaking in favour of the Amendment. I do not think it is generally known that there is a very close connection between this question of the instalments of taxation and the question of finding employment. I have known as an actual fact a case where the finances of a business were in such straitened circumstances, owing to the fact of having to pay instalments of taxation, that the only way in which they could pay was temporarily—for a few weeks—to shut down the business. That has happened in many cases, and it means that the fact of taxation having to be paid at a particular time, and to a particular extent, is the direct means of causing loss of employment which the firms concerned are exceedingly anxious to give.

    As one hon. Member said, I am most anxious to listen to the suggestions of the trading community on matters of this kind, and everyone is aware that great embarrassment is being caused at the present time. I am not convinced, however, that there would be any real gain derived from extending the period, and certainly 10 years is too long a period of time to allow for the payment of Excess Profits Duty, so far as present circumstances show. It may he that as time goes on the matter will become plainer, and it may be thought necessary to give a, further extension. In the meantime, I think it would be unwise to increase the period to any figure over five years, but I have got no very confident opinion upon that matter, and if my hon. Friend will allow me, I will consider the case further between now and the Report stage, and if I can see that there is really a sound foundation for what has been said in support of the Amendment, then I shall give it my attention.

    The Chancellor expresses the hope that between now and the Report stage he will consider the extension of the five years' period. Can he tell the Committee the amount of arrears of Excess Profits Duty at the beginning of the present financial year?

    It is a very large sum. I could not give the actual figure, but certainly it is a large sum, and I am sure my hon. Friend will make any use he likes of its size.

    I am trying to find out what effect an extension of the period will have on the revenue of the year. The Chancellor of the Exchequer expects to receive a sum of £30,000,000 odd from the Excess Profits Duty. If the five years' period were extended it would have some bearing on that revenue.

    My hon. Friend will remember that under present conditions the rate of interest which is being charged offers an inducement to the trader to pay rather than allow the arrears to stand.

    Amendment negatived.

    I beg to move, to leave out Sub-section (2).

    This Sub-section means that if a concession is granted to a debtor to the extent of his being allowed a certain period in which to pay his debt, the Inland Revenue authorities may require security and also may revoke any authorisation granted. I quite agree that the Commissioners of Inland Revenue, on behalf of His Majesty's Treasury, ought to have some earnest of good will, but this makes it a condition of granting an application. That officials who know their duty and who will, if it is necessary, take some sort of security, will go as if they were bailiffs in charge of the property. This puts a chain around the man's leg with the power in the hands of the Inland Revenue at any time to revoke his authorisation. It is holding a sword of Damocles over a man's head. I think we can, with some justice, ask the Chancellor of the Exchequer to modify that Sub-section, at any rate, by rendering it less easy for the Commissioners of Inland Revenue to revoke any authorisation which is granted under the Clause. Otherwise, the Clause may destroy a man's credit and may ultimately ruin him. It will certainly paralyse him and prevent him borrowing money from his bankers with which to buy raw materials for his business, and for that reason I would ask the right hon. Gentleman to give his attention to the effect of the power which the Commissioners have to revoke that authorisation. If he could see his way to soften that Clause down, I think he would be wiping away what might ultimately be. a great hardship.

    I am sure the hon. Member will readily agree that some power of this kind is necessary.

    I think he will also agree that it would not be in the interest of the Inland Revenue Department to exercise this power harshly, but the kind of case which he suggests, where the effect of revoking the power to pay by instalments might have a most detrimental effect on a man's credit, is the very kind of case in which the Inland Revenue Department would desire to avoid acting harshly.

    It might go further and result in the security being called in, in which case it might put the trader in a great difficulty.

    As I say, after all, there is no creditor which has so large an interest in the solvency of the man indebted for arrears of Excess Profits Duty as the Inland Revenue Department, and the whole tendency of that Department would, in such circumstances as the hon. Member has described, be rather to prevent anything happening which would injure the solvency of their debtor than that they should bring about circumstances in which he would be unable to pay any further instalments. Accordingly, I think the hon. Member may take it as a certainty that no harsh act would be likely to be taken by the Department under any power which they have got under this Sub-section. If, however, he can suggest any form of words at a later stage which would, as he says, soften this particular power, I shall be glad to consider them, and in the meantime I think he may assure himself that there will be no arbitrary or harsh exercise of that power on the part of the Inland Revenue Department.

    I accept the right hon. Gentleman's assurance. I might suggest some words which would compel the Inland Revenue Department to give three, six, or nine months' notice, or some notice, so that the, revocation should not take place in a hurry or in an arbitrary manner, in order to give the man at any rate some time in which to look round.

    Amendment negatived.

    I beg to move, in Subsection (4), after the word "duty" ["Excess Profits Duty"], to insert the words

    "to be paid by instalments under this Section."
    The Chancellor of the Exchequer agreed at the beginning of the year that he would allow those who could not pay Excess Profits Duty to pay it by instalments over a period of five years, and that he would charge 5 per cent. interest without deduction of tax, but he is doing something more. He is asking that, if a firm or company up to the present time had not yet been assessed to Excess Profits Duty for their final accounting period, owing to some difficulties on one side or the other, directly that assessment was made, even though the firm or company did not want to pay on the instalment system, he should take power to charge interest from the time the assessment was made. I do not think it is intended that after all these years of Excess Profits Duty people who do not want to take advantage of the instalment system should have to have interest accruing from the date on which the assessment is made against them, and my Amendment is to make it clear that this 5 per cent. interest is to be charged only in the case of firms who accept the offer of the Inland Revenue Department to pay their duty by instalments. The Chancellor of the Exchequer has in previous Acts got every remedy he wants against those who do not accept the instalments system and yet do not pay up their Excess Profits Duty.

    I confess that I was in some difficulty in appreciating the point of the Amendment until I heard the hon. Member's speech, and I now understand that what he wants is that since no interest has been charged on arrears of Excess Profits Duty in the past, upon people who have some difficulty in paying, it would be unfair now, in cases where assessment is only now being made, to charge them, as from the date the duty becomes payable, interest upon any arrears that may subsequently accrue. I appreciate the point. I cannot agree that there is a departure from the practice which has been pursued previously of doing nothing which in any way seems harsh in the way of urging payment upon people who are not in a position to pay, but, on the other hand, if interest is to be paid by those who are to pay by instalments, it is clear that it would be absurd to allow people who are not under the obligation to pay by instalments to get off paying interest altogether. The result of your action would be that nobody would choose to pay by instalments at all, and nobody would pay any interest.

    The right hon. Gentleman, under the 1915 Act, can step in at once in such a case as that. All I am trying to do is this. A man, to-morrow we will say, has his final accounting period settled and an assessment of £2,000 made against him. What I want is that if he pays the Chancellor in the ordinary way on the 1st August he shall not have a demand note for interest from the date at which the assessment is made up to the 1st August. if the Chancellor of the Exchequer finds on the 1st August that this man is not paying he can put the law into operation against him, and the man would either be compelled to accept the instalment system and pay interest or legal process could be issued against him in the usual way. I only want to protect the cases where assessments are now made and where a reasonable period may be given for payment before the Chancellor of the Exchequer acts.

    My hon. Friend's Amendment goes much further than the case he has just made, because it would really have the effect of making it incumbent only upon those who pay by instalments to pay interest as well. Obviously, that would be an error, but I am willing to consider what I can do to cover the case to which he has referred, where a person pays his Excess Profits Duty within a reasonable period after it has been assessed. Obviously, it would he a great concession to go further and to give an inducement to people not to enter into any arrangement about paying by instalments, because in that way they would escape the payment of interest.

    Amendment, by leave, withdrawn.

    Clause ordered to stand part of the Bill.

    CLAUSE 25 (Right of appeal as to amount of deficiencies or losses) ordered to stand part of the Bill.

    Clause 26—(Amendment Of S 38 (3) Of 5 D 6 Geo 5, C 89)

    Where the interest or any part of the interest in any trade or business of any person, being the proprietor thereof or a partner therein, passes by a voluntary disposition inter vivos made by that person or under his will or on his intestacy to the husband or the wife or any lineal descendant of that person, that last-named person shall, for the purposes of Sub-section (3) of Section thirty-eight of the principal Act (which allows a repayment of or set-off against Excess Profits Duty in case of a deficiency or loss), be treated as if he were the person from whom the interest passed.

    On a point of Order. Would it be in my power to ask you, Mr. Chairman, to allow me to draw attention to something which looks like a drafting oversight in the earlier part of this Clause? The Clause refers to a disposition made by a person "to the husband or the wife," and so on. Ought not the words "or for the benefit of" to be put in before "the husband"? Otherwise, the Clause does not include cases where only the income of shares passes to the wife for life.

    It is for the hon. Member to move to insert certain words if he wishes to do so. It cannot be discussed without an Amendment.

    I beg to move, after the word "to" ["on his intestacy to"], to insert the words "or for the benefit of."

    My reason is that if these words are not put in, the Clause does not include cases where only the income of shares passes to the wife for life.

    I cannot quite follow the point of the Amendment. It seems to me that all the cases meant to be covered are contained in the phraseology of the Clause as it stands. It is a case in which a business is transmitted, and the question arises as to whether the person to whom the business is transmitted would have the opportunity of obtaining a setoff in respect of losses incurred against the amount of Excess Profits Duty paid in a previous period. Under these circumstances, I confess I cannot quite follow the effect of my hon. Friend's Amendment.

    I think the point raised by the hon. Member is really covered by the earlier words in the Clause, "Where the interest or any part of the interest."

    Amendment negatived.

    The first Amendment on the Paper to Clause 26, standing in the name of the hon. and gallant Member for South-West St. Pancras (Major Barnett)—

    "after the word 'Where,' to insert the words the ownership of a business has nominally changed hands, but there is substantial identity of interest between the old owner and the new owner, such new owner shall, for the purposes of Sub-section (3) of Section 38 of the principal Act, be treated as if he were the old owner, and where'"—
    is out of place. The natural course is to put such amplifications as this after the Section. The same point can be raised on the next Amendment on the Paper.

    May I point out that Clause 26 is an Amendment of Section 38, Sub-section (3), of the principal Act? The principal Act is the Finance (No. 2) Act, 1915, which establishes the Excess Profits Duty. What I have embodied in my Amendment, I submit, can only be put in the place where it is. What I have put forward does not involve a change of ownership at all. There is a substantial identity of interest, and I submit that the proper and only place for this Amendment is at the beginning of this Clause.

    On a point of Order. You have already put an Amendment relating to subsequent words in this Clause, and I understand my hon. and gallant Friend wants to move an Amendment in the first line of the Clause.

    That is so. It may be that I omitted to see that the hon. and gallant Member had a new point to make. I ruled that the natural place was at the end of the Clause. If I am wrong, I am afraid I cannot go back on it now, but, of course, there is the usual remedy on Report.

    I beg to move, at the end of the Clause, to add the words

    "and in ally other case where there has been a change in ownership of a business, repayment of or set-off against Excess Profits Duty shall be made to the new owner in a similar manner, if there is, and to the extent to which there is, substantial identity of interest by reason of persons beneficially interested in the old owner being beneficially interested in the new owner."
    This Amendment arises as the result of a case known as the Gittus case, which was decided in the House of Lords on the 18th April, 1921. I will point out what, has arisen as the result of that case. In the original Act, the Finance (No. 2) Act, 1915, by which Excess Profits Duty was first imposed, Section 38 reads as follows:
    "There shall be charged, levied, and paid on the amount by which the profits arising from any trade or business to which this Part of this Act applies,"
    and so on. I want the Committee to note that it refers to "any trade or business." Then, at the beginning of Section 39, the Act describes the kind of trades and businesses that will be liable, and those that will be exempt. It says:
    "The trades and businesses to which this Part of this Act applies are all trades or businesses (whether continuously carried on or not) of any description,"
    and so on. Then, in Section 45, in Subsection (2), it is enacted:
    "The duty may be assessed on any person for the time being owning or carrying on the trade or business."
    I want the Committee to note those words. In Section 38, Sub-section (3), the right is given of repayment or set-off, that is to say, a man is liable in a given year to pay Excess Profits Duty, having made more profit that his pre War standard, and if in the following year he made a profit below his pre-War standard, he would be entitled to get a proportionate amount of Excess Profits Duty, which he had already paid. If in a given year he was below the standard, and, therefore, not liable, he had a set-off in any year in which he became liable to Excess Profits Duty in respect of any deficiencies in previous years, that is to say, the amount by which his profits in previous years were below his pre-War standard. That, we may take it, is the position of the law with regard to the payment of Excess Profits Duty; that persons who would be assessed, namely, trades and businesses, had the right of repayment or set-off. The Gittus case, which was decided in the House of Lords, in April, 1921, was in respect of a wagon builder named Gittus, of Penistone, Yorkshire. The business belonged to his father, who died, leaving it to his son. The father had paid Excess Profits Duty. The son succeeded to his father's business, in which he had been previously employed, made a loss, and claimed repayment of the Excess Profits Duty which his father had paid. This was refused on the ground that it was not the same person. It was refused because of the actual words in the Act of 1915 with regard to this question -of set-off. Perhaps the Committee will allow me to read Sub-section (3) of Section 38, to which this refers:
    "Where a person proves that in any accounting period which ended after the fourth day of August, nineteen hundred and fourteen, his profits have not reached the point which involves liability to Excess Profits Duty, or that he has sustained a loss in his trade or business, he shall be entitled to repayment of such amount paid by him as Excess Profits Duty in respect of any previous accounting period, or to set off against any Excess Profits Duty payable by him in respect of any succeeding accounting period such an amount as will make the total amount of Excess Profits Duty paid by him during the whole period accord with his profits or losses during that period."
    The point to which I want to call the attention of the Committee is that, whereas in the first Section Excess Profits Duty was levied on trades and businesses, and those who were liable under Section 39 are referred to as trades and businesses, it is held that this set-off or repayment should apply to a person, and it was on that that the Gittus case turned. The effect of the Gittus case was that where a man had been carrying on business in his own name up to, we will say, the end of 1916, and had paid Excess Profits Duty, and then turned his business into a private limited company, taking all the shares himself, by so doing he lost all his right to reclaim Excess Profits Duty. That is about the most extreme case one can give, but it would apply to all similar cases. Four men in partnership forming a company and each having 25 per cent. of the shares in the limited company, lose all right of set-off or repayment as the result of the Gittus case, and the injustice, the inequity, of it was aggravated by the fact that a limited company right through is treated for Excess Profits Duty as the same entity. A, B, C and D may be four shareholders in a private company carrying on trade or business. They may sell all their shares to E, F, G and H. The proprietors become entirely different, but E, F, G and H can get back, if they make a loss, the whole of the Excess Profits Duty paid by A, B, C and D. One knows perfectly well that in large public companies the shareholding is almost completely changed between 1914 and 1921; yet in those cases the money is paid back, and, except for administrative concessions, to which I am coming in a moment, if a man turned his own business into a limited company, and though no one has ever taken a penny out of it, he has no right to recover the Excess Profits Duty which he has paid.

    Last year this decision of the House of Lords was given just as the Budget was introduced, and, in an effort to get a statement from the Chancellor of the Exchequer, I moved an Amendment on the 20th June, 1921, to reverse the Gittus case. I said frankly that that was the purpose of it, and the proposal I made then was that, instead of a person having the right to recover Excess Profits Duty, each trade or business should have the right. The entity should remain the trade or business, and the owner for the time being should have the right to obtain repayment, just as he had the liability to be assessed if he made excess profits. The Financial Secretary to the Treasury replied on that occasion. I had suggested it was possibly a question of drafting when the 1915 Act was before the House, and that no one noticed how the use of the word "person" would affect the future administration of the Section, but the Financial Secretary said:
    "There is no question of it being a result of thoughtless drafting. I should be inclined to say that the word "person" does really carry out what is the bedrock principle of the Excess Profits Duty, that it is a charge personal to the man who pays it, and the man who carries on the business, and that for very practical reasons it cannot be attached to the business as an entity distinct from the person or persons who carry on the business. I do not really think there will he any dispute between the view I have advanced, and that advanced by the hon. Member, as regards the great majority of ordinary cases of the transference of a business to a successor."
    Then he went on to say:
    "I quite agree that there would be hardships possible in the too punctilious application of the Statute in some cases. I believe they are not hardships which it is possible to frame legislation to overcome, but they more approach matters of administrative action."—[OFFICIAL REPORT, 20th June, 1921; cols. 949 and 951, Vol. 143.]
    That was a sort of promise given as a result of that Amendment last year. On the 20th February this year I put this question to the Chancellor of the Exchequer:
    "What instructions he has given to the Board of Inland Revenue for dealing administratively with hard cases which are primâ facie governed by the Gittus case in respect of claims for the repayment of Excess Profits Duty, in accordance with the promise made by the Financial Secretary to the Treasury on 20th June, 1921?"
    The Financial Secretary to the Treasury replied:
    "The Commissioners of Inland Revenue have been instructed to deal administratively with eases of the character to which the hon. Member refers. The cases coming within their purview are numerous and present widely divergent features, and no detailed instructions could be framed to cover the various circumstances arising. Broadly speaking, however, where there has been a change of ownership of a business, repayment of Excess Profits Duty is made if there is, and to the extent to which there is, substantial identity of interest between the old and the new owner."—[OFFICIAL REPORT, 20th February, 1922; col. 1526, Vol. 150.]
    That is still carrying out the idea of a person having the right to repayment. That answer of the right hon. Gentleman was printed in most of the well-known newspapers of the Kingdom, and a construction was put upon it by business people which is quite different, I understand, from the construction which the Inland Revenue authorities themselves put upon it. They are construing this in an extremely narrow sense. The words which the Financial Secretary used were:
    "If there is, and to the extent to which there is, substantial identity of interest between the old and the new owner."
    The Inland Revenue say that if a man has been carrying on a business and turns it into a company and holds 80 per cent. of the shares, then they recognise that that is substantial identity of interest, but if, say, there are four partners in a firm, each of whom has a quarter share in the partnership and they turn themselves into a limited company, and hold 25 per cent. of the shares each, that is not substantial identity of interest, because no man has more than 25 per cent. of the new ownership. That surely, is a misconstruction of the words of the Financial Secretary, and are, I say, narrow in the extreme.

    I want to give some instances which are, perhaps, more to the point in exhibiting the inequality and injustice than mere general statements. I want first to tell of a partnership in a well- known town in the North of England where there were four partners, all having various shares in the business. In 1918 they formed themselves into a private company and took shares in that private company in the exact proportion of their share in the private firm. No one has ever had anything to do with the business except themselves, or has taken a penny out of it. The four men have been partners for years, yet because none of them have 50 per cent. or 40 per cent. of interest in the company, they are denied any repayment of Excess Profits Duty which they paid before. The second instance is that of a big company in Yorkshire with a capital of £500,000. They had distributed very small dividends, had put large sums to reserve, and had a reserve actually more than double the capital. They wanted fresh capital during the War for extensions so they decided to form a new company with £2,000,000 capital. They decided that each shareholder should have two bonus shares for each one held, which absorbed £1,500,000, on condition that they subscribed for one new share per share, thus bringing in £500,000 new money. This arrangement 99 per cent. of the shareholders accepted. One per cent. renounced the arrangement. The rest of the old shareholders remain in that company to the extent of 99 per cent., and in the exact proportion as before, yet they are denied any return of Excess Profits Duty resulting from the narrow reading of the answer given by the Financial Secretary to the question put to him.

    The third illustration relates to a company in Scotland. A number of the shares were bought by someone interested in the trade, but the original shareholders remained behind, and it was not, indeed, a change in the company at all. In that case, as in the case of the companies I have explained, the company was admitted as of the same entity, and therefore it was said the Excess Profits Duty would be repaid. It was found, however, when four-fifths of the shares had been actually paid for that this man was buying, that the other one-fifth could not, under the will of the founder of the business—made about 60 years ago, by which the shares were to be handed down from generation to generation—be transferred for fear that certain grandchildren, on becoming 21, might object to the transfer, and it was decided to cancel the whole transaction. The money was paid back, a new company was formed, exactly the same, without any promotion money paid, and so on; the transaction was simply to get out of the difficulty, and affairs went on exactly as under the old company, but no Excess Profits Duty could be returned. The fourth case relates to a company in Cheshire where one individual carried on a business. He died in September, 1916, and his wife carried on the business until 1st June, 1919—a period of nearly three years. Then she formed the business into a limited company. She and her sons took 96 per cent. of the shares themselves. They afterwards admitted one or two outsiders with fresh money. She and her sons still hold 79 per cent. of the shares in that family business, yet they have been refused all repayment. This is one the cases where they have actually gone into liquidation and been wound up. There were two private companies, one in London and the other in Manchester. They found their businesses almost identical in the way of profits and assets. They therefore agreed to form a company with £250,000 capital. Of this, £200,000 was to be paid-up capital. Two Shareholders in the one works took £100,000 worth of shares, and, I think, five shareholders in the other took the £100,000. The businesses were simply amalgamated. They were all working partners in their companies, seven all together. There was no difference whatever in the businesses except that the two firms came together and worked both, and had paid Excess Profits Duty, yet because they amalgamated, there being, as I say, no alteration whatever in their businesses—although their accounts were kept entirely separate—they are refused all repayment of Excess Profits Duty.

    My last example is one of a firm that is joined to three private companies. They agreed to a basis upon which they would amalgamate. They took shares in their new company in exactly the same way as I have described. There was no alteration practically in the shareholding during all the years for Excess Profits Duty. Each separate business had prior to amalgamation paid Excess Profits Duty, and the accounts are still kept separately and separately audited; yet although they have the figures and there is no confusion whatever, and they can be put before the Inland Revenue, the repayment of Excess Profits Duty is entirely refused. I suppose the answer will be, as it was last night from the Solicitor-General, that it costs money. The right hon. Gentleman justified Clause 14, and, I think, another Clause, on the ground that certain people were trying to avoid paying their fair share of taxation and that they were making other people pay their share for them. This seems to be a case in which we are making certain of the taxpayers pay a further share of the taxes which we ought not to ask them to do. We say, "We are going to cut down the Income Tax, and do this, that and the other, and we are going to make you pay for it. By the construction put upon the Gittus case the Inland Revenue are going to make those concerned unable to recover. "Therefore," they say, "we are going to reduce income-tax—at your expense."

    I want to point out to the Solicitor-General that the effect of the Gittus case was to say this: that the right of repayment is a personal one; it belongs to the individual who has paid the Excess Profits Duty. The result of the speech last year of the Financial Secretary, his answer to me in February, and the actual judgment in the Gittus case, and the wording of Section 38, Sub-section (3), of the principal Act shows that this right of repayment now generally accepted is a personal one—personal to the person who has already paid the Excess Profits Duty. Let me read a portion of Lord Cave's Judgment in the House of Lords. He said:
    "The relief there provided is given to a 'person' and that person must prove a deficiency in 'his profits' in order to be entitled to a return or set off in respect of duty paid or payable 'by him.' The object of the Sub-section is expressed to be to make the total amount of duty paid by him 'during the whole period accord with his profits or losses' during that period. In my opinion it would be doing violence to the express terms of the Act to construe these expressions as including a previous owner of the business. There is in this Statute just that 'personal note' which in the case cited to your Lordships (Scottish Shire Line v. Lethem) (1912, 6 Tax Cases 91) was found by the Court of Session to be absent from the Statute there in question. This being so, I agree with the opinion expressed by Mr. Justice Rowlatt, and adopted by the Court of Appeal, that, taking this Section alone, it clearly points to the case of an individual and means that the loss in his business which a person is to be entitled to set off against the Excess Profits Duty payable by him is a loss personal to himself."
    I put it to the Solicitor-General that the words "substantial identity of interest" must not be taken to mean only where one man retains 80 per cent. of the old business. If there are four partners in a. firm which paid Excess Profits Duty, and they form a limited company and take shares in the correct proportions, there is substantial identity of interest; they are the persons who paid the Excess Profits Duty, and they are the persons who have the right to get it back. The judgment of Lord Cave brings that out—there is "the personal note," as he says, that personal note which was absent from another Statute.

    To try and ride off in that very narrow, unjust, and inequitable way by that narrow construction is doing an injustice to a number of firms. It is bringing them to the ground, and making them pay a share of taxation which other people ought to share with them. It is causing a very considerable amount of distress and fear, and the consequences and effect of it must he that where businesses are closed down, not merely are the proprietors sent to another method of earning their living, but work-people are thrown into the streets.

    6.0 p.m.

    I beg to second the Amendment. I do so because I, with others, have Amendments on the Paper aiming at the same thing, which is an Amendment of Sub-section (3) of Section 38 of the principal Act, and deals with the substantial identity of interest between the new owner and the old. I must not, however, be taken to be associating myself with the exact wording of the Amendment on the Paper. The words of the Amendment are:

    "Substantial identity of interest by reason of persons beneficially interested in the old owner being beneficially interested in the new owner."
    If those words be placed upon the Statute Book they will simply constitute an anomaly. The Amendment standing in the name of the hon. Member for Farnham (Mr. A. M. Samuel) seems to me to be the first Amendment on this subject which has passed through the hands of a lawyer. The words he uses are:
    "identity of interest by reason of any person, or persons, beneficially interested in the original ownership being beneficially interested in the new ownership."
    I think that makes the point clearer. After all, this is a drafting matter, but I hope the Chancellor of the Exchequer will accept the principle of this Amendment. I cannot help thinking that the hon. Member for North-East Derbyshire (Mr. Holmes) has missed the principal argument in favour of his own Amendment, which is the very existence in the Bill of Clause 26. The Government comes forward with a Finance Bill containing a Clause which makes a far wider extension of the original privilege given by the principal Act than is contained in any of these Amendments. The Clause lays down that where there is devolution of ownership, without any identity of ownership, the new owner shall in certain cases be put into the same position as the original owner. In other words, this means that as long as the devolution is on the usual lines of husband to wife, wife to husband, father to son or daughter, grandfather to grandson or granddaughter, so long as the devolution is in accord with that principle of legitimate expectation which Jeremy Bentham terms the basis of security, the new owner shall be recognised as having the rights of the old owner.

    We are now asking for something very much less than that, for the Clause deals with cases where there is no identity of ownership at all. No one quarrels with Clause 26, but if we put that Clause on the Statute Book how can we refuse the Amendment? An answer has been quoted from by the Mover of this Amendment which was given in this House on the 20th February last dealing with administrative action in these cases. I protest most strongly against the idea of correcting these hardships by administrative action, because such action in matters of taxation is only a temporary makeshift at the best, and it is always bad. The words are so important in the answer which has been quoted by the hon. Member for North-East Derbyshire that I will venture to repeat them:
    "The Commissioners of Inland Revenue have been instructed to deal administratively with cases of the character to which the hon. Member refers. The cases corning within their purview are numerous and present widely divergent features, and no detailed instructions could be framed to cover the various circumstances arising."
    My submission is that it is for the House of Commons to decide the principles upon which people are to be taxed, and it is not for us to leave it to administrative action. I trust my right hon. Friend will see his way to accept this Amendment, but if he is not able to do so, I hope at least he will be able to assure us that the administrative method of dealing with taxation will be strictly limited.

    I would like to give my support to this Amendment, because I have one on the Paper very much of the same nature. How can the right hon. Gentleman justify the operation of this Clause on lines of justice, reason or honesty? The Chancellor of the Exchequer said something about legal decisions and common sense, or something of that kind, but here is a case where the Treasury talk about adopting administrative action in order to deal with certain hard cases. To me this proposal looks very much like repayment dodging. If you wish the taxpayer to deal out equity to you then you must deal out equity to the taxpayer.

    On this subject which is one of very great importance, the Committee will, of course, naturally expect the Chancellor of the Exchequer to deal with the main question. I wish to disarm hostility at the outset by saying that I am not going to attempt to deal with the main question, but I will put before the Committee certain preliminary considerations which I submit are of the utmost importance to a proper appreciation of the question which the Committee has to decide. With the aphorism of the hon. Member for St. Pancras (Major Barnett) that administrative action in matters of taxation should not include a discretion to tax or not to tax, I for one am in profound agreement as a general principle. The reason why administrative action in certain cases exercises a discretion as to whether a given case comes within the tax or not, is because it is one of practical difficulty, and that is the only justification for administrative action. In certain cases it is a fact that it is so extraordinarily difficult by general language such as must be used in an Act of Parliament to cover the variety of cases which arise that sometimes resort must be had of necessity to minor degrees of discretion in administrative action in order to prevent hardships in individual cases which cannot have been intended by the spirit of the taxing Act.

    Subject to these general remarks, I agree and accept the challenge on behalf of the Government that the question which has to be decided to-day is a legislative question. We have to decide whether or not the proposal contained in Clause 26 of this Bill is a right or a wrong proposal, and if it is wrong, we have to decide how it should be altered. I accept that proposition, and it is from the point of view of endeavouring to help the Committee in this matter that I want to deal with a certain aspect of the case which seems not to have received quite sufficient attention in the speeches which have been made to-day, and in the various discussions which have taken place on this subject in the past. The speech of the hon. Member who moved this Amendment, if I may say so, was like all his speeches, extraordinarily clear and lucid.

    I wish to point out, however, that the aspect of the case, with which I want to deal, was not faced by the hon. Member. The fundamental error made by the hon. Member is that he treated the Excess Profits Duty as a tax on the businesses, instead of being similar in character to the Income Tax, the Super-tax, and other taxes payable by the individual person. He said, practically, that whereas the duty by the Act is levied upon businesses, and whereas those who are liable to the duty are the owners of trades and businesses, under Sub-section (3) of the Section in question an individual is entitled to repayment if he makes a loss and asks for a recoupment out of the tax paid in a previous accounting period. The reason why that is important is, that this question of identity, of continuing identity, is really at the bottom of the views of most of those who feel that there is a moral force in the claim for a wide extension of the law as it is to-day, in order to give recoupment under Sub-section (3) to a great many persons and companies who do not at present by the law get it. If the subject of taxation had been intended by Parliament to be the business, then continuity of the business would, ex hypothesi, also come under the same provision. According to the assumption of the Mover of the Amendment, that was the basis of the legislation the continuous business, and that would seem to carry a right to repayment where, having made a profit in one accounting period, it made a loss in another accounting period, even though the ownership of the business may have been more or less changed.

    That is not the point of view from which Parliament imposed this duty. Parliament imposed it as a personal tax, and that is the whole point of the decision in the Gittus case. No one is more sensible than a lawyer—and no one is less inclined to boast than a lawyer—of the disinclination of this House to be lectured on legal questions, but I hope the Committee will listen to me for a few moments while I submit what I think is the true view of this case. The point I want to make clear to the Committee is that this legislation as to Excess Profits Duty is based on the taxation of the person with certain necessary limitations when you come to work it out, and we have worked it out in this country to be for a period of seven years. That is the question the Committee has really to decide. An hon. Member has suggested, by way of interjection, that it is a question of honesty and of moral obligation, but those are questions which one cannot decide until it is known what Parliament intended to do by this particular legislation. It is only when one appreciates the character of the tax that you get the real object of the Section. A question which, I agree, is of great importance is the question of what is right and what is wrong. The hon. Member said that that was the whole issue. It is not the whole issue. Necessarily these questions of taxation involve a degree of right or wrong. You cannot help hardships in individual cases, but in considering the moral obligation you have to consider the question of what you can afford. You can conceivably have a case where the moral claim to the remission of taxation which was well founded would yet result in such a cost to the Exchequer that it could not simply be made. These questions are necessarily questions of degree, and assuming they are questions of degree, you get to the point that where it is right a thing should be done, it has to be done at whatever cost. We have not been through the Great War without learning that lesson.

    I want to say a few words on the purely legal question as to what Parliament intended by this legislation as expressed in the Act itself. In the Section which imposes the duty, Section 38 of the Finance (No. 2) Act, 1915, it is provided that:
    "There shall be charged, levied, and paid on the amount by which the profits arising from any trade or business to which this part of this Act applies in any accounting period…exceeding by more than £200 the pre-War standard of profits as defined for the purposes of this part of this Act a duty…of an amount equal to 50 per cent, of that excess."
    And then Sub-section (3) says:
    "Where a person proves that in any accounting period after the fourth day of August, 1914, his profits have not reached the point which involves liability to Excess Profits Duty or that he has sustained a loss in his trade or business, he shall lie entitled to repayment of such amount. paid by him as Excess Profits Duty in respect of any previous accounting period, or to set off against any Excess Profits Duty payable by him in respect of any succeeding accounting period such an amount as will make the total amount of Excess Profits Duty paid by him during the whole period accord with his profits or losses during that period."
    Those of us who were in that Parliament remember the Debates that took place on this Averaging Clause. The point that was made was that if a man made a profit in one accounting period and lost in the next it was fair to him that he should be able to set off one against the other. There is nothing in the Statute which goes back upon or modifies that fundamental position as contained in Sub-section (3) of Section 38. On the contrary all the other provisos bear out that view because it is laid down that the calculation of profits shall be made in the same manner as the calculation of Income Tax profits, and Income Tax methods, and the Income Tax point of view runs through the whole Schedule and the whole of the provisions of the Act. Throughout it is treated as a sort of Income Tax. I need not trouble the Committee with details. There is only a single case where there is a reference to change of ownership of the business—and that is for a purely subsidiary purpose, namely, for the purpose of calculating the profits of the accounting period for which the duty is to be paid. What the House of Lords pointed out in the Gittus case was that that was a subsidiary purpose with the object of getting at the pre-War standard, but that the basis of the legislation all through was that the individual must make the payment.

    With regard to the interpretation which the hon. and learned Gentleman has put on Sub-section (3) of Section 38, that it is the man who paid the Excess Profits Duty and that no one else has a right to claim repayment, will the hon. and learned Gentleman explain the position in a case where, say, four partners in a private firm turn it into a private company each with a quarter share in the company? Are they not, in making a claim for repayment, asking for the return of the Excess Profits Duty which they themselves have paid?

    I paid such close attention to the hon. Member that I quite understood the point he made, and I shall deal with it; but by his permission I think it would be more convenient to take it in what seems to be its logical place rather than at this moment. Perhaps he will forgive me if I postpone my reply to him on that point till later. I want to read a few of the remarks of Lord Sterndale, the Master of the Rolls, who presided over the Court of Appeal in the Gittus case—a man of extraordinarily sound judgment and with a great knowledge of business. He pointed out that the issue in the case was whether there was a continuing identity in a- business which had been owned by the father and which by him was left to the son who, before the father's death, had had no part in the business. It was claimed that the tax was payable out of the business and was a tax on the business, and that therefore a claim for repayment attached because of the continuing identity of the business. After quoting Sub-section (3), which I have read to the Committee, Lord Sterndale in the course of his judgment said:

    "In order to make that argument good you would have to alter the language of Sub-section (3) as enacted by Parliament and introduce into it a number of words that were not there, referring in each case to the owner of the business for the time being, instead of, as the Section does, simply to him and his business. You would then find that you would have to read the Sub-section thus: 'The person carrying on the business for the time being shall be entitled to repayment of such an amount paid by the person carrying on the business for the time being, whether himself or another person, as Excess Profits Duty in respect of any previous accounting period, or to set off against any Excess Profits Duty payable by the person carrying on the business for the time being in respect of any succeeding accounting period such an amount as shall make the total amount of Excess Profits Duty paid by the person for the time being carrying on the business, whether the same person as before-mentioned or not, accord with his profits or losses during that period.'"
    Lord Sterndale remarked that these words were not in the Act, and they seemed to him to be entirely foreign to the idea of the Act. The repayment was intended by Parliament to be given to the man who had paid the tax and because he had paid it. It follows from that, that where the business passes to somebody else, whether by sale or by assignment at law, the person who succeeds to the business may find he has made a bad purchase, or he may find he has succeeded to an unprofitable concern, but Parliament took the view that the tax had to be paid and that that kind of hardship was not to be taken into account. I venture to submit that that is the first fundamental principle. It is essential to realise in regard to this scheme of taxation that it was not intended by Parliament to give to the successor in a business any right to recover payment. I am expressing no opinion whether that is right or wrong I am dealing with what was the scheme of Parliament when the legislation was passed. Let us consider the result of the scheme introduced by Parliament—a result not from a legal point of view, but from a moral point of view. It is create undoubtedly a great anomaly, to cause greater disadvantages to the Exchequer, and to confer great advantages on individuals themselves who have never paid any Excess Profits Duty. In law a limited liability company, registered under the Companies Act, is a legal person. The result of the framework of that legislation is that where a legal person continues from one accounting period to the other a company is just as much entitled to repayment as if the company had been a natural person. What is the moral aspect of that? The moral aspect of it may be, as has been already said, that the shareholders' list may be completely changed at the end of one accounting period, and there may be an entirely new list of shareholders at the commencement of the next accounting period; and, if that business in the next accounting period makes a loss, then, under this legislation, the Exchequer has to pay back what has been previously paid in Excess Profits Duty. Why? There is no moral justice in it. You do not have these moral questions existing in cases of taxation nearly so much as has been generally supposed. I now come at once to the case which has been put by the hon. Member who moved the Amendment. We all agree that in that particular case, where, say, four persons pay Excess Profits Duty in one accounting period, at the end of which they turn themselves into a limited liability company, keeping each the same share in the concern and taking in no new person, it seems to be a hardship on moral grounds that they could not be entitled to recover. Why? Because you are concerned with persons. But is the Exchequer to be hit both ways? Is it to be "Heads I lose, tails you win?" You must face this inevitable result of all taxation, that there are cases which fall on each side of the line. Some are hard on the Exchequer, some are hard on the individual, and sufficient allowance has not been made for the legal necessity that follows from all taxing Statutes.

    May I interrupt for just a moment? I only want to follow the argument of my hon. and learned Friend. Why is not this case covered by the Clause as it stands, it being a voluntary disposition?

    Because the company, which is the person who owns the business, is not the husband or the wife of the previous owner. I hope my Noble Friend will not think I am being facetious at his expense, because it is not very clear. Approaching the matter, not from the legal, but from the moral point of view, which even the Chancellor of the Exchequer wants to do if he can—

    Even the Solicitor-General agrees with that. Approaching the question, so far as possible, from the point of view of the moral plane, I would ask the Committee one question: What is the hardest case of all? Is it not just the Gittus case, where the father has paid large sums in Excess Profits Duty, hands over his business, whether as a gift or upon his death, to his son, and, in the next accounting period there is a great loss and the son cannot get back one penny?

    I am glad to find myself in agreement with the hon. Member. That case has been met by this Clause, and in addition we include a grandfather as well as a husband or a wife. We all feel that those are the hardest cases, and the ones which ought to come first on the list if we are to meet any of them. We have met those cases; but I say it is quite illogical, as, I think, the hon. Member who moved the. Amendment remarked, that we should have done so. He says the Clause is founded on no principle, that it is illogical. I agree. It is not founded on any taxing principle; it does not follow by any logical relevance from any provision whatever in Excess Profits Duty legislation. For the purpose of dealing humanly by administrative action with such cases, we have attempted to put into the Statute the cases which we think are those which are most clamant for treatment—and at what price? At the price of some three millions sterling. Do let us face these taxing questions as taxing questions. There is no rhyme or reason for the extensions that have been asked for based upon any provision in the original legislation. It was an artificial tax, arbitrary, capricious, in many ways bad. It has gone, but it has left a heritage of trouble behind it. Can the Exchequer afford, because the tax was an unfortunate one in some of its effects, to pay a number of claims, because, from a certain point of view, as I am sure the Chancellor will be the first to admit, some of these claims—not all by any means, but some of them—are claims which he would like to meet if he could.

    I do not propose to follow the Solicitor-General in the legal argument which he has just put before the Committee. It seemed to me that the greater part of that argument was directed against the Government's own Clause. Be that as it may, I rise simply to follow the example of the hon. Member for North-East Derbyshire (Mr. Holmes), and to give to the Committee a definite, concrete case, which I believe will satisfy them that some Amendment on the lines of that which has just been proposed is absolutely necessary. The Committee will notice that the Clause covers a disposition from a. father to a son. I have a concrete case of a private company in which a father and son were shareholders. The son was killed, and his share devolved to his father. Under the Government's Clause, the company is not entitled to make a claim for repayment of Excess Profits Duty in respect of the son's share. I venture to think that that is a very hard case, and that, whatever the Government may do with this Amendment, which is of a more general character, they ought., at any rate, to extend this Clause to cover a disposition, not merely from a. father to a son, but from a son to a. father. I can give the right hon. Gentleman the actual facts, which I have in my possession here, and I very much hope that he will be able to make this small and very reasonable concession, even though he may find that, for financial reasons, he cannot accept an. Amendment of general scope. The case is a very hard one, and is a very genuine case. The son was killed in the War, and the father is unable to claim the repayment to which he would otherwise be entitled. I venture to make this appeal on that concrete case to my right hon. Friend.

    The case which the last speaker has mentioned is just an example, not only of the difficulty of dealing with this kind of case, but also of the possibility of the Chancellor of the Exchequer doing something at any rate to meet it. Everyone will agree that the case of the succession of a father to the share of his son is as strong as that of a son succeeding to his father. In fact, the Solicitor-General, only a minute or two ago, stated, apparently in error, that the Government's Clause did cover the succession of an ancestor as well as of a descendant. I only hope it may be the case that he was merely intelligently anticipating what the Chancellor of the Exchequer was intending to do, namely, to make that slight concession. The Solicitor-General referred to the Gittus case, which was a case of the succession of a son to a father, as being the hardest one that could be imagined, and the one that it was most necessary to relieve. I am not quite so sure about that. I think that, perhaps, a harder case still is that of the man himself who succeeds to his own business and cannot get relief. May I put this case? The owner of a business, or it may be a partnership form of three or four individuals, find themselves in the difficulty in which so many firms found themselves at the end of the War. They are absolutely unable, without further funds, to purchase the necessary stock or plant for carrying on their business. They have not the money, and they have practically very little security upon which they can borrow it, owing to their liability for Excess Profits Duty. What is that firm to do if it can? The first thing that occurs to one's mind is that it must borrow that money, and many of them, those who were able to do so, did. Many of the oldest and most substantial firms in this country borrowed money at 8 or even 10 per cent. But suppose that they say they cannot get anyone to lend them money, even at 10 per cent., because their security is not good, what can they do? They look about and find a man who has not only money, but youth, ability and the power to work, who wants a chance to become a partner in a business, and they take that man into their business as a partner instead of borrowing the money from him. Is that a change in the ownership of the business which is to disqualify the original partners in the firm from recovering the Excess Profits Duty?

    Let me go one step further. An individual or a set of individuals in partnership are in the position which I have described, and they have to get further money which they cannot borrow. The only way in which they can get it is by getting a number of people to come in as sleeping partners, or, in other words, to turn their business into a limited liability company, and get these other people to take shares in it. The Chancellor of the Exchequer and the Solicitor-General both, I have no doubt, know the case that I have in mind. It happened a very short time ago. The partners in that case formed their business into a limited liability company and let in other persons as equal shareholders with themselves. They took their purchase money entirely in shares. They did not take one penny of cash, and, in fact, bound themselves not to part with those shares, putting it out of their power, therefore, to take cash. There is no clearer case in this world of a man who himself has made a loss in a business in which he himself has made the profits which made him liable to pay the Excess Profits Duty, and if the Chancellor of the. Exchequer cannot go so far as the Amendment would go, there are cases of this kind where there is personal identity of interest, even if it may be only in a part of the business instead of the whole, where you can trace that actual personal identity in which that man should not be debarred from getting back his share by reason of the fact that he has been obliged to part with part of his business owing to the stress of the times and the difficulties in which he finds himself.

    Dealing administratively with hard cases may be justified as a temporary measure till the time when you are able to legislate for them, and if the Government has been able to deal with certain cases administratively in the past that: s one very strong reason why they should deal legislatively with the question now, and it is not an answer to their argument that owing to the complexity and the glaring number of cases which have to be dealt with, it cannot be dealt with satisfactorily by this Bill. I say it can. You have only to get a certain form of words, which will carry you some way at any rate, and if the Chancellor will not go the whole way we want him to, let him go a little way. Then he can still reserve to the Government the power of dealing administratively with cases which are on the border line, or to put it more easily for him still, give himself by legislation the definite power to deal administratively with cases which come within a certain limit and the Inland Revenue can be left perhaps a discretion to deal according to the circumstances of the case with any deserving case as long as it comes within the limit.

    I quite appreciate the Solicitor-General's point that where a company is still the owner of a business the shareholders in that company may have changed, but surely the answer to that is something like this. Where a company can get back this benefit, notwithstanding the fact that the beneficial owner has changed by reason of the shares changing hands, that is a case in which the Chancellor has left a hole in his tax-collecting net, and because he has allowed some people to get a benefit which they are entitled to legally, but not in equity or according to the higher standards of morality, it is not for him to say, "I will stop other people who are most thoroughly entitled to get this money back from getting it back. I cannot afford to let them have what they ought to have because I have allowed someone else to have it." I suggest that something should be done on the lines of this Amendment, and I hope the right hon. Gentleman will hold out some hope that on the Report stage we may have some slight modification of Clause 26 so as to cover the case of the individual who remains the owner, and is practically bound to remain the owner of the business, notwithstanding the fact that he has been driven by stress of circumstances to share it with someone else either in a partnership or, through necessity sometimes, turning that partnership into a private limited liability company.

    I could not vote for the Amendment as it stands, because it seems to me, whatever view you take of this, that it goes a great deal too far. As I understand it, even if a man had sold the business completely, provided there is an identity of interest between the purchaser and the vendor, the purchaser would be entitled to come upon the Exchequer for repayment of the Excess Profits Duty paid by his vendor. I cannot think that that is just.

    Does it not? I think it does—

    "and in any other case where there has been a change in ownership of a business, repayment of or set off against Excess Profits Duty shall be made to the new owner in a similar manner, if there is, and to the extent to which there is, substantial identity of interest by reason of persons beneficially interested in the old owner being beneficially interested in the new owner."

    That means that if A had 25 per cent. of the old business and continues to have 25 per cent. of the new business and there is no one else who has an interest in the old and the new business, A himself will have the right to get back 25 per cent. of the total which the new company would have the right to get back from the Inland Revenue, and the other 75 per cent. would not be recovered by the other owners.

    As the thing stands, I think it goes a great deal further than that. So I read it. I do not know whether that is the view of the Chancellor of the Exchequer, but it appears to me to go a great deal further than that.

    Is it only the case of the owner continuing in the business in fact that is dealt with by the Amendment? I do not so understand it. If that be so, you must have entirely different drafting. Is not the real conclusion of this that the moment you try to meet hard cases under the Excess Profits Duty, you are launched on an absolutely endless quest? You cannot meet all the hard cases that arise, and the real question is where you are to draw the line. Wherever you draw the line, there will be some cases on the other side which will be hard cases.

    We are not asking really for relief for hard cases. We are asking for what we consider to be the truly equitable and right interpretation of the old Act, which says that where an individual has made profits in a business on which he has paid and has afterwards made losses he may reclaim those losses We ask the Government to say that that person who has made a loss in a business represented by 100 per cent., and who has lost 50 per cent. of that business, may be able to get back in respect of what he has lost on the 50 per cent. of the business which he has retained. We keep entirely to the person. We say that if that person instead of being a partner in a firm is shareholder in a limited liability company who has not parted with his shares he is still the person who has made the profit, paid the tax, sustained the losses and should get the repayment.

    I quite realise, indeed it was because of the hon. Member's speech that I realised, the great hardship of the case that he puts. I think it will be quite easy—I am sure my hon. Friend can do it with great ease—to extend that and to show other hard cases a little further on and so on.

    I am not sure that he is right in saying they come outside. I am not against any remission of taxation which is called for by justice, but it appears to me that this Amendment, as drafted, goes a great deal too far, and I could not possibly vote for it as it stands, and if there is a Division I shall vote for the Government.

    I have been asked by an organisation which is representative of a very large number of smaller manufacturers, who are the persons very largely interested in the recovery of this tax, to press the Chancellor of the Exchequer to make some wide and generous concession. The point he has to remember is that this tax was hasty War legislation. I remember when it was passed through the House, I think in an Autumn Session. It was rushed through with very little consideration of the Clauses. There was no opposition or criticism at all from the point of view of the people who would be ultimately liable to pay the tax. It was just that the money had to be raised, and there was no grousing on the part of the manufacturing interests as to what they would have to pay. They paid willingly. They were only too glad to give their profits and to give everything to help to win the War. [Interruption.] Of course, there was a great distinction between their attitude and that of the Labour party, who incited strikes and harassed the Government in every possible way and who were profiteers. So far as the taxpayers were concerned, they were only too glad to do what they possibly could to find the money for the purposes of the War.

    Now our case is that this is a very great hardship, and it is necessary for my right hon. Friend to look at all these things from the point of view of whether or not the demands which the Treasury are making are or are not honest. We do not want to deal with this matter now from the strictly legal standpoint. You want the principle of give and take. Is it right and is it fair? I think my right hon. Friend will be well advised if he makes some concession in the direction of meeting this Amendment. There is a feeling in the mind of a very great number of taxpayers that they have been harshly used by the Treasury, which is taking a far too technical view. Instead of taking a broad view, it is making demands from a purely technical point of view. The cases which have been stated to-day show that there is a very great measure of justice in this claim which has not been met by the purely legal argument which has been addressed to the Committee by the Solicitor-General. I want to make an appeal to the Chancellor of the Exchequer if he cannot see his way to meet it at this moment to reserve this question till the Report stage and see if he cannot find some words which will to some extent meet these great cases of hardship.

    7.0 p.m.

    I hope the Chancellor of the Exchequer can see his way, if he cannot accept the actual wording of the Amendment, at any rate to substitute something which will give more or less the same effect. I think the Mover of the Amendment put his case so ably and clearly that there is very little left for anyone else to say, but I have been particularly asked to bring what seems to me an extraordinarily hard case to the notice of the Committee. The case I have in mind is that of an amalgamation prior to 1920. Three firms which were separate, individual entities; during the years prior to 1920 they made large profits, and between them they paid something from £400,000 to £500,000 to the Chancellor of the Exchequer. In 1920 they amalgamated. Since then, as every-one knows, times have been extremely bad and much money has been lost. It was a perfectly genuine amalgamation; these firms did not go out of existence with the idea of avoiding the Income Tax or anything of that kind. This is not only a case of substantial identity of interest, but they are, to all intents and purposes, the same identical firms. Yet the fact remains that on account of the amalgamation they are not entitled to recover any of the excess profits they have paid, and they are not entitled to any repayment or set-off on excess profits. If they had not amalgamated these three separate, individual firms would have been entitled to that set-off; but owing to the amalgamation and to what, to me, is the most extraordinary state of the law, they are apparently not entitled to recover anything. I am no lawyer. I am perfectly well aware of the fundamental fallacies with which every layman approaches all these legal technicalities. What the taxpayers of the country want, however, are not legal quibbles, but common elementary justice, and nothing will convince them that it is fair or just that three firms, who would have been entitled to recover or to have a set-off in regard to this tax, should, by the mere fact of amalgamation, lose that right. Therefore I hope the Chancellor of the Exchequer will see his way to do something to put right what seems to me to be an extraordinary anomaly in the ordinary tax-paying law.

    I should like to add my voice to the appeal of the Chancellor of the Exchequer and the Solicitor-General again to consider carefully whether, when the conduct of a business remains in the hands of the vendor and when the personnel is in no way changed, such a case cannot be dealt with on the basis of no change of ownership. I thoroughly appreciate the action of the Government in meeting the case of the one man, but is it fair to single out one man and to say, "We are going to give you this benefit," and then to take two or three men, or more, and say, "In your case we will continue the injustice which we confess exists in the case of the one man." I hope the Government, as they have admitted the injustice in the case of the one man and have met it under this Clause 26, will now carry the matter through and meet the injustice in the case of all those who come under the category in which the business and the personnel remain the same. As a chartered accountant I have many cases of this description and I trust that this injustice will be remedied. We all know the case in the Bible where, for the sake of 10 just men, it was promised that two cities should be saved from destruction. In this case we have to appeal in a reverse way. It is not a question of 10 just men saving a city from destruction, but you have one just man whom you are saving from destruction while there are two, three or more just men whom we ask you to save from penalties and from having their businesses destroyed. I hope the Chancellor of the Exchequer will look at the matter in this light, and will see that equity and justice demand that the principle which has been applied to the one man should be applied to all those who are in the same position, and who are suffering under the disability due to the non-return of the Excess Profits Duty.

    I should like to emphasise what has been said with regard to the particularly malicious working of this intolerable tax and the continuation of this very dreadful injustice even after the War has concluded. Like the rest of hon. Members, I could give instance after instance where men have had their businesses denuded of capital in order to meet the payments of the Excess Profits Duty. They have been compelled, having no other resources open to them, to turn their businesses into private limited companies. Thousands of pounds have been paid by them previously under this compulsory Act, yet they have been precluded from claiming repayment of the duty. One could not help admiring the courage of the Solicitor-General in his defence of this Clause when one remembered that he, himself, belongs to a profession that has made vast profits during the War and which carefully excluded itself from the operation of this tax. When, however, he says that the Excess Profits Duty is on all fours with the Income Tax, the thing is untrue and in every way incorrect. I will proceed to prove that. The basis of the Excess Profits Duty is that it selects a certain section of the community and penalises them, leaving the rest of the community free from this special taxation. I invite the attention of hon. Members on the Labour Benches to the fact that half the land of this country changed hands at very huge profits during the War. Have the vendors been called upon to pay Excess Profits Duty?

    No. Yet the Solicitor-General says that this tax is something which, in common with the Income Tax, applies to the whole of the community. I say that the Excess Profits Duty, as a whole, is a wrong tax. It is a tax that inflicts hardship on one special section of the community to the exclusion of the rest. I support most strongly the Amendment moved by the hon. Member for North-East Derbyshire (Mr. Holmes). It is pitiable to think that you are taking £80 and £90 out of each £100 from the profits of a man who, in pre-War days, was doing badly.

    The hon. Member says "excess profits." Supposing, however, that a man was making nothing before the War. Perhaps he missed the market through some circumstance over which he had no control. He had a bad time. With this tax and Super-tax you take from him £90 out of each £100. Then, when he hopes to carry on after the War, the slump comes—take the case of cotton, where you had twist at 70d. a lb. and which dropped to 17d. He has to face that loss and the slump. The only chance he has of saving himself from bankruptcy is to go to the Government and ask them to hand back to him some of the profits which he paid them previously. If he has been compelled to change the ownership of his business in the slightest degree, and to call in someone else to give him financial aid, he is precluded definitely and for all time from getting that assistance which his more worthy competitor is able to receive purely and simply from the fact that the wealthier man has not had to call in outside assistance. I feel very strongly that that is not a position the House of Commons ever contemplated would arise when this legislation was passed, and I hope hon. Members will recognise that this Amendment simply offers an opportunity to remedy something that in previous Sessions was done wrongly, and which would not have been done had Members been fully acquainted with the way in which the thing was going to work out. Therefore, so far as I am concerned, I shall support the Amendment.

    After the very improving lessons we have had, and after the exhibition we have been given of the humorous and interesting capitalistic virtues, I am rather sorry to introduce anything like an element of discord into the harmony of the proceedings. I want, however, to call on the Chancellor of the Exchequer not to concede one single inch or one single copper. I hope on this occasion he will remember something more than this present Budget, and recall what happened during the War. The only objection I ever had to the Excess Profits Duty was that it was not cent. per cent., and that it never went up above 80 per cent. What anybody wanted with excess profits I cannot imagine, nor can I imagine what title anybody could have to excess profits at a time when the nation was in such awful peril. This is another illustration of the nobility of private enterprise. You will adways notice that as soon as these private enterprisers get into a tight place they come snivelling to the Government, either for a subsidy, or for some remission of their natural and proper obligations to the State of which they are citizens. I do not think there is anything more deplorable—I am almost ready to say more depraved—than the attitude of some of these people who pretend that they are concerned with the interests of the small struggling traders and manufacturers. They are asking one for the small traders and two for themselves all the time and every time. It seems to me that under existing conditions, whether or not we agree with the method of the Chancellor of the Exchequer, we must all concede that he has to get the revenue. We know that he has to balance the national accounts somehow, and if he is going to listen to every importunate for release from natural and proper obligations, I do not know where he will be. I suggest that he should stick tight in this particular case and give no concession whatever.

    I have listened to the discussion with very deep interest, and with a not unnatural anxiety to discover whether there was any method by which individual hard cases, to which reference has been made, could be alleviated. This problem has been continuously before me ever since I became Chancellor of the Exchequer. As the hon. Member for North-East Derbyshire (Mr. Holmes) has stated, the question was raised on the Finance Bill of last year, and at that time I gave certain indications of my desire to find a remedy in cases which, obviously, were hard. I also indicated that if such a method was discoverable I should be very glad to give it my most earnest consideration, but everything which has happened during the discussion this afternoon has made it clear to me that the problem is just as difficult to-day as I found it when I discussed it a year ago. The real fact is that when you cone to define the class of cases in which relief ought to be given, you find yourself in an absolutely impossible position. Nobody has really indicated where we can draw a line upon which what is supposed to be justice in this matter has to be done—if we look at the views on justice and equality put forward by hon. Members—rather than the rights which are given by Statute.

    We find difficulties disclosed in the Amendments on the Paper. One of the Amendments talks about "substantial identity" of personality in the old firm and in the new. This is a phrase which is adopted from an answer to a question given by the Financial Secretary. It is a phrase which may be broad and may give a rough meaning, but it is a totally different thing when you come to put it into an Act of Parliament. I am certain that there is no possibility of construing "substantial identity" when you come down to actual practice. I have some difficulty, as had my Noble Friend the Member for Hitchin (Lord R. Cecil), in understanding the first Amendment moved by the hon. Member for North-East Derbyshire, where he speaks about
    "substantial identity of interest by reason of persons beneficially interested in the old owner being beneficially interested in the new owner."
    That seems to indicate a continuance of the personality of the old owner, although the business has passed entirely from him. I find it very difficult to arrive at any clear idea as to what is contained in these words, and I am not surprised, for the reason that I have found it just as difficult in every attempt I have made to frame any form of words which would at once give a remedy to some of the types of harsh cases which have been mentioned this afternoon, and deny a similar remedy to the people who in justice do not deserve it. The second Amendment obviously foresees a difficulty in defining "substantial identity," and tries to work the matter out as a mere question of proportion. However small an interest a man may have in a business, if he passes on from that business to another business he is supposed by the second Amendment to carry with him his right to get back any losses that he suffers, as against the Excess Profits Duty which he has paid. Obviously that is carrying the matter far beyond the limits of reason, and I find myself in precisely the same position as the Noble Lord the Member for Hitchin, when he said that he recognised great hardship was involved in certain cases, but, on the other hand, he also saw that any attempt to legislate on the line which the Amendments disclosed would result in claims upon the State which would be perfectly unjustifiable.

    When I say that, I do not attempt to conceal my own view that the legislation in regard to Excess Profits Duty has had results, in certain cases, of great hardship. I am afraid that that is the tendency of fixing legislation every time. There always will be some cases on one side of the line which seem to be harshly treated, wherever you draw the line, and in the present instance I think it is more difficult to draw the line than in any case I have known. The position which was stated by the Solicitor-General was that Parliament enacted that there should be certain privileges to persons who had paid Excess Profits Duty if at a certain period they suffered loss in the same business, but, as he explained, those benefits were conferred purely upon persons. Whether that is right or wrong, that is the enactment, and it has to be construed by the Courts. We have endeavoured by the Clause I have put forward to meet the harshness of certain cases. The case of a son succeeding a father in business and finding himself confronted with great losses, and deprived of the opportunity of claiming Excess Profits Duty paid while the business was in his father's control, is a case which, if you are to deal with the matter at all, we might appropriately treat. The hon. and gallant Member for Chelsea (Sir S. Hoare) mentioned a similar case, where a father succeeds a son in a business, where father and son were in partnership, and the father succeeds to the son's share by reason of his death. That is a case which comes precisely within the narrow category with which we have set ourselves to deal, and, so far as that is concerned, I am prepared to put in words which will bring that case within the bounds of the Clause. I must warn the Committee that even what seems a very restricted concession in this matter involves the Exchequer in a loss of £3,000,000.

    No, the concession in the Clause. The last concession extends that loss slightly, but not to a very large amount. The concession in the Clause will cost the Exchequer £3,000,000. I would call the attention of the Committee to the fact that the Government at the present time is trying to get payment of Excess Profits Duty, and is finding very great difficulty in getting it, even by instalments. We are extending, by a Clause which has been passed this afternoon, the period within which instalments of Excess Profits Duty may be paid, to five years. Some hon. Members do not consider that period long enough, and it is possible that a longer extension may have to be given. While, on the one hand, the Exchequer are unable at the present time to collect the Excess Profits Duty which is due to them, nevertheless, the obligation to pay in respect of loss is immediate. Therefore, we are in the position of not being able to collect all that is owing to us, and, at the same time being compelled to pay what we owe. To extend that obligation means the creation of a very difficult situation for the Exchequer this year. If we were to give the concessions which are involved in these Amendments it would cost us, in addition to the £3,000,000 I have already mentioned, at least another £10,000,000. Whatever one may have desired to do under more advantageous circumstances, it is perfectly plain that the giving of concessions of that kind at this time would be to wreck the whole of the present Budget. We should have to start to reconstruct it, and, in the face of the circumstances, I must ask the Committee to reject the Amendment.

    If we can find the right hon. Gentleman a line of demarcation to bring in one or two very hard cases, and also bring it to him with a proposition that a certain percentage should be paid in those cases, and that the repayment may be over a number of years, would he consider something on those lines?

    I shall be very glad to consider any proposition of that kind which my hon. Friend puts before me, but I have some little doubt as to whether it will be possible to frame a practicable line of demarcation such as he suggests.

    The impression made upon my mind by the speech of the Chancellor of the Exchequer is that the Exchequer have changed their minds very considerably since February. It almost appears to me that because times are bad and the -Exchequer are very hard up they are going to decline to repay Excess Profits Duty to those firms who are entitled to them. May I give the Committee a very glaring example, without mentioning names There is a firm in the North of England who, during the War, did a tremendous lot of work, and they had to extend their premises to a degree that they would never have contemplated during peace time. They had money advanced to them by the hank, and they paid Excess Profits Duty. Owing to the condition of the market and to the decision of the bank it was necessary that they should appeal to the public for preference shares. The constitution of the firm was not altered, except that the preference shares took the place of the bank. The identity of the firm was practically the same as it was before. Now it seems to me that because times are hard that the Chancellor of the Exchequer is taking refuge behind the hard times, and I do not think that he is treating these firms properly. Unless something it done to protect these firms they will be in bankruptcy, and good businesses, which men have spent their lives in building up, will be ruined. This particular firm employs about 1,200 men. These are cases to which the Chancellor of the Exchequer ought to give special consideration. I hope that my hon. Friend will press his Amendment to a Division.

    Question put, "That those words be there added."

    The Committee divided: Ayes, 54; Noes, 284.

    Division No. 167.]

    AYES

    [7.31 p.m.

    Armitage, RobertGould, James CPickering, Colonel Emil W.
    Balfour, George (Hampstead)Gritten, W. G. HowardRae, Sir Henry N.
    Banbury, Rt. Hon. Sir Frederick G.Hall, Rr-Adml Sir W. (Liv'p'l,W. D'by)Randles, Sir John Scurrab
    Banner, Sir John S. Harmood-Hannon, Patrick Joseph HenryRemer, J. R.
    Barrand, A. R.Herbert, Col. Hon. A. (Yeovil)Remnant, Sir James
    Barrie, Sir Charles Coupar (Banff)Hinds, JohnRichardson, Sir Alex. (Gravesend)
    Barton, Sir William (Oldham)Hogge, James MylesRutherford, Sir W. W. (Edge Hill)
    Blgiand, AlfredHolbrook, Sir Arthur RichardSprot, Colonel Sir Alexander
    Bird, Sir R. B. (Wolverhampton, W.)Holmes, J. StanleyStanton, Charles Butt
    Blair, Sir ReginaldHurd, Percy A.Stephenson, Lieut.-Colonel H. K.
    Chadwick, Sir Robert BurtonJames, Lieut.-Colonel Hon. CuthbertSykes, Sir Charles (Huddersfield)
    Conway, Sir W. MartinKenworthy, Lieut.-Commander J. M.Terrell, George (Wilts, Chippenham)
    Cory, Sir J. H. (Cardiff, South)Law, Alfred J. (Rochdale)Terrell, Captain R. (Oxford, Henley)
    Davies, Sir William H. (Bristol, S.)Lyle, C. E. LeonardWindsor, Viscount
    Dawson, Sir PhilipLyle-Samuel, AlexanderYate, Colonel Sir Charles Edward
    Doyle, N. GrattanMacqulsten, F. A.
    Erskine, James Malcolm MonteithMitchell, Sir William Lane

    TELLERS FOR THE AYES.—

    Fildes, HenryNall, Major JosephColonel Lambert Ward and Major
    Foot, IsaacPennefather, De FonblanqueEntwistle.
    Ganzoni, Sir John

    NOES

    Adamson, Rt. Hon. WilliamEdgar, Clifford B.Inskip, Thomas Walker H.
    Adkins, Sir William Ryland DentEdge, Captain Sir WilliamIrving, Dan
    Agg-Gardner, Sir James TynteEdnam, ViscountJohn, William (Rhondda, West)
    Amery, Rt. Hon. Leopold C. M. S.Edwards, C. (Monmouth, Bedwelity)Johnson, Sir Stanley
    Ammon, Charles GeorgeEdwards, G. (Norfolk, South)Johnstone, Joseph
    Armstrong, Henry BruceEdwards, Major J. (Aberavon)Jones, Henry Haydn (Merioneth)
    Astbury, Lieut.-Com. Frederick W.Edwards, Hugh (Glam., Neath)Jones, J. J. (West Ham, Silvertown)
    Baird, Sir John LawrenceEvans, ErnestJones, Morgan (Caerphilly)
    Barker, G. (Monmouth, Abertillery)Eyres-Monsell, Com. Bolton M.Joynson-Hicks, Sir William
    Barlow, Sir MontagueFalls, Major Sir Bertram GodfrayKellaway, Rt. Hon. Fredk. George
    Barnes, Rt. Hon. G. (Glas., Gorbais)Farquharson, Major A. C.Kennedy, Thomas
    Barnston, Major HarryFinney, SamuelKidd, James
    Bartley-Denniss, Sir Edmund RobertFisher, Rt. Hon. Herbert A. L.King, Captain Henry Douglas
    Beckett, Hon. Sir GervaseFitzRoy, Captain Hon. Edward A.Lambert, Rt. Hon. George
    Bell, Lieut.-Col. W. C. H. (Devizes)Flannery, Sir James FortescueLarmor, Sir Joseph
    Belialrs, Commander Canyon W.Foreman, Sir HenryLawson, John James
    Benn, Captain Wedgwood (Leith)Forestler-Walker. L.Lewis, Rt. Hon. J. H. (Univ., Wales)
    Betterton, Henry B.Forrest, WalterLewis, T. A. (Glam., Pontypridd)
    Blake, Sir Francis DouglasFraser, Major Sir KeithLindsay, William Arthur
    Boscawen, Rt. Hon. Sir A. GriffithFremantle, Lieut.-Colonel Francis E.Lister, Sir R. Ashton
    Bowles, Colonel H. F.Galbraith, SamuelLloyd, George Butler
    Bowyer, Captain G. W. E.Gibbs, Colonel George AbrahamLocker-Lampson, G. (Wood Green)
    Bramsdon, Sir ThomasGilbert, James DanielLorden, John William
    Brassey, H. L. C.Gillis, WilliamLort-Wililams, J.
    Breese, Major Charles E.Gilmour, Lieut.-Colonel Sir JohnLunn, William
    Brlant, FrankGoff, Sir R. ParkM'Donald, Dr. Bouverle F. P.
    Bridgeman, Rt. Hon. William CliveGraham, D. M. (Lanark, Hamilton)Macdonald, Sir Murdoch (Inverness)
    Briggs, HaroldGraham, R. (Nelson and Coins)Mackinder, Sir H. J. (Camiachie)
    Brittain, Sir HarryGraham, W. (Edinburgh, Central)McLaren, Hon. H. D. (Leicester)
    Broad, Thomas TuckerGreen, Joseph F. (Leicester, W.)Maclean, Nell (Glasgow, Govan)
    Bromfield, WilliamGreene, Lt.-Col. Sir W. (Hack'y, N.)Maclean, Rt. Hn. Sir D. (Midlothian)
    Brown, James (Ayr and Bute)Greenwood, William (Stockport)Macnaghten, Sir Malcolm
    Bruton, Sir JamesGriffiths, T. (Monmouth, Pontypool)Macnamara, Rt. Hon. Dr. T. J.
    Bull, Rt. Hon. Sir William JamesGrundy, T. W.Macpherson, Rt. Hon. James I.
    Butcher, Sir John GeorgeGuest, Capt. Rt. Hon. Frederick E.Magnus, Sir Philip
    Cairns, JohnGuest. J. (York. W. R., Hemsworth)Maitland, Sir Arthur D. Steel-
    Campion, Lieut.-Colonel W. R.Gulnness, Lieut.-Col. Hon. W. E.Malone, Major P. B. (Tottenham, S.)
    Carter, R. A. D. (Man., Withington)Hallwood, AugustineMarks, Sir George Croydon
    Carter, W. (Nottingham, Mansfield)Hall, F. (York, W. R., Normanton)Marriott, John Arthur Ransoms
    Casey, T. W.Hallas, EldredMatthews, David
    Cautley, Henry StrotherHalls, WalterMiddlebrook, Sir William
    Cecil, Rt. Hon. Sir Evelyn (Aston)Harmsworth, Hon. E. C. (Kent)Mildmay, Colonel Rt. Hon. F. B
    Cecil, Rt. Hon. Lord R. (Hitchin)Haslam, LewisMills, John Edmund
    Chamberlain, Rt. Hon. J. A.(Blrm.,W.)Hayday, ArthurMond, Rt. Hon. Sir Alfred Moritz
    Chamberlain, N. (Birm., Ladywood)Hayward, EvanMoreing, Captain Algernon H.
    Churchman, Sir ArthurHenderson, Rt. Hon. A. (Widnes)Mosley, Oswald
    Clay, Lieut.-Colonel H. H. SpenderHenderson, Lt.-Col, V. L. (Tradeston)Murchison, C. K.
    Clough, Sir RobertHerbert, Dennis (Hertford, Watford)Murray, Hon. A. C. (Aberdeen)
    Cobb, Sir CyrilHilder, Lieut.-Colonel FrankMurray, Rt. Hon. C. D. (Edinburgh)
    Colfox, Major Wm. PhillipsHirst, G. H.Murray, Dr. D. (Inverness & Ross)
    Collins, Sir Godfrey (Greenock)Hoare, Lieut.-Colonel Sir S. J. G.Myers, Thomas
    Cope, Major WilliamHodge, Rt. Hon. JohnNeal, Arthur
    Cowan, D. M. (Scottish Universities)Hohler, Gerald FitzroyNewman, Colonel J. R. P. (Finchley)
    Cralk, Rt. Hon. Sir HenryHope, Sir H. (Stirling & Cl'ckm'nn'W.)Newman, Sir R. H. S. D. L. (Exeter)
    Daizlel, Sir D. (Lambeth, Brixton)Hope, Lt.-Col. Sir J. A. (Midlothian)Newton, Sir Percy Wilson
    Davidson, J. C. C. (Hemel Hempstead)Hopkins, John W. W.Newton, Sir D. G. C. (Cambridge)
    Davidson, Major-General Sir J. H.Hopkinson, A. (Lancaster, Mossley)Nicholson, Reginald (Doncaster)
    Davies, A. (Lancaster, Clitheroe)Horne, Sir R. S. (Glasgow, Hillhead)Nicholson, William G. (Petersfield)
    Davies, Evan (Ebbw Vale)Howard, Major S. G.Norris, Colonel Sir Henry G.
    Davies, Thomas (Cirencester)Hunter, General Sir A. (Lancaster)Norton-Griffiths, Lieut.-Col. Sir John
    Davison, J. E. (Smethwick)Hurst, Lieut.-Colonel Gerald B.O'Grady, Captain James

    Ormsby-Gore, Hon. WilliamSanders, Colonel Sir Robert ArthurWallace, J.
    Parker, JamesSassoon, Sir Philip Albert Gustave DWalsh, Stephen (Lancaster, Ince)
    Parkinson, John Allen (Wigan)Scott, A. M. (Glasgow, Bridgeton)Walters, Rt. Hon. Sir John Tudor
    Parry, Lieut.-Colonel Thomas HenryScott, Sir Leslie (Liverp'l, Exchange)Walton, J. (York, W. R., Don Valley)
    Pearce, Sir WilliamScott, Sir Samuel (St. Marylebone)Ward, Col. J. (Stoke-upon-Trent)
    Pease, Rt. Hon. Herbert PikeSeddon, J. A.Ward, William Dudley (Southampton)
    Percy, Lord Eustace (Hastings)Sexton, JamesWarren, Sir Alfred H.
    Perring, William GeorgeShaw, Hon. Alex. (Kilmarnock)Waterson, A. E.
    Pollock, Rt. Hon. Sir Ernest MurrayShaw, William T. (Forfar)Watson, Captain John Bertrand
    Pownall, Lieut.-Colonel AsshetonShort, Alfred (Wednesbury)Watts-Morgan, Lieut.-Col. D.
    Pratt, John WilliamShortt, Rt. Hon. E. (N'castle-on-T.)Wedgwood, Colonel Josiah C.
    Purchase, H G.Sitch, Charles H.White, Charles F. (Derby, Western)
    Rattan, Peter WilsonSmith, Sir Harold (Warrington)White, Col. G. D. (Southport)
    Rankin, Captain James StuartSmith, W. R. (Wellingborough)Wignall, James
    Ratcliffe Henry ButlerSpencer, George A.Williams, C. (Tavistock)
    Raw, Lieutenant-Colonel Dr. N.Stanley, Major Hon. G. (Preston)Willoughby, Lieut.-Col. Hon. Claud
    Rawlinson, John Frederick PeelStewart, GershomWills, Lt.-Col. Sir Gilbert Alan H.
    Rendall, AthelstanStrauss, Edward AnthonyWilson, James (Dudley)
    Richardson, R. (Houghton-le-Spring)Sturrock, J. LengWilson, Rt. Hon. J. W. (Stourbridge)
    Roberts, Frederick O. (W. Bromwich)Sugden, W. H.Wilson, Col. M. J. (Richmond)
    Roberts, Rt. Hon. G. H. (Norwich)Surtees, Brigadier-General H. C.Wintringham, Margaret
    Roberts, Samuel (Hereford, Hereford)Sutton, John EdwardWise, Frederick
    Roberts, Sir S. (Sheffield, Ecclesall)Swan, J. E.Wood, Hon. Edward F. L. (Ripon)
    Robertson, JohnTaylor, J.Wood, Sir H. K. (Woolwich, West)
    Robinson, S. (Brecon and Radnor)Thomson, F. C. (Aberdeen, South)Wood, Sir J. (Stalybridge & Hyde)
    Rodger, A. K.Thomson, Sir W. Mitchell- (Maryhill)Wood, Major M. M. (Aberdeen, C.)
    Rose, Frank H.Thorne, G. R. (Wolverhampton, E.)Wood, Major Sir S. Hill (High Peak)
    Rothschild, Lionel deThorne, W. (West Ham, Plaistow)Worthington-Evans, Rt. Hon. Sir L.
    Roundell, Colonel R. F.Tickler, Thomas GeorgeYeo, Sir Alfred William
    Royce, William StapletonTillett, BenjaminYoung, Sir Frederick W. (Swindon)
    Royds, Lieut.-Colonel EdmundTownley, Maximilian G.Young, Robert (Lancaster, Newton)
    Rutherford, Colonel Sir J. (Darwen)Tryon, Major George Clement
    Samuel, A. M. (Surrey, Farnham)Turton, Edmund Russborough

    TELLERS FOR THE NOES.—

    Samuel, Samuel (W'dsworth, Putney)Waddington, R.Colonel Leslie Wilson and Mr.
    McCurdy.

    Clause ordered to stand part of the Bill.

    CLAUSE 27 ( Interpretation) ordered to stand part of the Bill.

    Clause 28—(Suspension Of New Sinking Fund)

    In the financial year ending the thirty-first day of March, nineteen hundred and twenty-three, that portion of the permanent charge for the National Debt, which is not required for the annual charge directed by the National Debt and Local Loans Act. 1887, or any other Act, to be paid out of that charge, shall not be paid.

    Motion made, and Question proposed, "That the Clause stand part of the Bill."

    Those of us who are in favour of sound finance would like to record our votes in the Division Lobby against the suspension of the Sinking Fund. This is no light matter. In the old days the financial stability of this country depended very largely upon the fact that, on the average, before the War, we paid £25,000,000 every year off debt. That gave strength to our financial position and made us the centre of finance for the world. This is the first year since the War that we have abandoned the old-fashioned plan of finance in favour of a habit that has been growing all over the Continent in recent years, which is having on the Continent most lamentable results. We are ceasing to pay off debt. The Chancellor of the Exchequer, by ceasing to pay off debt, finds himself in the happy position of being able to remit taxation. Next year he may find that he has to increase taxation again to make both ends meet. How much simpler it will be, not only to cease paying off debt, but to start accumulating debt. The very argument that has appealed successfully to the Chancellor of the Exchequer in favour of dropping the old-fashioned English habit of paying off debt may very well appeal to him next year to carry the process a little further.

    We have only to look abroad to see how very attractive this new method of progression is to Chancellors of the Exchequer in other countries. In Germany, of course, no Chancellor of the Exchequer attempts to balance his Budget. What he cannot raise in taxation he can print with the printing press and carry on. The only result is that the mark sinks ever lower in value.

    In France even, budgeting has not ha-come a question of balancing; the extraordinary expenditure is not met and the ordinary Budget is short of £80,000,000 of balancing. Before the War France was not remarkable for balancing the Budget. Instead of paying off debt the French merely increased debt, and now they are going over the same road, only more quickly. On the Continent they borrow money, or print paper money if they cannot borrow. I do not say that we are on that road yet, but this is the first step, and it is the first step that counts, as far as conscience is concerned. If the Chancellor of the Exchequer will do this one year some other new Chancellor of the Exchequer will come along and say, "Well, the late Chancellor of the Exchequer showed me the road, and I will follow along that road. He was hailed as the saviour of his country because he ceased to pay off debt. I will be hailed as the second saviour, because I increased debt." Many of the arguments of the rich men to-night are arguments for the next Chancellor of the Exchequer not only to cease paying off debt, but to increase debt, and so to send up prices and decrease the value of the pound. It is a rosy path that the future Chancellor of the Exchequer can tread. He will be blessed by Lancashire. He will find that the first year he can borrow a little money and the second year a little more money, and then, like the Gadarene swine, he will run down the same precipice that Austria has run down, that Germany is running down, and that all other countries will run down sooner or later if they do not follow honest finance by paying their way. I wish we were paying our way in the old-fashioned way that was blessed by such patrons of sound finance as Mr. Gladstone and Sir Robert Peel, remembering that, after all is said and done, honesty is the best policy.

    The Chancellor of the Exchequer in his Budget statement, before he announced to the Committee his intention to repeal the Sinking Fund, reminded the House that the National Debt had been largely repaid during the last few years. On 1st May the Chancellor of the Exchequer said:

    "The policy of the redemption of debt we have pursued with vigour and success." —[OFFICIAL REPORT, 1st May, 1922; col. 1039, Vol. 153.]
    Anyone reading those words would infer that during the last three years the National Debt has been largely reduced. What, however, are the facts? It has been clearly brought out since that date that the National Debt has been decreased by only £21,000,000. During that period the Government have sold national assets to the extent of £800,000,000. Every morning in the columns of the "Times" one reads speeches delivered by the chairmen of different companies, and one reads on many occasions that the chairman of a company points out to the shareholders that mortgages have been reduced and financial liabilities reduced, and the chairman refers with pride to the progress made during the past twelve months. If the chairman of a public company, speaking at his annual meeting, told his shareholders that liabilities had been reduced, but did not point out that they had been reduced by the sale of capital assets, that particular chairman might not hold his office twelve months hence. That is my first charge against the Chancellor of the Exchequer. On 1st May the right hon. Gentleman pointed out with truth that. he had provided "£322,000,000 in cash towards the redemption of debt during the last two years"; but side by side with that statement he did not make clear to the people that the position of the country to-day is very much worse than it was three years ago. The Chancellor of the Exchequer cannot deny that statement. Three years ago we had £800,000,000 worth of assets. Those assets have been sold. It is true that debt has been reduced by £21,000.000 during the last three years. Therefore the nation to-day is poorer to the extent of at least £780,000,000 in capital assets. The Chancellor of the Exchequer made the further claim:
    "I do not mean to say that he is not to find the revenue to meet the expenditure."— [OFFICIAL REPORT, 1st May, 1922; col. 1040 Vol. 153.]
    The right hon. Gentleman first of all justified the repeal of the sinking fund by his broad statement that the National Debt had been reduced. His second point was that during the present year he was meeting his annual expenditure out of his annual revenue. How far is that accurate? Take the figures presented in the White Paper. Exclude the special revenue on the one hand and the special expenditure on the other. The total revenue is £820,775,000, and the expenditure is £845,846,000. In other words, there is a deficit during the present year of £25,000,000. In addition to that deficit the Government have taken power to borrow £14,000,000 for the payment of unemployment benefit. That amount should be brought into our annual statement, so as to reveal clearly to the public the true financial position. I have made further inquiries into the ordinary revenue of the year and I wish to ask the Chancellor of the Exchequer a question. His miscellaneous receipts are £22,000,000. There is a sum of £16,000,000 for the Currency note Reserve Account surplus. Perhaps the Chancellor of the Exchequer could say what that account is. I have asked several hon. Members if they could explain it to me, but I am at a loss for information. It has a very direct bearing upon this point. The Chancellor of the Exchequer claims that he is meeting his ordinary expenditure out of the revenue of the year. I have endeavoured to show that, judged on his own figures, his annual expenditure exceeds his annual revenue by £25,000,000, and that to that figure must be added £14,000,000 borrowed for unemployment benefit. That is a total of £39,000,000. I submit, therefore, that the claim that the debt had been reduced fans to the ground, and that in the present Budget his annual revenue is insufficient to meet his annual expenditure. I have been trying to find out what causes the Chancellor of the Exchequer to take such a light view of our present financial position and not to set aside any money to meet the National Debt. I find that the Chancellor of the Exchequer in this House on 13th February last dealt with the, question of the National Debt. The words he then used rather made light of the size of our National Debt. He said:
    '"The £350,000,000 of the revenue which is taken from the taxpayer to-day is returned to him in the shape of dividends from the Government stock which he owns."—[OFFICIAL REPORT, 13th February, 1922; col. 704, Vol. 150.]
    That rather implies that in the opinion of the Chancellor of the Exchequer the size of the National Debt is of little consequence. I have gathered during the last two days that the Chancellor of the Exchequer has no regard for the shibboleths of the past. He is willing to turn his back on the principles which have made this country great. But I feel that the size of our National Debt has a very direct bearing on the prosperity of the country. Any attempt the right hon. Gentleman can make during the next twelve months to reduce expenditure on the one hand and to reduce taxes on the other, and thus to have money available for the reduction of debt, will do much for the trade of the country. He is raiding the Sinking Fund. He has also raided and drained the pockets of the taxpayer. We have pointed out on several occasions that the Government have searched with success the pockets of the British taxpayer—more successfully than any Government at any time. They drained the pockets of the taxpayer to make their Budget balance. They propose to raid the Sinking Fund. The sooner the Government return to the principles of the past, the sooner will prosperity return to this country.

    8.0 p.m.

    It is absolutely vital to a great exporting country to maintain its financial position. The case of France has been cited. Whatever country like France or any Continental nation may do is no guide to this country, a great exporting country dependent upon the maintenance of its financial position in the markets of the world. We can maintain that position only by largely reduced expenditure, on the one hand, and by further reductions of taxation on the other hand. The proposals of the Government are retrograde; they are not in keeping with the financial sacrifices made by the country during the last five years. I, know the Chancellor of the Exchequer will say, "If I do not stop the automatic working of the Sinking Fund where am I to find the necessary money?" During a Debate in this House a few weeks ago the right hon. Member for the Central Division of Glasgow (Mr. Bonar Law) clearly pointed out that, in his opinion, certain Departments of the State were exceeding the normal expenditure. If the Chancellor would direct his attention to those Departments in the coming year, there might be a sum of money available at the end of the year for the reduction of the National Debt. I have endeavoured to deal with the claim put forward by the Chancellor on two grounds. First, as to our record during the last few years being unprecedented, I submit that during the last two years if there has been a reduction of the National Debt it has been secured by means which are not clearly realised by the public outside. They think, as the Debt has been reduced, the country can afford reduced taxation. On the other hand, national assets have been reduced, and the unfortunate possession of these assets by the Chancellor during the last two years has enabled him to reduce it. We feel that there should be a drastic curtailment of the cost of armaments, so as to set free further large sums of money in the coming year for the reduction of the National Debt.

    We have had two rich speeches on finance. The hon. and gallant Member for Newcastle-under-Lyme (Colonel Wedgwood) ended up his speech by saying "honesty is the best policy." I quite agree with him, and I am sure as Britishers we will stick to honesty and see that any debts we may owe are properly paid. He referred to Austria. Well, Austria is in a terrible plight, but so are other countries. There are very few countries in the world balancing their budgets to-day, whether they were in the War or not, but the countries that were in the War are not balancing their budgets because they did not tax their people (luring the War. That is why we are in such a wonderful position with regard to our finance. The hon. and gallant Member also referred to the Sinking Fund. One hundred years ago we did something exactly similar to that which is being done in the present Budget. We cancelled our Sinking Fund for so many years. It answered correctly then, and I feel confident it will answer correctly in this case. The hon. Member for Greenock (Sir G. Collins) referred to a speech of the right hon. Member for Central Glasgow. Perhaps he may also remember a speech made a month or so ago when the right hon. Gentleman stated that the actual reduction in our Debt had been over £500,000,000. That is a gigantic amount. I think there is no country in the world which has reduced its debt at all in the last five or six years, and it is remarkable to think that we could reduce ours by such an immense sum in six years—indeed it is really since 1919 or only three years. That is beyond all description.

    My hon. Friend's statement that we were not reducing the amount in any way is entirely wrong. Has he referred to the Floating Debt? Does he watch those figures? If he looks at the figures of the Floating Debt he will find that it is down £390,000,000 in the last year. Think of what that means in interest alone, and as showing how the credit of the country is going up. Taking the interest on a 5 per cent. basis, it means a saving of £20,000,000 a year in interest alone. He also stated that our expenditure was greater than our revenue. If he looks at this week's figures he will see that our revenue is £7,000,000 greater than our expenditure. That, again, has reduced our Floating Debt. I merely want to bring these figures in front of my hon. Friend to show him how wrong he is, and to show how good our credit is. I am not afraid of our great National Debt. As long as we increase wealth we need not be afraid of the National Debt. We will be able to pay the interest, and we will be able in due course to pay our Sinking Fund, but I feel at the moment it was right of the Chancellor to cease the Sinking Fund, perhaps for a year or so, so that it might help our trade, and it is trade we want.

    I desire to support the Amendment. We think the Chancellor is not making that extraordinary effort that should be made in order that the National Debt might be reduced, and we think this Clause should be deleted. We do not pretend to be financiers, but we cannot agree with the philosophy which has just been expressed by the hon. Member for Ilford (Mr. Wise).

    Well, as to one aspect of the facts and figures which he put before us, we are inclined to agree. There has been a substantial increase in the wealth of the country, but, side by side with that, there has been a most tragic effect in the increase of poverty among our people. We think something might have been done in order that those people who have accumulated vast amounts of wealth might be called upon to discharge the great obligations which their wealth entitles them to undertake towards the State and the people out of whom they have made it. All kinds of charges are imposed upon the poor of this land, and they are expected to worry through in their misery and despair without any hope. We are told that the financial position of the nation will not allow of further taxes in order that these debts may be reduced. Of course we disagree with the present policy of getting revenue. We have seen how, in order to meet liabilities, Government assets have been sold to the extent of £800,000,000. We disagree with the selling of those assets, but when they were sold, the proceeds ought to have been earmarked for the reduction of National Debt. Regarding the ways and means whereby these debts may be reduced, we desire to show that there are avenues which the Chancellor of the Exchequer might have entered upon had be been desirous of bringing in not only a certain amount to meet current revenue, but also of substantially reducing the debt of the nation.

    Let us consider where we are as compared with 1913. I think it is an obligation imposed upon the Chancellor of the Exchequer to ascertain the relative position of the financial resources of the nation compared with what it was in 1913–14, and the taxable possibilities. In 1913 the gross income brought under the review of the Inland Revenue was £1,111,000,000, and in 1914 it was 21,167,000,000. During the period of the War debt has been accumulating. We have found that there has been that enormous increase of wealth to the amount of £1,167,000,000, and in 1921, the latest figures given by the Chancellor of the Exchequer to myself, show that it amounted to £3,000,000,000. We are told that the people who own this wealth cannot afford to pay any further taxes. We assert that these people are not being called upon to discharge their obligations to the State in the manner in which they ought to. Of course, higher taxes are being imposed upon them, but their incomes are greater than formerly.

    I do not understand how this argument as to general national wealth is relevant to the question of whether the Sinking Fund should or should not be suspended. It may be that the hon. Member will establish a connection, but it is not apparent, so far.

    Is it not in order to argue that the Sinking Fund is being raided in order to relieve other sources of taxation, and that it would be more desirable to keep the existing taxation rather than raid the Sinking Fund, as is being done?

    I am suggesting that there should be no suspension as is proposed by this Clause, and that instead of going on borrowing the Chancellor ought to meet all liabilities and maintain that fund in order that the debt may be reduced by a deliberate financial effort directed towards those incomes which are accessible. Instead of that being done these people are escaping their liabilities, and a charge is being made upon the poor of the community. I have said we are in agreement with the hon. Member for Ilford as to the existence of this wealth, but we certainly do not agree with his policy of dealing with the wealth. We think that policy is not likely to assist trade nor to establish this country in the world equal with other nations. If the Chancellor wants further proof of the ability of the nation to make itself solvent in this way, he need only refer to the figures which he himself gave to me on 23rd May. According to his return of the incomes of people who are paying Supertax, incomes ranging from between £5,000 and 210,000 up to £100,000 were being received in 1914 by 14,008 persons. According to the Chancellor's figures the number of these people to-day has increased to 72,385. In 1914 the number of persons with incomes of between 255,000 and 265,000 was only 68. To-day we find the number is 335.

    I suggest that a more honest and determined effort ought to be made by the Chancellor of the Exchequer and that these people ought to be called upon to pay their due liabilities. We may be told, "Look at the amount of taxation they are paying to-day.' We know they are paying a substantial amount, but what have they got left? We are called upon directly and indirectly, with small incomes, to discharge our obligations, which are out of all proportion to those of the people to whom I have been referring. I see that there were only 67 persons in 1913–14 with incomes between 275,000 and £100,000, whereas to-day we find they have gone up to 126; and today there are 169 persons with incomes over 2100,000, while in 1914 there were only 80. Therefore, we believe that we are entitled to support the deletion of this Clause in order that we might face the financial situation of this country in a more honest manner than we are doing, and place the burdens of the nation on the backs of those who are able to bear the burdens, instead of spreading them over the poorer elements, handicapping prosperity in the future, and putting a millstone of debt round the neck of the nation.

    I have listened to the speech made by my hon. Friend the Member for Barnard Castle (Mr. Swan), but I do not think I have discovered anything very new in the point of view which he has urged upon the Committee. The figures which he has given us as the increase of incomes which has occurred in this country over the last few years are very fallacious. In point of fact, as my hon. Friend very well knows, the value of money is not even to-day what it was before the War, and if he will pursue his analysis a little further, he will find that while a larger number of people enjoy incomes which come within the Super-tax limit, they have very much less in most cases to spend than they had before the War. It would be quite wrong to draw from these figures an inference that there was a much larger spending power on the part of the people to whom he refers, as extracted from the tables which he got in reply to a question in the House of Commons. I confess I understand his point of view when he urges that it would be better to go in for higher taxation in this country than to reduce the Sinking Fund, or to suspend it altogether. I understand that point of view, but I do not believe in it. I am perfectly certain that any higher taxation imposed upon the people of this country in the nature of Income Tax or Super-tax at the present time would have the most detrimental results upon every class of the community, and not merely upon those who were asked to contribute it.

    I turn to the characteristic speech that was made by the hon. Member for Greenock (Sir G. Collins). I confess I have listened to that speech so often now that I have ceased to be any longer moved by it. The hon. Gentleman always assumes an attitude of talking down to the rest of the Members of this House when he speaks upon matters of finance. From some cloudy height of Olympus he breathes forth warnings as to the parlous state of the country, and, indeed, if anybody outside listened to the speeches that the hon. Gentleman made, or paid any attention to the dire menaces which he imposed upon the country as to the appalling fate which awaits it, then, indeed, we should be in a worse position to-day than we were three years ago. If his vaticinations could make us poorer, undoubtedly by this time we would have been an impoverished country, but, happily, nobody listens to him. He said. I could not deny, but I do entirely deny, that this country is worse off to-day than it was three years ago. Even if it were true, I do not think I should say it, because that is not the way to increase your country's credit, but there is absolutely no justification or ground whatsoever for the statement which the hon. Gentleman made. On the opposite side of the House they ventured upon many predictions as to the appalling results upon our credit of suspending the Sinking Fund, but every prophecy they made on this matter has been entirely falsified.

    My hon. and gallant Friend is now looking at the produce of the pound sterling within the past week, due to particular purchases for consumption in this country—one of the seasonal purchases which must be made and which always affect currency at the time.

    I would ask the hon. and gallant Gentleman to remember that the cost of the pound sterling since the date when the Budget speech was made, and when the indication of the suspension of the Sinking Fund was given to the world, has been one of steady progress, and even with the alteration of the last few days, owing to the seasonal purchases to which I have referred, the value of the pound sterling is still high as compared with what it was on the 1st May of this year. The hon. Member for Greenock quoted from a speech of mine, by which he sought to prove that I put the fact that there was a large National Debt in a light spirit—in far too light a spirit evidently, according to his point of view. The passage he quoted had nothing whatever to do with the point of view I take in regard to the National Debt. He referred to a statement which I had made in the House, in the month of February, I think it was, when I explained to the House that £350,000,000 of what was raised in taxation in this country was immediately handed back to the holders of Government securities in this country. I was not seeking to establish any point of view with regard to the National Debt when I was making that statement. What I was endeavouring to show was that all the money that was raised by taxation was not unfruitfully used. The accusation which was made from the other side of the House was that all this money which the Government raised by way of taxation was never profitably employed, that it was, so to speak, money which was entirely unproductive, and that that was why trade and industry suffered so badly. In rebutting that argument, I pointed to the fact, which is one of great moment, that in truth the bulk of the National Debt is held in this country, and that £350,000,000 is distributed each year in the shape of interest upon that National Debt and must go somewhere. Where does it go? Of necessity, it goes back into the pockets of the people, and is spent in the production of further wealth.

    My hon. and gallant Friend asks why. May I remind him, of the speech which he made yesterday, in which he indicated—he was dealing especially, I admit, with the working class people—that the more money they got the more money was spent by them, which created industry for other people. If that be so in regard to the working classes of this country, it must be equally true that £350,000,000 distributed to the interest-holders of this country must equally pass into the channels of commerce, and fructify and produce employment.

    I misunderstood the right hon. Gentleman. I thought he meant to say that it went back to assist trade. Does he mean that it is simply spent in the ordinary way?

    I think in the case I am putting it was truer than in the case the hon. and gallant Gentleman took, for the reason that while, undoubtedly, the ordinary expenditure of money in itself creates trade, although not always the trade that is most valuable, in point of fact the people who draw these sums in interest for the most part return it direct to industry. I leave that point, and I wish once more to deal with a matter which the hon. Member for Greenock always persists in misstating. I have certainly more than once in this House replied to asseverations of my hon. Friend seeking to impute to me the statement that the National Debt has been reduced by £320,000,000 in the course of the last few years. Of course he knows very well I never made such a statement, and when I spoke of the reduction of the National Debt by £320,000,000, I said specifically that this was done during the course of the last two years. He today reiterated the statement without any qualification, and I am glad he states it here, when I can reply to him but I hope he will not state it elsewhere, where I have not an opportunity of replying. What I have said ought to be perfectly clear to the mind of the hon. Member. It is perfectly true that, during the last two years, we have reduced the Debt by about £320,000,000. That is a matter of history, and cannot in any way be controverted, but he returns to the statement that large sums, which had been obtained from the sale of assets, have been employed as ordinary revenue for the purpose of doing the business of the country. That is perfectly true, but he also forgets to put against the assets sold the special expenditure arising out of the War, and if he is going to say that the assets which remained after the War, and which have been sold, ought to be put to a special capital account, then equally he must agree that all these special burdens imposed upon us as the result of the War ought to be set against that capital account.

    I turn to the hon. and gallant Member for Newcastle-under-Lyme (Colonel Wedgwood). He assured the Committee that he would not take up much of its time, and he did not, but he gave us some maxims, not entirely novel, such as "Honesty is the best policy"—a very good motto, which is apt, sometimes, to be forgotten. But I confess he has never succeeded in convincing me that we are doing anything but fairness by suspending the Sinking Fund in the present year. He says that we ought always to be paying off debt. What does that mean? How much? Ought we to be paying off £5,000,000, £10,000,000, £20,000,000 or £100,000,000 a year?

    I think the right hon. Gentleman ought to be living up to the promises of the Prime Minister and the former Chancellor of the Exchequer.

    That is not an answer to the question which I put. If there be some obligation to pay off debt, then hon. Members should be able to tell me how much we ought to pay off each year. I imagine that the only real answer to that is that you must pay off as much as you can. If you can pay off £100,000,000, then pay off £100,000,000; if you can pay off £50,000,000, then pay off X50,000,000; but if you can pay off none except by doing something which will have the effect really of increasing the burden of the people, then, obviously, it becomes a matter of business, and you have got to decide what you ought to do. I venture to put forward this proposition, that, having paid off so much during the last two years, it is wise and prudent in the present year, when to pay off more would be detrimental to trade, to suspend the payment which hitherto we have made, and there is no Chancellor of the Exchequer in the past of this or any other country who has not recognised that fact.

    Division No. 168.]

    AYES

    [8.33 p.m.

    Adkins, Sir William Ryland DentDavies, Sir William H. (Bristol, S.)Horne, Sir R. S. (Glasgow, Hillhead)
    Agg-Gardner, Sir James TynteDawson, Sir PhilipHotchkin, Captain Stafford Vere
    Ainsworth, Captain CharlesDewhurst, Lieut.-Commander HarryHurd, Percy A.
    Amery, Rt. Hon. Leopold C. M. S.Doyle, N. GrattanHurst, Lieut.-Colonel Gerald B.
    Armitage, RobertEdgar, Clifford B.James, Lieut.-Colonel Hon. Cuthbert
    Astbury, Lieut.-Com. Frederick W.Edge, Captain Sir WilliamJesson, C.
    Balfour, George (Hampstead)Ednam, ViscountJodrell, Neville Paul
    Banbury, Rt. Hon. Sir Frederick G.Edwards, Hugh (Glam., Neath)Johnson, Sir Stanley
    Barker, Major Robert H.Evans, ErnestJohnstone, Joseph
    Barlow, Sir MontagueEyres-Monsell, Com. Bolton M.Jones, Henry Haydn (Merioneth)
    Barnes, Rt. Hon. G. (Glas., Gorbals)Farquharson, Major A. C.Kellaway, Rt. Hon. Fredk. George
    Barnett, Major Richard W.Fell, Sir ArthurKidd, James
    Barrand, A. R.Fildes, HenryKing, Captain Henry Douglas
    Barttey-Denniss, Sir Edmund RobertFord, Patrick JohnstonLarmor, Sir Joseph
    Betterton, Henry B.Foreman, Sir HenryLaw, Alfred J. (Rochdale)
    Bigland, AlfredForestier-Walker, L.Lewis, Rt. Hon. J. H. (Univ., Wales)
    Bird, Sir R. B. (Wolverhampton, W.)Forrest, WalterLewis, T. A. (Glam., Pontypridd)
    Blair, Sir ReginaldFraser, Major Sir KeithLister, Sir R. Ashton
    Boscawen, Rt. Hon. Sir A. GriffithFrece, Sir Walter deLloyd, George Butler
    Bowles, Colonel H. F.Fremantle, Lieut.-Colonel Francis FLocker-Lampson, G. (Wood Green)
    Bowyer, Captain G. W. E.Ganzoni, Sir JohnLocker-Lampson, Com. O. (H'tlngd'n)
    Breese, Major Charles E.Gilmour, Lieut.-Colonel Sir JohnLorden, John William
    Bridgeman, Rt. Hon. William CliveGould, James C.Lort-Williams, J.
    Briggs, HaroldGreen, Joseph F. (Leicester, W.)Lyle, C. E. Leonard
    Broad, Thomas TuckerGreenwood, William (Stockport)Mackinder, Sir H. J. (Camlachie)
    Brown, Brig.-Gen. Clifton (Newbury)Greer, Sir HarryMcLaren, Robert (Lanark, Northern)
    Bruton, Sir JamesGuest, Capt. Rt. Hon. Frederick E.Macnaghten, Sir Malcolm
    Bull, Rt. Hon. Sir William JamesGuinness, Lieut.-Col. Hon. W. E.Macpherson, Rt. Hon. James I.
    Carr, W. TheodoreHailwood, AugustineMacquisten, F. A.
    Carter, R. A. D. (Man., Withington)Hall, Rt-Adml Sir W. (Liv'p'l,W.D'by)Magnus, Sir Philip
    Casey, T. W.Hannon, Patrick Joseph HenryMaitland, Sir Arthur D. steel-
    Cautley, Henry StrotherHarmsworth, C. B. (Bedford, Luton)Mallalieu, Frederick William
    Chamberlain, Rt. Hon. J. A.(Birm.,W.)Harmsworth, Hon. E. C. (Kent)Malone, Major P. B. (Tottenham, S.)
    Chamberlain, N. (Birm., Ladywood)Harris, Sir Henry PercyMarks, Sir George Croydon
    Churchman, Sir ArthurHaslam, LewisMiddlebrook, Sir William
    Clough, Sir RobertHenderson, Lt.-Col. V. L. (Tradeston)Mitchell, Sir William Lane
    Coats, Sir StuartHerbert, Col. Hon. A. (Yeovil)Mond, Rt. Hon. Sir Alfred Moritz
    Cobb, Sir CyrilHerbert, Dennis (Hertford, Watford)Moore-Brabazon, Lieut.-Col. J. T. C.
    Cohen, Major J. BrunelHilder, Lieut.-Colonel FrankMoreing, Captain Algernon H.
    Conway, Sir W. MartinHinds, JohnMurchison, C. K.
    Cope, Major WilliamHolbrook, Sir Arthur RichardMurray, Rt. Hon. C. D. (Edinburgh)
    Cory, Sir J. H. (Cardiff, South)Holmes, J. StanleyNall, Major Joseph
    Cowan, D. M. (Scottish Universities)Hood, Sir JosephNeal, Arthur
    Davidson, Major-General Sir J. H.Hope, Sir H. (Stirling & Cl'ckm'nn, W.)Newman, Sir R. H. S. D. L. (Exeter)
    Davies, David (Montgomery)Hope, Lt.-Col. Sir J. A. (Midlothian)Newson, Sir Percy Wilson
    Davies, Thomas (Cirencester)Hopkins, John W. W.Nicholson. Reginald (Doncaster)

    You cannot find in the policy of any Chancellor of the Exchequer in the past, as I say, in this or any other country a positive assertion that in all circumstances, and at all times, you must pay off debt.

    Evidently my hon. and gallant Friend does not mean to live up to his own professions. I did not rise really to re-argue a question which has been worn threadbare during the last few months in discussions in this House, but I think I have said enough, at least, to establish the fact that the Government is entirely free from the kind of imputations which have been put upon us, and that this Clause ought to receive the support of the Committee.

    Question put, "That the Clause stand part of the Bill."

    The Committee divided: Ayes, 217; Noes, 74.

    Norris, Colonel Sir Henry G.Robinson, Sir T. (Lancs., Stretford)Tickler, Thomas George
    Norton-Griffiths, Lieut.-Col, Sir JohnRodger, A. K.Tryon, Major George Clement
    Oman, Sir Charles William C.Roundels, Colonel R. F.Turton, Edmund Russborough
    Ormsby-Gore, Hon. WilliamRoyds, Lieut.-Colonel EdmundWaddington, R.
    Parker, JamesRutherford. Sir W. W. (Edge Hill)Wallace, J.
    Parry, Lieut.-Colonel Thomas HenrySamuel, A. M. (Surrey, Farnham)Walters, Rt. Hon. Sir John Tudor
    Pearce, Sir WilliamSamuel, Samuel (W'dsworth, Putney)Walton, J. (York, W. R., Don Valley)
    Pease, Rt. Hon. Herbert PikeSanders, Colonel Sir Robert ArthurWard, Col. J. (Stoke upon Trent)
    Pennefather, De FonblanqueSassoon, Sir Philip Albert Gustave D.Ward, Col. L. (Kingston-upon-Hull)
    Parring, William GeorgeScott, A. M. (Glasgow, Bridgeton)Warner, Sir T. Courtenay T.
    Pickering, Colonel Emil W.Scott, Sir Leslie (Liverp'l, Exchange)Warren, Sir Alfred H.
    Pollock, Rt. Hon. Sir Ernest MurraySeddon, J. A.Watson, Captain John Bertrand
    Pownall, Lieut.-Colonel AsshetonShaw, Hon. Alex. (Kilmarnock)White, Col. G. D. (Southport)
    Pratt, John WilliamShaw, William T. (Forfar)Williams, C. (Tavistock)
    Prescott, Major Sir W. H.Shortt, RI. Hon. E. (N'castle-on-T.)Windsor, Viscount
    Purchase, H. G.Smith, Sir Allan M. (Croydon, South)Winterton, Earl
    Rae, Sir Henry N.Smith, Sir Harold (Warrington)Wise, Frederick
    Randles, Sir John ScurrahStanley, Major Hon. G. (Preston)Wood, Hon. Edward F. L. (Ripon)
    Rankin, Captain James StuartStanton, Charles ButtWood, Sir H. K. (Woolwich, West)
    Ratcliffe, Henry ButlerStephenson, Lieut.-Colonel H. K.Woolcock, William James U.
    Rawlinson, John Frederick PeelStrauss, Edward AnthonyWorthington-Evans, Rt. Hon. Sir L.
    Remer, J. R.Sturrock, J. LengYeo, Sir Alfred William
    Remnant, Sir JamesSugden, W. H.Young, Sir Frederick W. (Swindon)
    Richardson, Sir Alex. (Gravesend)Surtees, Brigadier-General H. C.
    Roberts, Rt. Hon. G. H. (Norwich)Sykes, Sir Charles (Huddersfield)

    TELLERS FOR THE AYES.—

    Roberts, Samuel (Hereford, Hereford)Taylor, J.Colonel Leslie Wilson and Mr
    Roberts, Sir S. (Sheffield, Ecclesall)Thomson, F. C. (Aberdeen, South)McCurdy.
    Robinson, S. (Brecon and Radnor)Thomson, Sir W. Mitchell- (Maryhill).

    NOES

    Adamson, Rt. Hon. WilliamHallas, EldredRoberts, Frederick O. (W. Bromwich)
    Banton, GeorgeHalls, WalterRobertson, John
    Barker, G. (Monmouth, Abertillery)Hayday, ArthurRose, Frank H.
    Bramsdon, Sir ThomasHayward, EvanRoyce, William Stapleton
    Bromfield, WilliamHenderson, Rt. Hon. A. (Widnes)Sexton, James
    Brown, James (Ayr and Bute)Hirst, G. H.Short, Alfred (Wednesbury)
    Cairns, JohnHodge, Rt. Hon. JohnShortt, Rt. Hon. E. (N'castle-on-T.)
    Carter, W. (Nottingham, Mansfield)Hogge, James MylesSitch, Charles H.
    Colfox, Major Wm. PhillipsIrving, DanSpencer, George A.
    Sir Godfrey (Greenock)John, William (Rhondda, West)Sutton, John Edward
    Davies, A. (Lancaster, Ciltheroe)Jones, J. J. (West Ham, Silvertown)Thorne, G. R. (Wolverhampton, E.)
    Davies, Rhys John (Westhoughton)Jones, Morgan (Caerphilly)Thorne, W. (West Ham, Plaistow)
    Davison, J. E. (Smethwick)Kennedy, ThomasTillett, Benjamin
    Edwards, C. (Monmouth, Bedwellty)Kenworthy, Lieut.-Commander J. M.Walsh, Stephen (Lancaster, Ince)
    Edwards, G. (Norfolk, South)Lawson, John JamesWaterson, A. E.
    Finney, SamuelLunn, WilliamWatts-Morgan, Lieut.-Col. D.
    Foot, IsaacMaclean, Nell (Glasgow, Govan)Wedgwood, Colonel Josiah C.
    Galbraith, SamuelMills, John EdmundWhite, Charles F. (Derby, Western)
    Gillis, WilliamMurray, Hon. A. C. (Aberdeen)Wignall, James
    Graham, D. M. (Lanark, Hamilton)Murray, Dr. D. (Inverness & Ross)Wilson, James (Dudley)
    Graham, R. (Nelson and Colne)Myers, ThomasWintringham, Margaret
    Graham, W. (Edinburgh, Central)Newbould, Alfred ErnestWood, Major M. M. (Aberdeen, C.)
    Griffiths, T. (Monmouth, Pontypool)O'Grady, Captain JamesYoung, Robert (Lancaster, Newton)
    Grundy, T. W.Parkinson, John Allen (Wigan)
    Guest, J. (York, W.R., Hemsworth)Raffan, Peter Wilson

    TELLERS FOR THE NOES.—

    Hall, F. (York, W.R., Normanton)Richardson, R. (Houghtnn-le-Spring)Mr. Walter Smith and Mr. Swan.

    Clause 29—(Continuance During Current Financial Year Of Section 58 Of 10 & 11 Geo 5, C 18 38 & 39 Viet, C 45)

    Section fifty-eight of the Finance Act, 1920 (which provides that amounts applied out of the Revenue in paying off debt are to be deemed to be expenditure within the meaning of Sections four and five of the Sinking Fund Act, 1875), shall apply as

    Division No. 169.]

    AYES

    [8.41 p.m.

    Agg-Gardner, Sir James TynteBetterton, Henry B.Bull, Rt. Hon. Sir William James
    Ainsworth, Captain CharlesBigland, AlfredButcher, Sir John George
    Amery, Rt. Hon. Leopold C. M. S.Bird, Sir R. B. (Wolverhampton, W.)Carr, W. Theodore
    Armitage, RobertBlair, Sir ReginaldCarter, R. A. D. (Man., Withington)
    Astbury, Lieut.-Com. Frederick W.Bowyer, Captain G. W. E.Casey, T. W.
    Balfour, George (Hampstead)Breese, Major Charles E.Cautley, Henry Strother
    Barker, Major Robert H.Bridgeman, Rt. Hon. William CliveChamberlain, Rt. Hn. J. A. (Birm., W.)
    Barlow, Sir MontagueBriggs, HaroldChamberlain, N. (Birm., Ladywood)
    Barnett, Major Richard W.Broad, Thomas TuckerChurchman, Sir Arthur
    Barrand, A. R.Brown, Brig.-Gen. Clifton (Newbury)Clay, Lieut.-Colonel H. H. Spender
    Bartley-Denniss, Sir Edmund RobertBruton, Sir JamesClough, Sir Robert

    respects the current financial year as it applied as respects the financial year ending on the thirty-first day of March. nineteen hundred and twenty-one.

    Question put, "That the Clause stand part of the Bill."

    The Committee divided: Ayes, 212 Noes, 72.

    Coats, Sir StuartJames, Lieut.-Colonel Hon. CuthbertRemer, J. R.
    Cobb, Sir CyrilJodrell, Neville PaulRemnant, Sir James
    Cohen, Major J. BrunelJohnson, Sir StanleyRichardson, Sir Alex. (Gravesend)
    Colley, Major Wm. PhillipsJohnstone, JosephRoberts, Rt. Hon. G. H. (Norwich)
    Conway, Sir W. MartinJones, Henry Haydn (Merloneth)Roberts, Samuel (Hereford. Hereford)
    Cope, Major WilliamKellaway, Rt. Hon. Fredk. GeorgeRoberts, Sir S. (Sheffield, Ecclesall)
    Cory, Sir J. H. (Cardiff, South)Kidd, JamesRobinson, S. (Brecon and Radnor)
    Cowan, D. M. (Scottish Universities)King, Captain Henry DouglasRobinson, Sir T. (Lancs., Stretford)
    Davidson, Major-General Sir J. H.Larmer, Sir JosephRodger, A. K.
    Davies, David (Montgomery)Law, Alfred J. (Rochdale)Roundell, Colonel R. F.
    Davies, Thomas (Cirencester)Lewis, Rt. Hon. J. H. (Univ., Wales)Royds, Lieut.-Colonel Edmund
    Davies, Sir William H. (Bristol, S.)Lewis, T. A. (Glam., Pontypridd)Rutherford, Sir W. W. (Edge Hill)
    Dawson, Sir PhilipLister, Sir R. AshtonSamuel, A. M. (Surrey, Farnham)
    Dewhurst, Lieut.-Commander HarryLloyd, George ButlerSamuel, Samuel (W'dsworth, Putney)
    Doyle, N. GrattanLocker-Lampson, Com. O. (H'tlngd'n)Sanders, Colonel Sir Robert Arthu
    Edgar, Clifford B.Lorden, John WilliamSassoon, Sir Philip Albert Gustave D.
    Edge, Captain Sir WilliamLort-Willlams, J.Scott, A. M. (Glasgow, Bridgeton)
    Edwards, Hugh (Glam., Neath)Lyle, C. E. LeonardScott, Sir Leslie (Live,p'l, Exchange)
    Entwistle, Major C. F.Mackinder, Sir H. J. (Camlachie)Seddon, J. A.
    Evans, ErnestMcLaren, Robert (Lanark, Northern)Shaw, Hon. Alex, (Kilmarnock)
    Eyres-Monsell, Com. Bolton M.Macnaghten, Sir MalcolmShaw, William T. (Forfar)
    Farquharson, Major A. C.Macpherson, Rt. Hon. James I.Shortt, Rt. Hon. E. (N'castle-on-T.)
    Fell, Sir ArthurMacquisten, F. A.Smith, Sir Allan M. (Croydon, South)
    Ford, Patrick JohnstonMagnus, Sir PhilipSmith, Sir Harold (Warrington)
    Foreman, Sir HenryMaitland, Sir Arthur D. Steel-Stanley, Major Hon. G. (Preston)
    Forestier-Walker, L.Mallaileu, Frederick WilliamStanton, Charles Butt
    Forrest, WalterMalone, Major P. B. (Tottenham, S.)Stephenson, Lieut.-Colonel H. K.
    Fraser, Major Sir KeithMarks, Sir George CroydonStrauss, Edward Anthony
    Freon, Sir Waiter deMiddlebrook, Sir WilliamSturrock, J. Leng
    Fremantle, Lieut.-Colonel Francis E.Mitchell, Sir William LaneSugden, W. H.
    Ganzoni, Sir JohnMond, Rt. Hon. Sir Alfred MoritzSurtees, Brigadier-General H. C.
    Gilmour, Lieut.-Colonel Sir JohnMoore-Brabazon, Lieut.-Col. J. T. C.Sykes, Sir Charles (Huddersfield)
    Gould, James C.Moreing, Captain Algernon H.Taylor, J.
    Green, Joseph F. (Leicester, W.)Murchison, C. K.Thomson, F. C. (Aberdeen, South)
    Greenwood, William (Stockport)Murray, Rt. Hon. C. D. (Edinburgh)Thomson, Sir W. Mitchell- (Maryhill)
    Greer, Sir HarryNall, Major JosephTickler, Thomas George
    Guest, Capt. Rt. Hon. Frederick E.Neal, ArthurTryon, Major George Clement
    Guinness, Lieut.-Col. Hon. W. E.Newman, Sir R. H. S. D. L. (Exeter)Turton, Edmund Russborough
    Hailwood, AugustineNewson, Sir Percy WilsonWaddington, R.
    Hall, Rr-Adml Sir W. (Llv'pl,W. D'by)Nicholson, Reginald (Doncaster)Wallace, J.
    Hannon, Patrick Joseph HenryNorris, Colonel Sir Henry G.Walton, J. (York, W. R., Don Valley)
    Harmsworth, C. B. (Bedford, Luton)Norton-Griffiths, Lieut.-Col. Sir JohnWard, Col. J. (Stoke-upon-Trent)
    Harmsworth, Han. E. C. (Kent)Oman, Sir Charles William C.Ward, Col. L. (Kingston-upon-Hull)
    Harris, Sir Henry PercyOrmsby-Gore, Hon. WilliamWarner, Sir T. Courtenay T.
    Haslam, LewisParker, JamesWarren, Sir Alfred H.
    Henderson, Lt.-Col. V. L. (Tradeston)Parry, Lieut.-Colonel Thomas HenryWatson, Captain John Bertrand
    Herbert, Col. Hon. A. (Yeovil)Pearce, Sir WilliamWhite, Col G. D. (Southport)
    Herbert, Dennis (Hertford, Watford)Pease, Rt. Hon. Harbert PikeWilliams, C. (Tavistock)
    Wider, Lieut.-Colonel FrankPennefather, De FonblanqueWilson, Lt.-Col. Sir M. (Bethnal Gn.)
    Hinds, JohnPerring, William GeorgeWinterton, Earl
    Holbrook, Sir Arthur RichardPickering, Colonel Emil W.Wise, Frederick
    Holmes, J. StanleyPollock, Rt. Hon. Sir Ernest MurrayWood, Hon. Edward F. L. (Ripon)
    Hood, Sir JosephPownall, Lieut.-Colonel AsshetonWood, Sir H. K. (Woolwich, West)
    Hope, Sir H.(Stirling & Cl'ckm'nn, W.)Pratt, John WilliamWoolcock, William James U.
    Hope, Lt.-Col. Sir J. A. (Midlothian)Prescott, Major Sir W. H.Worthington-Evans, Rt. Hon. Sir L.
    Hopkins, John W. W.Purchase, H. G.Yeo, Sir Alfred William
    Hopkinson, A. (Lancaster, Moseley)Rae, Sir Henry N.Young, Sir Frederick W. (Swindon)
    Horne, Sir R. S. (Glasgow, Hillhead)Randles, Sir John Scurrah
    Hotchkin, Captain Stafford VereRankin, Captain James Stuart

    TELLERS FOR THE AYES.—

    Hurd, Percy A.Ratcliffe, Henry ButlerColonel Leslie Wilson and Mr.
    Hurst, Lieut.-Colonel Gerald B.Rawifnson, John Frederick PeelMcCurdy.

    NOES

    Adamson, Rt. Hon. WilliamGriffiths, T. (Monmouth, Pontypool)Murray, Hon. A. C. (Aberdeen)
    Banton, GeorgeGrundy, T. W.Murray, Dr. D. (Inverness & Ross)
    Barker, G. (Monmouth, Abertillery)Guest, J. (York, W. R., Hemsworth)Myers, Thomas
    Bramsdon, Sir ThomasHall, F. (York, W.R., Normanton)Newbould, Alfred Ernest
    Bromfield, WilliamHallas, EldredO'Grady, Captain James
    Brown, James (Ayr and Bute)Halls, WalterRattan, Peter Wilson
    Cairns, JohnHayday, ArthurRichardson, R. (Houghton-le-Spring)
    Carter, W. (Nottingham, Mansfield)Hayward, EvanRoberts, Frederick O. (W. Bromwich)
    Collins, Sir Godfrey (Greenock)Henderson, Rt. Hon. A. (Widnes)Robertson, John
    Davies, A. (Lancaster, Ciltheroe)Hirst, G. H.Rose, Frank H.
    Davies, Rhys John (Westhoughton)Hodge, Rt. Hon. JohnRoyce, William Stapleton
    Davison, J. E. (Smethwick)Hogge, James MylesSexton, James
    Edwards, C. (Monmouth, Bedweilty)Irving, DanShort, Alfred (Wednesbury)
    Edwards, G. (Norfolk, South)John, William (Rhondda, West)Sitch, Charles H.
    Finney, SamuelJones, J. J. (West Ham, Silverown)Smith, W. R. (Wellingborough)
    Foot, IsaacJones, Morgan (Caerphilly)Spencer, George A.
    Galbraith, SamuelKennedy, ThomasSutton, John Edward
    Gillis, WilliamKenworthy, Lieut.-Commander J. M.Swan, J. E.
    Graham, D. M. (Lanark, Hamilton)Lawson, John JamesThorne, G. R. (Wolverhampton, E.)
    Graham, R. (Nelson and Colne)Lunn, WilliamThorne, W. (West Ham, Plaistow)
    Graham, W. (Edinburgh, Central)Maclean, Nell (Glasgow, Govan)Tillett, Benjamin

    Walsh, Stephen (Lancaster, Ince)Wignall, JamesYoung, Robert (Lancaster, Newton)
    Waterson, A. E.Wilson, James (Dudley)
    Wedgwood, Colonel Josiah C.Wintringham, Margaret

    TELLERS FOR THE NOES.—

    White, Charles F. (Derby, Western)Wood, Major M. M. (Aberdeen, C.)Lieut.-Colonel Watts-Morgan and
    Mr. Mills.

    Clause 30—(Power To Borrow Moneys Required For Certain Sinking Funds)

  • (1) The Treasury may at any time, if they think fit, raise money in the same manner-in which they are authorised to raise money under Sub-section (1) of Section one of the War Loan Act, 1919, for any of the following purposes, that is to say:
  • (a) for providing during the financial year ending the thirty-first day of March, nineteen hundred and twenty-three, for the issue out of the Consolidated Fund of the sums to be issued thereout under Section forty-five of the Finance Act, 1921, for the purposes of the sinking fund established under that Section in connection with the three and one-half per cent. Conversion Loan; and
  • (b) for providing during the said financial year such sums as are required in connection with four per cent. Victory Bonds, or stock of bonds forming part of the four per cent. Funding Loan, 1960–1990, which are transferred in satisfaction of death duties, or as are required under Section two of the War Loan Act, 1919, to be issued to the National Debt Commissioners for the purposes of the sinking funds established in pursuance of that Section in connection with the four per cent. Victory Bonds and four per cent. Funding Loan, 1960–1990; and
  • (c)for providing for the repayment to the Consolidated Fund of all or any part of the sums issued out of that fund for the purposes aforesaid.
  • (2) This Section shall be construed as one with Section one of the War Loan Act, 1919, and the provisions of that Section shall have effect accordingly.
  • I beg to move, in Sub-section (1), after the word "money," to insert the words

    "at a rate of interest not exceeding three and one-half per cent, per annum."
    We all realise that in order to provide the moneys required for certain sinking funds some provision of this kind is necessary. Following the principle which I have laid down in previous Debates, my object is to save to the Government of this country as much money as possibly can he saved by trying to get the Government to put legislation into effect which will enable them to obtain the money required to pay the interest on certain loans at a much cheaper rate. One of the statements made by the Chancellor of the Exchequer and other Members of this House at various times has been that there is a great burden of debt upon the country, and it has always been pointed out what a huge sum total of interest we have to pay on the loans Which have been issued. My contention has always been that many of those who are dealt with under this Clause are getting an advantage which, judging from the bank rate and the fact that certain things have happened in the money market, makes it unwise for the Government to pay so much in interest as they are doing, and my Amendment is to remedy this.

    I think I can anticipate what the objection of the Chancellor of the Exchequer will be to my proposal. He will probably say that it is impossible for him to borrow money at the present time at 3½ per cent. If that is going to be his argument, then it is very peculiar, because some of the Conversion Loans already in operation carry that rate of interest. The Conversion Loan that has already been issued, and is supposed to amount to per cent., actually means considerably more when you take into consideration the price at which conversion took place and the yield until the date of redemption. It is considerably more than the 3½ per cent which appears on the paper. I do not wish to have any investor being led to believe that he is going to have a greater yield for the whole period than 3½ per cent. The very first Conversion Loan by this Government means that those who were getting the interest, instead of receiving 4 per cent. it actually worked out calculating the actual yield to be 5½ per cent., or 1½ per cent. more than they had been receiving prior to the conversion. That is not a fair way of dealing with finance. It is unfair to treat the people of this country in this way, because they have to provide by taxation the money which the Government require to pay interest on their loans, and for these reasons I am endeavouring to limit the Chancellor of the Exchequer.

    I know from the views which are held by the Chancellor of the Exchequer that but for the fact that he is sitting on the Treasury Bench he would be inclined to support the view I am putting forward. The position he will take up will no doubt be that he must get the money, and as he has not up to the present said that he is going to accept my Amendment, I expect he is going to oppose it, because he does not desire any limit placed upon him. He wishes to be able to secure money at the rate of interest which he thinks the money market at the time is entitled to receive. I know quite well, and so does the right hon. Gentleman, that Government securities are looked upon as being the safest. As a matter of fact the way in which they are quoted on the Stock Exchange, according to the daily Press, shows that they are regarded as one of the safest investments in which anyone can put money. The rate of interest for a safe investment is always lower than that which is paid on a highly speculative investment. Consequently, there is no necessity for the Government continuing pay a high rate of interest. They are paying, approximately, only 1 per cent, less than what is received on normal industrial shares, most of which return 6 per cent. Without detaining the Committee any longer, because I like other Members want to hear the views of the right hon. Gentleman on this matter, I will simply express the hope that, in the interests of that sound finance which the right hon. Gentleman has proclaimed from that Box on several occasions this year, he will accept the Amendment and make it perfectly clear to monied people outside and to financiers who attempt to rig the market against himself and the Treasury in order to compel the payment of a high rate of interest, that this House does not give its consent to securing any loan on which a higher rate of interest is to be paid than that mentioned in the Amendment, namely 3½ per cent.

    My hon. Friend is the most optimistic financier I know. He has been kind enough to attribute to me powers which unfortunately I do not possess. He assumes that whatever the British Government says ought to be the rate of interest, I necessarily can borrow at that rate. But there are very conclusive evidences that that view is not borne out by the facts. The British Government, like every other borrower, can only borrow at the price at which the market will lend. It is perfectly true that the British Government can borrow money at cheaper rates than most other people, but still, like other borrowers who go into the market, it has to borrow at the price at which the market is willing to lend. During recent years we have been in a particularly favourable position by reason of the very unfortunate fact that industry in this country has been taking less money than usual, and accordingly more money is set free for the use of the Government and for finance generally. The result has been a glut of money in the market, and, under these circumstances, the most favourable rate of interest at which I can borrow on behalf of the British Government is the best test of what is possible. My hon. Friend wishes me to borrow at 3⅜ per cent. There is a British stock on the market to-day which yields a return of 3½, per cent. But what are people in the market willing to pay for that stock? They are only willing to pay £77 for £100 of it, thus showing that the market is prepared to lend money to the British Government at something like from £4 10s. to £4 13s. per cent. That is a complete test of what I am able to do.

    9.0 p.m.

    It is true that on short-term loans I can borrow money more cheaply, and every week the financial journals report the rates at which Treasury Bills are issued. That indicates what people are willing to lend money to the Government at on short-term loans. The loans I have hitherto been speaking about are perpetual loans redeemable at the option of the Government, but on short-term loans I can borrow much more cheaply and Treasury Bills are issued at the present time at £2 18s. per cent. I have, however, to replace that money as soon as the Bill comes to maturity. It may be a three months bill or a six months' bill. I can borrow more cheaply on the former. The difficulty is that one has a great deal of floating debt which it may be necessary to pay off at a moment when it is very embarrassing to the Government. Great financiers always say that the first duty of the Exchequer is to get rid of the floating debt, and naturally the desire of the Chancellor of the Exchequer is to get money on long terms so as to be free from embarrassment in the immediate future. That is the reason why everyone agrees that the time must come when it will of great advantage to the country to fund the debt. At present it is coming due at various periods, always compelling the Chancellor of the Exchequer to find money to meet these maturing obligations. After what I have said I hope my hon. Friend, who has been kind enough to use expressions towards myself for which I am grateful, will see

    Division No. 170.]

    AYES

    [9.4 p.m.

    Davison, J. E. (Smethwick)Roberts, Frederick O. (W. Bromwich)Watts-Morgan, Lieut.-Col. D.
    Gillis, WilliamRobertson, John
    Graham, D. M. (Lanark, Hamilton)Swan, J. E.

    TELLERS FOR THE AYES.—

    Jones, J. J. (West Ham, Silvertown)Thorne, W. (West Ham, Plaistow)Mr. Neil Maclean and Mr. Mills.
    Lawson, John James

    NOES

    Adkins, Sir William Ryland DentEyres-Monseil, Com. Bolton M.Larmor, Sir Joseph
    Agg-Gardner, Sir James TynteFalle, Major Sir Bertram GodfrayLaw, Alfred J. (Rochdale)
    Ainsworth, Captain CharlesFarquharson, Major A. C.Lewis, Rt. Hon. J. H. (Univ., Wales)
    Amery, Rt. Hon. Leopold C. M. S.Fildes, HenryLewis, T. A. (Glam., Pontypridd)
    Armstrong, Henry BruceFoot, IsaacLloyd, George Butler
    Astbury, Lieut.-Com. Frederick W.Foreman, Sir HenryLocker-Lampson, Com. O. (H'tngd'n)
    Balfour, George (Hampstead)Forestler-Walker, L.Lorden, John William
    Barker, Major Robert H.Forrest, WalterLort-Williams, J.
    Barker, G. (Monmouth, Abertillery)Fraser. Major Sir KeithLunn, William
    Barlow, Sir MontagueFremantle, Lieut.-Colonel Francis ELyle, C. E. Leonard
    Barnett, Major Richard W.Galbraith, SamuelMcLaren, Robert (Lanark, Northern)
    Barrand, A. R.Ganzoni, Sir JohnMacnaghten, Sir Malcolm
    Bartley-Denniss, Sir Edmund RobertGilmour, Lieut.-Colonel Sir JohnMacpherson, Rt. Hon. James I.
    Bellairs, Commander Canyon W.Goff, Sir R. ParkMacquisten, F. A.
    Betterton, Henry B.Gould, James C.Maitland, Sir Arthur D. Steel
    Bigland, AlfredGrant, James AugustusMallaileu, Frederick William
    Bird, Sir R. B. (Wolverhampton, W.)Green, Joseph F. (Leicester, W.)Malone, Major P. B. (Tottenham, S.)
    Blair, Sir ReginaldGreenwood, William (Stockport)Marks, Sir George Croydon
    Bowles, Colonel H. F.Greer, Sir HarryMiddlebrook, Sir William
    Bowyer, Captain G. W. E.Grundy, T. W.Mildmay, Colonel Rt. Hon. F. B.
    Bramsdon, Sir ThomasGuest, Capt. Rt. Hon. Frederick E.Mitchell, Sir William Lane
    Breese, Major Charles E.Guinness, Lieut.-Col. Hon. W. E.Mond, Rt. Hon. Sir Alfred Moritz
    Bridgeman, Rt. Hon. William CliveHallwood, AugustineMoore-Brabazon, Lieut.-Col. J. T. C.
    Briggs, HaroldHall, F. (York, W.R., Normanton)Moreing, Captain Algernon H.
    Broad, Thomas TuckerHall, Rt-Adml Sir W.(Liv'pl,W.D'by)Mosley, Oswald
    Brown, Brig.-Gen. Clifton (Newbury)Hannon, Patrick Joseph HenryMurchison, C. K
    Bruton, Sir JamesHarmsworth, C. B. (Bedford, Luton)Murray, Hon. A. C. (Aberdeen)
    Bull, Rt. Hon. Sir William JamesHarmsworth, Hon. E. C. (Kent)Murray, Rt. H on. C. D. (Edinburgh)
    Butcher, Sir John GeorgeHarris, Sir Henry PercyNall, Major Joseph
    Carr, W. TheodoreHaslam, LewisNeal, Arthur
    Carter, R. A. D. (Man., Withington)Hayday, ArthurNewman, Sit R. H. S. D. L. (Exeter)
    Casey, T. W.Hayward, EvanNewson, Sir Percy Wilson
    Cautley, Henry StrotherHenderson, Lt.-Col. V. L. (Tradeston)Nicholson, Reginald (Doncaster)
    Chamberlain, Rt. Hn. J. A.(Birm.,W.)Herbert, Col. Hon. A. (Yeovil)Norris, Colonel Sir Henry G.
    Chamberlain, N. (Birm., Ladywood)Herbert, Dennis (Hertford, Watford)Norton-Griffiths, Lieut.-Col Sir John
    Churchman, Sir ArthurHilder, Lieut.-Colonel FrankOman, Sir Charles William C.
    Clay, Lieut.-Colonel H. H. SpenderHinds, JohnOrmsby-Gore, Hon. William
    Clough, Sir RobertHirst, G. H.Parker, James
    Cents, Sir StuartHogge, James MylesParry, Lieut.-Colonel Thomas Henry
    Cobb, Sir CyrilHolbrook, Sir Arthur RichardPearce, Sir William
    Colfox, Major Wm. PhillipsHolmes, J. StanleyPease, Rt. Hon. Herbert Pike
    Collins, Sir Godfrey (Greenock)Hood, Sir JosephPennefather, De Fonbianque
    Colvin, Brig.-General Richard BealeHope, Sir H.(Stirling & Cl'ckm'nn,W.)Perring, William George
    Conway, Sir W. MartinHope, Lt.-Col. Sir J. A. (Midlothian)Pickering, Colonel Emil W.
    Cope, Major WilliamHope, J. D. (Berwick & Haddington)Pollock, Rt. Hon. Sir Ernest Murray
    Cory, Sir J. H. (Cardiff, South)Hopkins, John W. W.Pownall, Lieut.-Colonel Assheton
    Dalziel, Sir D. (Lambeth, Brixton)Hopkinson, A. (Lancaster, Mossley)Pratt, John William
    Davidson, Major-General Sir J. H.Horne, Edgar (Surrey. Guildford)Prescott, Major Sir W. H.
    Davies, David (Montgomery)Horne, Sir R. S. (Glasgow, Hillhead)Purchase, H. G.
    Davies, Thomas (Cirencester)Hotchkin, Captain Stafford VeraRae, Sir Henry N.
    Davies, Sir William H. (Bristol, S.)Hurd, Percy A.Rattan, Peter Wilson
    Dawson, Sir PhilipHurst, Lieut.-Colonel Gerald BHandles, Sir John Scurrah
    Dewhurst, Lieut.-Commander HarryJames, Lieut.-Colonel Hon. CuthbertRankin, Captain James Stuart
    Doyle, N. GrattanJodrell, Neville PaulRatcliffe, Henry Butler
    Du Pre, Colonel William BaringJohn, William (Rhondda, West)Rawlinson, John Frederick Peel
    Edgar, Clifford B.Johnson, Sir StanleyRemer, J. R.
    Edge, Captain Sir WilliamJohnstone, JosephRichardson, Sir Alex. (Gravesend)
    Edwards, C. (Monmouth, Bedwelity)Jones, Henry Haydn (Merioneth)Roberts, Rt. Hon. G. H. (Norwich)
    Edwards, G. (Norfolk, South)Kellaway, Rt. Hon. Fredk. GeorgeRoberts, Samuel (Hereford. Hereford)
    Edwards, Hugh (Glam., Neath)Kidd, JamesRoberts, Sir S. (Sheffield, Ecclesall)
    Evans, ErnestKing, Captain Henry DouglasRobinson, S. (Brecon and Radnor)

    that, even with all the powers the Chancellor of the Exchequer possesses, it is quite impossible to raise any money at the rate he desires to have it done.

    Question put, "That those words be there inserted."

    The Committee divided; Ayes, 10; Noes, 243.

    Robinson, Sir T. (Lancs., Stretford)Stephenson, Lieut.-colonel H. K.White, Charles F. (Derby, Western)
    Rodger, A. K.Strauss, Edward AnthonyWhite, Col. G. D. (Southport)
    Rose, Frank H.Sturrock, J. LengWignall, James
    Roundell, Colonel R. F.Sugden, W. H.Williams, C. (Tavistock)
    Royce, William StapletonSurtees, Brigadier-General H. C.Wilson, Lt.-Col. Sir M. (Bethnal Gn.)
    Royds, Lieut.-Colonel EdmundSykes, Sir Charles (Huddersfield)Winterton, Earl
    Rutherford, Sir W. W. (Edge Hill)Taylor, J.Wintringham, Margaret
    Samuel, A. M. (Surrey, Farnham)Thomson, F. C. (Aberdeen, South)Wise, Frederick
    Samuel, Samuel (W'dsworth, Putney)Thomson, Sir W. Mitchell- (Maryhill)Wood, Hon. Edward F L. (Ripon)
    Sanders, Colonel Sir Robert ArthurThorne, G. R. (Wolverhampton, E.)Wood, Major M. M. (Aberdeen, C.)
    Sassoon, Sir Philip Albert Gustave DTryon, Major George ClementWood, Major Sir S. Hill- (High Peak)
    Scott, A. M. (Glasgow, Bridgeton)Turton, Edmund RussboroughWoolcock, William James U.
    Scott, Sir Leslie (Liverp'l, Exchange)Waddington, R.Worthington-Evans, Rt. Hon. Sir L.
    Seddon, J. A.Wallace, J.Yeo, Sir Alfred William
    Shaw, Hon. Alex. (Kilmarnock)Walters, Rt. Hon. Sir John TudorYoung, Sir Frederick W. (Swindon)
    Shortt, Rt. Hon. E. (N'castls-on-T.)Walton, J. (York, W. R., Don Valley)Young, Robert (Lancaster, Newton)
    Smith, Sir Allan M. (Croydon, South)Ward, Col. J. (Stoke-upon-Trent)
    Smith, Sir Harold (Warrington)Ward, Col. L. (Kingston-upon-Hull)

    TELLERS FOR THE NOES.—

    Spencer, George A.Warner, Sir T. Courtenay T.Colonel Leslie Wilson and Mr.
    Stanley, Major Hon. G. (Preston)Warren, Sir Alfred H.McCurdy.
    Stanton, Charles ButtWatson, Captain John Bertrand

    Clause ordered to stand part of the Bill.

    Clause 31 ( Charge on Consolidated Fund under Section 24 (1) of 10 & 11 Geo. 5, c. 67, to extend to the growing produce of Fund) ordered to stand part of the Bill.

    Clause 32—(Temporary Continuance Of Exemption From Corporations Profits Tax Of Profits Of Public Utility Companies, And Building Societies)

    The exemption from Corporation Profits Tax given by the proviso to Sub-section (2) of Section fifty-two of the Finance Act, 1920, shall be continued from the thirty-first day of December, nineteen hundred and twenty-two, until the thirty-first day of December, nineteen hundred and twenty-five, and in Section fifty-eight of the Finance Act, 1921, for the words "the thirty-first day of December, nineteen hundred and twenty-two" there shall be substituted the words "the thirty-first day of December, nineteen hundred and twenty-five."

    I beg to move, after "1920" ["Section fifty-two of the Finance Act, 1920"], to insert the words

    "except in the case of any undertaking which is trading beyond its statutory obligations."
    This Clause is the first Clause that deals with the Corporations Profits Tax. It is true that it does not refer to the imposition of the tax, but it provides for the exception of certain corporations. Although it would not be in order on this occasion to go into the question of the heavy burden of this tax, I think the Committee will agree that the burden is so heavy that it is of great importance that its incidence should be fair and equal. Everyone knows that the tendency at the present time is for public utility companies to enlarge their activities, and directly they get beyond their statutory limits they are in fair and open competition with other companies who are subject to tax, so that there is a palpable disadvantage. Instances of this are not rare. Railway companies have lately had before Parliament a heavy Bill, which has now disappeared, in which they proposed to act in connection with road traffic. Tramway companies, in some instances, use motor omnibuses. Gas companies enlarge the field of their chemical operations far beyond the working up of their own products, and manufacture and sell in open competition such substances as muriatic acid, nitric acid, and bleaching powder, which are the business of other companies who are liable to tax. The Port of London Authority is not subject to the tax. The wharfingers of London are. The wharfingers and the Port of London Authority are in competition, and I thought it was worth while to call attention to the very unequal and unfair incidence of this tax. The position of these public utility companies is very much more powerful than it was two years ago. In those days they had to face the situation created by the War. Since the first exemption was given the House has passed the Railways Act, and I was Chairman of a Committee in which the statutory obligation as to the amount of fares on tramways was removed. There has been a Gas Bill. I think the House wants to remember that the position of these statutory companies is very much changed for the better, and that makes it all the more important that the incidence of this tax should be altered. I think it is a bad tax. It is so bad that. I do not really want to put public utility companies under it. But the House and the Government ought to realise how unfair its incidence is. My first object is to try to put the Government out of conceit with the Corporations Tax as being an unfair tax. My second object is to try to curb the ardour to some extent of public utility companies which are going in for general competition. They are in a very good position now. They are pretty well secured in their pre-War dividends, and perhaps a little more, and there are very few industries which would not be glad to change their position with these public utility companies. They are in a position of ease and comfort and they ought to realise that if they intend to go in for general competition they are to a certain extent destroying their own position. If that line of activity is pursued by public utility companies—it may be for the good of the public or it may not; I think not—if they are going to extend their general activity into every walk of life and enter into general competition in all sorts of things, good-bye to the position of privilege which the Government gives them under this exemption Clause. I do not know that I want to push it any further than that, but it is a point of some substance, and I thought it right to call attention to it, and get the views of the Government, in the hope that we might show the Government still more the unequal incidence of the tax and in some way give a warning to the public utility companies that they should live and let live, and unless there are very strong reasons for it they should not be constantly attempting to enlarge their activities beyond their statutory duties.

    I recognise, as everyone does, that the Corporation Profits Tax is open to criticism of a serious kind in many ways, but the question whether it is a good or a bad tax does not arise on this Amendment. It is important to consider, first of all, what the Clause provides, and, secondly, what the Amendment provides. When the Corporation Profits Tax was introduced, it was considered that it was not fair to apply it to companies which by statute were prevented from making more than a certain dividend, or were otherwise limited in the scope of their profit-making powers. Gas companies cannot declare more than a certain dividend. They are obliged to devote profits over and above the amount necessary to declare that dividend to a reduction of the price of gas. Railway companies cannot charge more than certain rates and fares. Dock authorities are in a similar position, having their charges limited by statute. All these statutory companies, to which the Corporation Tax was not originally applied, stand in the same general position of being concerns which save their profit-making power tied up and limited by Statute. To apply the Corporation Profits Tax, therefore, to those concerns would be to apply a tax which in its incidence would necessarily have a different effect upon shareholders interested in the concerns from the case of a tax where the company was one upon which there was no limit at all as to its profit-making power except the conditions of the market and business generally. That being so, Parliament took the view that the tax should not be applied during the year when it was first applied to other companies, and, secondly, that as the position was a permanent position and as it was thought possible, and may be still possible, that the Corporation Profits Tax would not be a permanent tax in the financial system of the country, upon which I express no opinion, it would be desirable not to deal with these statutory companies for only one year, but to put them outside the category of the tax altogether for a period of time, and so it was arranged that they should stand outside the tax altogether down to 31st December of this year. This Clause merely proposes to extend that enactment for a further period of three years on the same sort of grounds that Parliament imposed that limitation in the first instance and nothing more.

    The Amendment. says that from that general provision of immunity from Corporation Profits Tax of the statutory concerns an exception should be made so that the concerns falling within the exception would ipso facto become liable to tax. I say nothing upon the question of order as to whether that would impose a charge. What are the conditions upon which the Mover of the Amendment suggests that these concerns should be brought under the harrow of the tax? Let us look at it. The hon. Member says "except in the case of any undertaking—that is, an undertaking of the kind which is at present exempted—"which is trading beyond its statutory obligations." He does not say "trading beyond its statutory powers," but, "beyond its statutory obligations." In order to make quite sure what was meant by the word "obligations" I looked up the question which the hon. Member put last month to the Chancellor of the Exchequer. He asked the Chancellor of the Exchequer then if he proposed to continue exemption from Corporation Profits Tax to statutory companies which were engaged in competitive business outside of their primary duty. The answer given was that it was proposed to extend the existing exemption for a further period of three years. The gist of the hon. Member's position therefore is that if a statutory company does anything beyond what it is its obligation or duty to do, it ought not to have immunity from the tax.

    Let us see what that means. What is the statutory duty of a railway company? I think it is to run two Parliamentary trains a day. Is the railway company that does anything more than that to be deprived of immunity? A gas company is under a statutory duty to make and supply gas. In the course of carrying out that duty it produces coal tar, and in the ordinary way of business various byproducts are made by gas companies out of coal tar. It is not the statutory duty of a gas company to make any one of those things—

    I think on that I said "over and above the manufacture of their residual products." I was not attacking the operations which the Solicitor-General has mentioned to the Committee. If, however, the words of my Amendment are wrong, I am quite ready to adopt others.

    Take another illustration. A gas company, I am told, hires out gas stoves. It is not its duty to hire out gas stoves, and if it does hire them out, is the entire concern to pay Corporation Profits Tax on the whole of its profits? I am merely making this sort of unpleasant criticism, if I may say so to the hon. Member, to show that this is an exception that will not work. Let us put aside for a moment the exact wording of the Amendment, which, I submit, will not do at all, and consider the thing broadly on its merits. The principle of not putting under the harrow of the Corporation Profits Tax a concern whose profit-making power is limited by Statute was adopted by Parliament, and rightly so. Because, incidentally, in a purely ancillary way to its main business, a railway company or a gas company does something that is not its main business; is that any reason for making any difference? I respectfully submit that the Amendment, though it raises interesting questions, ought not to be accepted by the Committee.

    Amendment negatived.

    Motion made, and Question proposed, "That the Clause stand part of the Bill."

    I do not think it is right that we should let this Clause pass without pointing out, as far as is possible, the difficulties which arise in connection with the Corporation Profits Tax. I will not anticipate the discussion which may take place at a later stage on new Clauses, but I would point out that if you decrease the number of companies which are concerned with this Tax, and if you have to produce the same amount of money from the tax, you thereby increase the amount of tax which will fall upon those companies that are liable to it. Therefore, if it be said that the Government want to get £20,000,000, or £30,000,000, or whatever it may be, out of the Corporation Profits Tax, and if the tax be put on a smaller number of companies, they will necessarily have a much heavier charge laid upon them than if the tax were spread over a larger number of corporations. The railway companies comprise an enormous amount of the investments in this country, and the ordinary shareholders in those railway companies are free in their dividends from the payment of Corporation Profits Tax. When the tax was originally put on, it was not quite as the Solicitor-General said in his first speech. I believe it was decided that the railway companies should be exempted because at the time they were under Government control, and the Government had to make up the dividends which were to be paid to the shareholders. If the Government had deducted the amount of the Corporation Profits Tax which would have fallen upon the railway companies, it would, while receiving this tax on the one hand, have had to pay it back with the other, and so there would have been no benefit whatever.

    For that reason the Government exempted the railway companies. Then, the question was raised whether the Government would exempt other companies, and the exemption was increased to cover the utility companies—the gas and water companies. Originally the railway companies were exempted, because they were under the control of the Government and the Government never taxes its own property because it has to pay it back, and so it is useless. Now, however, the railway companies are working on their own account they are charging excessively heavy rates, and are perfectly able to stand this tax, as are also their shareholders. I cannot see any difference in the position of shareholders in a railway company in England from that of shareholders in any of the great steamship companies. They are doing equally useful work, and are possibly providing something like the same dividends to the shareholders. The steamship companies, however, have to pay the Corporation Profits Tax and Income Tax, whereas the railway companies escape the Corporation Profits Tax and pay only income Tax. That is a material point in the railway companies' favour, and it is a question which is raised at every annual meeting of the steamship companies, when it is pointed out that the Corporation Profits Tax is pressing very heavily upon their shareholders.

    When the Government started this Tax it. was not their intention that any ordinary shareholders, who are receiving their dividends, should be free from it. The railways were only exempted to save the Government from receiving this amount and then having to pay it back again. The original proposal was that this exemption should cease with the end of Government control of the railways. That should be done, though it may not be possible this year. I think I ought to call the attention of the Committee to the fact that this exemption is putting an additional charge on the shareholders of all other companies in the country, because they are paying what the shareholders in the railway companies do not provide in the way of this taxation. It is right that we should point this out now, and perhaps it may be another nail in the coffin of the Corporation Profits Tax in the future.

    I hope that this Debate will be another nail in the coffin of the Corporation Profits Tax. I think, however, the hon. Member was wrong in one particular—

    —when he said that exemption was given to the railway companies first and to the statutory companies afterwards. My recollection is that it Ns as the other way about, and that the statutory companies proved to the Chancellor of the Exchequer that if the Corporation Profits Tax were levied on them they would not be able to pass it on to the consumer. The statutory companies, in consequence, were relieved of the tax. Immediately, the right hon. Baronet the Member for the City of London (Sir F. Banbury) explained to the Chancellor of the Exchequer, with equal lucidity, that if the Corporation Profits Tax was levied upon railway companies, the railways could not pass it on to the consumer, and that their shareholders would have to pay the tax. I recollect the rapidity with which the Chancellor of the Exchequer recognised the hard case of the railway company which could not pass the tax on, and he exempted them for three years from payment of the Corporation Profits Tax. It was a perfect illustration of what the Government intended when they introduced the Corporation Profits Tax. They introduced it because they felt that they had discovered a new way of plucking the goose with the least squeaking; but when it left this House, after the vested interests had looked after it, the Corporation Profits Tax was not levied upon any business which could not transfer the tax to the consumer.

    Oh, yes. Why should not the consumer pay? A tax which cannot be transferred to the public is preferable to a tax which can be transferred to the public. My principal objection to the Corporation Profits Tax is that it is a new form of tax which is inevitably transferred to the consumer, thereby causing the greatest possible hardship. On every article that is produced in this country the Corporation Profits Tax is paid. On every article that is bought in this country for home manufacture—

    There will be an opportunity of discussing the Corporation Profits Tax. The only question now is whether certain exemptions shall or shall not be continued.

    I was trying to show that the object of this exemption was obvious. It was to exclude all those capitalist concerns which could not pass the tax on, and I want to eliminate that exemption, not because I want to penalise unfortunate capitalists like railway companies, but because I want to abolish Corporation Profits Tax. It is a tax which falls only upon ordinary shareholders. Preference and debenture shareholders are exempt. The best way to end the tax is to see that everybody contributes to it, instead of exempting those people who, in my opinion, are best able to bear it. Three years ago, when the railways were exempted from the tax, the railways, and especially the ordinary shareholders, were in a very different position from their position to-day. Three years ago the ordinary shares in railways were depreciated 100 per cent., almost, from pre-War values. In those days there may have been some case for exempting the ordinary shareholders of railway companies from this burden, but now, after the passage of the Government Railways Act, which has done the ordinary shareholders of railway companies so much good, I hardly think that a case can be made any longer in favour of the ordinary shareholders. They have done very well during the past year. I suppose that the hon. Member for Oxford (Mr. Marriott) is a fortunate owner of ordinary shares. If so, I congratulate him. He has done very well. Since the passage of the Railways Act, North Easterns have nearly doubled their price, and other railway companies have done very well. I do not see the hon. and gallant Member for Durham (Major Hills) present, but the Midland Railway Company has done very well. The ordinary shareholders in railways and the deferred shareholders have done very well.

    I understand that this Clause continues the exemption of certain statutory companies from the payment of Corporation Profits Tax at the end of three years. I do not understand that it does anything more or anything less than that. The hon. and gallant Member has made a statement in regard to the position of railway ordinary shareholders. Shall I be in order in following the hon. Member, and speaking at length upon the position of ordinary shareholders in railway companies in 1914 and in the present year, and showing how the Railways Act of last year has influenced their position?

    The question being whether a company like a railway company should have further exemption or not, while I wish, in the interest of the dispatch of business, that I could rule both hon. Members out of order; but I fear I must admit the one, and having admitted the one, I shall, of necessity, have to admit the other.

    The right hon. Baronet knew perfectly well that I was in order, and he will be in order when he tries to rebut my argument. My argument is, that whereas three years ago there was, perhaps, in the mind of charitable Members of the Government some case for exempting ordinary shareholders of railway companies from this impost, that case has now ceased to operate since the value of the shares of these ordinary shareholders has nearly doubled in price during the last three years. Therefore, we should abolish this exemption of railway companies from the Corporation Profits Tax. They were originally exempted, not on account of the low price of the shares compared with the pre-War price, but because they could not pass the tax on to the consumers. I am against a tax which can be passed on to the consumer and in favour of taxation which cannot be passed on to the consumer.

    Question "That the Clause stand part of the Bill," put, and agreed to.

    Clauses 33 ( Extension to Malay States of Section 20 of 57 & 58 Vict., c. 30) and 34 ( Repayments in respect of spoiled and unused stamps) ordered to stand part of the Bill.

    The Amendment standing on the Paper in the name of the hon. and learned Member for Central Bristol (Mr. Inskip) should come as a new Clause, and not as an Amendment to Clause 35.

    Clause 35 ( Construction, short title, Application, and repeal) ordered to stand part of the Bill.

    New Clause—(Charge Of Higher Rate Of Duty On Change In User, Etc, Of Mechanically Propelled Vehicles)

  • (1) Where a licence has been taken out for a mechanically-propelled vehicle at any rate under the Second Schedule to the Finance Act, 1920, and the vehicle is at any time while such licence is in force used in an altered condition or in a manner or for a purpose which brings it within, or which if it was used solely in that condition or in -that manner or for that purpose would bring it within, a class or description of vehicle to which a higher rate of duty is applicable under the said Schedule, duty at such higher rate shall become chargeable in respect of the licence for the vehicle.
  • (2) Where a licence has been taken out for a mechanically-propelled vehicle, and by virtue of such user as aforesaid a higher rate of duty becomes chargeable and duty.at the higher rate was not paid before the vehicle was so used, the person so using the vehicle shall be liable to a penalty of an amount equal to three times the difference between the duty actually paid on the licence and the amount of duty at such higher rate or twenty pounds, whichever amount is the greater.
  • (3) This Section shall come into operation on the first day of January, nineteen hundred and twenty-three."—[Mr. Neal.]
  • Brought up, and read the First time.

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

    I have to move one or two new Clauses dealing with motor taxation, but they do not raise any serious controversial questions, such as the question how taxation should be raised for road purposes. In order to make clear the first Clause I shall have to deal with certain taxation in the Finance Act of 1920. Under that Act, by the Second Schedule, the rate of duty -was fixed for various vehicles according to their character. The 4th Clause related to vehicles used solely in the course of trade or in agriculture. The 5th Clause was for vehicles used or adapted for carrying goods in the course of trade, and for such things as motor lorries. The 6th Clause was intended to cover mainly private motor cars which were taxed according to horse-power. As is always the case in reference to new taxation, ingenuity was brought to bear by certain persons in the effort to get exemption from some of the duties and to escape with the horse-power tax. I may give one or two instances in illustration. [HON. MEMBERS: "Agreed!"] If that be the case, I will content myself by moving that the Clause be now read a Second time.

    Question put, and agreed to.

    Clause read a Second time, and added to the Bill.

    New Clause—(Amendment Of S 9 Of The Roads Act, 1920)

  • (1) Section nine of the Roads Act, 1920 (which enables manufacturers and dealers in mechanically-propelled vehicles to take out a general licence in respect of vehicles used by them in lieu of separate licences for each such vehicle) shall extend to repairers of mechanically-propelled vehicles.
  • (2) It shall be lawful for the Minister of Transport to make two sets of Regulations under the said Section nine prescribing the conditions subject to which general licences are to be issued and prescribing the purposes for which the holder of a general licence may use it, and in that case—
  • (a) if a licence to which the one set of Regulations applies is taken out by a manufacturer, repairer, or dealer, the yearly rate of duty shall be twenty-five pounds, or in the case of a licence to be used only for vehicles chargeable with duty under paragraph 1 or paragraph 2 of the Second Schedule to the Finance Act, 1920, five pounds;
  • (b) if a licence to which the other set of Regulations applies is taken out by a manufacturer, repairer, or dealer, the yearly rate of duty shall be five pounds, or in the case of a licence to be used only for vehicles chargeable with duty under paragraph one or paragraph two of the Second Schedule to the Finance Act, 1920, one pound.
  • Provided that any such licence to which the first-mentioned set of Regulations is applicable may be taken out for one quarter of the year only, beginning the first day of January, the twenty-fifth day of March, the first day of July, or the first day of October, and in the case of any licence so taken out the duty shall be thirty per cent. of the full annual duty. It shall be at the option of every manufacturer or repairer of, or dealer in, mechanically-propelled vehicles wishing to take out a general licence whether the licence is one to which the one or other of the two sets of Regulations applies.
  • (3) This Section shall come into operation on the first day of January, nineteen hundred and twenty-three, and on the rates of duty for general licences prescribed by the Section becoming chargeable the rates prescribed for such licences by Section nine of the Roads Act, 1920, shall cease to be chargeable.—[Mr. Neal.]
  • Brought up, and read the First time.

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

    This Clause is to meet the wishes of those who are interested in the sale and manufacture of motor cars to enable them to have fewer classes of what are called general identification plates. The matter was investigated by a Committee, and the proposals embodied in this Clause are the result of unanimous recommendations of that Committee.

    Question put, and agreed to.

    Clause read a Second time, and added to the Bill.

    New Clause—(Alkali, Etc, Works Stamp Duty)

    Sub-section (6) of Section nine of the Alkali, etc., Works Regulation Act, 1906 (which relates to the Stamp Duty chargeable on certificates of registration of alkali and other works), shall have effect as if for the words "five pounds" there were substituted the words "ten pounds," and for the words "three pounds" there were substituted the words "six pounds."
    Provided that nothing in this Section shall affect the Stamp Duty chargeable in respect of any certificate of registration issued before the first day of April, nineteen hundred and twenty-three.—[Sir J. Baird.]

    Brought; up, and read the First time.

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

    It was proposed by the Geddes Committee that the stamp duty chargeable on certificates of registration of alkali and other works under the Act of 1906 should be increased so as to cover the cost of inspection and collection. That would have entailed the Government Department fixing the exact amount of duty. It was obvious when the matter was before the Committee of Ways and Means that the Committee preferred that the duty should be fixed in the Statute by the House itself. Deferring to that view, the Government are now proposing that the stamp duties should be doubled, a proposal to which I understand those interested in the trade do not offer any opposition. The effect is that while we do not carry out the whole of the proposals of the Geddes Committee by increasing the duties to an extent which would enable the whole of the cost of collection and inspection to be recovered, we do substantially increase them, so that whereas we have hitherto obtained an amount equal to one-third of the cost, we shall, if the new proposal is adopted, receive about two-thirds of the amount.

    Question put, and agreed to.

    Clause read a Second time, and added to the Bill.

    New Clause—(Reduced Customs Duties On, Sugar)

    In lieu of the present Customs Duties, drawbacks, and allowances in respect of sugar, molasses, glucose, and saccharine, there shall as from the first day of September, nineteen hundred and twenty-two, be charged, levied, and paid the duties specified in Part I of the First Schedule of this Act, and there shall be paid and allowed the drawbacks and allowances set out in Part TT of that Schedule.—[Mr. Holmes.]

    Brought up, and read the First time.

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

    The reduction of the duty on sugar which is proposed in this Clause is a matter on which most Members of this House could speak for at least one hour, but having regard to the fact that to a certain extent there is a bargain with the Government and that we had a very full discussion on the indirect taxation embodied in the duty on tea, which is very similar to the duty on sugar, I will not detain the Committee long. Many arguments were advanced last Monday in favour of reducing the duty on tea, and all these arguments can be also advanced with regard to sugar in addition to many other arguments which do not apply to tea. Sugar is far more used than tea. Tea is used by itself. Sugar is used for making all sorts of things, including, as I am reminded by an hon. Member, the manufacture of beer. From the point of view of children it is far more important to reduce the duty on sugar than that on tea. The Chancellor of Exchequer may say that it is more difficult for him to give a reduction in the duty on sugar, but that does not weigh very heavily with us. I read up the last Debate on sugar this morning, and there were so many suggestions there for speeches which would occupy time that I tried to avoid bringing any notes to the House, but the subject is so familiar, and we have discussed it so often, that it is not neccessary for me to say any more.

    The proposal involved in this new Clause would cost the Government in a full year £14,000,000, and no doubt the hon. Member had that figure in his mind. As he has said the arguments in favour of the reduction of the duty on sugar are so familiar that he did not think it necessary to mention any of them. Would he think it discourteous on my part if I were to suggest that the still more conclusive arguments against the reduction of the duty at the present moment are so familiar to every Member of the House that I may venture to pay him the compliment of flattering him by imitating him and saying no more on the subject?

    I think this Amendment has been treated by the Government with a little less respect than it deserved. The Mover should not have been impressed so much with the necessity of fulfilling the supposed bargain with regard to the Budget as to prevent him bringing forward some of the arguments in favour of the Amendment. If carried, the Amendment would bring benefit to every family in the land. People are beginning to realise that sugar is a food. In the old days they thought it was a luxury. It has now become the food of the poor. It is one of the best sources of energy for human beings. If the Solicitor-General were playing golf for a whole day he would get on much better if he took with him a bag full of sweets rather than a flask of whisky.