My name is on the Paper to an Amendment to oppose this Clause. I had no hope of its being accepted, but it was put forward in the interest of the beer drinkers of this country. In 1914 the duty on beer was 7s. 9d. per standard barrel. In 1939, just prior to the war, that was raised to 8s. To-day it is 281s., or about 35 times more than in 1914. That is a very enormous increase. The Chancellor of the Exchequer expects to get £251,500,000 from beer this year. Beer drinkers complain not only of the price they have to pay but of the strength of the beer. While the duty on beer goes up, the strength of the beer goes down. To-day people say that ordinary mild ale is hardly worth drinking. The tax makes no difference to the brewers, because they are limited in the supply of the barley they are able to employ. There is also the fact that all the beer they brew is drunk. The Chancellor stated in his Budget speech that his object was not only to obtain revenue, but also to lower purchasing power, but as the demand now almost exceeds the supply, I am afraid that wish of his will not be gratified. The majority of industrial workers are quite able to pay this penny a pint extra on beer, and I suppose that very few of them are complaining, but the excessive duty bears most hardly on old age pensioners and on the poor middle class, and also on agricultural workers. These classes are also debarred from drinking whisky, because it is quite outside the possibilities of any ordinary pocket to-day.

The Chancellor was asked on the Second Reading whether he could not make some concession to old age pensioners in connection with the taxes on beer and tobacco. He was sympathetic, but unfortunately he replied in the negative. What I want to ask the Chancellor is this: Will he not consult the Ministry of Food to see whether it would not be possible to arrange a plan whereby beer and tobacco, at reduced rates of duty, could be obtained by old age pensioners in exchange for sweets points, copying the cheap milk plan which has been so easily worked by the food offices and by the producer retailers? It is exceedingly hard on poor people to have to pay 11d. and 1s. a pint for beer and 2s. an ounce for tobacco. It means a prohibition of the enjoyment by them of two of their very few comforts. In 1914 beer was 2d. a pint and tobacco was 4d. an ounce—very different from the prices which I have just quoted. I admit that beer, tobacco, sugar and tea are not necessities, but they are necessaries, which is quite a different thing.

Two hundred years ago most of the people in this country had not tasted sugar, nor drunk tea nor smoked tobacco, but beer has been drunk here for over 1,000 years as the national beverage. I cannot understand why the Chancellor of the Exchequer still allows cider to go free, considering that a very great proportion of it contains more alcohol than ordinary mild ale. I asked this question of the late Mr. Neville Chamberlain when he was Chancellor of the Exchequer, and he replied that the difficulties of collection were so great that circumstances did not warrant the imposition of a tax upon cider. I think to-day the position is different because cider is beink drunk in greater quantities, owing, I presume, in part, to the excessive price of beer. Beer has always been a very fine much cow for succeeding Chancellors of the Exchequer, especially since 1914. Beer is always the first commodity to suffer increased taxation and the last to get any relief. I hope, however, that the present Chancellor of the Exchequer will be more generous and fairer than his predecessors, and will, when the war is over and taxation is reduced, see that the duties on beer and tobacco are reduced in proportion to the reduction on other sources of taxation.

I hope the Chancellor. of the Exchequer will not accept the Amendment. I do feel that the tax upon beer is extremely high, but it is clear from the fact that the whole production of beer in the country is now being drunk that the purchasing power in the hands of the people has risen at least as much as the duty on beer. I hope, however, the Chancellor of the Exchequer will consider the importance of widening, in some degree, the scope of his taxation. There is among beer drinkers a feeling that those who are abstainers and nonsmokers should have made a larger contribution to this Budget. I hope also that the' Chancellor will bring his influence to bear upon the Ministry of Food in order to increase, if possible, the production of beer. There are industrial areas where the shortage of beer is a genuine hardship to those who are engaged in heavy industries and are working long hours. There are other parts of the country where large numbers of soldiers have been stationed and where it has not been possible to increase the production of beer sufficiently to meet the normal, legitimate requirements of the inhabitants as well as the demands of the soldiers.

I must say that I am a little disquieted at the 'constant pressure which is being brought to bear in war-time, by so-called temperance interests, on the Ministry of Food in order to reduce what is one of the few solaces of the workers of this country and a commodity which is of immense importance to the Chancellor of the Exchequer and provides him with the readiest way of absorbing that increased purchasing power which is in the hands of the people. I hope that the Chancellor of the Exchequer will, next year, bear in mind the desirability of calling for sacrifices from sections of the community who are not beer drinkers and who are not smokers, and that in the meantime he will do all he can to increase the amount of beer available to the industrial classes.

I wish to support my hon. Friend the Member for Canterbury (Sir W. Wayland) in his proposal to have the tax taken off beer, but, like him, I have not much hope in that direction. It is true that this tax bears heavily upon the poorer sections of our community. My hon. Friend mentioned that, but he did not define who were the poorer sections of our community. He seemed to assume that they were the agricultural labourers and the industrial workers. He was wrong. It is we who are the poorer section of the community now. Like Mr. Micawber, if you keep within your income, even £5 within your income you are rich; but if you live at a rate which is £5 above your income, you are poor. What is the position in which the Chancellor of the Exchequer has placed us to-day? Before the war those of us who had, say, £1,000 a year were wealthy people. We had then what represented an income of £800 a year, and if we were wise, we lived at the rate of £700 or £750 a year, and we were, comparatively speaking, rich. We had spending power. But what is the position in which the Chancellor of the Exchequer has placed us to-day? Out of our £1,000 a year we have a spending power of only £600 a year, and if we try to keep up the £700 or £750 standard of life which we had before the war, we shall be overspending and will therefore be poor. The workers of the country who before the War were earning, say, £3 a week have had their incomes increased from £3 to £4 or £5 a week, with little extra expenditure. They have money to spare on luxuries. We have no money to spend on luxuries. We cannot afford to buy beer, whisky or tobacco. We have to go without to keep within our incomes. They have that surplus expenditure to spare. Therefore I suggest that we are the poor, and we are suffering from this taxation of beer.

I hope my hon. Friends will not think it necessary to spend very long in the consideration of this matter, nor, I hope, will they pursue the no doubt very interesting thoughts that have come from the hon. Member for Leominster (Sir E. Shepperson) as to who really are the poor at this time. I hope my hon. Friend opposite will not be led away on that. I would like just briefly to say that, with regard to the Budget proposals for the taxation of beer, I did not appear in the guise of a temperance reformer, nor did I attempt to impose further duties on tobacco and entertainment in any kill-joy spirit. I am myself very desirous of seeing as many people as possible enjoying themselves in all those three directions within reasonable limits, as I occasionally do myself.

But the Committee will remember that, as I explained in my Budget speech, the sum of £1,000,000 had to be obtained. That was after a very careful examination of the facts upon which I satisfied the Committee, I think, at the time. It was in those circumstances that I had to see where I could most usefully and fairly turn. The Committee may remember that on that occasion I showed that if I was not able to go to indirect taxation. I might have to turn to direct taxation, which might be very difficult, and which might bring in its turn difficulty and hardship. I had to make this choice in formulating the proposals I put before the House. I think I would briefly say, in reply, that I think the general verdict ,of the House and country was that, having regard to our financial circumstances, on the whole the fairest and wisest course had been taken.

I regret very much that whoever we may call the poor, there may have to be some curtailment of consumption or some further expenditure as a result of this provision in the Finance Bill. I venture to say it is not really a very great hardship. I elaborated the point on an occasion a little while ago when I pointed out that if in fact one wanted to avoid the payment of these particular duties, no great sacrifice was necessary to enable one to do so. In fact, this Budget might well go down to history as the "Pay if you like" Budget, because no one need pay any of these taxes unless he desires to do so. It is true, nevertheless, as my right hon. Friend will agree with me—he is looking at me very seriously at the moment—that there is not much doubt as to the choice which will be made by the great mass of the community. My hon. Friend, having made his usual protest—I see in him one of the staunch supporters of beer, I might almost call him a beer die-hard—and having again filled his role, I hope and have no doubt that between now and next year people will still be able to consume a reasonable amount of this particular beverage.

I have had a look at the position of cider. I am not very hopeful from the point of view of a Chancellor who wants considerable sums of money. For instance, cider production for 1940, the latest estimate, was from my point of view a rather small figure, some 12,500,000 gallons. I should also be confronted, if I attempted to venture into that small field, with the difficulty that there are a large number of farmers who make cider, and with the problem of seeing that the conditions of the Revenue and the collection of the tax were duly completed. This would present great difficulties. Therefore, while I welcome my hon. Friend's suggestion, which no doubt has been marked in certain quarters as a practical suggestion, I am afraid I could not entertain it. I would ask my hon. Friend and the Committee to endorse what I think is the verdict of the country, that in all the circumstances this is the right and reasonable thing to do.

This is a very heavy tax falling on everybody, but most heavily on working people, and, let us remember, on our soldiers and the other troops in this country who are paying this tax at the same rate as the civilians. Therefore I think the hon. Member for Leominster (Sir E. Shepperson) should remember the cheerful, willing way, in which this tax is paid by people whose incomes are small.

That is so. I am very willing myself to pay the extra duty.

I would ask the Chancellor to consider the fact that this commodity carries such a heavy tax that it involves some obligation that it should be supplied in reasonable quality. I think there has been a lot of very deplorable beer sold at very high prices, carrying a very high rate of tax. Whether it is the brewer or the retailer or who is responsible, I do not know, but I do hear many complaints about deplorable fluid being sold as beer which is carrying the full rate of taxation. Perhaps the Chancellor will see if some means can be devised whereby the taxpayer gets beer instead of something else.

I appreciate the Chancellor's remarks, and my Amendment to omit the Clause was put on the Order Paper with no idea of forcing it on the Committee. I only look to the future and consider the growing taxation on beer, not the extra penny a pint now being imposed, but the difference between 1914 and 1913, which I hope will not continue.

I do not want to move a reduction in the Spirits Duty, but I would ask my right hon. Friend whether, in his opinion, this high duty is a war tax or whether it is to be continued after the war. I know that he cannot decide that now, but it would be a good thing to have it on record that the Chancellor of the Exchequer has given it as his opinion that the tax should be reduced after the war. After all, we are fighting for freedom; and when we have established our freedom we want to enjoy it. I do not drink much whisky myself: I take it for a cold, but very rarely otherwise; but I am interested in the subject. The hon. Member for The High Peak (Mr. Molson), speaking of beer, said that all the output was consumed. I daresay that all the output of whisky is consumed to-day, but I am not sure that it is consumed by the people who previously consumed it. There are new consumers. There is a large number of foreigners who have come into this country, who, I dare-say, are in a better position to consume it than our own people. After the war they will go back to their own countries. If we set the example of high taxation in this field the countries to which it is exported after the war are likely, when they want to raise more taxation, to say, "In the country where whisky is produced it is subject to high taxation; why cannot we tax it heavily here?" That will adversely affect exports to those countries. This is a special commodity, not something with which other commodities compete, and it is essential that we should not give foreign countries an excuse for raising the duty, to the detriment of our export trade.

Also, I represent an agricultural constituency in Scotland, where a great deal of barley is produced, and I think it is essential, from that point of view, to see that when we have established our freedom and have got back to normal, there shall be a demand for the barley that is produced.

I am afraid I can only note what my hon. Friend has said. I would not like to put myself in the position of a prophet and attempt to indicate what is likely to be the course of taxation after the war. I have no doubt that this speech will be welcomed in certain parts of Scotland, and that it will be widely reported in the Scottish newspapers.

Not infrequently the only medicine which a doctor can honestly prescribe for aged people is a drop of brandy or whisky. I realise the difficulty of meeting this problem, but perhaps the right hon. Gentleman will consider whether something can be done when the next Budget is introduced.

Duties are differentiated between the non-Empire product and the Empire product. I want to ask a question about North African wine. Now that Algeria, which has a very large production of wine, has lost its market, owing to our occupation, some effort presumably is going to be made by the Allied authorities to provide a market. It is a very serious matter to the Algerian authorities, as wine is one of the main products which they sell for cash. Would it be possible to consider charging the tax on those wines at the Empire rate? This is a somewhat unorthodox proposal, but I know that to our friends in Algeria the matter is very serious.

I have no power on this matter. It is something to be settled by Parliament, and I do not think it would be wise or expedient for me to do anything. I appreciate my hon. Friend's idea in putting the question, but obviously it is a matter to be dealt with by Parliament.

I notice in this Clause a reference to "sparkling sweets." Perhaps my right hon. Friend will tell us what they are?

"Sweets" in this connection means, to all intents and purposes, British wines. When the word "sweets" is used my hon. and gallant Friend may take it that that is the general meaning. It is defined by Section 52 of the Finance Act, 1909–10, which says:

"any liquor which is made from fruit and sugar, or from fruit or sugar mixed with any other material, and which has undergone a process of fermentation in the manufacture thereof, and includes British wines, made wines, mead and metheglin."

The amount of the increase is the same as that on Empire light wines.

If a householder or a cottage-holder makes wine from elderberries or any other fruit, has an Excise Duty to be paid on the wine?

Perhaps my hon. Friend will put a Question down, and I will inquire.

I beg to move, in page 4, line 6, after "etc.)," to insert:

"and in the case of games where a charge is made to spectators."

The object of this Amendment is to remove what I consider a genuine grievance. Under the law at present there are two classes of entertainment. The first is charged at full duty, the second at reduced duty. The second class includes stage plays, ballet, concerts, lectures, music-hall, variety performances and circuses. These are entertainments which are not necessarily of a particularly high class, but of which the performers are actually present and taking part. The relevant words of the Customs and Excise notice say that they are

"entertainments where all performers whose words or actions constitute the entertainment are actually present and performing."

I would submit that games in which professionals are playing can be classed as entertainments coming under this head. At present, this discrimination hits the professional player very hard indeed, and also the spectators who go to watch professional matches. Smith may go to a circus, he buys a ticket for 11½d., and the Chancellor demands from him ½d. by way of taxation. Jones may go to a football match; he buys a ticket costing 10½d. and this time the Chancellor demands no less than 7½d. from him. That is grossly unfair. It puts the person who goes to watch a match in a far worse position than a person who goes to watch a circus or music-hall or variety entertainment. What is the reason? The reason may be said to be that we wish to encourage drama, lectures and other entertainments of the higher sort, but you cannot class circuses and music-halls under that head. Secondly, the reason may be said e) be that football and cricket clubs are making great profits. I cannot speak for cricket but I must admit that I represent a constituency which has a famous football team and I can speak for football. Not one of the 72 football clubs that took part in the matches this year has paid a dividend, and 16 others have shut down altogether, so it can hardly be said that football is a profitable entertainment at the moment. I will not speak about my own club, but Tottenham Hotspur have lost no less than £13,000 in the past season. It may be said that the players are very well off, and can well afford any loss as a result of this duty. But this is not so. In the Cup final which was played on 1st May this year, the Chancellor took a little profit for himself. He took £7,250. That is not a bad sum for an hour's hard work, done by somebody else. The people who did that work, the football players, took £42. For the football players, £42;for the Chancellor, £7,250.

As a matter of interest I looked up the Chancellor's record in "Who's 'Who." I failed to find any particular sporting activity to his credit. It may be that he was very shy, and did not choose to say what his sport was. Looking at his figure, I do not think it is football; it might be ballroom dancing or figure skating, or something like that. But whether or not he is a footballer or a cricketer, I appeal to him to realise that these two games play quite a considerable part to-day in keeping up the nation's morale. Of course, there are many other factors and I would not for a moment suggest that if there were no cricket and no football we would lose the war to-morrow. Of course not. But the fact that there are such games to which people can go and relax when they come out of the factories, and where men in the Forces can go, helps to keep up the nation's morale. I ask the right hon. Gentleman to remove from this particular form of activity the very grievous burden which is placed upon it by the law at present. I hope that if he cannot accept this Amendment he will at least say that he realises that a very grievous burden is placed upon cricket, football and other games, which are playing a very important part in our national life, and that he will himself look into the matter, and see whether something cannot be done to remove this burden.

I think that everybody in the Committee will agree that the sum of £42 divided between 22 players at a Cup final for the extremely high exhibition of skill that they have given is hopelessly inadequate. But does the hon. Member suggest that if the Amendment is carried, these players will receive one penny more? I very much doubt it. It will all go into the pockets of the clubs. I admit that if there was any guarantee that the players would have the benefit of any reduction which the Chancellor of the Exchequer was prepared to give, I could back the Amendment with much more enthusiasm. The very high standard of skill which is exhibited in an Association football match is worth a much higher rate of remuneration than the players are now getting, but until we can have some guarantee from the Chancellor of the Exchequer or the Mover of the Amendment that the proceeds, as a result of the Amendment, would be distributed among the players and not among directors and shareholders, I am afraid I cannot see my way to support the Amendment.

My hon. Friend whose name is attached to this Amendment with mine pointed out that neither the clubs nor the players would benefit from this concession. Very few clubs are making any profit, and many of them only sufficient to cover expenses. They are making a gallant effort to save a very important national game in this country. It may not be that we shall lose the war, as my hon. Friend said, if football and cricket stop. But this Committee would agree that without cricket and football the morale of war, country, which means so much in the would not be quite the same. It must surely be worth while trying to save it. I thing that it is just plain cheating on the part of the Chancellor. Here is a great national game which most industrial centres in this country at any rate greatly appreciate, and the workers are able to relax when they are able to watch a game to which they have become so attached. The point that the money should go to the players is not valid. The players do not ask for it. In fact, they ask for nothing out of this, only that the Chancellor shall not ruin both the clubs and the prospects of this game, by unfair taxation. The whole point of this taxation is that it is not equitable and fair. Whether the Chancellor indulges in ballroom dancing or skating or whatever he does, he should do something so that this great national game can be preserved and that clubs should not have to suffer very severe financial losses. Everything should be done that the Chancellor can do to preserve the clubs, the players and the recreation, which means so much to the workers in our industries.

I would like to support what has been said regarding football, but it is also true of cricket. I am a member of the famous Surrey Club, and the financial position of cricket is very serious. The Chancellor is looking very sympathetic but one is apt to be deceived by his charming smile. If, however, he is looking kindly upon this proposal, he must not forget cricket as well.

Not one of the three hon. Members who have supported the Amendment has given the Committee any reason to believe that this tax acts as a deterrent to attendances at football matches. That is the criterion which has to be applied. Therefore, until that information is produced, if it can be produced, the Chancellor of the Exchequer should adhere to the rate of taxation.

It can be proved by the effect upon attendances.

:There is no Member of the Committee who would not like to do what he can to help cricket and football, and I think many hon. Members are as keen to do it as the hon. Member for West Bromwich (Mr. Dugdale) and the hon. Member for East Middlesbrough (Mr. A. Edwards), both of whom have very good reasons for appreciating the particular sport of football. I would like to remind the Committee of the reasons which lay behind the action of the Chancellor of the Exchequer of the time, when he introduced this particular relaxation. The object of giving a reduced rate of tax for the living stage was to help the living stage in competition with the cinema, and that still stands as the justification for it. I do not think that anyone would suggest that the living stage can really be compared with football and cricket in the sense that the people who go to see football and cricket matches would be seduced from their allegiance to football and cricket in favour of the cinema. [An HON. MEMBER: "Why not?"] Because I do not think that, on the whole, human nature works that way. The reason for making the concession, which the Committee, I am sure, wishes to see continued, is to protect the living stage. There is one point of which I would like to remind the Committee. If a concession were made for football, we should find very soon similar concessions being asked for horse racing and many other forms of activity in which many other Members of the Committee take an interest. I am very sorry, therefore, that the particular Amendment must be rejected.

All of us would, no doubt, be delighted if it were possible to have these various taxes reduced, but what weighs with me is the fact that the Chancellor of the Exchequer must get his money. I would be delighted if the tax on beer and tobacco could be removed and if the Chancellor of the Exchequer could arrange with the various tobacco people to supply a special tobacco for the old age pensioners, but evidently all this cannot be done. In considering all these various taxes, we must have regard to the payment for the war, and the only way to do it is by these taxes. If in the course of this Debate in Committee the Chancellor of the Exchequer could see his way to do anything to alleviate permanent taxation, we should be delighted, but in the meantime we must support him in his endeavour to raise money to pay for this stupendous expenditure in which the country is engaged. I am satisfied on the whole that the Chancellor is doing his utmost and his very best in very difficult circumstances to get money necessary for the payment of the war.

I beg to move, in page 4, line 10, at the end, to add:

"(2) Subsection (3) of section one of the Finance Act, 1935, shall apply to a zoological park or garden which belongs to an individual and to which the public are admitted for payment, in like manner as the said subsection applies to the entertainments therein mentioned."

I was very gratified to hear the remark which has just been made by the Financial Secretary to the Treasury when he said that this provision was made with the intention of encouraging the living stage as against the cinema. My Amendment applies to almost the smallest concern of its kind in the country. I believe that there are only two such zoos in the country. They are so small that the money that the Chancellor will get is hardly worth discussing, and I do not intend to occupy the Committee long. if the people who own these two zoos would form themselves into a society, they would not have to pay any tax at all. No tax is paid by zoos run by societies. The owner of one of these zoos is chairman of several other zoos, and he does not pay tax in the one case but pays it in the other. This seems to be divided up between the living and the dead. The Regulation says:

"All the performers whose words or actions constitute the entertainment are actually present and performing and the entertainment consists solely of one or more of the following items, namely, the stage, the ballet, form of music, a lecture, a recitation, a music hall, a variety entertainment, a circus or a travelling show."

If these animals are put into a ring and made to run in a circle, the proprietor pays the reduced rate of tax, but if they are allowed to stay in their cages, he does not get the reduction. It is rather a paradox. When this Regulation was made it was not known that there were these two very small incidents in our national life. I would call the attention of the Chancellor to the fact that they are really educational and that, being educational, they should not have to pay any tax at all. The individual on whose behalf I have put down this Amendment is not desirous of avoiding taxation and recognises that at the present time the Chancellor of the Exchequer has to raise the money he requires, but he does not see any reason why he should have to lose a certain amount of money if he is entitled to have his zoo added to this list. The animals, instead of running round and round, just walk to and fro in their cages. I hope that the Chancellor can see his way clear to accept this Amendment.

I trust that the Chancellor's usually extremely hard heart will not be softened on this occasion. If there is one anachronism to-day in the advance of education and knowledge, it is the continued prevalence of zoological gardens where the larger wild animals are retained in captivity. This is an act, in any evens, of great cruelty, and when one is compelled to take children to such places there is a revolting feeling that great hardship is being inflicted on these animals.

I would like to explain that in this particular zoo these animals are not in cages, as the hon. Member is indicating. They are accommodated outside where they are allowed the greatest freedom and can demonstrate all their movements. The monkeys are the only animals in cages, not the large animals, so that the reference of the hon. Member does not apply in this case.

Am I to understand that the larger animals in cages are not affected by the proposed Amendment? If that be so, certainly no one who has visited these zoos can say the animals are as contented and happy in these circumstances as they would be in their natural state. To-day the film, the museum and the written book provide an abundance of opportunity for those who desire to study in a most intimate manner the wild life of the world, and. for that reason I hope that there will be no concession granted which will enable this form of cruelty more readily to continue.

I do not expect that the Committee will want me to enter into an argument with the hon. Member on the general merits of zoos, but I would like to say a word to my hon. Friend the Member for Maidstone (Mr. Bossom), who takes such an interest in the particular zoo in his part of the world. Naturally we have looked carefully at the proposals he has made to see if anything ought to be done, but I am bound to say that the Chancellor came to the conclusion that the case was not very strong. The hon. Member will have heard me say, when dealing with the last Amendment, that the object of this concession is to assist the theatre against competition from the cinema. I do not believe that the particular show which the hon. Member has in mind is suffering from competition from the cinema. Therefore, I do not believe that it comes within what I may call the original terms of reference for this concession. In addition to that, the hon. Member himself almost pointed out to the Committee how his difficulty might be avoided. If this zoo was managed by a committee rather than an individual, it could come within the terms of the Finance Act, 1916, which provides for:

"Entertainments provided for partly educational or partly scientific purposes by a society, institution or committee not conducted or established for profit."

In view of that, I do not expect the Committee will wish to support the Amendment, although I am sure we are all glad that my hon. Friend the Member for Maidstone has had the opportunity of stating his case.

In view of the rather hardhearted attitude o{ my hon. Friend, I beg to ask leave to withdraw the Amendment.

I beg to move, in page 4, line 10, at the end, to add:

"(2) The said subsection (3) of section one of the Finance Act, 1935, shall be extended to apply to an entertainment consisting solely of a football match where all the players are of amateur status, and the foregoing provisions of this section shall apply accordingly."

There has been quite a sporting atmosphere about the proceedings so far, and I am wondering whether it is too much to hope for a sporting reply from the Chancellor. Unlike my hon. Friend the Member for West Bromwich (Mr. Dug-dale), who moved a previous Amendment to get a reduction of Entertainments Duty for professional clubs, I am asking for a reduction to be made for wholly amateur clubs. I am confining my Amendment to football amateur clubs, although I would not object if amateur cricket clubs were included. Some figures have already been mentioned by my hon. Friend the Member for West Bromwich, and I would like to give one or two others. If a charge of 6¼d. is made for admission to an amateur football club's match, the tax is 7d., making a total of ¾d., but if an individual afterwards transfers to the stand for any reason—and often a reason is rain—the charge is 6d. more, and the extra tax on that 6d. for the stand is 7¾d. There is a further anomaly. An admission charge of 11½d. to the theatre carries a tax of ½d., making the full charge is., but 11½d. charged for an amateur football match carries a tax of ½d. It has been said in connection with Amendments to previous Finance Bills that a reduction of taxation was sought in order to benefit the living stage against the cinema. That may be so, but I wonder whether the Committee would not agree that amateur football clubs do a great deal of important work for the country and ought to be included, at least under the educational heading, if not the scientific heading.

I am not a great exponent of football and never have been, but I should imagine that there is educational and scientific value in most amateur sportting games. I make this appeal not because clubs are not patriotic and do not want to pay their share of taxation, but because they may not be able to pay and may have to close as a result of this increased taxation. It has already been pointed out to-day that there is no evidence that as the result of increased taxation fewer people go to these sporting matches. Am I to understand that the Chancellor is waiting for a number of clubs to close as a result of this increased taxation before he will grant the relief for which I ask? There is not a lot of money involved here, and I am sure the Chancellor would wish to encourage all young people to go in for sport and to help those who run these amateur clubs, without charge, because they believe they are helping the country.

If the Committee could be assured that this Amendment, if carried, would apply only to small amateur clubs who are impecunious, and to whom this tax would make a considerable difference, there would be a great deal of sympathy with it, but the hon. Member who has moved it appears entirely to have ignored the fact that if this Amendment were carried, it would relieve from tax the gigantic sporting contests that used to take place at Twickenham, Inverleith and Cardiff Arms Park, where the crowds were well able, to afford to pay the tax and make their contribution towards the expenses of the nation. The hon. Member may say that that does not apply now, and that the Twickenham Rugby ground, for instance, is to-day closed. That is true, but there have been matches all through the winter at the Old Deer Park at Richmond which have been watched by very large crowds, the majority of whom could well afford to pay the small amount of extra tax which is being demanded. There is another difficulty which will face the Chancellor if he accepts this Amendment. Hitherto, there have been two Rugby football unions, the amateur and the professional. To-day both play to all intents and purposes as amateurs under the aegis of the Rugby football unions of the various Services, and the question will arise whether a match in which there were members of the Rugby Union and the Northern Union was an amateur match or whether it was an amateur team. In view the circumstances and difficulties, I think the Chancellor will be well advised not to give way.

I am not appealing for the big clubs. I am speaking mainly on behalf of a county football association which has 50 or 60 small teams associated with it. There are many county associations like that all over the country.

But the Amendment would also bring in the big international amateur football matches.

Generally I have sympathy with my hon. Friend the Member for Mile End (Mr. Frankel), but on this occasion I do not think I can support his Amendment, because I can see the tremendous difficulties which its acceptance would create. I have attended international amateur matches between Scotland, England and Wales which have been attended by huge crowds who could well afford to pay almost any charge.

My hon. Friend's constituency must be much richer than mine.

I have also been to Rugby League football matches, and I would rather see the Rugby League professionals have some concession than the amateurs. What my hon. Friend has in mind, I think, are the lowly amateur clubs, but there is the difficulty of defining them. As you get higher into the scale, how could the Chancellor decide who was to pay the extra tax and who was not? I hope that on reflection my hon. Friend will not press his Amendment, because the difficulties are immense, and I do not see how they can be overcome.

I am quite certain that my hon. Friend the Member for Mile End (Mr. Frankel) did not see the implications of his Amendment, especially with regard to the dispute between the Rugby League and the Rugby Union and the stigma attaching to professional status. Although there might be difficulties in accepting this Amendment as it is worded, there is a problem behind all this which I know interests the Chancellor not only as a financier but as a man concerned with the health and development of the young people of our country. Years ago we had to raise funds and pay rent for grounds for schoolboy football. Now those days have gone, and municipalities make provision for grounds. We are assured of full opportunities being available up to school leaving age, but immediately afterwards, in many areas, the only way in which sporting proclivities are carried on is by forming a team and raising funds from the public, partly by charging for admission to matches. If this was not done, clubs would cease to exist. I think the Chancellor might give an assurance that where the charges are small and sufficient merely to cover the expenses of maintaining a club's facilities, they would have some consideration.

I do not expect the Committee will be surprised to hear that the Chancellor does not feel able to accept this Amendment. It has really been answered by the case made from this Box on the last two Amendments which were moved. There is a great deal of sympathy for amateur football and cricket clubs, but here is a case where the differentiation asked for could not possibly be accepted. The grounds on which the original concession was made were the protection of the living stage against the cinema. I do not think there is any reason to suppose that amateur football or cricket needs protection against the cinema, and in view of that I am sorry to say that we are not able to accept the Amendment.

Before we part with this Clause I wish to enter a protest which I have done before on Finance Bills against Entertainments Duty in war-time. At such a time Entertainments Duty is a bad tax. Two hon. Members have said that the Chancellor must find money for war purposes, and one suggested that in some way or other only a portion of the cost of the war was being paid at the present time. That is entirely a misconception; we are paying for the whole of the war as we go along. There is no doubt as to how the Chancellor gets his money. The position is this: There is production on the one side, which provides the wealth of the country which is needed for war purposes, and all he has to do is to prevent the consumption of any article or anything else which in any way interferes with the total war effort. The more you can cut that down, the greater is the direct effect upon the war.

One of the effects of a tax is to act as a deterrent. For example, the taxes on tobacco, beer and spirits should cut down consumption, and that is right, because a good deal of labour and material is required. It is right that the consumption of spirits, beer and tobacco should be cut down. But that cannot be so with regard to entertainments. Entertainment, instead of being deterred, should be encouraged, and the Government recognise that with regard to certain forms of entertainment, because all the time they are encouraging entertainment to the troops and inside the factories. Why not, therefore, encourage it throughout? They realise that entertainment is necessary to maintain morale, and I protest against the continuance of this tax in time of war. Unfortunately it was first introduced in 1916, in the middle of the last war, before rationing had been introduced; therefore we were proceeding upon an entirely different principle from that on which we are proceeding now. I wanted to utter that word of protest before we part with the Clause.

I think the Government are getting into a false position in this matter. On the one hand certain entertainments are to be taxed, while others are to be subsidised. Only recently the Minister of Production announced that a payment was to be made to the Performing Rights Society and that a substantial sum must be raised by taxation, lest the entertainment of the people be reduced for providing "Music while you work." Similarly, we are glad to see that the Government, by means of a Government-assisted enterprise, have re- opened the Theatre Royal at Bristol, It seems to me that they should make up their minds what is to be their policy on entertainment. Either tax it or encourage it, but do not tax it where you can and refuse to make any concession and pass over the money that you raise to the Performing Rights Society, and send Ministers to speak, as you yesterday sent the Minister of Labour on the second anniversary of Workers' Playtime. Do please be logical.

I do not share exactly the views of the last two speakers. I dislike the Entertainments Duty altogether, whether in war or in peace-time, but, as it is war-time, one must judge it in this way, that the tax has not deprived the population of entertainment. People are going to the cinema and theatres more than they ever did before. It cannot he said that entertainment has been reduced. On the other hand, there are some things about it which I should like to see altered. I had a few words to say about this in the Budget Debate, and I understood that the Chancellor of the Exchequer was going to look into the question of the differentiation that has been made in taxing certain forms of theatre enterprise. I was glad to hear him say he was going to set up some kind of Committee to decide what sort of entertainments were suitable for exemption on the ground of their educational value. That is one side of it.

There remains the other side, on which I hope my right hon. Friend will let us know what his views arc. I pointed out that the tax in the past has laid itself open to' various forms of abuse and evasion. I hope we are not going to regard this only from the point of view of its educational value, but also from the point of view of the profit motive. It is obviously quite unfair that some entertainments should escape a large portion of the tax if the financial machinery is so arranged that there remains for the people principally concerned a profit motive which in fact escapes tax, I have heard of very large sums which have accrued to lessors of theatres who had let them on a rental basis plus a percentage of takings untaxed, and of salaries to performers plus a percentage of the takings untaxed. My right hon. Friend will see that commercial managements could not offer anything like the same terms when taxed. That is a matter of some importance. Also we have got into a rather curious position, because some forms of entertainment are actually being subsidised indirectly through the Board of Education. Does it not come to this, that the entertainments which are mostly patronised by the public are presumably those which the public most appreciate? After all, I take it that the real reason for subsidising is to enable a form of entertainment to be given to the public which they do not appreciate enough to pay for themselves. If the matter is allowed to go too far along present lines, we shall get an amateur dictatorship running the drama of the country, and that is most undesirable. In the past the theatre has gone through good times and sometimes very bad times, but on the whole it has stood up quite well and has compared favourably with the theatre in other countries.

I should like to say one word in view of the observations of my hon. Friend who has just spoken. I appreciate what he has said. The Financial Secretary and I have been looking into the matter, and I have asked him to pay special attention to some of the points to which my hon. Friend has referred. It is not an easy problem, but the Financial Secretary and I must look with rather more detail and particularity into the machinery part of it. I understood my hon. Friend to say not that there is any question of fraud but that there are cases on which the statutory provisions bear rather curiously. He may take it from me I shall give due regard to that. On the other hand, one wants to encourage as far as one can the legitimate stage. It is true that special facilities have been given by the Government for the troops and for munition workers under special arrangements. I should have thought that that was a perfectly proper and reasonable thing to do, and I should not think it inconsistent that an Entertainments Duty has been placed upon cinemas. I cannot always follow my hon. Friend's mind, but, speaking for the ordinary men and women in the community, I think they would see nothing illogical in the situation.

It is right that the Committee should be informed that when I had in mind this further Entertainments Duty I saw the representatives both of the theatre and of the cinema. There was never any hesitation on their side. As long as I did the fair thing and saw that there was a reasonable allocation of the duty between the various grades of seats, there was no grumbling or hair-splitting or suggestion that there was any inconsistency in what the Government had done. They responded admirably to my suggestions, and said that if we thought they could assist still further, they would be only too glad to do so, and I have myself seen in the last few weeks that the tax has made no difference whatever to the attendance at cinemas or theatres. I had in mind the poorer sections of the community, and I purposely saw to it that the extra tax should not apply to the lower priced seats. In the result, at any rate in London, never have there been such great audiences at all the theatres One could only hope that more frequently the pieces that one saw would be worthier of the audiences that attend them. Apart from that observation, I am sure that in no respect has this tax interfered with the audiences. The same observation applies to the cinemas though, incidently, the same criticism also applies to many of the productions that one sees there. It is only fair to say, however, that the proprietors of both theatres and cinemas would be only too glad if they could put forward better productions. They have their difficulties, as we have. I am sure that the great majority of the people will support me in saying that there is no ground for criticism of a tax of this kind, in view of the exemptions applying to the lower-priced seats. I think the people of the country are quite willing to pay the extra tax, and I am glad that there has been no interference with their entertainment. J. hope the country will continue to enjoy this form of relaxation, for there is no reason why we should live in a state of gloom during the war. We would not help the war effort by doing that and I am glad to see that there are large audiences at theatres and cinemas, and that their size remains unaffected by the worst I have done.

This is a complicated Clause offering substantial concessions to those engaged in agriculture, and I shall be glad if the Parliamentary Secretary to the Ministry of War Transport could explain it in view of the involved language of Sub-section (3).

The general purpose of the , Clause is to help food production, and it amends The present legislation in the following ways: Under the existing Act agricultural tractors pay 5s. tax only and get rebated petrol. The purpose of the Clause is to extend the use of agricultural tractors and vehicles in three ways. They may now haul agricultural produce and farm requisites not only for their own farms but for any farm or market garden. It removes the existing limits on destination, so that they may haul not only from one farm to another, or from a farm to a station, but anywhere. 'The Clause also gives these advantages to agricultural contractors, who are defined in the Bill. They must be registered with the county agricultural committees and must be persons whose business is or includes that of ploughing, or of cultivating land other than land in their own occupation, or any other agricultural occupation thereon or threshing the crops of another person. Sub-section (3) will enable these people for these purposes to get rebated fuel, that is at the lower level of tax of 1d. instead of 9d.

I rise to make my protest at the language which the Chancellor and those advising him think fit to use in this Clause. In this age, when we have had the internal combustion engine for many years, the Treasury draftsmen might find some better word than "contrivances." It is typical of the whole attitude which the Treasury has shown towards the motor industry over a long course of years. It has always been ignored and badly treated by the Treasury, which is in complete ignorance of this trade. The result is that when they refer to a gas-producer plant they do not recognise it when they see it and call it a contrivance. Paragraph (b) refers to such a contrivance being attached to each end of the vehicle. I have been trying to imagine any designer except Heath Robinson being successful in doing such a thing.

My hon. Friend is under a misapprehension. This Clause does not deal with trailers for gas-producer plants. It has to do with contrivances for towing. In severe winter conditions such as we had in two recent winters, when the roads were frequently blocked by snow, it was often desirable to clear them so as to get urgent stuff through for convoys to Russia and other purposes. Vehicles often blocked the roads to other transport, and they had not the necessary attachments to enable them either to tow another vehicle or to be towed themselves. Under the existing legislation goods vehicles pay tax according to their unladen weight. Hooks or other contrivances for permitting towing in an active or passive sense may weigh a considerable amount. The limits laid down in the latter part of the Clause are one cwt. if the contrivance is at one end only of the vehicle, that is for being towed if in front or towing if in the rear, and 2 cwts. if contrivances are attached to both ends. These contrivances may thus put the vehicles above the tax limit, and in order to encourage people to have the contrivances, so that in bad weather conditions any vehicle can tow or be towed, the Chancellor has made this concession.

There is general appreciation of the Chancellor's difficulties in regard to the Purchase Tax and the raising of the tax on definitely luxury articles. Many of us feel that some of the things which are being manufactured are quite unnecessary and that if they were taken off the market there would be no injury to the war effort or the wealth of the country. I should like the Chancellor to go through these items, because one or two of them are not really luxuries. I will quote one case. If a parent wishes to supply a school boy with a sensible satchel, he will have to pay 100 per cent. Purchase Tax on it. That is one of the items which I hope the Chancellor will consider again. There is general appreciation of the fact that by transferring taxation from essentials to luxuries the Chancellor will get the same return. We have to bear in mind that the Government are by far the biggest direct employers of labour now. The cost-of-living figure is, therefore, a substantial item for the Government, so that anything that can be done to keep it down should be done. I should like to appeal to the Chancellor to collaborate with the Board of Trade to exempt things which are essential. I understand that the production of utility cutlery is contemplated. It will not be of permanent value in the sense that it will not be of a quality that anybody would buy to keep but would buy only as a wartime necessity because it will not be stainless. The tax should be removed from it. There is also the question of utility china.

We should not discuss the difference between utility and other articles, for that seems to be a question for another Ministry.

I am only dealing with the difference as it affects the Chancellor. Certain commodities such as clothing are subject to tax if it is not utility but exempted if it is utility. Utility china, however, is subject to tax. It is very utility and those who buy it are for the most part people who have been victims of enemy action or the newly married. I cannot imagine anybody buying it unless driven by necessity. While we appreciate what the Chancellor has done and have no objection to 100 per cent. tax on luxuries, there are a few items which are not luxuries and the tax on them imposes an additional burden on parents. Other articles which are purely utility might be relieved of the tax. If they were we should know where we were, trades-people would be in an easier position, and the Chancellor would be happier if he had the consciousness that this tax was not adding a burden on people who were trying to comply with the desire of the Government to keep their expenditure down to a minimum.

I am indebted to my hon. Friend for his statement, and I appreciate what he has said about the endeavour I have made to put 100 per cent. tax only on luxuries or semi-luxuries. I took the schedule of last year of articles which bore a tax of 66⅔ per cent. I then increased the tax on these articles. The only article my hon. Friend has mentioned is satchels. The 100 per cent. is put only on satchels which are composed of real leather. I myself should doubt whether very many parents to-day, or even in days gone by, provided their children with satchels made of real leather. My recollections are of satchels of the fabric type, which in due course were knocked about and damaged and which we then asked our parents to replace. I do not think any parents will be severely hit by reason of the 100 per cent. tax on satchels made of real leather. I will note what the hon. Member has said for future reference. Those and other matters are under consideration, because I saw a deputation of him and some of his friends headed by my right hon. Friend opposite. I have always been prepared to give, I think, reasonable consideration to his requests, and I think that on the whole the Committee will feel, as most people do, that a duty of 100 per cent. on the articles now set forth is not unreasonable. Look at the list. People are paying ion per cent. duty on piano-player records, articles made wholly or partly of ivory, amber, and so on. I would just mention cosmetics in passing. I do not think there will really be hardship over this. I will note what my hon. Friend has said, but I hope the Committee will regard the proposals in general as reasonable and fair.

While I very much appreciate "the right hon. Gentleman's reply, may I mention in connection with cosmetics that dusting powder is very necessary for tiny babies? I know that it is difficult to say that it shall be exempt, because a mother might use it exclusively for herself, but it is an instance of the little points that crop up when one begins to tax things. However, I feel that the Chancellor of the Exchequer would meet the point if it were at all possible to do so, because he would like to do the reasonable thing by fathers and mothers.

There are three points which I wish to raise with regard to Income Tax. The first concerns the system of "pay as you go," or whatever it is called. It will not have escaped the notice of the Chancellor that in the United States further progress has been made with this system. An announcement regarding it was made in, I think, this morning's broadcast. I am not clear whether a Bill on the subject has actually become law, but at any rate that principle is meeting with real attention and some approval in the United States. All I would ask now is that the Chancellor should give us an assurance that he is watching what is happening on the other side of the Atlantic with a view to ascertaining whether there is any feature in their scheme which could be applied mutatis mutandis to our scheme here. I would point out that it is probably not very easy for ordinary people in this country to ascertain exactly what is being done in the United States. The reports that appear in the newspapers here or that we hear broadcast are generally rather vague. Probably it may be some weeks, or even longer, before we shall in the normal course get reliable information and details concerning the American proposal. If it were possible for the Chancellor to supply us in some form, not necessarily by the issue of a White Paper, with particulars of any scheme that is adopted in the. United States, so that we might be in a position to discuss it, it might be convenient to do so at a later stage of this Finance Bill. We are anxious to help the Chancellor, there is no question of putting obstacles in his way, and I hope that he will be able to get that information for us.

The other two points I wish to raise are really administrative points. The present Chancellor, or it may have been a predecessor, decided very wisely some year or two ago that employers should be the collecting agents for the Inland Revenue for Income Tax imposed on workers who are paid a weekly or a monthly wage or salary. One of the provisions is that the employer shall hand over monthly the proportion of the tax which he has collected. In the case of an employer with a large number of workpeople, say 100 or 200 or more, that is a most reasonable proposal, because there is no reason why he should retain in his possession large sums which he has already deducted from the pay of his workers, and the revenue that the money should be paid over as frequently as once a month.

On the other hand, it has been pointed out to me that there are a large number of employers, within the definition, with a very small number of workers. In extreme cases—and they probably run into many thousands an employer may be employing only one secretary or typist, yet under the present arrangement he has to collect from that secretary or typist the proportion of the wage that is to go in tax and solemnly, once every month, hand over the proceeds to the Inland Revenue. Let the Chancellor think what that involves. It means writing a letter, drawing a cheque, sending it to the Inland Revenue and filing the receipt. That happens every month although the tax may amount to only a few shillings, and is certainly not likely to exceed a few pounds. This involves a great deal of unnecessary waste of labour, paper and postage at a time when the Government are anxious to save all those things. I suggest that employers with less than a certain number of employees—it might be less than 10, or 4, or some other figure —should be allowed to pay at longer intervals than a month.

The remaining point I want to raise concerns a quite different question. It relates to evasion of Surtax, but I think it properly comes under this Clause because it is a matter of the computation of income. I am told that a form of evasion is being practised which takes this character. A firm or an individual—this does not affect companies—purchases by means of a bond premises which there is no intention of using during the war. In fact it would not be possible for the firm to use the premises, because they would not be permitted to make use of them. At the same time they have to pay regular interest on this bond, and by the rules of reckoning they are allowed to deduct the amount of that interest from the profits of the business, the profits being reduced by those means. It is true that the money paid as interest goes to someone else who himself has to pay Income Tax on it, but those who are paying the interest on the bond escape not only Income Tax but Surtax. I am told this method is being used to an increasing extent to evade Surtax. I do not expect an immediate answer, but I shall be glad if the Chancellor will look into the point to see how far this practice has gone. If he does find that it is extending possibly he can meet the situation, without an alteration in the law, by means of some administrative change, but if that is not possible and he does not see his way to introducing a new Clause into this year's Bill perhaps he will look into it with a view to dealing with it in a subsequent year.

I wish shortly to draw attention to two points in connection with Income Tax. The first relates to children's allowances. I do not propose to discuss the amount of the allowances, but if I did, I should argue that they were not large enough. What I wish to point out is that the allowance is granted irrespective of whether the parent contributes to the maintenance of the child or not. In his Income Tax return the parent has only to make a declaration of the existence of the child and that it is under the age of 16, or, if over that age, to declare that the child is still undergoing education, and further that it has not more than a certain amount of income in- its own right. I know that the present position has existed ever since 1920, or possibly before, but I think that the question has now assumed, at any rate since the war, much more importance than it had previously, because under the large-scale evacuation which has gone on I am sure that a large number of parents are obtaining the benefits of children's allowances without making any contribution to the maintenance of their children. The Chancellor will very likely reply that it is the business of the Minister of Health to collect through the local authorities in the evacuation areas the contributions which parents should make towards the cost of billeting their children in the reception areas, but I think that obligation is very loosely enforced. It would certainly assist the enforcement of the obligation if the parents, in order to claim child allowance, had to declare that they were making a contribution to the maintenance of the child.

I mentioned this matter previously at Question time, and the Chancellor of the Exchequer then replied that the Inland > Revenue could not possibly undertake the inquest which would be involved in individual cases. It is fair to compare with this matter the declaration that had to be made by the married man who claims the personal allowance appropriate to a married man. He has to state that his wife is living with him or is wholly maintained by him, and that declaration is requisite to his claim for the personal allowance. I think the comparison is fair. That requirement does not seem to have caused the Inland Revenue any embarrassment, and I hope that the Financial Secretary will explain why it is so easy to insist upon that declaration in one case and why the Inland Revenue feel unable to require from a parent a declaration of the kind I have described.

Considerable hardship is caused in wartime from the fact that the cost of accommodation elsewhere is not allowed as a deduction from the profit of letting a furnished house. In normal times, people who wished to move from one part of the country to another could dispose satisfactorily of their former houses, but it is not so easily done in war-time. This is particularly true in the case of people who have had to move to perform war work in another area, such movement being obviously of a temporary character. They might well desire to return later to their former homes and not wish to dispose of them. It is very unfair that the cost of their other accommodation is not a permissible deduction for Income Tax purposes.

I would like my hon. Friend to consider an illustration which demonstrates the principle which I am endeavouring to lay before him. If 500 people let their homes in Wales to 500 people from England and vice versa, at the same furnished rent, the Chancellor of the Exchequer taxes 1,000 so-called profits, and yet there is no net profit whatsoever to any of the persons so taxed. That is a pretty piece of profiteering but is perfectly lawful, because the Chancellor of the Exchequer is supported by the legal authorities. In the leading case—Wylie v. Eccott—it was held that the deduction of the rent of other accommodation was inadmissible. I realise that in war-time the Treasury do not want to undertake anything that would involve a substantial revision of Income Tax principle. They are much too busy with more pressing work, but something ought to be done in cases where, owing to exceptional conditions prevailing in wartime, hardship arises which did not exist before. It is not only of importance to the individuals who are taxed, but it has a wider aspect of great importance. We know that the Minister of Labour is anxious to increase the mobility of the population as much as he can and to enable people to move at short notice from one part of the country in order to take up work in another part. There are cases where officers in the Forces with duties at military stations may have to change those stations and would naturally like to be accompanied by their wives and families. In order to promote the mobility of the population, it is important that some concession should be made.

We have heard many complaints of the very high cost of obtaining furnished accommodation. The high scale of furnished rents is largely due to the fact that the people who let those houses have to find accommodation elsewhere. They suffer a very heavy loss. If a person lets his house furnished in one place at 4 a week and moves to a house in another part of the country and there pays i4 a week, he cannot set off one sum against the other for purposes of taxation. Having suffered a net loss, he then does all he can to recover the loss by charging an even higher price. This is a war-time matter of considerable importance, and I hope that the Chancellor of the Exchequer will give my suggestion his careful attention.

The speech made by the right hon. Member for East Edinburgh (Mr. Pethick-Lawrence) was clear and interesting in regard to administration rather than to anything else. I was very pleased to hear him refer to something which appears in this morning's Press regarding the United States, and the "pay as you go" Income Tax plan. It is very difficult for us to understand how they deal with the different points of view, partly because of the meagreness of the information we receive, but I hope that the Chancellor of the Exchequer will closely follow what is going on in that country, and particularly the plan of cancellation of two years' arrears, owing to the great difficulty of collection. Income Tax payers in the working class are put to a certain amount of hardship when they have to pay in arrear instead of having it collected weekly as they earn the money. I hope some great effort will be made by the Chancellor of the Exchequer and by those responsible for the collection of Income Tax from the working people. I have no doubt that the Chancellor has interviewed representatives of the workers and of the employers, and perhaps he has difficulty in finding some means by which the disturbing element can be removed. In the course of time I hope something will be done and the working class be relieved of the difficulty which is presenting itself every day.

My right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) suggested that the Chancellor should issue a White Paper, or should find some other means, to convey to us the information about the "pay as you go" scheme in America. An equally valuable piece of information would be a report upon the alterations in our own wage tax and how the tax has operated for the past 12 months. Very considerable changes were made in the last Finance Bill as to how the tax on weekly earnings should be assessed, and if those alterations have not been successful, the case for further alterations is very greatly weakened. The only source from which we can get really satisfactory information is the Chancellor of the Exchequer. When he has adequate data and has had a full 12 months of its operation, I hope he will consider issuing a small report on the matter showing how those alterations have affected the collection of the tax and how far they have gone towards removing the difficulties which were so obvious 12 months ago.

I want to support the point of view of the right hon. Member for East Edinburgh (Mr. Pethick-Lawrence) with regard to the burden falling upon small employers in making the monthly return of Income Tax. I am thinking particularly of the case of farmers who are very busy upon extremely important war work and are overwhelmed by the number of forms with which they have to deal. Clerical work is more of a burden on them than it is in the case suggested by my right hon. Friend, of a man with a secretary, and efficient production may be affected by the amount of clerical work that has to be done. Perhaps the Chancellor will be able to make some amelioration with regard to that matter.

I wish to add one word which occurs to me as a result of what was said by the hon. Member for Chesterfield (Mr. Benson). While it would be very helpful to learn what has been achieved by the concessions made a year ago in regard to Income Tax deducted from wages, I hope that if they have been successful that will not be taken to mean that no further change in this matter is called for. So long as people are continuing at the same level of remuneration as in the previous year, it does not much matter whether the tax is related to the current year or the one before it. The thing I suggest the Chancellor must keep his eye on is what will be the position when the level of employment is not as satisfactory as to-day, and when, moreover, the hours of work are not as long as they are to-day. On top of that there may well be found necessary some change in wage rates.

So after the war there is, to my mind, an inevitable position to be dealt with which calls for consideration in dealing with this "pay as you earn" question, so I hope that anything which is regarded as satisfactory now will not necessarily be taken as satisfactory for the future. One is very conscious of the administrative difficulties which a change such as is proposed must mean, but there are two which, to my mind, can be safely ignored and attention focussed on others. The first is the likelihood of wages being paid long after the work to which, they relate has been performed, but by a system of "subbing" I do not think that need present any real difficulties to the person concerned. The other one, which I hope will not be taken too much to heart, is the apparent loss to the Revenue of anything to wipe out tax related to a past year and the substitution of tax relating to the current year, because so long as money continues to be paid by individuals and received by the Treasury it is, to my mind, purely a bookkeeping entry as to which year the money is actually related. The idea that so many hundreds of millions are lost by this change, I feel. would be an illusion by which we should not be led away.

I would venture to offer a few observations on the points raised. The first, initiated by the right hon. Gentleman the Member for East Edinburgh (Mr. Pethick-Lawrence) dealt with the question which he described in what are now familiar terms in this Committee as "pay as you go." I would recall to the Committee the previous statements I have made on this matter. For the last year or 18 months I have, in the first place, kept in close touch with the executive of the Trades Union Congress and the employers' association on this particular matter. We have discussed and examined a number of- the schemes which have been put forward, and there has been no desire on behalf of either that great body which represents the workmen or that powerful association which speaks for the employers, to act otherwise than in the best interests of the worker and of trade and business in this country. I can assure my hon. Friends who have spoken that those bodies are just as much alive to the post-war position as any Member. In fact, they are much more concerned, since they would have to deal in a more intimate fashion with many of the difficulties which might arise. I invite any who would like to refresh their memories on the difficulty of the matter to read again the White Paper which I issued at the time of the previous Budget, which was purely a presentation of the facts of the matter, and raised very substantial difficulties.

That is one side of the position. The other side is that I have said that if at any time any further scheme came forward which promised to be of practical application and to offer a reasonable solution, I would be only too glad to see it and again submit the matter to careful examination. Also I would remind the Committee that I have informed them that the Board of Inland Revenue themselves are making a further and expert investigation into this matter and that they have particularly in mind possible post-war complications. I also said, and I repeat to-day, that in that examination they must, of course, have regard to questions of this character. I have a feeling myself that it is in that direction that we are most likely to get a successful solution of the matter if it can be found, because they will themselves act, as I shall, in continued association with the representatives of the employees and employers. It is from that particular quarter that I am most hopeful of getting concrete proposals. I must say I was amused on one occasion when I heard someone get up and say it would be a good thing if I were to appoint a committee and put on it one representative of the workers and of women employees and others. Cruelty to animals, Mr. Williams. Many of us might be very unwilling to sit upon a committee of that particular character. This subject has to be dealt with by experts, and I am forcibly reminded of this because, of course, I should have to meet the situation if we failed to find a proper and satisfactory solution. But do not let us deceive ourselves that it is easy to find a solution. I have been asked about the position in the United States. Even with the incomplete information which is available to us, one has only to look at what has happened so far as the discussions in the House of Representatives there are concerned. Did any of my hon. Friends who are so optimistic on this matter see what the votes were on the particular proposals put forward? Did they observe——

I regret having to interrupt the right hon. Gentleman, but I do not think we can discuss the actions and votes of other Chambers in other countries on this matter, except as an illustration.

On a point of Order. We are discussing the question of Income Tax in relation to great masses of the wage-earning population. How it is collected has been the subject of contention, and the right hon. Gentleman has said, "Can we not examine the position and the solution sought in another country and learn from it?" The Chancellor replies, "Let us see what has happened in other countries, and let us study it." I would have thought that this was the appropriate moment to have done that kind of thing.

I agree with that so far as it relates to an illustration as to how the thing is done in another country, but there is no need to carry an illustration so far as to bring in the votes in the Chambers of those other countries. That is where I think the illustration should stop.

I shall not have any difficulty about this matter, Mr. Williams. I will content myself by saying that in fact there were considerable differences revealed on this subject in America. But I am mindful of what my right hon. Friend suggested about information for this House. Perhaps I might make available in the Library some record of the discussions in the House of Representatives. I have available some records of the discussions, because I was anxious myself to see exactly what was happening. I might place these at the disposal of my hon. Friends who are interested in this matter, so that they will be able to see, as I am endeavouring to see, exactly what has happened. The matter has gone through the House of Representatives and is on its way to the Senate. This demonstrates that the matter is a difficult one. At the same time I do not want anyone to think that because I am emphasising these difficulties and differences I am not alive to the necessity for further consideration of this matter; on the contrary, the Trades Union Congress executive, the representatives of the employers, and I myself are very mindful of it.

My hon. Friend the Member for Chesterfield (Mr. Benson) has again raised an important point, as he always does, in connection with the same matter, when he inquired how the scheme is now proceeding in the light of the alterations we made last year with the approval of the House. I will see whether there is any way of giving some further information about this. I would say in reply that practically all the suggestions which came from the House last year, and which I adopted, have helped to make very much for the easier collection of the tax. In saying that, I do not want to mislead the Committee. Just because these alterations have been made now that is no reason to assume that they will be a sufficient remedy for any problems in the future. My right hon. Friend the Member for East Edinburgh also asked what could be done to alleviate the position where perhaps, under a strict interpretation of the rules and regulations, an employer with one or two employees is called upon to make a monthly return and to make a monthly contribution on behalf of one individual. It is obvious that where there is a considerable number involved I must see to it and insist that the money comes from the employers at proper, regular and fairly short intervals, say of a month. I cannot contemplate a longer period than that, not that I wish to make accusations against anybody, but obviously it is businesslike to ensure that money which belongs to the State should be returned promptly and regularly. As. regards the cases where there is a single employee, we should be prepared—I should be obliged if hon. Members would let me know of any cases of the kind—as we can do administratively, to make an arrangement whereby, instead of sending it every month, they send it every quarter or something of that kind. We would be quite prepared—the authorities are desirous of acting reasonably—to enter into arrangements of that character, and indeed there are many cases in which we have done so.

Could the Chancellor take that point further? It is a very important point. I understood him to say that where there is a single employee arrangements will certainly be made to extend the period over more than one month, and, he rather vaguely said, where there were two or three concerned. Does he mean by that that he is fixing a number, say two or three employees, or is he only expressing rather general hopes that something may be clone? If he will fix a number, not now, and he asks for examples, quite clearly if some of us know what it is he is suggesting, we will willingly co-operate with him in working for that principle.

I will see whether I can give a more definite interpretation; but where the number is such that the authorities can be satisfied that proper and reasonable arrangements of this character can safely be made, they will be only too happy to consider it—that I think would be the best way of putting it. I will also look into the matter my right hon. Friend put before me on the question of evasion of Surtax. I would like to examine that in detail and give him a considered reply.

The hon. Member for Tamworth (Sir J. Mellor) raised the question of children's allowances.- He has put this matter before me previously in the House, and has given special attention to this and other questions of Income Tax administration which have been of interest I think that his suggestions have been of value to those of us who are engaged on the subject, But I hope he will permit me to say that I do not think that the analogy of the children's allowances with the personal allowance for a married man is a good one. The children's allowance is given only if the child's income is less than £50. The wife's higher personal allowance is given however high the wife's income may be. The wife's income for taxation purposes is treated as the husband's if husband and wife are living together. If, however, they are legally separated they are treated as single persons. Therefore, the declaration by the taxpayer in respect of his wife must be different from that made in the case of a child. In the case of the wife, he declares that she is living with or being maintained by him; but in the case of the child, he declares that the child's income is less than £50. If the child's income is below this limit, it would not be practicable to start an inquisition into the question of whether the parents do or do not perform their normal duties of looking after the child.

That is the duty of the local authorities.

Then my hon. Friend raised the question of profits from letting a furnished house. There, I think, the position was not correctly stated. In assessing the profits, an allowance is given in respect of the annual value of the house and depreciation and other out-goings. No question arises of double taxation, nor is the question of the cost of alternative accommodation, when the taxpayer lives elsewhere, relevant, since the cost of living, which includes rent paid by the taxpayer him self, obviously could not be an allowable deduction for taxation purposes. I have briefly answered the questions which have been put to me, but if there is any further information required, I will gladly communicate with hon. Members. I am glad that this discussion has taken place. It has been a short but a useful discussion, on a matter which is causing concern here and elsewhere, and which is very important from the point of view of our future administration.

Would I be in Order in asking whether there would be any allowance for a man whose sister is keeping house for him? I know a case of a man who is not allowed any rebate for his sister, although she has kept house for the whole family since the mother died. Is there any hope on that subject?

I think that there is an Amendment to be moved shortly, relating to allowances for a sister or daughter.

I beg to move, in page 8, line 38, to leave out "throughout," and to insert "for more than one-half of."

With your approval, Mr. Williams, and that of the Committee, I will speak on this Amendment and the next two Amendments together. These Amendments are intended to get the words "throughout" and "totally" better defined. If the word "throughout" is going to be interpreted literally, it might well be that after the Clause has been fully complied with on 364 days of the year, death may occur, and the relief which is provided for those taking charge of children will be completely lost. Clause 3 says that no relief shall be given under this Clause unless the claimant's wife was totally incapacitated throughout the year. It can be seen that the Clause may work extremely harshly, and I do not think that that is the intention of the Chancellor. Then there is the question of a person going away for a holiday. There could be no holiday for anyone who came under this Clause. Also, what would be the position of a person who was sick for a fortnight or longer? Now we come to the word "totally." This equally might result in extreme harshness. The phrase used is "total incapacity." Does that mean that the wife is not allowed to take a cup of tea up to her husband who is starting off for work at 5 or 5·30 in the morning? I think the Chancellor would be well-advised to soften these words. It is not he who is going to operate this Clause. Thousands of civil servants will be handling the Clause, and, therefore, we feel that we must have something definite from the Chancellor as to the meaning of these words.

I will gladly give some assurance and consolation to my hon. Friend-on the matter, which he has quite properly raised. The Committee will remember that in my Budget I was able, notwithstanding the difficulties of the time, to make a number of concessions of some importance to a considerable number of people. One of them was that, under Sub-section 3 of Clause 14, a man entitled to the married man's personal allowance of it 40 should be entitled to the new allowance on certain conditions, which I think were regarded as reasonable. One of the conditions was that where the housekeeper's allowance was given in this way the wife should be totally incapacitated throughout the year of assessment or be engaged for a time in employment or business. I based these concessions in the special circumstances of the times, also on another condition which was really the object of the further concessions that I desired to make, and that was that there was in the home a number of young children whose necessities and needs demanded attention even in the difficult financial times in which we are living.

These are the matters that operated with me at that time. When I was approached first about this matter the case was put to me of the husband with children who had them properly looked after and cared for and where the wife was away, as far as one could humanly see, for an indefinite period in some institution in the cOuntry—a very hard and terrible case for the husband and particularly the children. I was pressed very much that in a case of that kind I ought to make some further substantial contribution to the family. That was the case upon which I founded this concession. Having reached the conclusion that I would give an allowance in the case of a wife who is in some institution because of some permanent defect of health I could not see how, if a wife was permanently incapacitated and living at home, I could refuse the allowance to her. I said that in such a case, although the wife was living in the home, so long as she is totally incapacitated for the period mentioned in the Clause, the husband should equally have the advantage of the concession. That is how the Clause which we are now discussing developed.

I said, if my hon. Friend will do me the honour of looking at my observations, that in making these concessions I must ask the Committee not to press me further both as regards the cases and the conditions. When we use the word "totally," my hon. Friend can take it from me there will be no sort of silliness about whether there was a few days' or weeks' incapacity or anything of that kind or whether a person went for a fortnight's holiday. There will be nothing of that kind in the administration of these measures. But I cannot be landed into the position of being driven into going further. There will be endless trouble if a wife is not totally-incapacitated. One can imagine the situation that would arise among the authorities unless that condition was arrived at. I must also put down the period for that incapacity at some reasonable length of time. Again, following the analogy of the wife in an institution, I have therefore chosen, as I said in my Income Tax speech, the Income Tax year, which allows machinery to operate reasonably. If you go further than that, you will be in danger of the machinery and the administration of the Clause breaking down and not being satisfactory, and it may be abused.

This is the first time we have done this, and we shall be able to see how it works. I believe that it will work satisfactorily, and I know that the Inland Revenue will treat people fairly in these cases. We do not want to be driven into inquisitions in the administration of this Clause. My hon. Friend will appreciate that if you get outside these conditions, you will he in danger of having to set up machinery to inquire into this, that and the other, which people would naturally resent. I hope that my hon. Friend will feel that I have made a considerable concession, and will wait and see how the machinery works. He can take it that the Commissioners of Inland Revenue will interpret the Clause in a reasonable way in order to give help to those concerned.

My right hon. Friend has referred to a wife being, totally capacitated in an institution. What would be the definition of "total incapacity" of a wife at home? Would there be any objection to her perhaps brushing out her bedroom or preparing a cup of coffee or tea for her husband?

It is not in the interests of the public that I should give a precise definition, but we shall deal with this matter reasonably. We are net going to be too critical, because if I began to give exceptions, I should begin to put an imposition on the people concerned.

I beg,to ask leave to withdraw the Amendment.

I have written to the Chancellor of the Exchequer on a point that I want to raise. It is a question where a sister is keeping house for her brother, The mother has been dead for 20 years and the sister has had the family in hand all this time. There is one brother left, and she is still keeping house for him. It is a very grave hardship that no allowance can be made in respect of Income Tax for her, and I would ask the Chancellor of the Exchequer whether he can give some idea whether he can make an allowance in such a case.

I want to tender my thanks to-the Chancellor of the Exchequer for this Clause. It corrects a matter to which I drew the attention of the Committee on the same stage of the Finance Bill last year. I know that it will ameliorate cases of hardship to which my attention has been drawn in my own constituency. I would not like the Chancellor of the Exchequer to think that what he has done by this Clause will perfect the housekeeper's allowance. It is still far from perfect. The reasons I have already given on the Second Reading of the Bill, and I do not propose to take up the time of the Committee with them now. I say this to warn the Chancellor that some of my friends and 'I will continue to study possible further improvements in the housekeeper's allowance, and I hope he will do the same.

I will take note of what my hon. Friend the Member for West Lewisham (Mr. Brooke) has said. In regard to the case put by the hon. Gentleman opposite, I am not sure whether any allowance is payable or not, but my hon. and learned Friend the Solicitor-General has pointed out to me that Section 10 of the Finance Act, 1920, provides that:

"If the claimant proves that he is a widower and that for the year of assessment a person being a female relative of his or 'of his deceased wife is resident with him for the purpose of having the charge and care of any child of his, or he proves that he has no female relative of his own or of his deceased wife who is able or willing to take such charge and that he has employed some other female person to undertake the same, he shall, subject as hereinafter provided, be entitled to a deduction…"

I would like to look at the case before I give any definite opinion.

This is the case of a single man who has a sister living with him who has brought up the whole family.

I must not mislead the hon. Gentleman. I take it that this is a case where there, are no young children in the home (HON. MEMBERS: "No.") and where there is a brother and sister (HON. MEMBERS: "Yes.") Then that is the case for an ordinary housekeeper's allowance, and I cannot hold out hope of a revision of the present allowance, which is made to a widower for a housekeeper, in a case where it is not particularly well justified, having regard to other people who might be in a much more serious position. I based my concession in this Budget on the fact that there are young children in the home.

I beg to move, in page 9, line 30, to leave out from "shall," to "have," in line 31.

This Amendment deals with the question of relief for the daughter of a man who has an invalid wife. The Chancellor has stated that in certain cases relief should be £50, but he exempts a daughter from that by that part of this Clause which I want to delete from the Bill. I cannot see why a daughter cannot be treated in a similar fashion, particularly where it is admitted that the test of incapacity will be dealt with by the Treasury and where the incapacity of the wife will not be in dispute. The man has a wife, and the allowance he gets for the daughter is to be only £25. I wrote to the Chancellor on this matter, because I could not understand why the daughter should be treated in this way. The man who carries the terrible burden and strain of a completely incapacitated wife ought not to be treated in any less favourable way than any other person. The daughter should receive the full £50 allowance. There may be an explanation, but I cannot see why the concession should not be granted. I raise this question chiefly because of the housing position in Glasgow. With us it is much worse, because the great bulk of our people live in three-apartment houses, which are fairly large. Two-apartment houses are common, and if a man has to bring in anyone else but his daughter, there is no accommodation. In such housing conditions the daughter is obviously the person to be asked to carry on the household duties.

I have never been an Income Tax expert and have not studied Income Tax until recently, because hardly anybody in Gorbals paid it. For many years my activities used to range over all sorts of other Departments, and I used to say that the Treasury was the only one that missed me. But recently I have—or at least my wife has—been conducting correspondence with the Chancellor regularly. As a recreation I began to take an interest in one or two other subjects, and I have been making a little research into Income Tax. It is most difficult, in the position in which we find ourselves in Glasgow, to make anybody else the housekeeper but a relative. If a man brings in a housekeeper from outside, he is placed in an almost impossible position, for a variety of reasons. I do not intend to make criticisms that the rich are bad and the poor are good, but if people could employ experts and knew the Income Tax law, they could get this £50 for the daughter and perhaps more. Why, even the Duke of Westminster in a court of law actually fought this matter. He pays his servants by what we call in Scotland a deed of annuity and by what you call in England a deed of covenant, By that means he gets not only the £50 allowance but a much greater sum. It is impossible for ordinary middle-class men to know the law and employ tax specialists. I understand, that there are firms in London who specialise in Income Tax work, and if the Chancellor cannot give me my concession, I hope that he will at least stop other people from getting the allowance or sums in excess of the maximum allowance by deeds of annuity or covenant.

I am sure that the Committee agrees that we have heard once again a case powerfully presented by the hon. Gentleman the Member for Gorbals (Mr. Buchanan), and that they will be glad to note that the Treasury have a new client as a result of the increased operations of Income Tax. I have no doubt that my hon. Friend the Financial Secretary will give due consideration and attention to all matters which the hon. Gentleman raises. There is a real answer to the case which the hon. Gentleman has mentioned. I rather hinted at it in the observation I have just addressed to the Committee. The hon. Member has put forward the case of a man with an invalid wife who has a daughter who keeps house for the family. He is asking me to extend my concession by doubling the £25 and making it £50. That does not comply with the condition that I was bound to make that there must he young children in the home. Also it is most difficult for me, if I increase the allowance where there is a daughter looking after the home with no children, properly and fairly to stop there. I can quite appreciate the position in, Glasgow and the almost impossibility of introducing into the home a stranger to the family, but directly I put on one side my condition as regards there being no children and say I will give this double assistance where there is a daughter, I have no real answer where, instead of the daughter, there is a sister or an aunt. You could go to a variety of relationships of that kind. It is only the accident that the designation of daughter was used that enabled the hon. Member to move his. Amendment. The provision was inserted by my predecessor, Sir Austen Chamberlain. It came on rather late in the day, a good time for dealing with these matters, and the Mover himself said he did not see how the then Chancellor would be able to stay at the designation of daughter, and it may be that later he would have to face the position of other relatives. That, in fact, is the case.

I must adhere to the limitation of the concession. At some time or other we shall have to discuss this matter afresh on its merits, whether the allowance in fact is justified in regard to other claims which can now be made. I have always. felt the difficulty of justifying the allowance for the widower where, there are no children. It has made a great deal of difficulty, and there are many cases of unfairness. That may well have to be the subject of future discussion. The hon. Member has been looking into the Income Tax and deeds of covenant. I do not think that any case has been directly brought to my mind of the operation of deeds of covenant, but I have not been able to close my mind to the fact that they may have been very extensively operated. The question whether they could be wholly justified in respect, we will say, of charities is a matter we shall have to consider at some time or other. The hon. Member is quite right in bringing such a matter forward to day, but it is not really material to the major consideration of the Clause. I am anxious to satisfy him and to have at least his mental appreciation of my position, but I hope that he will feel that I am not "being unduly hard in saying that I must maintain the limitation of the concession that I have given.

This concession with regard to the daughter has been made, and my hon. Friend only wants to extend it. The right hon. Gentleman says that the word "daughter" got in by some mistake.

No.

It crept in somehow or other, and, because there has been a mistake, he cannot allow this extra concession to be given. I think my hon. Friend has made a very good case why this concession of £25 to £50 should carry all the way through to everyone who was getting the £25 before, and it is worth:testing whether or not we should have it put in.

I knew the right hon. Gentleman's distinguished predecessor, but I never knew him let a matter slip which was not properly argued. Having conceded the daughter in an earlier Act, is there any substantial reason why she should not now get them same concession as is given to other people? I ask the right hon. Gentleman to reconsider the matter between now and Report.

I do not want to lead the hon. Member astray, and I beg him to appreciate that the reason why I have given the further concession is the presence of children in the home.

I beg to move, in page 9, line 40, at the end, to insert:

() "In this subsection aged means fifty-five years of age for a woman and sixty years for a man."

I have heard one or two complaints about the term "aged," because, when people have appealed for this allowance, there has been a difficulty in ascertaining the age and they have been told they must wait until they reach pensionable age in some cases, but it is not clear what "age" means. In order to get a clear definition, I propose 55 for a woman. It is recognised that a woman grows old more quickly than a man, and consequently it should be something earlier for her. I do not intend to press this Amendment to a Division. I simply want to clear the matter up so that there will be a guide to the Income Tax people as to what line they should take.

I am glad that my hon. Friend does not propose to press the Amendment to a Division because when he has heard what I have to say, I think he will come to the conclusion that the matter is best left as it is from his own point of view. The dependent relative's allowance, which was granted by Section 22 of the Finance Act, rq20, is given to a taxpayer who maintains a relative who is incapacitated by old age or by infirmity from maintaining himself. The general practice of the Board of Inland Revenue is to give this allowance if the dependant is 65 years old or above it. There is no distinction between men and women. The figure of 65 is not a rigid figure and the allowance can be given in respect of a younger person if it can be shown that his age incapacitates him from maintaining himself. In these circumstances I am sure my hon. Friend will see that it would e be wiser to leave the matter where it is, for if we were to adopt his suggestion et would put a stop to making the allowance for a man of 58 in cases where he was incapacitated on account of age.

'Is there any relaxation of the age of 65 for women, for it seems a big age in their cases? Is not some guide given to the Inland Revenue to take a lower age for women?

There is no limit. It's merely a question whether the woman is incapacitated on account of her age. It may well be 55. At whatever age she is incapacitated she comes under the terms of the Clause, but if we were to put a limit to the age it would cut out some people whom my hon. Friend would like to see included.

Is the Financial Secretary right in saying that if the Amendment were accepted, it would cut out some people? The phrase in the Clause, "old age or infirmity," provides an alternative. If the definition of old age as suggested by the hon. Member for Leigh (Mr. Tinker) were made it would still enable people to get the allowance in spite of their age. The Financial Secretary states that the practice at present is to take the age of 65. The Amendment suggests that the position should remain the same in respect of age except that the practice in future should be to take the age of 60 for men and 55 for women. If that were accepted no cases would be cut out. I do not think it is asking too much from the Treasury to seek this small concession.

It would be a mistake to put a figure to the term "old age." If 55 is to be the definition of old age, many Members of this House would be in a difficulty to justify their presence here. The 'hon. Member who moved the Amendment is the very refutal of the necessity of putting a numerical figure on old age. From what the Financial Secretary says the question of age is a question of physical condition and not a numerical condition, and I support that point of view rather than accept a figure which automatically brings other people not contemplated within the Clause.

The bon. Member does not seem to realise that the Clause provides an alternative. If a person is 30 and incapacitated, he is entitled to the allowance. Whatever the age, a person is entitled to the allowance if he is infirm. The Clause says "old age or infirmity," not "old age and infirmity." A working class woman is entitled to some concession at 55 because she has had a hard life, and if she could get this little allowance it would be well worth while. The Amendment merely proposes that the practice of the Treasury should be altered from 65 to a lower age in respect of incapacity due to age.

Some clarification seems to be needed. I understand the Financial Secretary to argue in this way. There is a range of ages and we can take that range as covering a period in which we can describe a person as being aged. We do not describe him as infirm because that is an alternative incapacity and he can be infirm at any age.

If a figure is not stated how can we determine who are aged?

I do not think there is really any difficulty. The point we have to determine is whether a person is incapacitated by old age or infirmity. That is a matter of fact, and I suggest it would be unwise to put into an Act of Parliament words which would leave it to be supposed that a man Qr woman was necessarily incapacitated by old age or infirmity if he had reached the age of 60. That would sound odd to many hon. Members, in view of the age of our present Prime Minister. The matter is really quite satisfactory as it is. The Board of Inland Revenue has a discretion to deal with a man who is, let us say, aged 58, and there would not be such a discretion if we were to limit the age to 60. I think my hon. Friend the Member for Leigh (Mr. Tinker) appreciates the point and thinks it wiser now to leave things as they are, and I suggest to the hon. Member for Camlachie (Mr. Stephen) that he would be very much wiser to do the same.

In point of fact, the inclusion of the age is redundant. All one really needs is the reference to incapacity.

In view of the explanation which has been given, I beg to ask leave to withdraw the Amendment.

I should like to ask for a little elucidation of this Clause. I think I can claim a certain amount of credit for the insertion of this Clause in the Bill, in view pf the tact that I drew the attention of my right hon. Friend to certain anomalies which exist overseas. I would ask whether this Clause applies to soldiers serving overseas, because the anomaly to which I drew attention was the fact that certain soldiers in certain parts of the globe had their Colonial allowances taxed whereas others did not. Could I have the assurance that the Clause does apply to His Majesty's Forces?

Yes, Sir.

This Clause and several which follow are for the purpose of extending some concessions to certain mining and oil-getting enterprises in relation to the nature of their standard for excess profits purposes. This need having been recognised I rise to inquire why it is that it has been limited in this way, and the most, vital ore-getting industry at the moment excluded. I have several times expressed somewhat unorthodox views on the effects of the Excess Profits Tax. While the general principle of the tax is to be approved, its effects have in many cases been somewhat unexpected and undesirable in that it favours established and unenterprising industries and penalises young, progressive, dynamic and experimental industries. In 'the post-war years we may pay a very heavy price in crippling the expansion of new ideas in industry through the Excess Profits Tax.

I have voiced this view before and nothing very much has happened, but I think that here we have an opportunity of pointing out one of the most undesirable effects of the Excess Profits Tax as it affects the coal mining industry. At this time the coal mining industry is called upon to make unusual efforts to obtain the maximum amount of coal in the minimum amount of time and with the least possible labour. That calls for the maximum of mechanisation. If a coal concern does expend large sums of money upon mechanical appliances for extracting coal at a higher rate than is normal it is, in fact, exhausting its physical assets, and if it has a high standard it is exhausting them for the financial benefit of the Chancellor of the Exchequer, whereas another concern, less patriotic or less enterprising and far-seeing, which does not exploit its minerals to the same extent will benefit financially by its failure to do so. In view of the urgent, overriding need for the maximum output of coal during the next——

The hon. Member had better not develop the argument about coal. If he really wished to bring in coal, there should be a new Clause.

You have indeed' been very indulgent, Mr. Williams, and I will, therefore, bring my remarks to a close by asking the Chancellor to explain why this concession is extended to some minor forms of mining, whereas the principal form of mining upon which we depend in this war, has been excluded from the concession.

Before the Chancellor replies I should like to ask what steps the Treasury are taking to see that the benefits given under this Clause do not induce the exploiters of mineral wealth to be wasteful, as it were, in its exploitation. Let me illustrate my point by' an example from the coal fields. In the past it has been the practice of some coal getters to throw away millions of tons of the nation's assets in order to work a rich seam without any regard to what was lost in the process. As far as I can gather, there would be an inducement under this Clause to certain exploiters of mineral wealth to work one rich seam of ore without taking out the rest of the coal; they would leave the rest of the coal in the earth and it would, in fact, never be worked. They would be getting the maximum out of the present situation and the rest would be lost to the community. From the point of view of the community I suggest that the Treasury ought to exercise some supervision to see that this position is not exploited to the detriment of the nation's mineral wealth resources.

So far as the last point is concerned, I think the taxation position at the moment is a sufficient precaution against that happening. I do not think the taxation position would allow anybody to go to any extreme lengths with the idea of taking an advantage of the present situation. I feel that we have a sufficient check there. As to the limitations of the Clause, what I have done has been to deal with those minerals which have been brought to my attention—sand, gravel, asbestos and mica. It is in those circumstances that the Clause has been restricted.

Will the right hon. Gentleman tell me how those industries differ from coal in this connection?

I do not think I am called upon for an explanation at this time. This Clause has been introduced to meet the cases put before me.

I beg to move, in page 12, line 2, to leave out

"otherwise than in the form of ore."

The object of the Amendment is to remove an anomaly in this Clause. Companies engaged in mining and the getting of oil are following various practices in war-time which in fact reduce their costs per unit of immediate output, for the sake of getting the maximum production with the minimum of labour, regardless whether damage is done to the future working of the undertaking. That working was probably planned in the first instance to achieve the most economical results over the whole period of the working of the deposit, but for war-time reasons there has been a departure from the optimum long-term method. In Subsection (2), the Clause deals with the case in which, under these special wartime conditions, an undertaking is deliberately seeking to get from the ground ore of a high metallic content. In Sub-section (3), which I wish to amend, a slightly different kind of case is covered, where an undertaking is departing from normal mining practice in order to achieve with 'a minimum of effort maximum production during the period of the war. That lowers its costs—and the immediate result is to increase the liability of the undertaking to Excess Profits Tax.

The lowering of costs in itself would not matter, without reference to the tax; The additional profits made under wartime practices would serve to offset the higher costs which would have to be incurred on reverting to the normal methods of mining when the war is over. But because of the operation of the Excess Profits Tax, the temporary advantage gained through the specially lower costs in war-time is swept away by the Chancellor. The undertaking is then suffering in just the way that this Committee does not want an undertaking to suffer; that is to say, E.P.T. is not only seeing to it that the undertaking is not better off owing to the war, but is ensuring that it is actually made worse off.

Whereas Sub-section (2) covers the mining of metal in the form of ore, Subsection (3) excludes metal mined in the form of ore and deals only with the mining of metal otherwise than in the form of ore. I feel inclined to put a general knowledge question to the Committee: What metal is mined otherwise than in the form of ore? I can think of alluvial gold, but I am sure that the Treasury did not have that in mind when drafting the Clause. If the Committee wishes to find an answer to the conundrum, I fancy it must turn to Sub-section (7), which says:

"This Section shall have effect … as if asbestos and mica were metals."

That is apparently the way in which Subsection (3) will have to be interpreted by the Treasury and if necessary by the courts. It seems a roundabout way of doing things. But there are cases of metals mined in the form of ore—home iron ore is the obvious example—which can receive no benefit from Sub-section (2) because such undertakings are not producing ore of greater than standard metallic content. Why should they be excluded from the benefit which is offered by Sub-section (3) to undertakings which are mining metal otherwise than in the form of ore?

There is substance in the statement which my hon. Friend has made. Within the last few days I have received representations from the Ministry of Supply much to the effect which my hon. Friend has indicated. In the Clause as presented there is a formula in Subsection (2) as to the relief that is to be applied, but when we come to Sub-section (3) the language is of a general character. There is the phrase:

"otherwise than in the form of ore."

The Ministry of Supply have said to me that in some cases they have required the concern not to deal with the matter as is indicated in Sub-section (2) but have asked them to concentrate production in that quarry or mine which will yield the greatest amount of ore at the least cost, even though the normal practice of the concern might have been to produce a relatively larger quantity of ore from other sources. In those cases no question of the difference in the grade of ore arises, it being due to the difference of working conditions in the quarry or mine concerned. In that state of affairs it is a legitimate criticism, and we shall have to consider between now and the Report stage an Amendment to the Clause, which I will put before the Committee. The Amendment would not be in the form indicated by my hon. Friend in his Amendment because I do not think it would satisfy the Committee unless I inserted a formula of some character. Without making any promise, I propose to consider this matter between now and the Report stage and to try to devise some formula which will be satisfactory to the Committee. In those circumstances, I hope that my hon. Friend will withdraw his Amendment.

After the war is over, such concerns will be faced with the worst part of their exploitation, and there may be a danger of unemployment unless Parliament is prepared to subsidise them to carry on the work. Would not this be a case in which, instead of giving the undertaking the benefit now, they might get the benefit of the 20 per cent. reservation after the war, on condition that they did the work in the other seams?

I will look at that matter.

If I interpret the Chancellor's statement aright, the putting down of the Amendment has had a satisfactory effect. I thank him.

My hon. Friend is entitled to have that testimonial to himself.

I beg to ask leave to withdraw the Amendment.

In calling upon the hon. a9nd learned Member for Montgomery (Mr. C. Davies), I would like to suggest that we might have a wide discussion on the principle, on the first of his Amendments and that standing in the name of the hon. Member for Northamp- ton (Mr. Summers). Later, particular Amendments can be moved, if hon. Members wish to secure some small points, but there can be no further general discussion.

Agreed.

I beg to move, in page 13, line 17, to leave out from "in," to the end of the paragraph, and to insert:

"addition to the ordinary annual contribution or premium payable under those arrangements."

I thank you, Mr. Williams, for your suggestion. It will meet the general convenience of the Committee to have a general discussion upon the Amendments standing in my name. Both they and a new Clause proposed in my name are framed to settle what rule is to apply to money set aside for superannuation funds by private companies. The Clause provides certain rules. My Amendments provide a different rule and the Amendments in the names of some of my hon. Friends are a mitigation of the rule in the Clause. The Amendment which I am now moving is the main Amendment. The others will be consequential.

The provision of pensions is a development in industry, and a very desirable development, which has made very big strides during the last 20 or 30 years. It has a quality rather like mercy—it blesses him that gives and him that receives, for the benefit both to the employer and to the employee is obvious. It puts in the mind of the employee a certainty that when he reaches old age he will not be faced with a miserable 10s. a week old age pension on Which to exist. So far as the employer is concerned, he gets employees who are satisfied, and there is, more or less, a sort of working partnership. If there has been a tendency during the last three or four years to set aside more sums for this purpose, I do not think it is with any intention of avoiding either Income Tax or Excess Profits Tax. I think it is really due to greater co-operation between employers and employees, and to greater consideration being given to the employees than was ever given before.

If such sums are set aside for the purpose of evading tax, then the Chancellor already has his remedy under Section 35 of the Act of 1941. Further, if a man desires not to contribute to the State, in the form of Excess Profit Tax, the profits he has made over and above the standard profit, he can do so by taking a short line rather than a long one. Under the Bill as it stands, if he puts a sum on one side now, with a view to providing pensions, he comes within this Clause. But if he says that in the circumstances he is not able to do so because he will be bearing the extra tax, he can avoid all this by increasing the wages of his employees straight away, or by giving them extra bonuses, coupled, perhaps, with an expression of the hope that they would use the money in a proper way and put it on one side so as to provide for old age, though he could not compel them to do so. That is a shortsighted policy. No one will approve of that. The only objection there can be to setting aside a sum of this kind is that the sum set aside is too large or that the sum is set aside for the purpose of evading Excess Profits Tax. Both these objections can be met. So far as evasion is concerned, it is met by Section 35 of the Act of 1941. So far as overdoing it is concerned I hope that my Amendment would meet that condition.

I think it is important we should consider how these funds are created. When an employer starts a fund of this kind it has to apply to the whole of his staff, whatever their ages and however long they may have been working. Usually he begins by saying, "I will put aside the equivalent of a percentage—say 5 per cent.—of the wages, and you will from your wages pay an equal amount of 5 per cent. These two put together in course of time will provide a proper pension for you at the end of your employment." If the fund remains in existence, say, for 40 years then all will be well. The amount of pension then paid out will be adequate to meet ordinary circumstances. But unfortunately people are of varying ages, and you may get a man who has contributed for only a year and has then reached the age when he can work no more. On the percentage given by the employer and that given by the employee, the amount available to the employee retiring at the end of one year, or five years, or even 10 years, would be negligible and not worth while. So the employer sets aside out of his own pocket, a sum to meet such cases.

He can do this in one of three ways. One way is to say, "I shall provide for you a pension at the time when you come to retire." The disadvantage of that is that the question of whether it is available or not when the employee comes to retire, depends upon the stability of the employer and what he is making, not only when the pension comes to be paid but during the whole period in which the pension has to be paid. There are two other ways. First the employer can set aside a lump sum, put it in the hands of trustees as a pension fund. It is thus earmarked for the particular purpose of paying pensions and cannot be touched for any other purpose. Secondly, he can pay a sum to an assurance company; he can go through their actuarial tables, work the thing out, and say, "When my people retire you will pay a particular sum in pension." Those are the two methods against which this Clause is aimed, as it stands at present.

It will probably be convenient for the Committee if we consider why these payments are covered by this Clause. The very title of the Clause shows what is in mind:

"Payments to superannuation funds, &c., in respect of back service."

The objection is to these sums being set aside, because it is said they would be used in respect of back service. That is a complete misconception of the position. There is no legal right of the employee to claim for back service over and above his wages which have been paid to him week by week. He has made his contract of employment whatever it may be. It may contain no clause, with regard to the provision of a pension but only for the payment of a weekly wage; it may contain a clause with regard to the provision of a pension and it is now desired to increase the pension, and it is increased from a certain day forward. No employee up to that moment, at the time the fund is created, has any right to claim for back service. Therefore, no action would lie for it, and the employer could not be sued. What has happened is that at the moment that fund is set aside and put in the hands of trustees a new agreement is then in existence between the employer and employee for future service. The consideration can only be for future service. The real consideration, of course, is that it makes the older employees as satisfied as the new ones who are coming along; and therefore, there is a better atmosphere throughout the works.

Yet, contrary to all our common law, and also, I might say, contrary to all reason and common sense, the Treasury in this Clause attempt to go behind all that, and treat the new contract as relating to back service. What happens is that when the employer puts down the sum of money, he wants a fair pension distributed among his employees, and he will say, "In computing that pension, there shall be taken into account the number of ears you have served in the past." That is not the only computation he will make—very often. it will depend on the position of the man at the time of his retirement—but this is one of the ways in which the computation can be made. What is the present law? It is contained in Section 33 of the Act of 1940. Prior to that Act, all such payments were allowable in computing profits. But under that Section in computing profits for any year only such payments are allowable as the Commissioners think reasonably and properly attributable to that year, and any payment in excess of what the Commissioners regard as resonably attributable to that year shall be attributable to other years, just as the Commissioners think fit. That means that, instead of taking the lump sum which the employer had set aside, and taking it away from the gross profits for that year, the Commissioners are allowed to split it, and to attribute it to a series of years. One would have thought that the Commissioners would have said, "We will split it up over the years ahead." That is 'precisely what they did not do. They saw the words "back service," and said, "We will now split it backwards." That reopened all the assessments, leaving a state of uncertainty and chaos throughout the country. There was a storm of protest, which was so great that at last the Commissioners themselves set down a test case.

That came before the Board of Referees, and the Board decided that that method of splitting and counting back was wrong. The right way of doing it was to count it on the years ahead. The Board of Referees said, in that instance, "Just for that particular case, the right way to divide it is the way we have hitherto done in regard to Income Tax, and we will apply the same rules." While that case was waiting, a number of people settled their cases with the Treasury. The Exchequer then said, "We will not allow this sum as a deduction at all for this particular year or for any future year." That was bad enough. But they went further and said, "Now that you have paid it, and cannot touch it again, you have, to that extent, reduced your working capital, and so your standard profits will be reduced, according to the statutory percentage of reduction, so that in future years your Excess Profits Tax will be all the greater, because' you have this year set aside this sum." So it was a double penalty. The Chancellor of the Exchequer was asked a Question by an hon. Member, and he replied that this was the practice of the Income Tax Commissioners. Unfortunately, there had been a case which rather reversed that, but he proposed to introduce a Clause which would reestablish this practice—which had been in existence only six months—as the right practice. That is the reason for this Clause.

If the Clause becomes law, two results will follow. Not only will the payments be disallowed for that particular year, but, as I have explained, the working capital will be reduced, and, therefore, the statutory standard will be reduced. If the employer has been accustomed up to the present to pay the pensions by an agreement, those amounts can be deducted. Now, instead of doing that, he sets aside a sum, and gives it to an insurance company, and tells them to pay the pensions in future. Three things will happen to him. That sum will not be allowed as a deduction in finding out what his excess profits are. His capital will be reduced as a result, and his profits will be reduced, because he is not paying the sum, but the insurance company will be paying it. I am sure that the Treasury have not realised another effect of the Clause. The cheater, the evader of the tax, is better off under the Act of 1941 than the honest man trying to work a proper scheme under this Bill. A man trying to dodge the tax sets aside this sum for that very purpose. Under Clause 35, his dodging can be disregarded. The sum is then. regarded as being still in his possession, as if he had never paid it out, so, in his case, the only result will be that, for the moment, that sum will be treated as part of his profits. But in future, in as much as it is treated as never having been paid out, his working capital will remain the same and so his standard profits will be kept up. Therefore, I presume that the Treasury in future, in order to get more Excess Profits Tax, will say, "Although this fellow is a criminal, an evader, and a dodger, we will say nothing about it, because it is better to treat him as an honest man and get more."

Under the Clause as it now stands the punishment for the honest man will be much greater, because his standard will be reduced by the amount of' capital, and in future the difference between standard profits and the profits he is making will be all the greater. I am sure that that is not what the Chancellor desires. He is fair and reasonable, and I know that when these matters are pointed out to him he likes to go into them with the very greatest care. I am proposing in my Amendment that the sum which has been put on one side shall be treated as a payment but not for that one year; that it shall again be split and divided in the following years in the same proportion and according to the same tables as one assesses what the capital sum you are paying in would have to be in order to provide these pensions. There are actuarial tables used for that purpose, and these could be applied in exactly the same way. The spread would be forward instead of backward, and the Chancellor would get a fair proportion of the profits in future years.

One alteration I have made is this, in case it should happen, and it could only happen in a very few instances. There are a great number of older people in a particular firm who will suddenly come upon the fund in the next three or four years, and it would not be fair that the spread-over should only be for a year or two, and I have suggested that the minimum should be seven years. That again is a matter for the consideration of the Chancellor. I suggest—and I hope there will be a discussion in Committee on this —that the Chancellor should hear what the Committee has to say on these matters and take them into consideration between now and the Report stage.

I am glad that it has been thought fit to give considerable scope to the one discussion and to take the discussion on a number of Amendments to this Clause simultaneously. The Mover of the Amendment that has been called described the Amendment standing in my name as modifying the effects of the Clause devised by the Chancellor of the Exchequer, but that is true of all but one, for there is one Amendment which seeks to cut out the entire Clause. I hope that it will have been apparent that great exception is taken to this Clause from many points of view. I do not propose to burden the Committee with an analysis of the amending of the Clause as it stands, for we are indebted to the hon. and learned Member for Montgomery (Mr. C. Davies) for a very fair exposition on that score. There are one or two points I would like to add, and I would also like to emphasise some of the fundamental principles which I believe are worthy of the attention of the Committee. He showed how, on the merits of the cases which have come before the Treasury, they took the point of view that payment in connection with these pension schemes should be spread backward over the years that had already past rather than forward. He pointed out how that was a false assumption in his mind, because there were many other considerations beside the number of years the employees had spent with the firm which it was proper to take into account.

Many of the pension schemes for Government servants, I believe, take great account of the remuneration of the employee during the last year of his service, and that in itself may affect at least as much what his pension shall be as the number of years he has served. But apart from the actual merits, what seems to me a very dangerous precedent is where there is conflict of opinion as to what is a reasonable thing to do between the Treasury on the one hand and the citizen or company on the other, and the independent tribunal or court of referees gives a ruling; and the Government at a later date come forward and introduce a Clause in the Statute to override the opinion of that tribunal and make the original opinion of the Treasury valid. I understand that where the referees are obliged, because of the nature of the wording of the Qause, to find in favour of the company or citizen, that clearly demonstrates that a change in law is wanted and that to avoid the technical point there is good reason for a fresh Clause. But in this Clause it was not some technical quibble or action which the original drafters of the Clause failed to take into account, but it was a studied argument as to whether a back- ward spreading or a forward spreading is ,the proper method to be adopted. Therefore it was not a quibble in any sense at all.

There is one point, however, in connection with the case which went to the referees which I would like to bring out. Having decided that it was proper in their view to spread the lump sum forward, for want of a better reason, they said they would follow the practice of Income Tax and divide the lump sum payment over six years. But that was, in my view, unduly generous and meant that if E.P.T. were retained for six years, the entire lump sum would be absorbed at the expense of E.P.T. Therefore in any fresh method that may be devised it seems a fair proposition to the Treasury in this instance to spread that sum over many more years than six because that will represent more accurately the number of years put into the fund to make up what the employee himself has been unable to find.

The Mover of the Amendment showed how it was possible for a company which wished to escape E.P.T. to distribute its profits and at the same time to appease its employees by increasing wages, whereas there are many good reasons why it could equally achieve the same result by introducing a pension scheme. Whereas on the one hand the high wages would be absorbed at the expense of E.P.T., under this Clause the pension scheme is at the expense of back wages. In these times—and we are speaking of war-time and E.P.T. conditions—the one form of increased advantage for services rendered which it is desirable to make is that of a deferred payment rather than one which puts additional money into people's pockets to spend against inflation. Therefore, by making it less attractive to introduce a pension scheme than put up the wages, the Chancellor is himself encouraging a policy directly contrary to tax that he is advocating in connection with inflation.

There are one or two other points upon which I must touch and which have not been mentioned as yet, and I am doing my best to avoid repeating much of what has already been said. There is a very strange reference in Sub-section (1, b). It has been pointed out already that the Treasury have reasons why back-spread- ing should be the practice in reference to back service. But here in this Sub-section they go to the length of assuming that back service for the employer is that service which was Trade to another employer before he joined the company issuing the pension scheme. It says in Sub-section(I, b) that this arrangement is

"in respect of back service (whether rendered to the person carrying on the trade or business or not),"

This means that if a man joining the company now issuing a pension scheme has had two years with him and 20 years with his predecessor this 20 years may be taken into account in assuming the amount of back service which may be taken into account.

There is another point. There will be companies which started pensions schemes maybe 10 years ago and as a result of their experience have found it necessary to pay some additional sum to insurance companies or add to the fund they themselves have created to make a proper actuarial balance. That is in no sense related to the current basis. The scheme was there many years ago. But a new payment is not to be related to the old pensions scheme and treated as such, but is to be treated as something entirely new, which penalises a firm for a scheme which has not been introduced now but which might have been introduced 10 years ago. The joining of modifications of an old scheme with an entirely new scheme seems to me an unreasonable way to go about it. I would like to draw the attention of the Committee to the strange wording which appears in Paragraph (ii) on page 14 of the Bill. There the question is what tax it would be proper to take into account. The remarkable statement is made in the paragraph that

"statements of the parties concerned …shall not be taken as conclusive."

I have never heard it suggested that any of this Clause is deliberately pointed at people seeking to avoid their obligations, but the wording here can be construed, in my submission, to mean that a perfectlybona fidetrader, bringing forward evidence to show that he is bona fideand that he is completing negotiations which have been on hand far some time, will have that evidence ignored. These words strike me as very strange in this context.

I would like to conclude by emphasing the fact that under this Clause as it stands a bona fide trader, anxious to follow a policy, which is recommended on all sides and by Sir William Beveridge, of introducing a pensions scheme and adding all such amounts as the State may think it proper to provide, is liable to be in a worse position than a criminal who deliberately sets out to evade E.P.T. I hope the Committee will not consider that the challenge made to this Clause in its present form is an attempt on the part of those interested in it to have lump sums which have been spoken of completely paid at the expense of E.P.T. There is no such suggestion. It is thought proper that some part of the lump sum should be taken at the expense of E.P.T. The Amendment suggests that that part should be the amount represented by the actual pensions paid, and I for one regard that as a perfectly reasonable method. There will also be a twentieth part by deciding that the lump sum shall be spread over a period of 20 years hence. There are various ways in which it can be done, but some part is a proper charge without seeking to get behind the spirit of the Excess Profits Tax as such. I hope the Chancellor will take into account the views which have been put forward and show that he is not desirous of penalising reasonable and progressive bona fide firms to a degree which a criminal himself is not called upon to bear.

It may be convenient if I say a few words on this matter now, but before I do that I would like to tell the Committee that I think it would be for the convenience of everybody if we did not proceed any further with the Bill to-day than the consideration of its Clauses and take the new Clauses on our next Sitting Day. I think that would enable us to finish in reasonable time today. We have made very good progress, and I do not want to press the Committee to sit late. I think this arrangement will not make an undue tax on the patience and efforts of the Committee, to whom I am obliged for the progress which has been made so far.

In regard to this Amendment, I would propose that after hearing anyone else who wishes to speak on it that I should take into account any suggestions which have been made, and which might be made, in relation to this Clause between now and the Report stage and consult with those who are particularly in- terested, to see whether there is any way in which the suggestions can be met. That will relieve the Committee of the necessity of going through the detailed Amendments on the Order Paper. Hon. Members can be assured that I have only one object, namely, to confer with anybody interested in the subject to ensure that the right and fair thing shall be done by the taxpayers of this country.

Anyone who has heard the observations of the hon. and learned Gentleman the Member for Montgomery (Mr. C. Davies) and my hon. Friend the Member for Northampton (Mr. Summers) might well say, "What is all this about? How reasonable these two gentleman are What is behind all this? Why is the Chancellor taking such an acute interest in these matters? It seems to be very unnecessary interference when everything is going smoothly. Why is all this happening?" There was nothing in their speeches which gave an indication to the Committee of what all the trouble was about. My conclusions on the matter are these:

There is no attack whatever on the principle of superannuation funds. We are only too glad, from the point of view of the Exchequer, to see them established, but we want to see them established under proper and fair conditions. We do not want to see the occasion seized as a means of making the great bulk of the payments at the expense of the Exchequer and the taxpayer. In other words, if you are going to do the fair thing by these funds, a proper allocation must be made and undue advantage must not be taken of the situation of zoo per cent. Excess Profits Tax. That is all that actuates me in the proposals of this Clause. Its object is, in the case of a tax which depends upon a comparison between the profits of the chargeable accounting period and those of the standard period, to prevent the undue loading of any period with more than its fair proportion of the total cost of making provision for a pension. In computing profits for the purpose of a war tax like E.P.T., which aims at taking the excess profits arising from the war, there should be allowed as a deduction only the expense in earning those profits. If, for instance, there is a provision of a pensions benefit for service in 1942, that is a proper charge in computing the profits for the year 1942, but, if you are dealing with the provision of a pension benefit for service which relates to the year 1932, that is not a proper charge and the cost of it ought not to be a burden to fall on the State. Those are my general propositions.

The matter arises out of what is the fair thing to be done when a company desires to establish a pension fund, and the question arises how the money is to be raised and utilised for what are called back payments. When you establish a pension fund you want to bring in the whole body of your employees and give them an equal pension, whatever their situation in the firm at the moment, and you either have to find a lump surf, sometimes called an initial solvency payment, or you. have to go to an insurance company and establish pensions based upon back service by means of a separate policy. The Clause is not in any way aimed at the disallowance of a payment because the deduction itself is objectionable. The object is to secure that the payment is not deducted in respect of the period or periods to which it does not properly belong. The provisions in the Clause are the accepted practice that has hitherto prevailed. In adopting this machinery the Inland Revenue do not act as semi-dictators. They co-operate with the people concerned, and, when the question came up, they took the usual steps by which they have been able to maintain their good associations with business and the workers of the country in a satisfactory way for so long. They consulted those acquainted with the matter in the insurance world, and a decision was arrived at that, inasmuch as you were dealing with any payment for back service, that must be related to the period of back service and not what was called forward service. I should have thought that was a perfectly obvious and reasonable thing to do when dealing with the position created by E.P.T.

It may be said, "Look at the precedent of Income Tax." I am not disclosing any secrets of the future when I say that Income Tax is going to continue for a very considerable period, and, if this matter were related to Income Tax only, you might well say it is not hurting anyone and it will not deprive any taxpayer of his proper due if the payment is spread forward. But no one would expect E.P.T. to continue after its object has been achieved, which is to take Too per cent. of the profit out of war. When you say this must be treated in the same way as Income Tax, you are in fact dealing with two matters which cannot be compared as matters are at present. He was a bold man who advised the particular company concerned to take this case to the referees. He did it on a chance. When we come to other matters in the Bill, particularly in the next Clause, we shall find how other people have been equally enterprising with regard to other matters in relation to our taxation affairs. There are a number of people who have more time than my right hon. Friend and myself to look carefully at these provisions and to see whether, by this method or that, some other result might not in fact be arrived at. Whoever advised the company know that, if they obtained a decision as favourable as they desired, a very undue proportion of the sum which would have to be paid in respect of this back service would be taken out of E.P.T. and would be obtained at the expense of the taxpayer.

Anyone who is concerned with the administration of superannuation funds knows that if you have such a scheme and want to be assured that everything is in order and that you are doing right so far as the general practice of the Inland Revenue and the intentions of the House of Commons are concerned, you can submit the scheme to the Inland Revenue, and your anxieties and troubles are at an end, because they will tell you whether the matter is in order. In this particular case no such step was taken. An enterprising appeal was entered, and a decision was arrived at. If I were to submit to it, an unfair burden would be imposed upon the Exchequer. My hon. and learned Friend rightly says that he does not want me to have to abide by that decision, but he wants to put forward some further proposal. I have endeavoured in this Clause to put forward what I think is a reasonable solution, much on the lines of what was previously approved by the House and carried into effect. I will examine the proposal. I do not want to treat unfairly those companies which want to go forward with superannuation schemes, but I want at the same time to see that an unfair proportion of the amount is not put on the State. There are Amendments dealing with the position of those companies which have not gone to appeal, and whatever proposals we have on the Report stage I will bear this matter well in mind. There may be a number of cases where Inland Revenue officers have said to the people concerned, "Do not appeal, as there is an appeal pending and you need not go through all the process yourselves." Where that has happened we shall have to look into the individual cases and make provision so that they are put in the same position as if an appeal had been made.

It has been stated that provision for back service, though not allowed as a deduction in computing profits, will be treated as reducing capital employed in the business. I cannot agree that any allowance should be given in the Excess Profits Tax period for back service payments relating to service before that period. If capital is taken out of the business, it cannot be taken into account in computing the capital employed in the business. If payments were to be included in the capital, this would go far to defeat the whole object of the Clause, because traders would receive under the provisions of the Excess Profits Tax relating to increase of capital an allowance of 8 per cent. on the amount of the payment which is roughly equivalent to spreading the payment forward for a period of 12 years. I wish to assure the Committee that I am not doing this from any desire to harry anybody or to do anything unfair. I only want to act justly. I am prepared to discuss any suggestions with my hon. Friends, and if I cannot satisfy them, we will take another turn on the Report stage of the Bill. If we can sit down together, however, I hope that I shall be able to satisfy them. All I am anxious about is that whatever is done is done fairly and not at the expense of the taxpayer.

I would not have intervened in this Debate were it not for the fact that I have interested myself a little for some years in the establishment of superannuation and pension funds. I hope that whatever happens to-clay nothing will be said or done to prevent the extension of these very beneficial schemes. We have to remember that there are tens of thousands of people who are outside the scope of the State contributory schemes and are included in voluntary schemes of this kind. Whether the Government adopt the Beveridge plan or not, I am assuming that private superannuation and pension schemes will continue in addition to any pensions provided by the State. There is a body of opinion in connection with this specific problem we are discussing which is neither that of the employer nor that of the employed. The superannuation and pensions schemes of this country have connected themselves together into a national association for mutual protection—the Association of Superannuation and Pension Funds. Once the employer and employee have made their contributions the money passes out of their control into a separate fund, and payments are made out of that according to age and length of service. This association cannot therefore be regarded as representing either employers, employed or the Treasury. In consequence it is fair that their view as an impartial tribunal on this Clause should be stated. I will read a paragraph of their memorandum to show how their mind is affected by Clause 22: They say:

"In seeking the amendment of this Clause a distinction must be drawn between those who are genuinely anxious to set up a superannuation or pension fund for the benefit of their employees and those employers who are merely actuated by a desire to avoid the payment of Excess Profits Tax, or in other words to set up such a fund at the expense of the Exchequer."

That is their point of view, and I am not saying whether I agree with them or not. Let me carry the right hon. Gentleman a little further into the intricacies of what is called back service. I helped to establish a small superannuation scheme some years ago, and, therefore, I am familiar with many of the points raised by the hon. and learned Gentleman. When the words "back service" are used it means in fact that the money is to cover future liabilities. I want to impress that point on the Chancellor. Back service refers to the number of years the employee has served the employer, but the lump sum that is paid for back service is to cover a future liability. It is not money that has been earned by the employer during the period called back serivce. Those are some of the reasons which have induced this Association to challenge Clause 22. I am very glad that the right hon. Gentleman has promised to consider the representations which have been made to him.

Here is another point which the Treasury ought to remember. When you establish a superannuation fund for your employees—there may be 20, 30, 50 or 100; you cannot apparently establish superannuation funds actuarially sound for less than 100—what you do in the case of a small number of employees is to open a separate ledger account in respect of each of them, and when an employee arrives at the age of 65 you ask an insurance company to provide an annuity for the accumulated sum. If the hon. Member does not mind my being personal, I get a small annuity myself in that way, and the Treasury take one half of it in Income Tax. That method works all right, and you may pay a lump sum in respect of back service to the account of an employee who is already 50 years of age at the time you establish the fund. There is not, of course, any back service in respect of young people of 15 or 16; the contributions cover their liabilities for the whole of their period of life. But supposing a new employee joins the staff, after having served another firm for 15 or 16 years, at 40 or 50 years of age! When he comes into the firm's employment they may pay £500 or £600 lump sum into the fund in respect of him, and the words used there, under this Clause are "back service" although he has never rendered any such back service to that employer. That is another point that concerns this Association. The Chancellor of the Exchequer poured a little contempt upon my hon. and learned Friend. I do not know why he should do so upon the hon. Gentleman and call him a learned Gentleman at the same time, but he did so. That is his habit, by the way.

Let me say that I am very glad that the hon. and learned Gentleman and the hon. Gentleman on the other side have induced the Chancellor to say that he will look into the problem before the Report stage. There is one thing in what he said about this which appeals to me very much, and that is that in regard to paying these sums into. any superannuation scheme we want to be fair to the decent employer who wants to establish a scheme because he thinks it is right, but the position must be guarded against employers who would establish a scheme merely to avoid their liability towards the Exchequer. As already stated, I do not take sides on this issue, but I am pleased that the Chancellor is willing to look into the points we have raised on Clause 22.

I think the Committee must be very grateful that the Chancellor has agreed to give serious consideration to the points that have been made by nay hon. and learned Friend the Member for Montgomery (Mr. C. Davies) and the hon. Member for Northampton (Mr. Summers). No one would question his deep interest in superannuation and in the social value of establishing a good, sound pensions system, and yet although he has expressed his sympathy the Clause gives no effect to that sympathy but, as it stands, actually, discourages the very thing which he has so much at heart. We must ask him to consider that it is important to encourage all employers, all those responsible for large businesses, to get the maximum of good will among those who are working for them. The establishment now of a sound superannuation system will be of immense benefit in this way in the conduct of the business both at the moment and in the future. Allowance ought to be made for that fact with regard to the incidence of these back payments. No one has suggested that the whole of these payments should be written off out of excess profits, but surely a larger allowance could be made than is provided for under the Clause, for this is a payment which is in the national interest; it is not just in the interest of the firm but in the interest of all the workers and the interest of the whole of our society. That must be borne in mind in corning to a final decision. I want to say how glad I am that the Chancellor of the Exchequer is willing also to reconsider the Sub-section which makes this legislation retrospective. I am not speaking in the interests of any one of the firms to which he alluded, but on general principles I hold that it is not fair or just that we should take away from firms a right which they have under the existing law and make the financial provisions which are being enacted in this Clause retrospective. I hope very much that the Sub-section may be reconsidered, and I am very glad the Chancellor of the Exchequer is willing to give very serious consideration to the other points which have been raised.

I want fo raise one or two points which have not yet been touched upon. I should like to say at the outset that I was very glad to hear what the Chancellor said about the spirit in which he approached this matter, and if we credit him with the desire to view it only in the national interest, I hope he. will give us the same credit. Personally, I think that the principle of spreading the contributions forward is equitable and just, but I am not going to argue that question again, because it has already been covered to-day. I wish to put forward a very moderate request, arid that is that the Chancellor in reconsidering this matter should do so with three objects in view. The first is to see that no employer who makes a provision of this kind shall be worse off as regards tax liability than if he had not done so. The second is that the funds which have been established before anyone had any knowledge that E.P.T. was coming should not be prejudiced. The third is that the scheme should be made practically workable. The hon. and learned Member for Montgomery (Mr. C. Davies) pointed out one or two directions in which the employer who made a lump sum contribution would find himself worse off than if he had not done so, but there was one point he did not mention. I should like to know whether I am correct in this. If what are regarded as back service payments are reckoned backwards, then that will reduce the profits of earlier years. If, for example, I set aside a lump sum of £200,000 in 1942 which covers back service for 10 years, that may be taken as having represented an expenditure of £20,000 a year over those 10 years. If that is so, the annual profits of the firm during the standard years will be reduced by £20,000. Therefore there will be an additional £20,000 of liability to E.P.T. I wonder whether that is intended?

Beyond this I am very puzzled by the wording of the Clause. It seems to me that its effects may spread' very wide so as to cover actual pension. payments. Suppose, for example, I have half a dozen employees of 65 years of age who retire in the course of this year. Suppose I have no pension fund, but, in accordance with my normal practice, I give them each a pension of £5 or £6 a week. These payments may be said to be made in respect of back service. Are such non-contributory pensions that are paid out by a firm in continuation of its ordinary practice to be disallowed?' It seems to me that the Clause could be interpreted in that way.

I put forward these special points for consideration.

Then as regards making the scheme workable, I want to put a question. Suppose a fund had been started, say in 1930, and there were a number of employees there who had entered the service from the. years 1910 onwards. Suppose the contributions were then fixed higher than they would have been if a pension fund had been started at the commencement of those people's service, fixed, that is to say, on a proper actuarial basis so as to give those people a reasonable pension when they retired. It would be a genuine contributory fund. The employees would be contributing, and the firm would be contributing, amounts which were actuarially necessary to pay the pensions which were promised when retirement came; but it could certainly be argued, if I have correctly understood the wording of the Clause, that a proportion of those payments really represented back service payments. The Revenue authorities might come along and say that a man who had entered the pension fund in 1930 but who had, commenced his service in. 1920, might be paying £50 a year, but that if he had started paying his contribution in 1920, he would be paying only £40, and that therefore a proportion of the £50 which he and the company were contributing represented a payment made this year in respect of back service. If that attitude were to be adopted, it would be necessary to make an actuarial calculation as to what does in fact represent the back service liability in respect of practically every employee. I say practically every employee, because I should think there are very few who are now members of a contributory pension fund who started their contributions in the first year of their service. A great majority of the existing business funds were started when the majority of employees had a considerable number of years of service. I put it to the Financial Secretary to the Treasury that if that is the result, then this Clause will create a totally unmanageable situation because the task of calculating the right figure in every case would be beyond the powers of the total force available in the country of men who are capable of making that kind of calculation.

I hope that points like these will be taken into consideration, and that the discussions which the Chancellor has pro- mised will lead to the production of a really fair Clause which will protect the national interest but will riot penalise people for trying to do the right thing.

I hope that as an outcome of this discussion the Chancellor, knowing what the Committee desire, will devise an Amendment which will give that assurance to which the most responsible and respectable employers of labour are entitled. Under the Finance Act, 1921, a number of schemes have been approved, but there is an almost endless variety. The coming of E.P.T. and the existence of abnormal profits which had to be disposed of in some way, gave an impetus to the initiation of some of these superannuation schemes. No Member of the Committee ought to be surprised that, under the cloak of a well-intentioned piece of legislation, people are trying to advantage themselves. I have a good deal of sympathy with the Chancellor and I can imagine that he will try to devise something drastic to meet a case which has 'caused some alarm among sincere and responsible employers.

The points raised by the hon. Member who spoke last are perfectly sound, particularly with respect to schemes which were initiated before there was any breath of E.P.T. and are therefore not under the suspicion of being devices to avoid tax. I cannot see how you can go carefully into allocating exactly what proportion of these superannuation funds applies to each year. That would mean an almost endless calculation, and would not secure final certainty. Expectation of life would enter into it as well as considerations of actual service. I hope the Chancellor will find his solution without involving the necessity of such calculations. This is all the time a prospective liability in actual human values. When a scheme is started, it is an invariable experience that while there is a sense of gratitude for the years of service given, years when wages were probably very low, the scheme is really looked on as a record of a sense of obligation for the workers' future. The employer does not want to feel that anybody who has been associated with his business should be in want.

I should like the Chancellor to look at cases where there is a ruling out or modi- fication of some of these schemes. Many superannuation schemes have been started which are very poor. They represented the thin edge of the wedge; the employers and the boards concerned, sooner than do nothing at all, did something of which they were really ashamed. When the scheme had gone on for a few years, people grew accustomed to superannuation ideas but were rather ashamed of their own tawdry and shabby scheme. They felt that if they were going to do the thing at all, they ought to do it decently. As the Clause stands it would be a bar to that. I am certain the Chancellor of the Exchequer would not desire that this Clause should be a hindrance to turning schemes which are really only apologies for superannuation schemes into proper schemes, bringing them up to a standard of respectability.

In all our discussion on this point there has been a good deal of criticism but not much in the way of constructive suggestion on how to let in proper charges, while putting up a bar against exploitation of the Chancellor's generosity, if it may be so termed. The only suggestion I have to make is that a special Clause should be introduced extending the powers given to the Treasury with regard to the approval of schemes. It seems to me that a basis ought to be laid down and that schemes should have to comply with certain conditions. Our experience has been that in the past the Treasury have been far more concerned about the solvency of superannuation schemes than about the solvency of the firms initiating them. That is sound. The Treasury have identified themselves with the people who were to benefit under the schemes, and I should like that attitude to continue. I remember one instance of a long dispute as to the percentage of interest to be paid on a capital sum provided by the firm which still retained the use of the fund. The Treasury stuck out for 5 per cent. as a minimum. That showed quite sound concern for the human interest involved. I am quite sure the Chancellor would not desire that this Clause should be used to prevent the extension or improvement of superannuation funds and I hope that ways and means will be found to give effect to his desire.

I cannot see how my hon. Friend reads into this Clause a bar to superannuation funds.

I did not say it would be a bar.

I understood my hon. Friend to say that superannuation funds should not be started at the expense of E.P.T. I was astonished also to hear the hon. Member for Walsall (Sir G. Schuster) say that he hoped the Chancellor of the Exchequer would see that no firm which started a superannuation scheme would be worse off.

Would be worse off than if they made provision in some other way.

If a firm starts a superannuation fund it must take the money either out of its own pocket or, alternatively, get it from the Chancellor of the Exchequer. Before E.P.T. was imposed the money always came out of the firm and the fact that E.P.T. has now become part of our taxation system does not seem a reason why the burden should fall on the Chancellor of the Exchequer. If a firm wants to be generous let it be generous, but not at the expense of E.P.T. There is no virtue in being generous and establishing a superannuation fund, if the Chancellor of the Exchequer pays the Whole cost. Calculation of past service may be difficult, but if a firm is going to spread the cost over seven years and E.P.T. lasts four years, then four-sevenths of the cost will fall on the Chancellor of the Exchequer, and that seems a very handsome contribution from the Treasury. Nobody wants to put hindrances in the way of the establishment of superannuation schemes, but if we want to encourage them, let us know what we are doing, and if there is to be any subsidy let it be given direct and not by way of abatement of tax. There is no reason for letting the whole burden fall on the Exchequer.

I am afraid I find myself in total disagreement with the hon. Member for Chesterfield (Mr. Benson). Having been associated for many years with a union that has encouraged many employers, especially in the distributive trade, to set up superannuation funds I have grave misgivings about the Clause and what can be done with it, if it becomes law. I think the arguments used by the hon. Member for Finsbury (Mr. Woods) deserve great consideration and call for a further explanation by the Minister. When it is argued that the cost of a superannuation should come out of the employer's pocket, I must say that in the case of very big firms it is difficult to see any legitimate profits which can be used for that purpose, unless it is at the expense of E.P.T. It is only very small firms with normal profits that can be in that position. It may be that the Chancellor of the Exchequer has evidence that some firms are contemplating using this Clause as enabling them to be generous at the expense of the Treasury, and we ought not in any way to associate ourselves with what is a form of common trickery. At the same time I think there is some explanation that can be given as to how projected superannuation schemes will be encouraged and how necessary funds can be found for a scheme acceptable to the Government and all concerned.

Therefore, I appeal to the Chancellor to make clear to the Committee how this will affect us, and whether it will retard in any way normal negotiations on behalf of the trade unions or workpeople concerned, and where the money will come from, or should come from, when this Clause becomes law.

I rise to refer for a few moments to the Amendment which is down in the name of the hon. Member for Canterbury (Sir W. Wayland), because it raises an entirely different point from that which has been brought into the Debate so far. I am concerned with superannuation funds which are arranged by local authorities, and certain superannuation funds which are a statutory obligation upon local authorities. There are three sources from which local authorities superannuation funds are built up. The first source is a charge of about five or six per cent, on the salary of the employee and there is then a similar payment contributed by the local authority, so that there is practically a fifty-fifty contribution to the superannuation funds. But it does happen that that superannuation fund, built up as I have outlined, may not always be at a figure which an actuary would consider to represent a solvent position. The. Act of Parliament which directs this particular sort of fund says that the local authority may make a contribution based upon a certificate issued by the actuary.

I understand that the first two items that go to build up this particular fund are admitted in arriving at the position of profit and loss but that the third item is to be disallowed. I submit that the Chancellor cannot deal with this case as he has suggested dealing with the other points which have been raised. I put it to the Chancellor that this is a statutory obligation, and I submit that in all fairness, being a statutory obligation, it should be allowed to be brought into the accounts in arriving at profit and loss.

I do not know whether I am intervening too soon. We have had a very interesting discussion. In view of the promise by the Chancellor to get a formula which is fair to the Government and to the taxpayer, and not in any way to discourage the formation of superannuation funds—I hope he can get, that formula before the Report stage—I beg to ask leave to withdraw the Amendment.

I would like to associate myself with the remarks of the hon. and learned Member with respect to the Amendments, a great many of which stand in my name, and to thank the Chancellor for the consideration he has given to the views which have been expressed.

I take it that the promise of the Chancellor referred to the Amendment standing in my name, and accordingly I do not move it.

indicated assent.

I beg to move, in page 15, line 10, to leave out "may," and to insert "shall." I move this Amendment because I feel that the Clause as now worded leaves this matter within the discretion of the Commissioners, and I think that the duty should be laid upon them more emphatically.

If it commends itself to you, Major Milner, and to my hon. Friend, and to the Committee, I should like to avail myself of this opportunity to give a brief sketch of the purview of the Clause. There is a considerable number of Amendments to be discussed on this Clause, and the general argument on many of them will be much more easily understood by hon. Members if that course is taken.

I am in the hands of the Committee, but I should have thought that that explanation' might have been better given on the next Amendment.

Like yourself, Major Milner, I am entirely in the hands of the Committee, and I willingly accede to your suggestion. May I deal briefly with the point raised by my hon. Friend the Member for Southampton (Mr. Craven-Ellis)? This Clause empowers the Commissioners to give directions with regard to the remedy necessary for dealing with abuses at which this Clause strikes. When persons in the position of the Commissioners are enabled to take that action, it becomes a duty upon them to take it in the appropriate case when the conditions precedent are complied with. I appreciate that what is troubling my hon. Friend is whether it is left to them in a discretionary way. I assure him that modern drafting practice, when it is intended that a matter should be left to the Commissioners in a discretionary way, is to insert after the word "may," the words "when they think fit," or words to that effect. The word "may" has been used on a number of occasions, and consistently, to deal with a situation like the present. If we change the word "may" to "shall," it will throw doubt on the use and interpretation of the word "may" in many similar provisions in previous Finance Acts—I can give my hon. Friend many instances afterwards. Therefore, with this assurance, that the wording which has been used will not deter the Commissioners from fulfilling the duty laid upon them by this Clause, I ask my hon. Friend to withdraw the Amendment.

I should like to point out that the Commissioners are called upon to make a decision upon what is a fact. They are not brought in until it has been established that stock has been sold under value. Having established the fact, which may be extremely serious, the Commissioners should decide to take proceedings. I understand that according to the modern interpretation, "may" means "shall," although that is contrary to the dictionary. When a fact is established it should not be left to the Commissioners to decide whether they "may" or "shall" do certain things. They should have no discretion at all. I will withdraw the Amendment provided the Chancellor is prepared to give me some satisfaction that the word "may" is justified in this case.

Does the hon. Member wish to withdraw the Amendment?

I beg to ask leave to withdraw the Amendment.

I beg to move, in page 15, line 29, at the end, to insert:

"Provided further that the provisions of this subsection imposing joint and several liability shall not apply in the case of any person who satisfies the Commissioners or (upon appeal) the Special Commisioners that there was no concert or arrangement between him and any other person upon whom the direction is made for the avoidance or reduction of liability to excess profits tax and in such a case the liability of the said person shall subject to the succeeding provisions of this section be limited to such part of the sum specified in the direction not being greater than the financial benefit he received as is in the opinion of the Commissioners appropriate in the circumstances."

I move this Amendment in the absence of my hon. Friend the Member for South Croydon (Sir H. Williams), and I shall detain the Committee very briefly, because I have already sent to the Chancellor of the Exchequer, who is always very receptive, even if he does not carry out what one desires, the points I would otherwise have given in Committee. Clause 23, as we see it, is undoubtedly a penal Clause. When a new enactment is being put on the Statute book, it behoves us to see that no new criminals are created. We understand that this Clause has been put in just to deal with some particular glaring case that has taken place recently. I am not really concerned about why the Clause has been proposed, I am only reading it as it is before me. No business or professional man desires in any way to aid those who are wishful to take advantage of the law or absence of laws to evade paying legitimate taxation. We look upon such actions with contempt. But under this Clause it will be possible to link up quite innocent people, merchants, traders, stockbrokers and even solicitors, who might be roped in as having taken part in some transaction which at its initiation was legitimate, or of which they had no knowledge. That might happen with regard to an individual. Later in the Clause it is stated that action taken by the Commissioners can be retrospective and that makes the matter more dangerous. Parties might easily be mixed up in the ordinary course of their business and a man of perfectly good faith might be trading with these people—perhaps not the original people but subsidiary people—and find himself in difficulties according to this Clause. I am anxious to know what is the Chancellor's reaction to the notes I sent to him a little time ago. If he is not satisfied with the wording of the Amendments we have put down, perhaps he would, between now and the Report stage, make it clear that anybody who was quite innocent in a transaction and who could demonstrate his innocence, would not be penalised. If so, I think we would be satisfied.

I would like to support the hon. and gallant Member for the Exchange Division of Liverpool (Colonel Shute), in his objections to this Clause. These Amendments try to put the Clause into a form which would avoid the danger of abuse. There is great risk of abuse as the Clause stands at the moment. This question of joint and several liability is a serious question. All parties who are chargeable are jointly and severally liable, and in many cases it would mean that people who knew nothing about malpractices could be charged with offences. Traders, solicitors, accountants and auditors might, for instance, be charged. I am certain that that is not the intention of those who drafted this Clause. This matter should be made perfectly clear. As Sub-section (5) is drafted at present it suggests that where a direction has already been made by the Commissioners the provisions of the direction can be upset.

On a point of Order. Are we discussing the whole Clause now or the Amendment?

As I understand the position we are discussing the Amendment.

Before we had the pleasure of your presence in the Chair, Mr. Williams, your predecessor signified that when the Amendment on the Order Paper was disposed of, he would be willing, if it was the wish of the Committee, to take all the other Amendments together. I gather that that was agreed to by the Committee and that that was the intention. May we take it that it is your wish that the Committee should accede to that?

Certainly, I was not aware of that. If that is the position, perhaps we can discuss the bearing of, all the Amendments.

My hon. Friend implied that if he got satisfaction on the first point, he would regard the whole of the other Amendments as being dealt with under the same heading. In the same way Subsection (7) makes the whole Clause retrospective, and again that is far too wide. The effect should be limited to that part of the Act which is a clarification of the previous law. Again Sub-section (8) gives very wide powers, which I am advised are much greater than those to His Majesty's Judges generally. They are apparently in a position to compel everyone to become a compulsory informer. There seems no reason why their powers should not be limited to giving evidence in the normal way. Phrase after phrase throughout the Clause gives drastic powers which are really very unusual and ought undoubtedly to be limited. If we could get an assurance that between now and Report the Clause will be carefully looked at, so that any of these abuses that might arise could be avoided by a little closer wording, I feel certain that we should be satisfied and it would not be necessary to deal with each Sub-section and each Amendment in detail.

I should like to support my hon. Friends, and I hope the Chancellor will amend the Clause so that it shall be just and fair. Although one might feel that perhaps the draftsmanship is at fault, one cannot also help feeling that perhaps the Commissioners are hankering after powers which they would very much like to have in their own hands. If the Clause stands as it is, whatever assurance the Chancellor gives, as it is not temporary legislation, it might be interpreted in future in a most unsatis- factory way. In regard to the phrase "those who obtain financial benefit," does, the liability extend to innocent parties? Are bona fidetraders buying goods or stocks liable for some acts of their vendors which were unknown to them? Does liability extend to accountants, solicitors and those who take commissions in good faith. I think those matters should be made clear. It should be made clear that these people are not going to be affected by the Clause. A man may be acting quite innocently and yet be liable for large sums of money and with no redress against the original vendor who might have dissipated the funds.

I cannot understand how the phrase "joint and several liability" ever got into the Clause in the present loose form. Joint and several liability is generally concerned with persons engaged in partnership and sharing in profits, or men who have conspired to evade their legal obligations. To bring it in the sense that innocent parties, perhaps, might be joined jointly and severally seems extraordinary. I hope this will be amplified or swept away or explained in some way or other, so that, when the Bill passes, it will be quite clear to those who have to administer it that it rests not merely on an assurance by the Chancellor in this Committee but on the definite wording of an Act of Parliament.

In regard to Subsection (7), I cannot understand how the retrospection has got into the Bill in the way it has. The general purpose of retrospective legislation is that it should be retrospective in regard to the clarification of existing law. That is not made clear in this Subsection. The Subsection is actually a clarification of Section 35 of the Act of 1941, and it should not bring in transactions which were not previously liable to tax. It is of far-reaching effect and should refer only to the sale of stock below cost in accordance with Section 35 of the Act of 1941 as I presume may be supposed. Subsection (8) is a penal Subsection which imposes a heavy penalty up to £500. It must be made clear that the right of appeal is not taken away, for there is no reference to it in the Clause. If these powers are to be given to the Commissioners, they should, at least, be only temporary—during the war. This Bill makes them permanent. I always distrust temporary measures in any case, because one Statute becomes a precedent for another and after all, Statute law is only a matter of expediency for one particular generation. The Commissioners have the right to demand information about a person's affairs from another person who may not be connected in any way with the business. Such a person can be subpoenaed not only for the hearing but also cross-examined in any way in order that the Commissioners can obtain information. How does that affect the confidence between a client and his solicitor? Does this mean that a solicitor can be called upon to betray the trust which a client has always been able to repose in his solicitor?

I understood the hon. Gentleman to say that under Subsection (8) it was the Commissioners who imposed the penalty. It is nothing of the sort. It is the court which imposes the penalty.

I cannot find the reference now.

That is the meaning of the words.

It is not a question of what it means; it is a question what is laid down in the Bill. The court is not mentioned in the penal Clause, therefore we have no right to make any assumption. The Commissioners are given almost Star Chamber powers, certainly inquisitorial powers. There is another point I would like to make about retrospection. It would be fatal if matters which are outside the things envisaged by Section 35 of the Act of 1941 could do away with judgments which have already been made by the courts. That can happen under this Bill. There is nothing to preventit. I have spoken perhaps somewhat emphatically, because I think this Clause attacks the citadel of liberty itself, and I hope, in view of the feeling of the Committee and in view of the expressions we have heard, perhaps the Chancellor will, between now and the Report stage, look into the matter again to see whether he cannot produce a Clause which has been purified in all respects, not one allowing the wrongdoer to escape, but one which will not allow the innocent to suffer.

I only intervene in this discussion to assure the Chancellor that the Committee are not unanimous, nor do they wholly endorse the point of view expressed by previous speakers. The Amendment is intended to prevent certain people from being brought to book and giving art account of whether they have profited by their interest in a particular concern. Why should we allow any to escape their obligations if they are receiving any profit from any company or any organisation? It is fairly obvious that, as the law stands, the Chancellor is riot able to call folks to account in the manner he would wish. I do not mind confessing that some weeks ago I myself was prosecuted for an offence of which I had no knowledge. I did not complain. I am a member of a local authority, and a person who was called the catering manager of a restaurant had certainly defrauded the nation. He had taken unto himself more food than he ought to have had, and he was prosecuted, and the local food committee decided to prosecute the local authority for failing to exercise adequate supervision, and they were convicted. The Chancellor may have reason to believe that certain persons have profited as a result of disposing of a company's stuck under its value. Has the Chancellor not reason to believe that such things are happening to-day? If he wants evidence, he certainly does not need to send out many investigators to find out.

It is not a question of evading the law. It is a question of the Chancellor legislating in such a way that he catches those people who have offended and those people only, and does not bring into his net a whole host of innocent people, and of not giving the Commissioners such powers as a court of law has never had since the days of the Stuarts.

I put it the other way round. I am anxious that the Chancellor shall not allow anybody to escape, no matter who they are or how big they are. I do not think it is a question of the Commissioners wanting to weary Parliament with Clauses to take to themselves powers which they do not require. I believe that some of the glaring cases in recent months in which there have been prosecutions have provided sufficient evidence of what is going on. Those cases have caused anxiety in the minds of the public; they have wondered how people could escape with such benefits as they have obtained through illicit transactions. In no circumstances should the Minister make a promise that will in any way weaken the Clause. Acceptance of the Amendment would weaken his powers, and I hope that he will remain firm. We are not disposed to agree that everybody is being brought into the net to-day or is being handled in the way that he ought to be, because possibly of inadequacy or weakness. We wish the Minister well, and I hope that he will remain firm.

It may be convenient for the Committee if I intervene at this stage and give some indication of the problems with which we are faced in the Clause. My right hon. Friend and I are always anxious to consider any improvement, and we are primarily interested in dealing effectively with the mischief with which we are faced. I should like the Committee to understand what the mischief is in this case. The scheme with which we are dealing works on these lines: The whole of the shares in a company holding substantial stocks, say of whisky, are acquired by a speculator. Having thus obtained control, he arranges for the whisky to be sold to him or to some person under his control at the pre-war manufacturing cost of whisky. He then disposes of the stock of whisky using the company as his agent, at the full war-time market value. The present value may be 20 times the pre-war value. He uses the proceeds of disposing of the stock to pay for the shares, and in some cases to pay extravagant commissions to middlemen who have intervened in the matter.. The shares may have changed hands several times at gradually increasing prices. Finally, in a number of cases, the eventual speculator who purchased the whisky and purports to make the profit, is a person living abroad, whose whereabouts cannot be discovered.

The intention of that scheme is that the Revenue can only assess the person abroad, a man of straw who cannot be discovered, to excess Profits Tax, as the person making the profit, but it is useless to assess him, because he is outside the jurisdiction, is a man of straw, or may have had only a small amount of the profit. The intermediaries may have filled their pockets well. The Commissioner has counter-attacked with the suggestion to which my hon. Friend the Member for Southampton (Dr. Thomas) has referred, under Section 31 of the Finance Act, 1941, and endeavoured to charge the Excess Profits Tax liability on the various persons who really benefited; but under that Section, when the persons affected appealed, the Special Commissioners decided that, although the purpose was clearly the avoidance of liability to tax and they had no doubt about that whatever, the only adjustment which could be made under the provisions of that Section was to charge the whole Excess Profits Tax liability on the whisky company. That was quite useless. The company had ceased distilling, it had sold its whisky, and it had no funds. So the person who really got the profit under the Section which my hon. Friend regards as sacrosanct, would have got away scot free.

I hope I am not taking up too much time, but I want the Committee to understand this matter; and I would like to put the facts in£s. d. I think hon. Members will then understand the question quite well. I call the first person "J" because in the numerical order of letters in the alphabet that is where he comes into the story. First, there is the purchase by "J" from "G" and "H" of the issued capital in "A" company—7,500 £1 shares for £ 210,000. "J" sells to "L" for £222,100, and "L" sells to "D" at £270,000. That is one side of it. Now we get the other side. "A" company sells the stock of whisky to "D"—I told the Committee the amount "D" paid for the shares—£21,940. There is a slight difference between £270,000 and £21,940. Then "D," not, of course, the "A" company but "D" using the "A" company as his purported agent, sells his whisky to "B" company and "C" company for £327,000. Now if the "A" company had sold it to the "B" company and "C" company for £327,000, their liability to E.P.T. would have been £303,897. By the process which I have shown, by the acquisition of the shares in that way and the gradual mounting-up of the matter, I think hon. Members can understand quite clearly how the tax evasion scheme was carried out. I suggest that my right hon. Friend with such assistance as he can get would not be doing his duty if he did not take strong powers to deal with a scheme of that kind.

Now let me sketch as shortly as I can what those powers are, and then I will deal with the specific points which my hon. Friends have raised. The general power for which we are asking in the Clause is that when these two conditions precedent are fulfilled, namely, that trading stocks are disposed of at less than the market value and the stocks are disposed of in such a way that the full Excess Profits Tax payable, if sold at full market value, is not paid or likely to be recovered—that is, if there is this artificial manipulation, a sale at less than value to somebody who has got the controlling position in such a way as to dodge tax—then the Commissioners are empowered to direct that the full Excess Profits Tax shall be chargeable and that the charge shall be a joint and several liability on all the persons who, in the opinion of the Commissioners, derive financial benefit as a result of the transaction or associated transactions.

Complaint has been made about the words "joint and several." I think the Committee will understand the reason for that very well. I have said that in a specific case the person purporting to make the profits is an elusive man of straw outside the jurisdiction, but, apart from that, the Commissioners will often have difficulty in determining how the booty has been shared by the persons behind the scenes who are the real profit takers. Therefore we quite deliberately adopted the principle of saying, "Well, there you are. You are in it, you are jointly and severally liable, and you will" —subject to safeguards which I will make clear in a moment— "settle the question between yourselves as to who is liable for what amount, but we want the money." I wish to make it clear that we have definitely given what I submit are the safeguards which are applicable and which are compatible with equity and justice, but not with sentimentality about people who choose to take this course of action.

My hon. and gallant Friend the Member for the Exchange Division (Sir J. Shute) was concerned with the distinction between the innocent and the guilty in this way, the persons who were concerned and acting in concert in working the scheme and the persons who had merely been concerned in the sale. The obvious case, which I think my hon. and gallant Friend mentioned or clearly had in mind, was that of the original shareholder who sold his shares in an innocent way. That is one class, at any rate, with which I will deal. It is quite true he may not be a member of the group which is engineering the avoidance, but of course we have had plenty of cases in which the original shareholder is really sharing in the avoidance by getting a price for his shares greater than the market value, assuming that the avoidance had not been carried out.

It does not stop there, and I will ask the Committee to consider the three answers there are to my hon. and gallant Friend's doubts. The first answer is that Sub-section (4, b) defines, in the case of the original shareholder—the persons who sell their shares—that the benefit has to be measured by the extent of the price received over the price that would have been received if the stock had been sold by the company without an avoidance scheme. If the Committee pause for a moment and appreciate that, it is a fair way of dealing with the original shareholder to take the difference between the price received and the price that would have been received had the avoidance scheme not been carried out. The second answer is that often where there is a joint and several liability the liability of the people between themselves has to be proportionate to the benefit they have received. That is, if someone has to pay, he can recover from the others according to the amount of booty which each of them have got. The third answer is, and I would ask the hon. and gallant Member to note it, as I think it is the one which will assuage the doubts he had in mind, is that the proviso of Sub-section (I) enables the Commissioners to distinguish between the various persons liable to pay. This is to enable them to distinguish between the original shareholders and to treat them apart from other persons who have engineered the avoidance. Thus they can apportion between the original shareholders, who may have made a profit of £50,000, and the perpetrators of the scheme who have made, say, a profit of £150,000. I suggest to the Committee that that is a completely fair way of doing it.

In a matter of this kind one has to leave it to the Commissioners to make apportionments, as the Commissioners are familiar with it in many fields. Here we are saying that they will distinguish between the classes of people who are connected with the scheme. I hope that I have given the Committee a general idea of how this scheme is worked and how we propose to deal with it. Now I only want to answer the specific objections that were made. My hon. Friend the Member for The Wrekin (Mr. Colegate) objects to Subsection (5) because it says that

"a direction under this section may be given notwithstanding that a direction in relation to the transactions in question or some of them has been given or might have been given under section thirty-five of the Finance Act, 1941."

I see nothing wrong in that. I have explained that that Finance Act did not go far enough to catch this scheme. As my right hon. Friend has said, there are certain persons sitting thinking all the time of ways of getting through the Finance Act. They have found this way, and we are now taking the necessary weapon to counter-attack their attack on that Finance Act. In my submission, there is no harm when, because you have tried the only weapon you had, and that has not proved sufficient, you take another weapon into your hand and try that. With regard to Sub-section (7), my hon. Friend objects to its retrospective character. I do not know whether he was in the House when my right hon. Friend the Chancellor dealt with this matter. I will spare the Committee from hearing me read the whole of it, but on 10th November last year a Question was put to my right hon. Friend. My right hon. Friend said that he would take the powers, and that the powers would be retrospective. Everyone who goes in for a tax-dodging scheme does so with his eyes open to the possibility that Parliament will take retrospective powers. Retrospective powers have been taken in at least four Finance Acts to my knowledge, and it is a perfectly proper way.

On Sub-section (8), my hon. Friend objected to the Commissioners being entitled, by notice in writing, to ask for particulars. Why should they not be entitled to ask people for particulars? If the people are doing something which is not wrong, the particulars will come, and nobody will suffer any harm. My hon. Friend raised the question of solicitors' privilege. I am not going at this stage of the day to give the Committee a lecture on solicitors' privilege, but my hon. Friend knows perfectly the limits that are laid down. If he wishes to be reminded, he has only to look at The Queen versus Cox when he leaves the House, and the position will be made perfectly clear. On the question of penalty, I should have thought that the word "judgment" made that clear. I have endeavoured to deal with the points that have been made and to give a picture of this matter. I want to assure the Committee that no question of the serious character of the mischief would ever prevent me from looking carefully at a penal provision. But that we should in any way treat actions of this kind in a sentimental or soft way is something which, I submit, would not appeal to the Committee, and, if I may say so, it does not appeal to me.

The Solicitor-General has explained with very great lucidity and convincingly the reasons for the inclusion of this Clause. It was difficult for him to explain the complicated transactions through which various people go in order to make money in these rather devious ways, but he explained the position and went through practically all the letters of the alphabet only leaving out "X," the unknown quantity, which presumably is the man who drank the whisky. I and some of my hon. Friends are a little alarmed as to whether the Government have not drawn the net rather widely so that it will include possibly a number of innocent people. There is the possibility that at the end of this long chain through which the goods or shares pass the final person who buys the goods or shares may be a perfectly innocent person.

The final person cannot be an innocent person because he is the person acquiring both the whisky and the shares, acquiring whisky at the pre-war cost and selling it through the company at the war-time cost. Therefore on no view of the facts can he be innocent.

I am talking about the person who buys it at the war-time cost. Surely he can be included in this. I understand that the final person who bought the whisky may have bought it in good faith, and will perforce be brought in.

That last person is not making a profit, therefore there is no question of his being brought in.

I am not at all sure that that is the governing factor, and perhaps my hon. and learned Friend, will look into that particular point. There is also the case of the banker, who, some time during the transaction, may advance money in good faith to one of the persons concerned against whisky in bond. Supposing action is taken under this Clause and all the rest of the men have tidied away the fortunes they have got, is there not a possibility that the banker may be brought in although he acted in good faith and was perfectly just? The main argument which hon. Friends and myself put forward is whether in fact the Clause has not been rather too widely drawn We are all agreed, I am sure, that we do not want to include innocent people with the guilty. Then there is the question of retrospective legislation. I can see that in cases such as a Finance Bill you have to a certain extent sometimes to indulge in it in order to catch cases of obvious evasion. That is another thing. I hope that Parliament will avoid, in all cases other than these difficult ones, the practice of retrospective penalties, because it is completely foreign to our general ideas.

I listened with great interest to the hon. and learned Gentleman and I agree that the Chancellor of the Exchequer has the right to stop these improper transactions, but it is a pity that the Solicitor-General did not direct himself to the purposes of the Amendments. His subject had not the remotest relationship to the Amendments, which are designed to protect people who are entirely innocent against an abuse of executive power. My hon. and gallant Friend has just mentioned a case in connection with an improper transaction in whisky. The whisky was placed in bond in the custody of the Chancellor of the Exchequer. The bonded warehouse is ultimately under his control. The Chancellor in his official capacity was getting some profit out of it. In the course of normal business a banker was asked, to provide money on loan on normal commercial terms. He did so and obtained financial advantage out of the fact that one of the racketeers had arranged with the warehouse under the control of the Chancellor, which, also, I assume, obtained some profit and, therefore, the Customs and Excise jointly and severally come into the business. It is a normal transaction of financing a commodity. The whole of the speech of the Solicitor-General was directed to a particular transaction, and in dealing with that he invented a gigantic instrument of oppression which may hurt masses of the people.

No.

Oh, yes. The noble Lord has not read the Clause; he does not understand it, or he would not interrupt. He is full of enthusiasm about a subject of which he knows nothing, and perhaps he may learn a little shortly. If the Commissioners do not give a direction with regard to apportionment, all sorts of people who are absolutely innocent are caught. The Solicitor-General has not devoted one word to the text of the Amendment—

None of us have read it; we are all foolish people.

I am trying to confirm the noble Lord's opinion of himself.

The hon. Member is the only person who knows anything about it.

My hon. and gallant Friend was kind enough, as I had a constituency engagement, to move the first Amendment for me. Let me take the case of Sub-section (4). When rich people die they sometimes have very large holdings of shares in an individual company. What do they do? The Chancellor wants his Death Duties. If a large block of shares is thrown on to the market it crashes the market, and that, in the long run, would not be of advantage to the Chancellor or anyone else. What is the customary and sensible procedure? The executors approach trust companies and institutions of that kind and say, "Will you take this block of shares over?" Naturally, it is at a price below the market value, because they have to take the risk of fluctuations in the meantime and they have to peddle them out over a substantial period of time so that they do not crash the market. That is a perfectly legitimate transaction which is undertaken by trust companies and institutions definitely in the public interest. They make a profit if they handle them intelligently and slowly. The shares may be standing at 22s., and they made decide that 20s. 6d. is a fair price to give to the executors, the 1s. 6d. representing the payment to them for the work they have to do and the risk they have to carry. As I have said, if they are intelligent, they finish with a profit. That transaction is to be made, I understand, an illegal transaction by the Chancellor, by this Clause as it stands, all because a racketeer has been holding whisky off the market. That is why we have been very short of whisky. The Excess Profits Tax makes it scarce, not the absence of it. People holding it have said that it would be to their advantage to hold it until E.P.T. has gone and then make a profit. Somebody said to me recently, "Do you want to buy 300,000 gallons of whisky?" and I replied that it was rather more than I anticipated consuming during the rest of my life and that I was not interested. But what about the man who is drawn into this transaction through performing a normal or professional function, who gets paid for it, makes a profit out of it and has no knowledge of tax avoidance or any improper motive?

It is all very well for people to get excited and say we have to stamp out the black market. I agree, but I see no reason why innocent people should be punished because inadvertently they played some part in a transaction which they had not the faintest idea was an improper one. I earnestly ask the Solicitor-General to apply his mind afresh to the problem and make a speech which has some conceivable relationship to the Amendment.

My hon. Friend always approaches these problems in a most disarming way by addressing the Committee as though no one had any sense except himself, telling the Government that they are half witted and telling those who do not agree with him that they have not read the Clause. I do not accept any of his propositions. The Solicitor-General made a convincing case for the Government, and, so far from its being true that we have not read the Clause, many of us have come across experiences in our own business life of people who should not only be punished but should be imprisoned for the type of offence that is being dealt with under this Clause. What are the arguments, apart from my hon. Friend's complimentary references to the mental deficiencies of the Solicitor- General and myself, which we all accept, because my hon. Friend is sui generis in this respect? I have never known anyone so confident of his own ability, though certainly none of us resent it.

What is the case which the Government put forward and which we support? The hon. and learned Gentleman, in a convincing and lucid statement, referred to a transaction which is a disgrace to the country. He pointed out that the people who were engaged in this particular form of transaction had been engaged in it for some time but, by inadvertence—because even the Treasury cannot catch every potential criminal—it was not possible so to frame the previous Act as to catch these people. Therefore the Chancellor very properly says, "Not only are we going to fine these people for what they have done, but we are going to recover the money that they have improperly made at the expense of the public and of everyone fighting for the country." My hon. Friend the Member for The Wrekin (Mr. Colegate) says, "That is all very well. We agree that it should be retroactive, but are you sure that, in making it retroactive, you will not catch any innocent person?" and he asks for an assurance that innocent persons will not be caught under this severe penal Clause. You do not batch many birds with that sort of salt. People who are engaged in equivocal operations of this kind do it with their eyes open. No banker of any importance would be such a fool as to lend money on whisky which had gone through the black market.

The sort of argument used by my hon. Friend would prevent not only the Chancellor but any other Minister of the Crown from dealing with black marketeers. The associates of people who are working in this sort of market, the solicitors who work for them and counsel whose opinion they seek, know perfectly well the type of client they are dealing with. It is no use the hon. Gentleman opposite shaking his head. There are people who are whole-time engaged in the City of London, counsel and solicitors, in giving advice to people on how to evade taxation. It is their business. Everybody knows it, and nobody can deny it. Therefore, if people of that type find themselves involved, it is right that they should pay the tax. I will give a bit of advice to my hon. Friends. While I am sure their intentions are innocent—it would be a gross abuse of the Rules of the House to suggest otherwise—I would not show undue tenderness to people within or on the verge of the black market. It is laid down clearly in the Clause that only those who financially benefit from these transaction will have to suffer. There might be an odd case here and there of people who do not benefit, and the Government might deal with them by an Amendment.

The Committee has had a grand opportunity of weighing up the merits of this Clause. I did not know anything about the Clause or the Amendments until I heard the discussion. The statement made by the Solicitor-General has convinced everyone of the necessity of the Clause. He made a damning indictment of the methods of business that are being carried on.

In one case only.

That one case showed that £100,000 was made out of certain things, and the people got away with it. When statements of that kind go out to the country the country will want to know what the House of Commons is doing to watch these people. If this Clause will protect the State against that kind of thing, it is a proper Clause to pass. The hon. Member who defends this kind of thing—[HON. MEMBERS: "No."] He usually seems to be at this end of the stick when this kind of thing comes up. When I see Amendments in his name on such subjects as this I am always suspicious. There are two sides here—those who protect big business and those Who try to defend the workers. When those of us who defend the workers hear of this kind of thing going on it makes us suspect the tremendous amount of trickery and dodging that is going on in high finance. I hope that the country will read the statement of the Solicitor-General and that they will demand from Parliament that there should be stricter control over this kind of thing. While we are asking the workers to save and do this, that arid the other for the war effort, we find that profits are being wrongly made, and when we endeavour to get hold of the people responsible Members get up and object, saying that we will get hold of innocent people.

I want to make it clear that we are not defending anyone, but we deplore a method which tries to catch hundreds of innocent people in order to catch one guilty person. Hard cases make bad law.

If a person is innocent, he has nothing to fear, and nothing can be done to him. Those who undertake prosecutions have to be very careful. They do not go forward with a case unless they feel pretty sure of their gound. We all know, as the Noble Lord has said, that it is going on, going on pretty strongly, and if this is the way to deal with it, I say "God speed," and the Government will have all the support they want from this side of the Committee.

There are one or two points which I should like to have cleared up. There is a difference of opinion in the Committee as to what is the meaning of the words "after judgment has been given." It is possible that the Solicitor-General made it clear to some Members of the Committee, but I did not hear him, and I think it is very necessary that we should understand what those words mean. Judgment by whom? Judgment by the Commissioners, judgment by the Special Commissioners, or judgment by a court of law?

A court of law.

I am much obliged. That is very important, and it should be made perfectly clear that there is an appeal from the Commissioners. Another point I should like to put before the Committee is that this Debate has arisen from the first two lines of the Clause:

"Where any of the stock in trade of a company is disposed of otherwise than for at least its full market value."

For the first time, I believe, in the history of Finance Bills we have introduced the term "full market value." We are well aware that when the Inland Revenue are going through the accounts of a company and looking at the stock as it has been valued there are two valuations that may be taken. One is the, cost of the goods and the other is the market value of them. Here for the first time we have "full market value" introduced. I am not going into the question of the whisky trade and the example which was given by the hon. and learned Gentleman, because we are all agreed about that, but there are other businesses beside the whisky trade. The cotton industry, the linen industry, the steel industry are all brought in, because it simply says "stock in trade of a company." It may be any company. They are all lumped in the same category as the whisky trade. The difficulty which may be experienced in arriving at what is "full market value" is one which has been appreciated for years with regard to values at the time of stock-taking. This is a matter which the Treasury ought to look into again. It is a very serious matter and is worthy of extra consideration. I do not want an answer now, but the Chancellor ought to give us some explanation of it before we finally part with the Bill.

The hon. and gallant Member for Penryn and Falmouth (Major Petherick) and the hon. Member for South Croydon (Sir H. Williams) have drawn a red herring across this trail. I hope it will not deter the right honourable hounds opposite. As I read the words of the Clause, it is quite plain that a banker could not be penalised.

Why not?

Because he has lent his money for a banking operation and has received interest on it. The Clause says that the direction shall be given against

"the persons who, in the opinion of the Commissioners, obtained (but for this section) financial benefits as a result of the transactions aforesaid,"

It appears plain that a banker has obtained his interest, not as a result of the "transaction aforesaid" but as a result of a simple banking operation, and will not therefore come under the direction.

Would the hon. Gentleman object to an Amendment which would aim at making the matter clear?

I have great confidence in those who are dealing with this matter.

I think there has been a certain amount of misunderstanding in regard to the question of cost. All goods sold go to the books of a company at their full market value. This provision refers only to goods which are disposed of. In the normal way they would become sales and not stock-in-trade.

We had from the Noble Lord one of the most extraordinary statements I have ever heard in this House, when he said that no bank or innocent person could be engaged in a criminal transaction without being aware of that fact. I need only remind the Committee of the Hatry case in which banks, corporations, and hundreds of innocent people were involved. To allege that such organisations could not be engaged in such transactions without knowing that the transactions were criminal, is to make a mockery of things.

I can only say that I had not the remotest idea about the story that has been told as to whisky. I was simply dealing with the Clause as it stands and I would still ask hon. Members to read it in the way that I read it. I still say that it is not a Clause to which we ought to agree; but, in the circumstances, I have no alternative but to beg to ask leave to withdraw my Amendment.

I should like to ask a question. If a Motion is put down on the Report stage that the Clause should be left out, does the Chancellor of the Exchequer think that by that time he would be able to reconsider the drafting? The Solicitor-General did not deal with the Amendment but only drew attention to a matter which muddled the minds of the Committee. [HON. MEMBERS: "Not at all."] Oh, yes. He drew attention to a discreditable transaction. If the object of the Clause is to deal with a specific transaction, that is one thing. But it goes far beyond that object. Any trader who, in order to close up a business, sells off his stock at less than he might have sold it at, if he had continued trading, will be caught under this Clause. [HON. MEMBERS: "No."] Certainly, and it is no good Ministers shaking their heads and saying "That is not our intention." Once a thing becomes an Act of Parliament it is the duty of certain people to administer it. If anybody sells below cost and somebody else buys the stock cheaper than the normal wholesale price, and subsequently sells it and makes a larger profit, he is brought under this Clause. It is no good the Solicitor-General shaking his head. A vast number of wholly innocent people may be brought under this provision. The case put against the drafting of this Clause has been blurred by the discreditable transaction described by the Solicitor-General, and the Committee have not applied their minds to the aspect of the Clause about which some of us are perturbed. Therefore, I would ask the Chancellor to give us an assurance before we part with the Clause that he will examine the arguments put forward. All the Amendments were designed to secure that innocent persons shall not suffer injury because evil people, with whom they do an innocent transaction, have done evil transactions.

I would also press the Chancellor or the Solicitor-General to examine the Bill in order that it may be made clear that the Commissioners, who are civil servants, should not have sole power and that if they find against a subject, then the subject should have the right of appeal to the courts. The final word should rest, as always, with His Majesty's judges. We should make it perfectly clear in the Bill that the Commissioners are not to be armed with final power.

I say at once that, of course, I will examine any matter that is put forward in the Committee. It is my practice when a Bill has been through the House in Committee to go through all the observations made in conjunction with my advisers, and in such a case as this with the Financial Secretary, and carefully to weigh those observations to see whether a case has been made for anything further being done. I shall do that with this Bill and with this Clause. But I am bound to say that I hope these observations of mine will not foster any hopes that I may deal with this Clause in such a way as to show any weakening in the Government's attitude. This concerns not only one transaction. I regret to say there have been a number of transactions of this kind. It is, I think, a disgrace that people should, at this time of all others, lend themselves to transactions of this character. I am surprised that more Members of the Committee have not got up to suggest that instead of a civil penalty some criminal penalty should be imposed. There is a great deal to be said for that, because this is very much akin to a black market offence. It is an endeavour to make money in a way that I think must be abhorrent to all. Equally we must not be led away by our feelings to do anything unfair or anything calculated to bring misfortune on innocent people. I must say I have looked with great care at all details of these cases and I find it very difficult to imagine anyone connected in any way with these cases being able for a moment to pretend that there is anything innocent about any of them. Take the case of the banker. Any banker must be an awful fool not to be, at any rate, put on his guard to make proper inquiries.

It is on your warrant he lent the money.

Anybody who has seen any of these transactions must have the greatest difficulty in finding any appearance of innocence. It is only fair to the country and everyone concerned that we should not in this House of Commons treat with the slightest leniency any transaction of this kind.

There is just one point. The Chancellor said that the banker must be a fool? May I explain—

If I might remind the hon. Member of it there is an understanding, and we have had the discussion on the first Amendment.

This is only a point of correction. The Chancellor said the banker must be a fool. The banker's authority for loaning money was a warrant on a certain amount of excisable liquor which had not paid duty and which was in a bonded warehouse authorised by the Chancellor. The stuff was there and a normal transaction like that does not make the banker a fool.

Up to the present we have not had a word of explanation from the Government of the terms of, or the reasons for, this Bill. I make no complaint of that, because the Second Reading came on at a late stage, at the end of a long Parliamentary day, in a very thin House, and no question was raised about it. I would ask the Joint Parliamentary Secretary on this Clause to say a word or two, and in particular to explain whether this- is a Bill which has been agreed to by all the parties concerned.

I put down on Second Reading a reasoned Amendment for the rejection of the Bill, not because I objected to it but because I did not like the way it was drafted. The Bill proposes to use for other purposes money which became available to the railways under the Derating Act, 1929. I believe that about £1,500,000 per annum is involved, which was designed to reduce rates on coal for export and certain agricultural produce. For the moment, the money is not wanted for that purpose.

The ordinary way would have been to let it faIl back to the Treasury; but when the Ministry of Fuel and Power saw £1,500,000 lying about they thought they would like to have it, and, by arrangement with the Ministry of War Transport, they decided to appropriate it to do as they liked with, without any questions asked. I thought that to allow them to appropriate this money without any effective control by this House, was not good enough. It was black-marketing far worse than anything we have heard about on the Finance Bill, because it would be handed over to the Minister and to the very active and pleasant Parliamentary Secretary, whom I see opposite, and who, I understand, is to have the handling of this £1,500,000. I rejoice that an AmendMent has been put down defining the way in which the Minister and the Parliamentary Secretary are to spend this money. As they are not allowed to spend it on any form of junketing, without control by this House, I am not going to raise any difficulty about the remaining proceedings.

I think that perhaps it is right that I should say what I have to say on the point made by the hon. Member for South Croydon (Sir H. Williams) when I move my Amendment on Clause 2. It will perhaps be in Order for me to make an explanation of the general purposes of the Bill at this stage, if that is the wish of the Committee. The Committee will remember that under the Local Government Acts, 1929, all rates——

It really is not in Order to explain the purposes of the Bill on the Motion that Clause 1 stand part. If the hon. Member wishes to say that the main purpose of the Bill is contained in Clause r, and to explain that purpose, he can do so, but I do not think we should have a Second Reading speech on this Clause.

I very willingly bow to your Ruling. The main purpose of the Bill is contained in Clause 1. It is the basis of the working of the railway freights scheme. That scheme was introduced to help certain depressed industries in 1929 and modified by other Acts in subsequent years. Those industries were the coal industry, the agricultural industry, and the iron and steel industry. By a later Act the scheme was confined to coal and agriculture, the agricultural products being milk and livestock. The Act has continued to work as Parliament intended in the case of agriculture. For export coal it has not continued to operate as Parliament intended, because our export of coal has greatly declined. There is still, technically, some export of coal, for bunkers and fishing vessels and a certain amount, though very little, for foreign countries. The rate of rebate is very high, but even so all the amount has not been used, and there is a large balance in hand. For that reason, and because it is actually undesirable that the original purpose of Parliament should be carried out, that is to encourage coal export and the transport of coal by rail, my noble Friend thought it better to suspend the working of this scheme so far as coal rebates are concerned until the end of the present emergency, and, with the agreement of all concerned, not only in the Government but in the industry itself, this plan has been put forward.

What about the agricultural industry?

The agricultural scheme continues to work as before the war, and it will continue. The hon. Member will see, if he examines the Bill, that coal is not to be damnified at the expense of agriculture, and vice versa.

I beg to move, in page 2, line 10, at the end, to insert:

"(2) There shall be paid to the Minister of Fuel and Power out of the fund in respect of each of the years mentioned in the preceding Sub-section the amount certified by the tribunal thereunder in respect of that year:

Provided that—

(a) in the case of the year beginning on the first day of October, nineteen hundred and forty-two, the amount to be so paid shall be the amount certified in respect of that year less the amount (as estimated by the tribunal and certified to the Minister) of the coal rebates required by the scheme in respect of traffics delivered for conveyance by railway in that year before the beginning of the period of suspension of coal rebates; and

(b) in the case of the year in which that period terminates, an estimate shall be made and certified under Sub-section (1) of this Section in like manner as in the case of a year falling wholly within that period, but the amount to be so paid shall be such part only of the amount certified in respect of that year as is proportionate to the part of that year elapsing before the termination of that period.

(3) The amounts to be paid to the Minister of Fuel and Power under this Section shall be paid at such times and in such manner as the Treasury may direct, and shall be applied by the Minister of Fuel and Power in accordance with arrangements made by him and approved by the Treasury for any purpose connected with the production or marketing of coal."

The hon. Member for South Croydon (Sir H. Williams) has explained the purposes of the Amendment which he put down on Second Reading. He thought that this Bill ought not to be agreed to because it did not declare for what purposes the Minister of Fuel and Power would use the money. This Amendment is to make it quite plain for what purposes the money shall be used, and to ensure that the Minister cannot use it for any purposes except purposes similar to those we have now in view. The Government were always ready to give Parliament the most categorical pledges as to the purposes for which the money would go. Indeed my Noble Friend did so in another place.

The purposes are two. First, we intend that part of the money shall be paid into the Coal Charges Account, which was set up last year and approved by an affirmative Resolution of this House. The Committee will remember that under the Coal Charges Order the Minister of Fuel and Power was authorised to impose a national levy on the coal industry, a levy which is now standing at a level of 5s. per ton and under which the Minister raises no less than £50,000,000 a year. By means of that levy he has set up the Coal Charges Account, and out of that account he maintains a reasonable national credit balance for the industry as a whole. By so doing, and by keeping each district in the industry financially on the right side, he prevents rises in the price of coal to the consumer. But that Account is very finely balanced, and if any large sums were suddenly withdrawn from the receipts of the coal industry, the balance might be upset, and a rise of prices to the consumer might result. If further explanations of the working of that scheme are required, I am sure that the Parliamentary Secretary to the Ministry of Fuel and Power would be very glad to give them to the Committee. In fact, by the suspension of the coal rebates by this Bill, a considerable sum will be withdrawn from the receipts of the industry, because, as I have just said, there is still a certain amount of, rebateable coal being moved and the rate of rebate is very high. Without troubling the Committee with details of the calculation, the coal industry will lose by this Bill in a full year about £500,000. The Government intend therefore that the Minister of Fuel and Power shall pay £500,000 from the money now being made available into the Coal Charges Account in order that he may keep a reasonable national credit balance in the Account and thus prevent a rise in prices to the consumers of coal.

The second purpose for which we intend that the Minister should use this money is this: We have been obliged in the national interest—it has been done by my Ministry—to make arrangements about the transport of coal which are not, by normal standards, economic. We have had to carry a lot of coal by coaster, which is very expensive. To prevent the extra cost falling on the consumer the Government have paid £2,000,000 on that item alone. Similarly, we have to carry coal by rail for long distances to certain places, which normally would have drawn their supplies from nearer sources, such as, for example, from Durham to the North of Scotland. The Government have paid a subsidy amounting to £1,000,000. These subsidies of £3,000,000 for transport charges the Minister of Fuel and Power now bears on his Vote. We propose that the remainder of the money released by this Bill from the Freights Rebate Fund should be used by the Minister to meet the cost of these subsidies. On present estimates, in a full year the sum will be about £800,000, against the £3,000,000 which he has to pay. That is to say that for the two purposes I have described the Minister will use the whole sum of £1,300,000 he is now going to receive from the Fund. The Committee will see that these two commitments will use up the whole of the money available, so long as present conditions last. Perhaps the hon. Member for South Croydon would say, if he were here, "Why do you not write these items into the Bill?"

My answer is that it is possible that present conditions may change. Our transport position may much improve; we may get rid of the abnormal transport charges by coaster and by rail and in consequence get rid of the £3,000,000 subsidy which has been paid. In that case we should have to find other purposes to which to apply the money, while this Bill remained in force. But if we cannot write into the Bill these exact purposes which we have in view, I hope we can write in a definition which would bind the Minister in finding other purposes, if the need arose. The levy which the Minister raises under the Coal Charges Order amounts, as I have said, to £50,000,000 a year. That Order lays it down that my right hon. and gallant Friend shall use the money

"in accordance with arrangements made by him and approved by the Treasury for any purpose connected with the production or marketing of coal."

We have written those exact words into this Amendment which, if it were adopted, would insert them into Sub-section (3). We hope that this may meet the Motion that was put down on the Second Reading and that the language used to satisfy Parliament in respect of the use of £50,000,000 which the Minister of Fuel and Power controls will equally satisfy Parliament in respect of this £1,300,000, since the purposes in both cases are identically the same.

Will the hon. Gentleman make it clear that the payments to which he made reference and which are being made by the Minister of Fuel and Power are made out of revenue and not of capital?

This is coming out of current money which comes from revenue.

Can my hon. Friend say whether hire charges are included?

I think not.

We bad better be sure on that point, because it will affect ascertainments in the counties.

I can assure my hon. Friend that they are not.

As I understand it, this £500,000 is being used to balance the £50,000,000. If that means that coal which is carried a long distance by coaster or rail will not rise in cost to the consumer, I approve it.