I would just like to complete what I was saying. I think that the test in all these cases must be whether the money is really paid in respect of or by virtue of the office which the person holds, or whether it is in fact given to him personally, and apart from that office altogether,

I would like the two points that I raised before the interval to be definitely settled. I do not think the Chancellor quite answered them. My first point was in support of the Chancellor's contention that if Easter offerings are treated by the church authorities themselves as part of the clergyman's income, it seems to me that there is no question that they are liable to taxation. The other was, is there to be a special bar put on the clergy receiving all gifts, apart from Easter offerings? The Chancellor said that he could not exempt Easter offerings and continue taxation on offerings at Christmas or Whitsun. But, as I said just now, suppose a clergyman gives a very able series of addresses in church or lectures in his school house, and a number of his parishioners feel that they would like to make a present to enable him to go to the seaside for a week or for some other purpose. Is that present taxable, because the money is given him in respect of something done in the course of his employment? The Chancellor says that the matter is a plain and well-established one, but I think it bristles with difficulties. It seems to me that clergymen are placed in a worse position than other people. Other officials can have casual gifts made to them without being liable to Income Tax in respect of such gifts. Surely it should be possible to make presents to clergymen not annually, but for good work in their parishes, without those presents being liable to taxation?

Perhaps I might be allowed in a few sentences to express my great regret to the hon. Member for Keighley (Mr. I. Thomas) that I cannot support this Clause. I suppose I have spent more time than most Members of this House in furthering the material prosperity of the clergy, and I would gladly support anything I could with that object. The reason why I cannot support this Clause is quite simple. The Church would not welcome what would be regarded as special privileges which are not granted to other people. I see much harm to Church work arising from the allegation, however unfounded it may be, that the Church enjoys economic privileges. It would be a profound mistake, by this Clause, to add fresh fuel to that particular fire.

Several hon. Members have referred to the fact that I am myself a member of the Church Assembly. I should like to tell the Committee what my position is. I am a member of the Church Assembly, and was for many years a member of the Central Board of Finance of the Church; so I have a certain amount of experience in matters of this kind. When this Clause first appeared on the Paper I examined the matter very carefully indeed. I am aware that several hon. Members have stated the position very clearly so far as the law is concerned. My hon. and learned Friend the Member for North Croydon (Mr. Willink) made some point of this: "We all know what the law is; what some of us want to do is to get it altered." It is admitted that this is the law, but the question I want to address myself to is, whether it is just. I think it is just.

In one of the most recent cases the Judge said that he very much disliked to have to decide the case in a way which the decision of the House of Lords forced him to do. I have the case here. It was in 1931.

The Committee will appreciate that I have not had an opportunity of studying the particular reference which my hon. and learned Friend made, but I address myself to the question of whether this law is just. Every member of a congregation who contributes to the Easter offering knows that it is to supplement the income of the clergyman. The next point is this. There is very little doubt that on such an occasion the clergyman is receiving the gift by virtue of his office. He would not be receiving that gift if he were not the clergyman of that parish. My hon. Friend the Member for East Aberdeen (Mr. Boothby) said that the Board of Inland Revenue is putting its hand into the plate and taking out what belongs to somebody else. My hon. Friend went on to suggest that if Income Tax was only 6d. in the £ it would not matter. I do not see the logic of that. If it is wrong to take 10s. in the £ it is wrong to take 6d. [AN HON. MEMBER: "He said that it would matter less."] He said that it would matter less. The Clause suggests that the maximum should be £50 a year, in which case, I suppose, my hon. Friend would suggest that it is all right to put your hand into the plate after £50 had been taken out, but not before. There, I think, my hon. Friend's argument breaks down.

There is no point in the argument as to whether this is or is not a contractual payment. My hon. Friend the Member for Walsall (Sir G. Schuster) made some play with the point, but that has nothing to do with Income Tax. When deciding whether something of this kind is income or not, it does not matter whether it is contractual or not. The barrister who draws his fees receives something which is not contractual. The waiter or hall porter who receives tips is assessed on those tips, and I find it difficult to distinguish between his case and the case of the clergyman who receives a gift from his parishioners. Then there are the other churches. In the Church of Rome there are many occasions when members of the congregation make a voluntary payment to a priest for a Mass. That voluntary payment is a taxable payment, and in fact such payments form the greater part of the remuneration of many priests. I think it would be quite unjust to relieve the Easter offerings of the Church of England—of which I am happy to be a member—and not to relieve offerings made in very similar circumstances.

Surely those are. fees or offerings for quite specific services? They are not a general tribute to the personality of the man.

They are paid to the priest, just as an Easter offering is paid to the clergyman by virtue of his office.

But surely they are in the same category as funeral or marriage fees.

But he receives them by virtue of his office.

I would like to deal with the point of poverty. It has been said by many Members, and it is well known, that the clergy are poor. I would say, in the first place, that it is a great discredit to many of the congregations that those clergy are poor. In the second place, I suggest that clergymen of the Church of England do not want to be exempt from taxation which falls upon them if similar taxation falls upon people with similar burdens. The whole essence of our taxation is that it is so carefully adjusted that it falls upon people according to what they can afford to pay. Look at the anomalies which would result from this Clause. Suppose you have two clergymen in adjoining parishes, each with an income of £400 a year. One has £400 from investments which belong to the living, and the other has £50 from Easter offerings and £350 from investments. Each clergyman has a wife and two children, so that both are in the same position to bear whatever taxation has to be borne. Why should the clergyman who derives £50 of his income from Easter offerings be treated in any way differently from the person who derives the whole amount from investment? The proper way to meet the matter is the way in which the Church authorities are trying to meet it now. We have heard from my hon. Friend the Member for Central Leeds (Mr. Denman) the views of an Ecclesiastical Commissioner, and I am certain that the views he expressed represent the general views of the Church. The Church would not seek to have some advantage at the expense of the rest of the community. They would take such steps as are open to them.

Does the Financial Secretary suggest that my hon. Friend the Member for Central Leeds (Mr. Denman) was speaking on behalf of the Ecclesiastical Commissioners?

I said that he spoke as an Ecclesiastical Commissioner.

An ex-Ecclesiastical Commissioner.

It is important that we should know whether he was representing the views of the Ecclesiastical Commissioners.

I did not suggest that he had expressed the views of the Ecclesiastical Commissioners. I do not know them, but I should not be at all surprised to hear that he did.

I used to be an Ecclesiastical Commissioner until about a month ago, but anyhow I have no authority to speak on their behalf. I was only speaking as one who had had a particularly long experience of these matters.

I do not want to put anything into the mouths of the Ecclesiastical Commissioners, but it is clear that my hon. Friend has had great experience of these matters, just as I myself have had experience of problems of Church finance. I was saying that the proper remedy was for the Church to see that the clergymen were properly paid, and I am happy to say that the Church is at the present time taking steps in that direction, and I believe that very soon the situation will be better than it is to-day. So far as this particular Clause is concerned, I am satisfied of two things—that, if it were accepted it would not be just, and I am also satisfied that, from the point of view of the Church, it would not be wise. My hon. Friend made that point very well and I ask the Committee therefore to agree with the Chancellor of the Exchequer, who said that not only was this the law, but it was also common sense.

I am not a member of the Church of England, but I have many friends among the clergy, and I do not think that they will be very pleased about the arguments which have been put up on their behalf to-day. It is said the labourer should be worthy of his hire, and the hon. Member for Central Leeds (Mr. Denman) said that he has spent a good deal of his life acting in the interests and prosperity of the clergy, and it must have borne upon him to-day that he has had a wasted life.

I only said that I had spent more time than most Members.

Had the hon. Member been more successful and the clergy had a decent living, this question would not have arisen.1s it not suggested that, if they had been provided with decent salaries, they would not have had to do this cadging? [An HON. MEMBER: "It is not cadging."] Is it dignified that a man, once regularly in every year in order that he may approach something like decency, should have to cadge from the congregation?

If the hon. Member will look at the Rubric of the Communion Service he will find that it is the duty of every parishioner at Easter to settle his bills with the vicar.

It also says in the Scriptures that everything shall be done decently and in order. Then let everything in regard to salaries be done decently and in order. Let the people who worship provide the funds. Many friends of mine feel that they have to cadge anyhow, no matter what the interpretation of my hon. Friend is. I listened to the arguments of hon. Friends, and I was impressed, and I was still more impressed when I heard the Chancellor's reply, and I cannot always say that. He certainly tore the arguments to pieces here. I have watched the activities of the hon. Gentleman the Member for South Croydon (Sir H. Williams), who is supporting this proposal, for some time. His ideas are always flowing in one direction, towards what is known as the Poor Law. A good many of the clergy and certainly those whom I know will be sorry of some of the arguments which have been put up here to perpetuate their poverty by gifts which are given to them out of pity for their poverty.

I apologise to the Committee for speaking in the Debate, not having heard all the arguments, but circumstances beyond my control made it impossible for me to be here before now. I confess that although it may be legal, that this taxation should take place, it seems to me that what we are discussing now is the question of justice towards the vicar. It cannot be common sense, if I send a cheque to the vicar's Easter offering, that it should be taxed, whereas if I meet him in the Street and slip £5 into his hand and say, "This is my Easter offering, but call it a donation for your holiday fund," that then it should not be taxed. It is no argument at all to suggest that the stipends of vicars ought to be greater than they are. Everybody knows that they ought to be greater than they are. I agree with the hon. Member who remarked that the efforts of the hon. Member for Central Leeds (Mr. Denman) to further the prosperity of the clergy have not been successful. That is why we are now trying to do something to help the clergy. This Easter offering is not part of the stipend. I look upon my donation, speaking personally as a member of the Church of England, as a gift that I ought to give at a certain time of the year, but I do not feel bound to give the same amount each year, nor, indeed, to give it every year.

The vicar would be hard up if you did not.

It is wrong to say that it is only given where the stipend is low. The Easter offering is given whatever the income of the vicar may be. It is also wrong to suggest that circumstances are the same with regard to members of the Roman Catholic Church. It is not so at all. In that case the sums are fees.

They are voluntary offerings.

They are voluntary offerings for services rendered. As I see it, the incomes are not comparable in the case which the Minister put forward when he said, that if there were two vicars in adjoining parishes, one having £400 a year and the other £350 a year, plus £50 Easter offering, it was right that both should be taxed. I do not think the cases are comparable at all. In the latter the vicar could not know with any certainty in any year that he would have that £50. Although the legal position may be what has been stated in the Committee, in common justice to men who are very hard working, these voluntary donations should be free of tax. It is true that the £50 limit is unreasonable. I would sooner have said that the whole of the vicar's Easter offering should be tax free, but it is a case of

"These ought ye to have done, and not to leave the other undone."

I agree with other hon. Gentleman, however, that £50 would be a beginning. If this question goes to a Division, I shall vote for the Clause.

I have listened to nearly the whole of the Debate and to the judgment by some learned Judge which was read out by the Chancellor of the Exchequer. I gather from that that the gift is taxable in virtue of the recipient's office, if it is "normal and continuous." Those are the definite words. How on earth a gift can be "normal and continuous" which is entirely art the option of the parishioners is something of which I would like to have an explanation.

Unfortunately, I was not present to hear the speech of my hon. and learned Friend the Member for North Croydon (Mr. Willink), but I want to join issue with the Financial Secretary in his discussion of the question: Is the law just? From my experience I am convinced that the law as it exists at present is not just. Expressions of opinion have been made from all sides of the Committee that this injustice ought to be put right, and I ask the Chancellor whether, between now and next stage of the Bill, he will reconsider the matter. My objection to the present state of affairs is this: The Blakeston case in the House of Lords laid down a hard and fast rule which, of necessity, has been applied by courts of law in matters which have no concern with Easter offerings and which have inflicted untold hardships on recipients who have received gifts from those who are fond of them. I must be careful not to depart from the question of Easter offerings, but as an instance let me give an example from my own experience. A former Member of this House, practising at the Bar, left to join the Armed Forces of the Crown. Being a generous man and having in his employment a clerk nearly 80 years of age who had been with him for many years, he gave him a very substantial cheque simply as a mark of appreciation of their years of service together. What happened? Fifty per cent. of that cheque was taken by the Revenue authorities on the basis of the Blakeston case.

The Financial Secretary talked about a contract having nothing to do with it, but the first thing you look into is to see whether there is a contract. That is the distinction between the Seymour case, in which there was a benefit, and the cases of professional footballers for whom I have appeared. We have got down to the absolute narrow border line with the Income Tax authorities who stand on the Blakeston case. In the interests of our clergy dare I ask the Chancellor to show leniency." Very soon, offerings will be given at our churches at Whitsun for our curates, whose wages in most cases are extremely small. The principle underlying this law is wrong from the word "Go," and I say that we would be failing in our duty if we did not make an appeal to the Chancellor to give further consideration to this matter.

I am interested in this discussion, because it seems to me that the clergymen of this country seem to have very many enemies in this House. There is a Scripture that is worth quoting at this moment:

"Woe unto you, when all men shall speak well of you."

I am very much concerned about the spiritual standing of the clergy, particularly after hearing the speech of the hon. Member for South Kensington (Sir W. Davison), who suggested that when you heard a clergyman make a really good sermon you felt like putting your hand into your pocket and saying, "There you are, my lad." What would the hon. Member consider to be a good sermon? Think of the temptation which will be put in the way of the clergy. I am not concerned about a sermon for soothing the troubled breast of the hon. Member for South Kensington but about those who go into the slum areas of this country and spend their lives helping mothers, the sick and helpless. Nobody ever thinks of making offerings to them, particularly if they go into the pulpit or on to a public platform and say what they think about the rotten system that produces their conditions.

I think the hon. Member is getting rather wide of the point at issue.

Do not be concerned about offerings to the clergy. Do not give them any; they will be all the better for getting no offerings; they will be all the better for doing a little bit of "scrounging" or fighting to get better conditions. Remember the Beatitudes.

"Blessed are the poor."

Nothing is ever said about blessing those who will receive the offerings of wealthy patrons. Then there is the other:

"Blessed are ye when men shall revile you … for My sake."

If Members on the other side would start abusing and reviling our clergy we should feel that the clergy were doing something worth while.

There seemed a little doubt on the Front Bench when I interrupted the Financial Secretary, and I would like to make my point clear. The authorities as I know them do not indicate that there is opposition in high legal quarters to a change in the law. The opposition comes from the Treasury, not from the Judges. May I make a short quotation from a judgment given by Mr. Justice Rowlatt in deciding a case about Whitsuntide offerings? In the case of the Rev. Starkie, in 1931, in the King's Bench Division, he said:

"In my judgment it is quite clear that iu this case the Crown are entitled to succeed. Although it is very unpleasant to have to decide against the respondent, one has to apply the law to the best of one's ability."

There is an indication that in the view of the learned Judge the law needed to be changed. The learned Judge finished his judgment in these words:

"In these circumstances, although I very much dislike deciding these cases against people like Mr. Starkie, I have 'no alternative but to say that I think the Crown are right and that this appeal must be allowed."

I regretted very much to hear the hon. Member for Chesterfield (Mr. Benson) saying it was more a question of, "Was this income? "There are all sorts of income which are not taxable. The question before the Committee is whether the whole of this money should be taxable.

The hon. and learned Member suggests that the law is unjust and should be altered. May I point out that the effect of the Clause which we are discussing now is not to alter the law? Whitsuntide offerings will be untouched. It merely says we are to make an exception in one portion of the law, and that is the first £50 of Easter offerings. If the law is indefensible, there is only one thing for the House to do and that is to alter it, and not make a tiny exception.

:I have never known any Amendment to any Bill which made all necessary amendments to the law.

It is with great reluctance that I do so, but there is no question of confidence in the Government involved, and, in view of the inability of the Chancellor to give any reconsideration between now and Report, I must force this to a Division.

Mr. Craven-Ellis.

May I ask leave to move to report Progess?

No.

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

The object of this new Clause is to endeavour to get rid of what many Members consider to be a great injustice under the Excess Profits Tax. I would refer the Chancellor to Subsection (2) of Section 33 of the 1940 Finance Act, in which the Commissioner has the opportunity of accepting or not accepting definite expenditure, say for repairs, and of deciding that the expenditure shall be spread over a period. He has, to a large extent, to investigate when similar repairs were required previous to the expenditure in question. It may be decided, that the period is to years and the Commissioner will say that the expenditure shall be spread over 10 years. I will quote one or two figures. I do not intend to burden the Committee with the whole of a complicated statement which I have prepared to support my Clause, so I will hand it to the Chancellor when I have finished. Suppose there is an expenditure of £10,000 in 1941. That is spread over Io years, which means that in that year only one-tenth is brought into account. The balance is carried back to previous accounts. These accounts can be re-opened, and I should like to ask the Chancellor whether the Statute of Limitations does not come into question? If the 10 years is the period of spread, what will be the position for those years which do not come within the six years in which it is allowed to re-open the accounts? I should like the Chancellor to give the Treasury view on that point.

The £10,000 having been treated in this way, it means that in 1941 the profits would be increased by nine-tenths. Then the one-tenth will be accounted for in the accounting period in question, that is 1941. This means that the total payment of E.P.T. is £10,000. It is true that Income Tax is lost by the Exchequer to the extent of £5,000. What is the position in subsequent years? This is a point I want to stress, because it seems to me that there is some injustice in the operation of this Section. It means first that the profits are increased by the reduction of standard profit by £10,000 a year. Then there is the question of capital adjustment. I am taking the period from 1941 when the expenditure was incurred to 1947 to give an example of the effect of the cost in terms of E.P.T. The result of this decision by the Commissioner is rather interesting but somewhat alarming. It means that in seven years the E.P.T. payable is more than twice the amount of the cost of the repairs. It is made up in this way. The cost of the full allowance in 1941 is £10,000, the cost of the decrease in Standard profit for 1942–47 £10,000, and the cost of the consequential capital readjustment £4,132. From 1941 to 1947 the total cost which is incurred for this £10,000 expenditure is £20,132 and it will continue accumulating as long as E.P.T. is on the Statute Book.

I am the last to say that there should be any profit in war, but I must draw the attention of the Committee to the possibility of these anomalies. They are not intentional and it is how things work out, but when anomalies arise we must try to correct them. If these anomalies are not adjusted, I fear that we shall shake the whole foundation of industry. If we do that we shall be in a difficult position in regard to getting full employment when the war is over. We must have regard to what the post-war position may be, however sincere and determined we are that the first consideration must be the wining of the war. Charging expenditure on repairs in this way is no encouragement for the owners of industrial property to keep them in proper repair. We do not want to have a policy of taxation which will lead to a lower standard in that respect.

As my hon. Friend recognises, these points are a little difficult to follow in Debate. My right hon. Friend will certainly look at the Case which my, hon. Friend has put forward and the table of figures which he has prepared with regard to it. We cannot accept the principle in the new Clause and I feel sure that my hon. Friend will not press it. The principle is that

"no deduction shall be treated in such a manner as to increase the amount of the liability to the Excess Profits Tax above the amount which would have been payable if the expenditure represented by the deduction had not been incurred."

If you are dealing solely with expenditure in the chargeable period no doubt that is a principle on which one can work to see how far there can be any departures from it. But if you consider an expenditure covering more than one year of the standard period which obviously has to beg, spread back, then necessarily the taxpayer's liability would be greater. I understand from what my hon. Friend said that the case he has in mind is one in which the expenditure was made in the chargeable period and was then spread backwards. I do not think the Statute of Limitations comes into it, because that really deals with the question of how far you can recover money or tax by legal process. The point of this Section is to enable sums payable in one year to be spread over other years in order to arrive at the proper figure. I hope that my hon. Friend will be content with the assurance of my right hon. Friend that he will look into this case.

On that assurance and that explanation I beg to ask leave to withdraw the Clause.

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

This new Clause relates to what is known as the minimum standard. If you are in business or trade as an individual, your minimum standard will be £1,000, but if you are in a partnership or are one of three working partners, your minimum standard will be £4,500. The object of this new Clause is to put the person who is the head of a trade or business into the more favourable position of those in a partnership or company. I will quote an example which I hope will convince the Committee that there is some justification for this Clause. Let us look into the case where the minimum standard for the individual who is in trade or business is £1,000 and the minimum standard for the partnership or for a company with three working partners is £4,500. Contrasting those cases we see the varying effects of the minimum standard. Let us assume that the current year's profits were £5,000. The individual who is running the trade or business would have to pay E.P.T. on the differences of the £1,000 minimum standard and £5,000 current profits, and therefore he is burdened with a tax of £4,000. In the case of the partnership with three working partners or the company with three working partners, the difference between their minimum standard of £4,500 and the current years profit of £5,000 means that E.P.T. is payable only upon £500. That difference does deserve some consideration in order that the individual can be put on a par with a partnership or a company.

My hon. Friend has put forward a case for my consideration and I would offer just one or two observations concerning it. I think he has omitted a matter which has a very material bearing on the question, namely, why Parliament came to the decision it did on this question. Generally speaking, apart from the merits of the Clause, I feel that unless a very strong case is made out, it would be wrong for me, at this stage, in the life of the Excess Profits Tax to begin to make considerable variations in its general provision, which were decided by Parliament after considerable Debate. It must not be said that I would not endeavour to deal with any difficulties which may arise, but the tax has been in operation for some time, and we may now look forward not so much to its continuation as, perhaps, to the day when it will disappear altogether. I think the Committee will appreciate the view I must take of proposals for substantial alteration at the present time.

But let me point out that there is, of course, a material reason for the variation between the two, classes of cases. The Section of the Finance Act to which the hon. Member referred me is Section 13 of the Finance (No. 2) Act, 1939, as amended by a section of the Finance Act, 1940. It provides for a general minimum standard of £1,000, but enacts that in the case of the trade or business carried on by a single individual, a partnership or a director-controlled company, the normal minimum standard shall be £1,500 for each working proprietor in the business, subject to a maximum of £6,000. It is true that there is a provision which gives the Commissioners of Inland Revenue a discretion in respect of not more than £1,000 for each working proprietor, or £4,000 in all, where they are satisfied, having regard to the nature and size of the business, that the normal standard is inadequate.

My hon. Friend is now suggesting that because a discretion is given in that class of case there ought to be a similar discretion in the case of other businesses with which this Clause is concerned, namely, those companies which are not director-controlled. There is, however, a very clear distinction between the two types of case. In computing for Excess Profits Tax purposes, the profits of a business carried on by a single individual, a partnership or a director-controlled company, no deduction is allowed in respect of the remuneration or drawings of the individual proprietors, partners or proprietor-directors, but when you come to the question of trades or businesses in which all remuneration paid even to the directors and proprietors is allowed as a deduction when computing profits, so long as they are not unreasonable, there you have a very clear indication of why Parliament made the distinction and gave the discretion to the Commissioners in one case but not in the other. Whilst I will examine the case further in the light of what my hon. Friend has said, to see whether, on reflection, further consideration ought to be given to this matter, in view of the very clear distinction between the one case and the other I doubt very much if I shall feel able to go further.

There was part of the Chancellor's remarks which rather disturbed me. He said: "We have gone so far," the implication being "Why bother? We have gone so far and let us do the rest of the journey in the same saddle." That may be all right, and one would not complain if the case which I put forward did not expose the vast dis- tinction there is between one class of profit and another. However, I am pleased to have had the Chancellor's statement, and I think it was useful, and I beg to ask leave to withdraw the Clause.

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

The Armorial Bearings Duty is an obsolete tax which cannot be enforced, brings in only a tiny revenue, and ought to be abolished. The Committee will see from the proposed new Clause that it has continued untouched since 1869, so at least the Chancellor will agree that it is time we took it out of the cupboard and had a look at it. The Act of 1869 imposed a duty of two guineas a year on anybody who used armorial bearings on his carriage, and one guinea a year on anyone who uses armorial bearings or any kind of crest, device or ensign otherwise than on a carriage. Let me make it clear that this duty and my speech have nothing whatever to do with the grant of the right to armorial bearings. You have to pay the duty whether the bearings relate to your family or not; if you have a crest of any kind on a seal or signet-ring, a piece of silver plate or china, whether it is your own or not, you are liable for a guinea. I hope I do not see any hon. Members looking guilty. I must warn them that the penalty for non-payment is £20.

The Act of 1869, which I have here, imposed a variety of duties by Section 18 on male servants, carriages, horses, mules, armorial bearings, and horse dealers. Over the years we have got rid of all those obsolete duties, even that upon horse dealers. The duty on male servants went six years ago, and now we are left with only the duty on armorial bearings. In the years from 1870 to the outbreak of the last war, the duty used to bring in £70,000 or £80,000 a year, quite a tidy sum in relation to the Budgets of those days. Since then the yield has been growing smaller. For one thing, carriages are less used and therefore the two-guinea duty hardly brings in anything now, although it is chargable on armorial bearings on motor cars. The £80,000 fell to some £50,000 after the end of the last war, and the yield continued to diminish until, immediately before this war, it was only £33,000. For the last year for which figures are available, the year 1941–42, it was down to a meagre £23,000. That is the sum of money which the Committee are discussing.

It is clear that there is evasion on a wide scale; yet my own belief is that evasion is not the main cause of this diminution in the last 20 years, but sheer ignorance that such a tax is payable. Elderly people who have paid it all their lives realise the fact and are pricked by their consciences when they have not paid their guinea, but the majority of younger people have never heard that there is such a tax. There is a difficulty in the way of the Chancellor doing the obvious thing and sweeping the tax out of existence immediately in that this House decided in 1909 that tine Armorial Bearings Duty in England and Wales should in future be collected and retained by the local authorities—county councils and county boroughs—though it continues to be collected and retained by the State in Scotland. When previous Chancellors have been questioned about this matter they have been inclined to use the argument that the tax is now out of their control and that enforcement is up to the local authority. They have suggested that if there is unfairness or inequity it is the fault of the local authority. The matter may be out of the control of the Chancellor of the Exchequer, but it is certainly not out of the control of Parliament. We have imposed the duty, and it is our task to make certain that it operates fairly between one taxpayer and another. Either it is enforced on all, or if it is proved unenforceable it should be repealed. If it is argued that the local authorities should be more active in enforcing it, because the revenue accrues to them, let us see in practice what that would mean. It would mean that the——

May I interrupt my hon. Friend to say that I shall not use any of those arguments to-day? Perhaps I shall be able to make a statement which will be satisfactory to my hon. Friend, so that we can get on with the Bill.

I am very pleased to hear what the Chancellor has just said. In 1798, just before Nelson won the victory of the Nile, Parliament first imposed an Armorial Bearings Duty. It has lasted for 145 years. I hope that this moment, when we have just again cleared the Mediterranean of the enemy, may be another landmark in its history.

I have a great deal of sympathy with what my hon. Friend has said. It looks to me as though this tax has exhausted itself. It is a matter with which the local authorities are concerned, as he has said, and also the authorities in Scotland. Following the proposal which my hon. Friend has made, I will undertake to consult the local authorities and the people concerned, with a view to making a proposal in connection with this matter next year. Obviously, I cannot do it without consultation with them, but it does not seem to me that there is very much in this duty from my point of view. It may be rather an unnecessary and vexatious burden that is not worth collecting.

This is an occasion when the right hon. Gentleman need not worry about anticipating his Budget statement. Does he think he will be able to make some statement within some reasonable time before his next Budget? This is a very strange tax. It is really a tax upon illiteracy. I believe that armorial bearings were invented to certify documents of people who could not write.

No. For going into battle.

These people had clerks in holy orders who could do the writing. Of course, these bearings were also a farm of snobbery. The Committee should be very grateful to the hon. Member for West Lewisham (Mr. Brooke) for bringing this matter before us and also to the Chancellor for the generous attitude he has adopted. Naturally, any statement made by the right hon. Gentleman would bind not only him but his successor, unless some very revolutionary change takes place in the composition of the Government. It would be helpful if he could let us know some reasonable time before the next Budget the result of his consultation with the local authorities. Some of us are interested in these financial matters, and it is just as well to discuss them with some care and consideration.

Yes, I will do that.

As one who has paid the Armorial Bearings Duty I should like to make what I hope will be regarded as a helpful suggestion. I have in my possession a gold watch which I got from my father. At the back are some scratchings and when I asked my father what they were he told me that his father, my grandfather, had the family crest taken off the watch in 1869, because he flatly declined to pay the duty. My one regret is that the old gentleman did not go the whole hog because I have also in my possession a considerable amount of family silver which, to my great discontent, has the crest on it. It is not pleasant for people to have to pay tax for something of which they thoroughly disapprove. If anybody is sufficiently a vulgarian to want an armorial bearing or a crest on his motor car, I say let him pay for it up to the hilt. Let the Chancellor take off the tax on old family silver and rings, and increase it as much as he likes on coats of arms on motor cars. It seems to me that that would get us out of the difficulty and certainly would not place an increased burden on the revenue.

I do not wish to take up much time on this matter, but I do wish to thank the Chancellor. I suggest that war time, when he is budgeting for a deficit of £2,000,000,000 or £3,000,000,000 a year, is the time when he might go with a duster through our financial machinery and sweep away a large number of these little trivial taxes which have accumulated over centuries, which bring in little or no revenue but which make our machinery complicated. I hope that between now and next year, he will see which of these taxes he can get rid of.

I am very grateful to the Chancellor. I hope he will find it possible to make an announcement before 1st January next, when the tax will otherwise become payable for 1944. I beg to ask leave to withdraw the Clause.

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

The object of this Clause is to repair an anomaly in the present law which bears rather hardly on certain of those who practise various branches of learning, science or technology. I can best illustrate the anomaly by referring very briefly to a distinction which the present law makes between scientific men who are practising their profession independently and scientific men who are practising their profession as employees. In the first case, the man who is carrying on some branch of science as a profession is, of count, assessed under Schedule D as a person who is carrying on a profession, whereas the employee is assessed under Schedule E as holding an office or employment. The independent professional man is entitled to deduct for Income Tax purposes any annual subscription to a scientific body which gives the right to use a qualification. No such concession is allowed to the scientific man who is employed, unless it is a condition of his employment that he should belong to that particular scientific society.

The anomaly, I think, can best be illustrated if one takes the case of a public analyst. Supposing there was an analytical chemist practising on his own account, who was also a part-time analyst to a city or county or borough. He would be entitled to deduct his subscription, for example, to the Institute of Chemistry or the Chemical Society because that is a subscription to a society giving the right to use a qualification. But if the same man were a borough analyst full-time and, consequently, an employee he would not be entitled to deduct subscriptions to those scientific bodies unless he had been able to persuade his employing local authority to make membership of those bodies a condition of his employment. This encourages attempts to escape the provisions of the law by employees who try to persuade the local authority, or whoever employs them, to impose membership of scientific societies as a condition of their employment. That is extremely clumsy and extremely inequitable because many employers naturally hesitate to assist in what they believe is an evasion of the law.

One recognises that the Treasury's duty is to safeguard the revenue, and I can well imagine that the Chancellor may say to us, "If I begin to make this concession in the case of a certain group of people—those who are practising science—I shall have a very large number of applications from other groups in the community for similar concessions." He may also say that it is difficult for the Treasury to decide which subscriptions to which societies should be entitled to this exemption. I think the answer to both those objections would be that there is in existence to-day for the use of Income Tax inspectors a list of societies, the subscriptions to which are allowed when the professional man is working on his own account, and that list of societies would be available if the same concession were to be extended to the man working as an employee.

One does not want, in dealing with financial matters, to appeal ad misericordiam. It is the duty of the Chancellor to harden his heart but nevertheless—[Interruption.]—we will see if we can bring about a chemical transformation of the Chancellor's heart and get it a little softer. The point I wish to make is that, generally speaking, the employees, the people who would benefit from this concession, are the more lowly paid scientific personnel. It is extremely difficult for a young graduate of a university who may be receiving £5, £6 or £7 a week to join the various scientific societies he would like to join, and which he ought to be encouraged to join, when the subscriptions may total £8 or £9 a year. The older man working on his own account will be able to afford them but the young man, who is full of enthusiasm and is mostly likely to benefit from the research work of scientific institutions, finds it most difficult to pay the subscriptions.

This is really part of a larger question. This war has been described as a scientists' war, and when it is over we are going to have a scientists' peace. In other words, there will be a colossal amount of work for scientific personnel to undertake. We have had the example of pre-war Germany, which was able to integrate all its scientific elements—universities, technical schools and industry. After this war we want to see a similar thing happen here, with every encouragement given to scientific people to join the appropriate professional scientific bodies. I am sure that any concession the Chancellor might be prepared to make would be amply repaid in the dividends, which would be forthcoming for the nation as a result of the encouragement it would give to science and scientific people.

The plea that has been made by my hon. Friend ought, I think, to commend itself to the Committee. I do not know whether he can accomplish the miracle he set out to do, because the softening of the heart of a Chancellor of the Exchequer on the occasion of a Finance Bill is as rare an event as the liquefaction of the blood of St. Januarius. [Interruption.] Well, perhaps it occurs occasionally. This is a small concession to ask for from the point of view of the nation, but a large concession from the point of view of a great number of public servants—as I think they are, in the widest sense of the term—who are giving their services for very small salaries, in research in connection with industry, in other forms of research, and in the technical branches of all the most important industries in the country. It is in the national interest that they should keep abreast of the times, and that they should be able to interchange their experiences and knowledge with their colleagues In other firms, universities, and institutes. Unless they are able to be members of these scientific societies, that is extremely difficult. We all know that the Chancellor of the Exchequer wishes to encourage the advancement of science and its application to industry, and this is one way in which he could give encouragement of that kind, at very little cost to the State.

As the law stands, it is possible for a professional scientific worker, working on his own account, to certify in his returns certain subscriptions to scientific societies as being essential to his work, and to get an allowance for them; but if he is working for a firm, he depends on that firm being willing to make such a certification. The managing director may take a narrow view, and may not realise the great importance of the man continuing as a member of the scientific or professional society in which he wishes to continue membership; and so he may not certify. Then there may be natural reluctance to ask the heads of a firm for a certificate of this kind. It is not fair that there should be such a disparity between a scientific worker who is working on his own account and another who is in the employment of a large firm or of some university. Again, it is important that those who are working as members of university staffs or in research laboratories not connected with industry should be encouraged and helped to continue in membership of societies which they have already joined, or of which it is necessary for them to be members. It is deplorable that so many of our scientific men, especially those engaged in research, should be so badly paid. Their salaries are in most cases far lower, than would be the case if they were employed in corresponding work in the United States. They have to meet these charges from a very modest income. In this country we do far less than is done in the United States to encourage technical and scientific research. Here is a practical way of giving such encouragement. I earnestly hope that the Chancellor of the Exchequer will be willing to accept the principle of the Clause.

I would like to congratulate my hon. Friend the Member for Putney (Mr. Linstead) upon the way in which he presented his case for this Clause, although I am afraid he may not have effected what he hoped. It is true that this raises a problem, but it is part of a wider problem. As my hon. Friend pointed out, there is, from a certain point of view, a difference between the criterion applying to a professional man who is working on his own, and who may make nothing, and that applying to the professional man who is employed, and who gets a fixed salary. The man who is employed and gets a fixed salary, if he wishes to deduct such a payment, whether it is a subscrip- tion to a society or anything else, has to show that that expenditure is necessary for the purposes of his employment. That is a narrower test than that which applies when he is working on his own, and has to show that it is necessary for the purposes of his activities. I do not want to be technical—nobody ever does—in tying people down to the words on the Order Paper, but the Clause is quite unrestrictive. It might enable me, for instance, to deduct a subscription to an archaeological society. It does not relate the society to the employment in any way. I do not think that that is due to inadvertence, but to the difficulty of doing so. This point has been considered from time to time: it has Come before the Courts and it is realised that it raises a great difficulty as to where you are to draw the line. That is the point. One of the learned judges who decided a case on this question—obviously rather a hard case—relating to a medical officer of health who subscribed to some society, said:

"I think that all subscriptions to professional societies and all taking in of professional literature and all that sort of expense which enables a man to keep himself fit for what be is doing are things which can none of them be allowed. If they were allowed every professional man would say, I have to belong to this society and I have to belong to that society; I have to take in this publication and I have to take in that publication and to do all sorts of things, and there would be no end to it."

I think that if there were cases where you could draw a satisfactory line, we would be glad to do it, but you cannot. The subscription to a learned society is only one example of the type of expenditure which a scientific man who is in salaried employment will experience. There is the buying of text books for keeping himself up-to-date. In some walks of life it can get further away. There is the schoolmasters' travelling; he may do it, in part at any rate, to keep himself fit for the work he has to do. Take the case of a don at a university. It is obviously desirable that he should spend part of his emoluments in entertaining, in having to tea and so on, some of the students under his care. Obviously that is not the kind of thing he could deduct for Income Tax purposes. I appreciate what the hon. Member for the Combined English Universities (Mr. Harvey) has said, and that it is not always easy for the man to go to his employers. The proper solution is, of course, that those who employ professional men, scientists, schoolmasters, and so on should pay them a salary which enables them to keep themselves fit for their employment, by subscriptions to learned societies, by buying books, by travelling, by entertaining the parents of their scholars, and so on. If the expense is necessary and cannot be deducted, and if it is an undue burden, the proper thing is for representations to be made by those who are interested, or by the organisations dealing with that side of the lives of the people concerned, to see that they get salaries which enable them to keep themselves fit for their employment.

I am not entirely convinced by the answer of the learned Attorney-General. I understood that there is a list, prepared by the Income Tax authorities, used for the purposes of Schedule D, and, if so, why is it not possible to use the same list for this purpose under Schedule E? We are asking that exactly the same conditions should apply to those who are under Schedule E.

It really is different. A Schedule D man may get nothing at all. A Schedule E man gets a fixed salary, and a Schedule D man may get nothing unless he makes a profit, which is to some extent a check on expenditure on this account whether made in respect of learned societies or on other purposes. That is the reason why under the Income Tax law the man who gets a fixed salary has to show that it is necessary, and for the man who is on his own and may make nothing in a particular year it is sufficient to say that it is for the purpose. Once you extend the principles to the man with a fixed salary—and the quotation of the learned judge supports it from that angle—it is extremely difficult to draw the line.

Will my right hon. and learned Friend give me some free advice on a matter in which I am personally interested? On Monday I was present at a board meeting of an engineering company when we discussed the question of whether we should encourage the technical members of the staff to join scientific and learned institutions in order to keep themselves up-to-date. Such a process would be to the advantage of the company in the long run, and we were speculating as to what our position would be as a company if we paid the subscriptions of employees to scientific institutions and whether that would be a taxable expense. It is not the narrow interest with which I am dealing but the larger interest. It is a good thing to encourage people to get into touch with the various technical societies, and the more people belong to them the better. It does not merely give them status by having letters after their name, but it gives them access to literature and the opportunity to attend important discussions. It is vitally important to enable those engaged in scientific occupations to keep abreast of the times, and would my right hon. and learned Friend oblige me by saying what is the position of the employer who decides to pay his employees' contributions to such a society? Can the employer treat it as a working expense of the business?

If that question had been asked at Question time, I would have said that I would like to see it on the Paper, but if my hon. Friend will write to my right hon. Friend, I have no doubt that he will assist him if he can.

Perhaps when the right hon. and learned Gentleman is examining this correspondence he will also examine whether contributions of members to trade unions can be so treated.

I still maintain the opinion that we have here an anomaly which ought to be removed, and with every respect to the learned Attorney-General I find very little justification for the Treasury not taking some action in what he has told us. He has indicated all the difficulties which might arise if you apply to Schedule E the conditions that at present apply to Schedule D, but he did not explain to us how it was these difficulties have not arisen in so far as at present the Schedule D men get the benefit of this exemption. I did not find, to my regret, that he was very convincing, but he conjured up imaginary difficulties, when, in present circumstances, such difficulties cannot arise. We shall have to plug away at this. I am certain that it is something which ought to be put right, but obviously at the moment there is nothing to be gained by taking the matter further, and I therefore beg to ask leave to withdraw the Clause.

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

The question is one of the capital which remains idle during certain periods in the life of a business. It will be within the knowledge of hon. Members haw this becomes important under present conditions. The amount of capital which is left in a business is part of the computation in arriving at the standard. Under normal conditions cash goes in and out of a business, but during the present conditions many of the tendencies are very much exaggerated. In every case new sets of conditions are set up. My hon. Friend the Member for Exeter (Mr. A. C. Reed) who would have moved the Clause had he been able to be present, would have told us the story of the paper pulp trade. There is an industry which must carry very considerable stocks. This is due to the fact that they have to get their stocks at a certain time of the year before the Baltic closes and hold them for the whole of the winter. What has happened in the present conditions is that control has come in and all their stocks have been taken over and paid for. They are allowed a certain amount of their own stock which they hold as storekeepers. Incidentally, they have to pay a considerable amount more for them after they have sold them to the Control, but that is not a matter for any grievance, because it comes under war conditions, and everybody understands it.

The problem is that they have on hand a considerable amount of money. If that is treated as money which is not needed in the business, it will be disallowed, but they maintain, and must maintain, that that money is in the business because at a later date they will have to restock, probably suddenly. They cannot take the money out and return it to share- holders or invest it in other directions, because they may want it again very quickly. Therefore, they are holding it, but if the Revenue authorities say that this capital is no longer wanted in the business and they insist on its being deducted from the standard, it reduces the amount they are allowed to retain. Many of these industries are passing through a difficult period, and any amount that is deducted will be a serious matter for them. Other industries concerned are those dealing with oils and fats, which are in the same state. They have had to seal down their activities, and in consequence they have collected money and are very anxious that that money shall not be deducted in computing and working out the amount of their standard.

There is another class of industry with which I am personally concerned—the production engineering industry—where the amount of cash which has to be carried varies considerably over a long period, particularly in the motor car and aeroplane industry. You cannot take one year and say that the average amount of cash you carry then is the figure. For instance, in making a model you have to put out a certain amount of cash at the start, and later you have to reduce this amount as the model is finished and then spend cash on making jigs and tools to start production. When the Chancellor of the Exchequer was Secretary of State for Air the aeroplanes that we have now were being talked about as models in the spring of 1939, when shops were being cleared to make way for their production. In due course those planes will fade out, and others will come in. So it can be seen that in manufacture of this description you have a cycle of cash which varies over a long period. We want the Revenue to differentiate between redundancy and reserve. If capital is redundant, of course we can understand that it could be taken out, but there is a great deal of difference between redundant and reserve capital, just as there is between redundant and reserve plant. The production engineering industry carries stand-by plant which is not used and which we hope will never be used, but that plant is not called redundant. It has to stand by in case of emergency. So it is in the case of this capital. When it is wanted at some period, we ask that it should be treated differently. The Revenue authorities should be empowered to treat each case on its merits. Yesterday I heard the Chancellor advise people that when they had a problem they should take it to the Revenue officers. Personally, that is the advice I have always followed, and I have always had their help. One of them once said to me, "Do not think that we are ordinary tax collectors whose only duty it is to see that the State gets everything it should get. It is also our duty to see that the State does not get anything it ought not to get. I am here to look after your interests as well as theirs." I maintain that this new Clause would help the Revenue authorities in dealing fairly as between the State and individual firms in cases where such treatment is necessary.

My hon. Friend has made a very clear statement of the position, and I am much indebted to him for the information which he has put before me and the Committee to-day. I will, of course, carefully study what he has said, but I would like to make one or two observations on the present position. The object of this new Clause, which relates to the treatment of money in computing capital for E.P.T. purposes, is to provide that money shall be included in such capital to the extent not only of current requirements but also of

"such other requirements as may be necessary or advisable for the maintenance and development of the trade or business."

Some hon. Members will recollect that under the Finance Act, 1939, in computing capital for E.P.T. purposes investments are to be excluded, with one or two exceptions which I need not go into now, and any moneys not required for the purposes of trade or business are to be left out of account. That is an essential condition to prevent taxpayers being able, by keeping surplus money in the form of cash, to take advantage of what is a compratively high percentage addition which is allowed on increases of capital. That percentage is to-day 8 per cent. I think the Committee and my hon. Friend will agree that it would clearly be unreasonable that a taxpayer should derive financial advantage by receiving an allowance for increased capital at 8 per cent. in respect of money which is, in fact, lying idle at the moment. The exclusion of the money not required is designed to prevent that state of affairs.

My hon. Friend talked of money which might be required for certain purposes, and it occurred to me that it ought to be quite possible, with all the forms of investment now available, for a firm to invest that capital in any one of the lines of articles which I have on my counter to-day. It is true that the law does not define what money is "not required" for the purposes of E.P.T., but the amount of surplus cash is determined in practice in the light of the needs of the business, due regard being paid to impending liabilities and the cash which may be expected to become available to meet them. It may be interesting to the Committee to know how, broadly speaking, the Revenue treat cash balances. They treat them as not required only so far as they include surpluses unused throughout the period under consideration; they do not seek to eliminate temporary surpluses absorbed during the accounting period, or cash representing the accruing profits of the period, or a reasonable margin for contingencies. I suggest that in that way the Revenue is meeting the position, having regard to the requirements of industry and the position of the taxpayers. I think my hon. Friend will see that if I acceded to his request and accepted his new Clause it would give an undue advantage.

I fully appreciate the point which the Chancellor has made although I thought I emphasised particularly the fact that capital which was redundant should be taken out. He hinted at what could be done with Surplus cash, and, of course, that is being done, but a certain amount must be always kept on call. It is only a matter of discussion with the Revenue authorities as to what is the essential amount. As I have said, a certain amount must be kept ready for immediate use and I commend that point of view to the Chancellor in begging leave to withdraw the Motion.

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

I am seeking the indulgence of the Chancellor in putting forward this new Clause, because my hon. Friend the Member for Stockport (Sir A. Gridley) had hoped to be here to move it himself, and I have only my recollections of talks with my hon. Friend to guide me in this matter. This Clause and the one that follows deal with the discretion of the Commissioners. We feel that in the paragraph referred to it is too limited. I wanted to put down a Clause widening their discretion, but it was finally decided to try to get the Chancellor to agree to a Clause giving a right of appeal to the Board of Referees. The sort of trouble that the Clause seeks to correct, if I may give an example, is the case of a company which was director-controlled before the war, but which is not controlled in the E.P.T. period. It usually has the directors' remuneration disallowed as if it were controlled, but the percentage on extra capital is reduced from 8 to 6 per cent. The company is therefore treated as director-controlled as far as the directors' remuneration is concerned and as non-director-controlled as far as the percentage on new capital is concerned. The Revenue thus has the best of both worlds. That is what the discretion of the Commissioners amounts to. And as it can be exercised either way sympathetically or harshly it was felt that it was only just and equitable that power should be given to the taxpayer to appeal to the Board of Referees.

Another example of what we are trying to get at is a company which was not controlled pre-war but is director-controlled in the E.P.T. period and has its standard reduced by deducting the directors' salaries, and its E.P.T. profit increased by adding those salaries. Here the discretion of the Commissioners is limited although they may give a countervailing advantage by the extra 2 per cent. which is allowed on increased capital. But there may be little or no increased capital so the 2 per cent. may be inadequate to cover the difference, and thus the discretion of the Commissioners is inadequate and not wide enough. So if the alternative of giving the Commissioners wider discretion is not taken it seems only fair that the taxpayer should have a right of appeal to the Board of Referees.

I do not think there is much that I need add after the very clear way in which my hon. and gallant Friend has moved the Clause. There is a wide desire to have the right to bring the decision of the Commissioners before the Board of Referees, and I think I might ask the Chancellor to be accommodating to us, because all we are asking for is that greater discretion should be given to the consideration of these questions and that, where injustice is felt, those aggrieved should have the right to go from the bureaucratic decision of the Commissioners to a Board of Referees, which, after all, has its justification and its being for the purpose of dealing with matters of this kind.

The general topic of the right of appeal from the Commissioners to the Board of Referees was discussed on the Finance Bill last year, and it was then pointed out that, in dealing with Excess Profits Tax, there are a number of cases, of which this is one, where you require to make adjustments to fit the particular facts of each case, adjustments which may depend on the amount of capital in the business and various other matters which do not arise in the case of Income Tax where you can apply a rigid code and express it in words. I was interested when the Mover said he and his friends had considered whether they should ask that the Commissioners should have a wider discretion or whether they should ask that there should be a right of appeal. That is interesting, because the Commissioners have frequently been pressed by those who are affected by this tax to take a wider discretion than they have at present to enable them to deal with special cases. The difficulty about an appeal is that, if you are going to have a right of appeal to a Board of Referees, you have to lay down a definite code of principles which they as a judicial tribunal, can apply. I believe on the whole, although of course the Commissioners' decisions have not given universal satisfaction, there has been no general complaint as to the extent of their discretion and, taking into account that if you have to decide something, you can never wholly please the people who come before you, I think they have not done too badly. I should have thought the subject matter of this Clause was a pretty good example of where it would be very difficult to formulate a general code. I do not want to be too technical or to go into too much detail, even if I were capable of it, which I very much doubt, but one of the cases which would arise under the Clause is where a company was director-controlled in the standard period and not director-controlled in the chargeable period, or vice versa. There, it is right and proper and necessary that adjustments should be made.

We have to take into account such facts as, for instance, when the company was not director-controlled, what director's remuneration could be deducted and what was included in that remuneration, whether it to some extent, as sometimes happens, included an element of share of profits as well as remuneration limited to the directors' duties. We then get questions as to changes in the capital structure of the company between the two periods. It is for reasons such as these, which I will not attempt to elaborate, that last year the House decided—and I think the House as a whole accepted it after argument—not to give a right of appeal to the Board of Referees, not out of any disrespect to the Board, but simply because if we were to give this right we would have to formulate the code which the Board should apply.

Therefore, I am afraid we cannot advise the Committee to accept this new Clause. Whether it will satisfy my hon. Friends or not I do not know, but all we can say to them to-day is that if they think the 2 per cent. is inadequate or the use which is made of the discretion under Section 33 (5) (2) of the Finance Act, 1940, is not being exercised fairly, and if they know of a particular case or any class of cases which give grounds for reconsidering the matter, representations can of course be made to the Commissioners that they should use their discretion somewhat differently from the way in which they have been using it and so forth. We think it would be quite impracticable, however, to formulate a code to deal with this class of case, as with the others, and therefore an appeal to the Board of Referees is an impracticable solution.

I find-myself in a personal quandary, because I have been listening to my right hon. and learned Friend very carefully to see on which side he was coming down as between my hon. Friend the Member for Stockport (Sir A. Gridley) and myself. It rather seemed that if this new Clause had been changed to give slightly wider discretionary powers to the Commissioners, we might have had a more favourable reply. I understand the reply to mean that the Commissioners, after the statement we have just heard, will give the broadest interpretation to their discretion. In these circumstances I beg to ask leave to withdraw the new Clause.

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

This new Clause is intended to apply to cases where at present, as far as I can see, the Commissioners have no discretion at all. We feel that E.P.T. by its nature depends on comparing the profits of the standard period with the profits of the period of liability, but it is axiomatic that like must be compared with like. No difficulty arises in achieving this object where the company has always been controlled by the directors and where the directors have not changed. The Committee will remember that where the company is under the control of directors their remuneration is disallowed in the standard period and also in the chargeable period. In other words, it is a case of comparing like with like, with the net result that any increase in remuneration is liable. The Finance Act, 1940, quite properly makes provision for the case where the company at one time has been controlled and at another time not controlled, and it does this by saying that no deductions shall be made in respect of directors' remuneration except in so far as the Commissioners otherwise direct. In other words, the Commissioners have discretion to do what is just and equitable within the spirit of the Act. The object of this new Clause is to extend that principle and continue the discretion of the Commissioners to those instances where there has been a change or alteration in the persons of the directors. The Finance Act, 1940, does not cover that situation.

I want to give one example of what we are aiming at. Take the case of a man or woman who was a salaried employee of a company in the standard period and who has since become a director, though still carrying on the same duties as formerly. In the standard period that person's salary is deducted from the profits, thus reducing the standard, but in the chargeable period the director's remuneration, which may be exactly the same as the former salary, cannot be deducted from the profits, as it would be if it were a case of like with like and, therefore, fair and just, simply because his firm, comes within the definition of a company controlled by the directors and is a case where the Commissioners have no discretion. It will be seen from my remarks on the previous new Clause that I am a believer in the discretion of the Commissioners, and we seek to have that discretion extended to this sort of case. Yesterday we were chiefly engaged in the early proceedings in discussing football, and I have been careful to keep the score so far. The Chancellor has not had a single goal scored against him, but I believe that one hon. Member may have crossed the line for a try and will have a chance to convert on the Report stage and to obtain a goal. I am hoping that as this is the first time I have moved anything in this House, I have made some little impression on the Chancellor.

I think that my hon. and gallant Friend gave the best reason for granting his request in the last observation he made. It is one which always appeals to me very much, and I wish I could accede to it. I hope that he will not regard the fact that some of the Amendments have not been carried as indicating that these Debates are a sort of contest between me and the Committee. I am always ready to meet the Committee whenever I can possibly do so, and it may be that as we progress a little a genuine goal may be achieved. I hope that after I have given an explanation of what the practice is my hon. and gallant Friend will be satisfied about the position. As I stated on a previous Clause, under the scheme of the Excess Profits Tax the director-controlled companies are treated, generally speaking, on the same lines as trades or businesses carried on by firms or individuals. In the latter type of cases no deduction is allowable in respect of the remuneration of the proprietor or proprietors. It is therefore appropriate that in the case of director-controlled companies no deduction shall be made in respect of directors' remuneration. That accounts for the fact that by the Finance Act, 1939, as amended by the Finance Act, 1940, a provision of that kind has been made.

It is a fact that the law does not make any special provision for dealing with the case where there is a change in the number or the persons of the directors between the standard period and the chargeable accounting period, but where difficulties arise in such cases they are dealt with as a matter of administration, and such adjustments are made as may be appropriate to the particular case, bearing in mind—I emphasise this—the general principle that the company is to be dealt with on the same lines as a partnership. Thus, if a person was an employee in the standard period and became a director before the chargeable accounting period his remuneration in the standard period is normally allowed to be treated as not deductable, as would be the case in law if he were a partner in a partnership who had been a mere employee in the standard period.

I think I am right in saying that this matter, perhaps in the broader aspect, was considered last year, or on a previous occasion, and I have, replied to one or two of the organisations which have made representations to me by saying that if I accepted this proposal, it would involve the negation of the principle of treating a director-controlled company as if it were a firm. I would also point out to my hon. Friends that if it were pressed to its complete conclusion, it would involve the Revenue authorities in having to adjudicate on "reasonable remuneration" in practically all the cases, and this is obviously a task which they are not particularly anxious to undertake. I hope that with this explanation of what we do administratively my hon. and gallant Friend may be content.

I am not quite sure what the right hon. Gentleman means by "dealt with administratively." If I followed his remark correctly, it would seem that this point is sympathetically dealt with administratively—using his phrase. In that case his information and mine differ, because I have come across instances which have not been dealt with administratively in a sympathetic manner, and that is why we are asking for the Commissioners to have discretion in these cases. There is the obverse of the matter which I have not put: When a manager or important salaried employee of a director-controlled firm dies or leaves, in our present man-power situation the directors may not be able to replace him and may have to do his work themselves. That is what is happening in some small firms. Formerly they would have been able to deduct that late manager's salary from the profits, but if they do the work themselves, they are not allowed to adjust their remuneration for the extra work they do.

I want to put forward two points for the consideration of the Chancellor of the Exchequer. I am sure that he does not want to make it more difficult for industries which are hampered by the shortage of man-power at the present time. If directors go abroad on active service, or die, or are called up to help in some Government Department, it may be necessary to fill the vacancies. One does not want to go outside, but to reward men who have served faithfully and well for many years in some managerial position by promoting them to the board. I am sure the Chancellor does not want to do anything which will hinder that most desirable practice. In the second place, we must have regard to the fact that the Minister of Aircraft Production, and possibly other Ministers, may find it necessary to make changes in directors. There have been cases already in which this has been done, and where it is necessary no one quarrels with it. Ministers may desire to take managers from their managerial positions and put them into positions as directors or managing directors. Those are two types of difficult cases which we are anxious about. We do not want the balance-sheet of the concern to be adversely affected by most desirable changes of that kind. Therefore, I would ask the Chancellor not to make it more difficult for some of us who are faced with this problem, and are hesitating to make changes which we think would be desirable and helpful to the national effort because of the adverse financial consequences which would follow.

I will look into what both hon. Members have said in this connection and give consideration to it and communicate with them.

In view of what the Chancellor of the Exchequer has said, I beg to ask leave to withdraw the Clause, but I would like to say that what is worrying so many of us is this question of promotions. The Army, the Navy, and the Air Force all believe in the principle of promotion and the law as it stands may have the result of preventing promotion.

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

This Clause deals with a fundamental matter affecting long-term agricultural policy, on which I venture to urge that it is the duty of the Government to take a decision as soon as possible. The whole atmosphere surrounding this question has been greatly changed during the past few months by a remarkable series of reports which show great unanimity on certain points. In addition to that, there has been a change of attitude towards agriculture in many quarters, quarters which have not in the past been regarded as particularly favourable to agriculture. I refer to reports issued by the Federation of British Industries, the London Chamber of Commerce, the National Union of Manufacturers and, perhaps the most striking of all, the Wholesale Textile Association, who are quite emphatic in their recommendation that the restoration of British agriculture is essential to the future prosperity of the country. Those reports show the essential place that British agriculture must hold in the economy of the country.

Next I come to the expert reports, which tell us what is one of the main features which will ensure the restoration of British agriculture to its rightful place in the economy of the country. I refer to the reports of the Royal Society of Agriculture of England, an expert body; to the Central Landowners' Association, an interested body who are entitled to have their views heard; to the sub-committee of the Conservative Reconstruction Committee, who have issued a remarkable report which has received favourable notice in every quarter; to the National Farmers' Union, which is very closely in touch with the whole situation; to another very remarkable report, signed by a group of peers of all political parties; and then to the Forestry Societies, the Royal English and the Royal Scottish; and lastly, but not least, in fact to the most remarkable report of all, the Scott Report, which, I gather from references made to it in this House, is accepted by almost everyone concerned.

Let me take first the report of the Central Landowners' Association. It is a very good report, and I advise everyone to read it. They say that it has already been pointed out that the incidence of Death Duties is the most competent cause of the break-up of agricultural estates, and they go on to say:

"No more effective method of eliminating such estates could have been conceived. If it is accepted by the Government that the remaining agricultural estates should be retained then it follows that such a result can only be achieved by the remission of those duties where land is scheduled for the production of foodstuffs and timber."

When we are asking for the remission of Estate Duties on agricultural land, we understand that proper Regulations should be made to see that that land is only freed from Death Duties while it is used for agricultural purposes.

Now take the Conservative post-war reconstruction report, one of the best upon agriculture that has been produced for many years. It comes up against this difficulty almost at once. It says:

"The most difficult to defend from an agricultural standpoint is Estate Duty. It is capricious and uncertain in its incidence. The accidents of life and death may give to one estate comparative immunity, while another feels its effects with crushing severity. In the absence of outside resources it can seldom be met without the break-up to a greater or lesser extent of the estate which is called upon to pay it. Again, under existing tax procedure the rate of tax will increase with the size of the estate and with the total wealth of the owner, a position which may be just from the standpoint of the taxpayer, but which bears no relation to agricultural needs. Psychologically it is disastrous. The guiding motive of the best type of owner is regard for the permanent welfare of his estate."

I do not think that would be denied by anyone who has any knowledge of the conditions of the agricultural industry. The report goes on:

"To such a man the knowledge that, on his death, taxation will destroy his life's work, cannot but have a most depressing effect. The evil effects of the Duties are not confined to the great estate. Equally onerous are the smaller sums demanded from the owner-occupier. To find them involves an inroad on working capital, which almost invariably impairs the future efficiency of the farm as a productive unit."

I come now to the report of the Royal Agricultural Society of England, a body composed of nothing but experts, and they make a very brief reference to the matter. They simply say:

"One of the prime causes of deterioration of the countryside and the loss of fertility has been the incidence of Death Duties. It is impossible to withdraw from the land, at frequent and irregular intervals, large sums of capital without exhausting its power of reproduction which is vital to the nation."

I will quote just a sentence from the report of the National Farmers' Union. Farmers by no means see eye to eye with landowners on every question, and their evidence is really of great value. They say that before the war they had, in collaboration with the C.L.A., made representations to the Chancellor of the Exchequer with regard to the incidence of Death Duties on Agricultural land and the need for relief for expenditure for the maintenance and development of agricultural production. They go on:

"The force of these representations has been intensified by war-time conditions and action in response to them should be an essential feature of the Government's long-term plans for the industry."

I come to the report of the Peers, who include one Socialist ex-Minister of Agriculture. They were quite emphatic. They said:

"Death duties in their present form as applied to the owner of agricultural land are incompatible with the proper maintenance of that land. The maintenance of the present system of landlord and tenant (which leaves the tenant's capital free for working the farm) depends primarily on such relief from death duties as would arrest the drain on the landlord's capital, which should be at disposal for the maintenance and improvement of the fixed equipment."

I will not refer to the Forestry Societies' reports, which are equally emphatic, but will go on to the Scott Report. This matter was not within the Scott Committee's terms of reference, and therefore the Report did not make recommendations. When the Committee turned to the subject of rural amenities and the position of agricultural land in England however, almost the first thing, in the first few pages, upon which they were compelled to comment was the incidence of Death Duties. This body was not concerned with landowners at all. Their terms of reference concerned the future of agriculture and rural England. The Report says:

"During the years before the war of 1914–18, as well as since, rising taxation and the incidence of death duties seriously reduced the ability of many landowners to make necessary improvements or to maintain their farms in good tenantable condition. Many estates became heavily mortgaged. To retain their farms many tenants bought them, often at high prices and frequently with borrowed money. This lock-up of capital in the land meant less money for working capital and became for many owner-farmers a source of considerable embarrassment when later the general world depression in agriculture brought low prices."

That is very remarkable testimony from the Scott Report.

Never has there been such unanimous testimony from widely differing interests and from such expert committees, such universal condemnation of the evil effect of Death Duties on agriculture, which is one of the major industries of this country. I would remind the Committee of the very wide difference there is between the incidence of Death Duties upon a money fortune and upon agricultural estates. If anyone leaves a large sum of money in a bank, the heir may very much regret that he has to draw a very large cheque in favour of the Chancellor of the Exchequer, but there is no difficulty about it. Unless that money forms the working capital of a business, or part of it, no harm is done to production. No business or estate is damaged. If you leave a large holding of shares in some company, some may have to be sold to pay the Death Duties, but that does not affect the company by a single farthing. If you are lucky enough to inherit some shares of the Imperial Tobacco Company, the money for the Death Duties is not provided from either the working capital or the fixed capital of the company but is provided by other members of the public, who purchase the shares.

Take the case of a man inheriting an agricultural estate. If he has not large outside resources, he must break up the estate, and that does no good to agriculture whatever. On the contrary, it does an enormous amount of harm. He may exercise the option, which the Treasury give him, of paying over a series of years. That is no help to the question from the angle from which I regard it, namely, the prosperity of British agriculture, because what does it mean? It means, because the net income is not high compared with capital value, that over a series of years the heir is short of money and is inevitably tempted to starve the estate, cut down on the repairs, and generally do little draining, etc., and thus seriously impair the fertility of the land. Whatever means he adopts he has to do one of two things, eat either into his fixed capital by disposing of part of the estate, or into his working capital by withdrawing money from it.

This question, I know, has been raised many times before, but, I would remind the Committee, never in the circumstances in which it can be raised to-day. This is the first opportunity, this is the first Finance Bill, on which we have the right to press upon the notice of my right hon. Friend the cumulative effect of these expert reports which I have quoted. The question has been raised before, and I just want to refer to that, because it has a considerable bearing upon the decision which I think the Chancellor ought now to take. In passing, I may say that the venerable and illustrious author of those duties, the right hon. Member for Carnarvon Boroughs (Mr. Lloyd George) said—[Interruption.] Ah, yes, but they were not on the scale which we know, and which affect agriculture. I am refer, ring to the time from 1909 and 1910. The author of these increased duties, I should have said, has said that agriculture is too heavily taxed. No one could fail to see, including the right hon. Gentleman, that these Estate Duties were heavy and had an extremely harmful effect. This was brought out very clearly in the Budget Debates of 1925. I may remind the Committee that the Chancellor of the Exchequer of that day was my right hon. Friend the present Prime Minister. The Death Duties were increased, but as a result of debate, as a result of the evidence then brought of the damage being done, a concession was made, and the Death Duties on agricultural land were not increased in the 1925 Budget. From that day to this there has been no increase. Every succeeding Chancellor of the Exchequer has had to maintain this differential rate for Death Duties on property and on agricultural property. I think I am right in saying that the scale to-day is the old scale under the Finance Act, 1919. Nobody has dared to change it, although the rates have been put up on every other form of property, because it has been recognised by Chancellors of all parties that the Death Duties were doing an extremely large amount of damage to the agricultural industry of this country.

The total amount raised by these duties is not large. Taking it in general, I think I am right in saying it has never been higher than £4,000,000 in recent years, and I think it has frequently ranged between £1,000,000 and £2,000,000 a year. That is not a very serious amount in a Budget of the £1,000,000,000 mark. I am not going to translate it into terms of battleships or bancors. I prefer to deal with the old-fashioned pounds, shillings and pence. Nor will I refer to destroyers. It must be realised that although the total amount is not large, seen as an item in the national revenue, the effect on individual owners is crushing, because this is not a tax of £2,000,000 or £3,000,000 or £4,000,000 levied over the whole of the agricultural estates of the country. It depends entirely upon the chances of death. Some estates, large estates, having landlords capable of keeping those estates in first-class repair, may go on for years without paying a farthing towards this levy, whereas a neighbouring estate may have to pay these duties in respect of two deaths in a very short period of time. Anyone who has seen, as I have, the effect on an estate of two deaths in a short period, will know it is disastrous, not only to the man who inherits, but to the tenants and to the people in the villages concerned.

I have dealt with that point. It may be said, "You have pointed out the evil and damage that this tax does. Surely someone must benefit?" I entirely agree; someone does benefit—two groups, indeed three. Two great groups benefit, mainly. They are the jerry builders and the land speculators. These duties are the charter of the land speculator and the jerry builder. I take an estate within my own knowledge, within a few miles of my own home. I passed through it recently. There was a beautiful house, there were wonderful woods. The people could not stand up to the effect of the Estate Duties. They threw in their hand altogether. A land speculator bought the whole thing, lock, stock and barrel. Pass that place to-day—windows empty, woods cut down, everything disposed of, men who have been employed in the neigh-hood discharged. What more would have happened if a foreign enemy had taken that place? Hitler, in his attacks on England, made a threat. He said, "I am going to destroy every country house which is starred in Baedeker." It was quite unnecessary. The Treasury are going to destroy the houses and contents of every house starred in Baedeker. They are doing it. When I was in America some time ago I noticed near the shores of Lake St. Clair, near Detroit, two Elizabethan houses, which had been sold in this country, taken down and re-erected there stone by stone, brick by brick. It was a horrible sight to me. They looked forlorn. I say, "Why should Britain sell its birthright and heritage in this way?"

At the risk of wearying the Committee I must, having dealt with the primary effects, just deal with the secondary effects of this iniquitous tax. You will see in the "Daily Mail" to-day the headline "America buys the family treasures." How true that is. How true it has been ever since these Death Duties have been in operation. The fact is that anything of high excellence in the way of furniture, pictures, books and manuscripts is one of the commonest forms of raising Death Duties at the present time. Many owners of estates feel that, to use an old-fashioned phrase, they have to do their duty to the land. They try to maintain the estate for their children, for the workpeople, and for all concerned. Therefore, their tendency is to look around, and to say, "What about the pictures; what about the other old treasures? We are offered so much for them." That is going on on a large scale, which I am sure a number of people in this country have not recognised. I am not looking now at the international art collections; I am talking of our native indigenous genius, the Romneys, the Raeburns, and others that you will find in the country houses of England. I am not talking about Matisses and that sort of thing, but of the native arts of England, the furniture made by Englishmen for Englishmen, the portraits painted by Englishmen of Englishmen—and by Scots, too; take the wonderful Raeburns that you can find about the country to-day; or that you could find once. Take the simple case of the Shakespeare folios. In many country houses there was an old Bible and a first folio of Shakespeare. I am well within the facts when I say that 95 per cent. of these folios are in the libraries of America. If you want to pursue Shakespearean bibliographical research to-day, you have to go to America to do it.

Is it wise to let your heritage go like this? This land and all its treasures of architecture, art, furniture, books, manuscripts, and what you like, have been handed down not for our own personal disposition, as many people think, but in trust for those who come after us. One of the questions we must ask about any statesmanship and any taxation is, what is the physical result? Is the land better, and are there more good houses large and small, or has the land degenerated, and have the houses gone out of repair; are the people living on their capital? An American said to me, "We Americans are the residuary legatees of the whole of English art." It is perfectly true. They have already got a large quantity of it. I press this matter most strongly on the Chancellor.

I have spoken at length, and I will sum up my argument very briefly. First, I have demonstrated that all expert opinion agrees that the effect of Death Duties is disastrous to the capital structure of agriculture. Is there anyone who denies that? Secondly, I have shown that all reports dealing with this subject, from whatever quarter they come, recommend the immediate abolition of these Death Duties. Thirdly, I have shown that the secondary effect of these Death Duties, namely, the putting of the whole of the country houses of England in pawn, is a disastrous step, and that it should be stopped at once. Lastly, the total amount of money accruing to the Treasury is not great. Had I more time I could have shown that it is very doubtful whether there is any net gain to the Exchequer, because, as a result of this exhaustion of capital, it has been necessary to pay subsidies for drainage and other purposes which might have been avoided had a more statesmanlike course been followed. This enormous damage is, I think, more important than any question of mere pounds, shillings and pence. It Is our heritage that we are selling lightly. We must not do it. I appeal to my right hon. Friend to see whether he cannot accept this Clause, and, if he cannot, to promise us such consideration that we may hope that the new long-term agricultural policy of England is going to be based on a system of taxation which will not exhaust the fixed capital of that industry.

I would like to congratulate my hon. Friend on a very fine effort, and a very persuasive one. He will not expect me, however, to make an announcement on this matter to-day. As he said, the reports which he has quoted are under the consideration of the Government, and they are one of the matters which will have to be considered in connection with the Government's policy on agriculture. This, I think, will be some comfort to him. His speech will be available to my colleagues and myself when we consider this question, and I can assure him that we shall give it the greatest consideration.

There is not a single argument which can be brought forward in favour of this proposal which cannot be brought forward for reducing the Death Duties on many other kinds of property. If it is true that they injure the interests of agriculture, it is equally true that they injure the interests of other industries. The hon. Member has attempted to escape from that dilemma by saying that in the case of industry ownership is very often vested in shareholders, who can sell their shares without affecting the actual control and conduct of the undertaking; but that applies in the case of agricultural estates. Every one of us knows that scores upon scores of agricultural estates have been turned by their owners into limited liability companies, to deal with this very problem. It is open to them to continue that process as far as they please. In that way the continuity of the company's ownership can be maintained, and the problem of raising the money can be dealt with by disposing of the shares, in precisely the same fashion as owners of shares in an industrial undertaking deal with the problem of paying Death Duties. In fact, there is no other object in this country which is dealt with so tenderly, so far as Death Duties are concerned, as is agricultural land, which is taxed upon a lower rate than other property, and on which the owner has an option, which is not given to any other payer of Death Duties, to pay the amount of the taxation by instalments spread over a number of years.

It is said that this taxation is a burden upon agriculture—a burden, that is, upon the industry on farming—but there is no proposal from the hon. Member to exempt from the burden of Death Duties the stock-in-trade of the tenant farmer, by which he carries on the actual operation of farming. It is only a proposal for exempting the owner of land from Death Duties upon the land. Let us not forget that the land is made up of two elements. There is the land itself, and there are the buildings and the other improvements which have been made to it. If there was a proposal to distinguish between those two things in order to encourage the provision of improvements, quite a good case could be made out. The Scott Report, to which reference has been made, contains a series of proposals that there should be a fresh system of valuation which would make that distinction between the land itself and the buildings and improvements which are placed upon it. If such a distinction were made, there would be an opportunity, not only in this case, but in other cases, to make a distinction between the actual contribution to production and the ownership of a natural resource which has not been created by anybody.

Let us assume for the sake of argument that Death Duties on agricultural land do to some extent fall upon persons who are actually conducting the business of farming. It is not a serious burden placed upon that industry. The amount in question is comparatively small. For the past 20 or 25 years the amount of Death Duties collected in respect of agricultural land has fallen to about half what it was. The amount now collected, something over £1,000,000—and I speak from memory—is only a very small part of the agricultural output of this country, which is well over £250,000,000. Therefore, this amount is of the order of much less than 1 per cent. of the agricultural output of the country. It is useless to suggest that the condition of agriculture is seriously influenced by the effects of this taxation. Reference has been made to the break-up of great estates, and something may be said for that in some cases, unless we are all prepared to stand by a system in which the ownership of the land of this country is concentrated in the hands of a comparatively few individuals. I question from the very foundation the soundness of an argument of that kind unless we believe in a state of society in which there is a great gulf fixed between those who have large possessions and the mass of the people of the country.

I sympathise with those who wish to preserve many beauties which have come down to us from the past, but the dispersal of these artistic treasures is not due to the incidence of Death Duties upon agricultural land. It had started long before the Death Duties on agricultural land came into existence and before they had attained any significance whatever. The Huntingdon Library in California, to which the hon. Member referred, has one of the most marvellous collections of ancient documents. The Battle Abbey deeds were sold by the owner of the land more than 100 years ago, before any question of Death Duties came into consideration at all. If owners of land desire to preserve these things for the benefit not of themselves, but of the nation at large which has contributed out of the rents which it paid to the owners of agricultural land, there are means open for them to do so. They can hand over their property to the National Trust in order that it shall be preserved for the benefit of every one of us. There is no reason why those who feel patriotic in this matter should allow artistic treasures of that kind to be dispersed. I hope that the proposal which has been made will be looked at from all its aspects—from its economic aspect and from the other aspects which have been mentioned—and in the light of the fact that every proposal of this kind means that more taxation has to be placed upon somebody else in order to improve the conditions of those whom it is hoped to benefit.

I would not have risen had it not been for the speech to which we have just listened, but I feel that there is a fundamental misunderstanding on this problem. It is looked upon by hon. Gentlemen opposite as a problem of ownership. It is nothing of the kind. It is a problem of management. If we can only realise that the management of an agricultural estate is just as important to the agricultural industry as the management and physical use of the land itself, we might get a better and a truer realisation of the proper function of the landowner. The hon. Gentleman referred in particular to estate companies and the shares which could be sold in the same way as industrial shares. I ask the hon. Gentleman to disabuse his mind of the fact that the shares of estate companies, if they are sold, do not have any effect whatever upon the management of that estate. They have just as direct an effect on that estate as if the company had not been formed. I myself am a land agent, and I have entered into many negotiations on the subject of the formation of estate companies, and I have never been able to see any advantage in that form of alteration. But a lot of people have done so, I agree. It does not affect in any way the unfortunate incidence of Death Duties so far as the capital in the estate is concerned. If shares have to be sold, then land has to be sold in order to realise the shares.

Another point that the hon. Member made, that there should be along with this suggestion an alleviation of burdens on the farmer's stock, is entirely a different one. if a farmer has to pay the duties, he first of all pays on a very much lower capital value, and consequently his stock is far more realisable than that of the landowner. The real point is that, in my experience, it is almost invariably the large estate in a ring-fence which is efficient, both economically and technically. It is a large estate which has all the advantages of a central workshop, a central maintenance unit and a central executive management. Wherever that ring is broken and the estate is reduced in size you get inefficiencies creeping in. The effect of Death Duties is that in almost every case the farm or farms on the outskirts of the estate are first sold off. Each of those farms goes to probably one owner, or perhaps one man buys all of them. Almost invariably he buys for investment what will give him 5 per cent. on his money. That is one principle that has done more damage to the agricultural industry than anything else.

It is this desire on the part of men and women who have no feelings for the land at all and who regard money put into agriculture in the same way as money put into investments that is ruining the industry. These people have no idea how to manage land as it should be managed, with the result that there is an increase in the number of speculative builders and investors. Hon. Members who live in the north of England know that some years ago there was an organisation called "The Forty Thieves," who used to go around buying up the estates of large owners who could no longer afford to run them, break them and sell bits here and bits there to speculative builders, bungalow proprietors or roadside garage proprietors. So, slowly and inexorably our countryside was wrecked and ruined. I hope the Chancellor will consider favourably the suggestion so eloquently put forward by my hon. Friend in this Clause. I ask him to remember that we have one prime national asset in this country—the land. Practically everything else is artificial and man-made, but the land will remain, and everything we can do now and in the future to improve it and to make landowners more efficient and more sensible of their responsibilities is all to the good of the country.

I would not have risen had it not been for the fear that some confusion may have arisen. The speech of my hon. and gallant Friend the Member for Ripon (Major York) may have led some people to suppose that he was strongly against small ownership or even-medium-sized owner-occupiers of land. I am sure that is not the impression he wished to give.

No.

There has been a spread of owner-occupiership in Scotland for the last five years, with very satisfactory results. Both the Mover and the Seconder of the new Clause seemed to suggest that the only way land can be farmed was solely through large estates.

I am glad my hon. Friend has allowed me to correct the impression which he suggests I gave. My hon. Friend who moved the Clause did refer to owner-occupiers' capital being taken up.

The hon. Member for North Battersea (Mr. Douglas) also seemed to confuse the Clause with the method of valuing land. He mentioned the Scott Report. I do not think that was in the mind of my hon. Friend who moved the Clause. I am satisfied that as a result of the Scott Report there will have to be a different method of valuing improvements to the land, but that is not directly affected by the Clause under consideration. It would be a pity to confuse the two issues, because it might be thought that anybody advocating the abolition of Estate Duties on land was opposed to any change in the method of valuing the land, particularly any method of valuing improvements to the land. That is not the case at all. The argument which can be adduced in favour of this Clause is that this duty is an arbitrary tax that may fall at any moment with crushing effect on a particular estate, which may, for the time being, be knocked out. There may be two or three deaths in rapid succession, with the result that there is no capital for development for perhaps 20 or 30 years. I do not think we can continue indefinitely under this system. As has been said, Death Duties falling in that way are a gift from on high to the land speculator as such, not to the farmer who wants to buy his own farm, but to the man who wants to break up an estate and sell it to a jerry-builder for the sole purpose of making as much money as can be made in the shortest possible time, thus doing irreparable damage to the countryside.

Nobody can doubt that there is need for capital in agriculture. The sum involved is trivial in relation to the results which could be achieved; as against the subsidies which have now to be poured out for land drainage and almost everything else, the cost to the Exchequer might be trivial. I am convinced that there are in the long run only two alternatives confronting this country—the remission of Estate Duty on agricultural land as such, and the nationalisation of the land. I do not see any other way of getting the necessary capital into the land of this country. That is an issue which may have to be fought out in the years which lie ahead, but that something must be done now I have not the slightest doubt.

Nothing astonishes me more than the boldness of a certain section of Members. of this House and we have had an admirable illustration of that to-day from the hon. Member who moved this Clause. At a time when the Chancellor is raising considerable sums of money from the poorest classes of the community, against which many in this House have dissented, we have this privileged section in the matter of monetary standing coming here and asking for a remission of taxation on agricultural land. I suppose it is evidence of the buccaneering spirit that has been utilised in industry with very good effect in certain spheres, but to request that the most prosperous industry in the country to-day should be relieved of any part of its proper taxation is astonishing. The hon. Member who moved the Clause was careful to blend together landowners and agriculturists, and I am quite agreeable to that, but the quotations he gave were very prejudiced. It was significant that he did not seek to put the position of agriculture as it is to-day—prosperous, fortunate and well-favoured by the community and the State——

After 20 years' depression.

That may well be the case, but surely we cannot argue from the position as it was 20 years ago.

If we did, I think we should be going very far beyond the Clause. I would ask Members, as the Chancellor of the Exchequer said he would go into this from another angle, whether it might not be well to get on with the Bill.

On a point of Order. Is an hon. Member precluded from referring to something which may appear prima facie irrelevant but, nevertheless, is absolutely relevant in the development of an argument? If that is to be ruled out, the Debate will be stultified.

I do not think I ever ruled that at all. My suggestion was that we seemed about to go a long way down a side line, which might entirely stultify the Debate and bring it outside this Clause, which is not very wide.

I have no desire to digress but it seems strictly logical that, if it is desired to relieve agricultural land, and most other land, some argument should be evolved for the purpose. If agriculture and agricultural land are in a depressed state, the depression extends to other forms of land, but we have had no such suggestion made. The fact is that taxation, generally, is being distributed with a very heavy hand upon all sections of the community, and the layman would assert that there is one section of the community, namely the agricultural, which ought to feel this tax least of all. They have been the favourites of fate and of Parliament, not only of this Government but of previous Governments. Vast sums have been conceded to agriculture as free gifts. These were grants not from high Heaven but from other taxpayers. We have had controlled prices, guaranteeing to agriculture certain specific profits, which the State has not guaranteed to any other section of the community. We have given the free use of implements, lime, fertilisers, and the remission of local rates.

We are not asking for the remission of Income Tax and Super-tax. We are talking of capital taxes—Death Duties.

I am not aware that I mentioned the remission of Income Tax or Super-tax. I am stating that there are these remissions of local rating and differential duties. The working classes, though they may not have many exponents here at the moment, are feeling the same burden of which agriculture is improperly complaining, and no evidence has been submitted to indicate the reasonableness of further remissions for agriculture, which is one of the most prosperous sections of industry. Industrial workers suffer not only through direct and indirect taxation but, in addition, have the burden of unemployment, which is perhaps the heaviest of all. We are promised that that will cease to fall upon them but we have to live and see whether that will be so under the capitalist system. If we indulge in the luxury of great wars in rapid succession, can we expect that these will be paid for, without the levelling down of those who have been in a privileged position in the past? We can only hope that the levelling process may not be too rapid, or indeed that there will be a levelling up rather than a levelling down. The proposals of the Clause would place an additional burden upon the rest of the community in the interest of agricultural landlords.

I rise to make an appeal which I hope may have some effect on the party opposite. I quite understand how the Clause cuts across a good many of their pre-conceived ideas. Since I have been in the House I have often learned a very great deal from their practical experience in certain matters and have changed my preconceived ideas. I trust that they will look at this matter without prejudice and see that there is more in the argument of supporters of the Clause than perhaps they thought. The last speaker treated this as a case of remission of taxation. It seems to me that that is a total mistake. At the present rate, taxation is not simply a question of raising revenue. It is a great instrument of policy, and our case is that this instrument of policy is unfairly affecting one of the great industries of the country. It Is true that, so far as immediate profit is concerned, so far even as capital in the sense of working capital is concerned, agriculture is, for the moment, prosperous, but our case is that the heavy, long-term capital industry is not prosperous, and the reason is the incidence of Estate Duty.

The hon. Member for North Battersea (Mr. Douglas) suggested that there was no single argument that could be applied to agricultural land which could not equally be applied to other forms of land ownership, but that ignores the real character of the capital structure of the agricultural industry. I can cite a case where the owner of a great estate and the owner's son died within a week. Next door there is an estate owned by a college. It has plenty of capital, because a college never dies, while the estate owned by the landowner has been starved of capital, because it has paid double Death Duties. As matters stand at the moment, the capital structure of agriculture demands money from the pocket of the landowner in a sense that other forms of industry and capital investment do not. Whether that is desirable or not I do not propose to inquire, but it is the fact.

It is said by hon. Members opposite that they do not approve of that form of society and that they do not want a dif- ferential form of society in which great landed estates exist in private hands. I am not at this moment arguing against that point of view. I do not say that I support it, although I have greater sympathy with it than hon. Members opposite think. What I say is that this Finance Bill is not an instrument for upsetting the social structure of the country or fundamentally altering it, and what cannot be justified is retaining the present social structure and preventing it from working efficiently. If you want to alter it, alter it by a proper Measure which will restore a proper balance in another way, but do not keep it on in such a form that it cannot operate efficiently. I therefore ask hon. Members, whatever their views, to regard a new Clause of this kind sympathetically, because it is conceived on the basis of the existing structure of society. The arguments against it are based on a misunderstanding of the capital structure of this industry.

One hon. Member suggested that landowners should hand over their property to the National Trust. The National Trust is not designed as a manager of agricultural land. It may have to undertake work of that kind from time to time in the course of its business, but it is not an instrument designed to take over agricultural land. It is not fair, while we have a system of private property, to turn to one particular class of property owner and say, "We are going to allow people who have their money in shares to continue as private owners, but because you own agricultural land you must give up everything you have." Therefore, I ask hon. Members, without prejudice to their general convictions, which I am not disputing at the moment, to give the new Clause the sympathetic consideration it deserves.

I say, frankly, that there is a certain amount of tragedy in the break-up of great estates, but I see a fallacy in arguing that the cure for that is necessarily this proposed Clause. This is a question of national planning and public policy in another direction altogether. I am sure that the Chancellor during the proceedings on this Finance Bill must have been surprised at the number of innocent, helpful people whom he has been punishing and penalising by his taxation. According to one of the arguments used every great landowner has been a benefactor who has held the land together and it has only been the wicked speculators who have broken it up. I know a number of cases in which the reverse has happened, in which the great landowner himself has taken advantage of every development of the community and exploited it by ribbon development and by selling his land to house speculators and making the most out of it. I suggest that he is not in the same category as people who are making profits in other directions.

It was never suggested that he was.

The suggestion was that the landowner was a person of great generous public spirit, but we have to take landowners as a mixed variety—the speculators, the gamblers and all the other people mixed up in the community of landowners.

The hon. Member has missed the point altogether. I was not talking for the great landowners but for all landowners, most of whom are small men. The imposition of Death Duties gives the opportunity to the jerry-builder and the land speculator. There are landowners who speculate, but they are driven to speculation by the Death Duties.

Surely there are other ways of sharing out the land than by selling it to speculators. Somebody has referred to the formation of a company. There is no reason why a landowner should not form a company and sell shares in it and still keep control of the land. If there is a profit, he can distribute the profit instead of the land. We have to realise that land is a big capital institution. If it is a question of perpetuating the control by one individual of hundreds of thousands of acres and to some extent the destinies of people upon that land, that is a position that has to be considered, but it is not a question of Death Duties. The Government and the people as a whole have no right to subsidise that system at the expense of people less able to bear the burden. So far as I can understand the system of taxation and Death Duties in this country, it is as fair as anything that can be devised. It is for the person who has land to make such arrangements that he can meet his obligations to the community in the proper way. It may be that if two or three deaths take place in rapid succession hardship arises, but hardship arises too in regard to a soldier's estate, if both father and son are killed in the war.

The point is not the hardship to the individual but the damage to agriculture.

The point surely is not the question of relieving a person of a financial obligation but a question of the Chancellor and the Government introducing some arrangement by which if the Death Duties involve the sale of land in a way which will harm the country, some arrangement should be made by which the Government could be able to take over the land. We have an instrument in the county agricultural committees, and I see no reason why they should not take the place of the National Trust so that if a person cannot finance the payment of his Death Duties, the community as a whole, through the Chancellor, should be able to take over the land in trust under the management of the county agricultural committees. This would solve the problem of the breaking-up of estates and ensure good management. There is no guarantee that a landlord is a good manager of land. There may be landlords who are good managers but there are also bad ones. During this war the community has had to see that the land is properly managed by taking it out of the hands of many landlords. The question of efficiency is not guaranteed by the individual ownership of land. I agree that we ought to have efficient management of the land, but it must be guaranteed by public policy and run by the public and not left to private individuals who may or may not be efficient.

May I appeal to my hon. Friends to proceed with the Bill? We have had a useful discussion on this matter but I am anxious to have adequate time for the consideration of the remaining new Clauses. This has been a general discussion and I think that the observations I made were generally satisfactory to my hon. Friends. In these circumstances, I would ask them to allow us to proceed.

May I just say two sentences with regard to two points that have been made?

The Chancellor has made an appeal to hon. Members to end the Debate, and it is only fair to other Members who are giving way that the hon. Gentleman should not continue to make points which have already been made several times. I appeal to him to take the wider view and let the Debate end.

I was not going on to argue but only to correct a statement. In view, however, of your appeal, Mr. Williams, and in view of the satisfactory statement made by the Chancellor, I beg to ask leave to withdraw the Clause.

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

This new Clause deals with a comparatively small question and concerns almost entirely small businesses. At the present time a small business which had no income during the standard period is limited to earning 6 per cent. on its capital, and on new capital which is raised it is allowed 8 per cent. I am not going into this subject in any detail, but I ask the Chancellor whether he cannot increase the 6 per cent. to 8 per cent. and the 8 per cent. to 10 per cent. The businesses concerned are mostly small businesses which underwent difficult experiences or else were in a period of development. Many of them are paying out in taxation more than the total amount of the income left, because they are only allowed 6 per cent., which is 3 per cent. after payment of Income Tax, and they are not allowed to deduct for Income Tax purposes their war damage premiums and certain other payments. The result is that there are actual instances of businesses, almost entirely very small businesses, where the 6 per cent. does involve the company, after the payment of tax, in an annual loss.

I regret that I cannot advise the Committee to accept this Clause. At this stage I cannot, I am afraid, increase these allowances. I should be in further difficulty if I did so in this case, because if the rate were increased to 10 per cent: the capital of the company would be treated in the same way as new capital, for which at present we are allowing 10 per cent. There was a special reason for that, and that was to encourage capital coming into a business, but if I were to accept this Clause the next thing would be that some of my hon. Friends would come along and say, "We want another 2 per cent. for the new capital," and I should then get to the question of having to allow 12 per cent. I hope the hon. Member will appreciate my difficulties, but I really cannot take this matter further.

I really do not think the Chancellor can expect us to be satisfied with the explanation he has given. I am sure that he does not want injustice to be done, as it is being done at present, to many industrial undertakings, and not only small ones. There are many firms who are in the fortunate position of having had during the standard years very satisfactory profits, which enabled them to pay in pre-war years 10, 15 or 20 per cent. dividends, and it is quite easy for them in the war years to continue to pay such dividends; but there are other concerns which were in the stage of development or were going through a period of depression in the pre-war years and had no profits at all. Their standard was so low that in present circumstances they are contributing immeasurably to the national effort and yet getting less than nothing for doing so. It would be quite easy for the Commissioners of Inland Revenue to bring before the Chancellor convincing facts showing the gross unfairness of the present system towards this type of undertaking. I doubt very much whether, when it was originally suggested that 6 per cent. or 8 per cent. should be a reasonable return on the capital, it was ever expected that we should reach an Income Tax of los. in the pound. If a company makes 6 per cent., the Income Tax reduces it to 3 per cent., and after you have to take out of the small residue the compulsory contributions towards war damage and pay what may be quite a reasonably small reward to the directors of the company, who may be whole-time directors. What inducement is there to such a concern, apart from the impelling motive of doing what they can for the national effort, to expand their business when they will get absolutely no reward?

Further than that, capital has been found by private holders of capital for the development of these businesses at a time when they will receive only this puny reward, and they have no idea whether that capital itself will not be lost or will depreciate considerably after the war when the type of business now being carried on may no longer be required or there may be only half the present volume of work. If the Chancellor wants to do justice all round, he ought to take this special case into consideration. All we are asking for is recognition to the extent of a miserable per cent. It does not sound very much, but it does make a difference whether you get 3 or 3½ or 4 per cent. on your money. In view of the moderation of the demand behind the Clause, I ask the Chancellor whether he will not soften his heart instead of keeping it quite so hard.

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

My hon. Friend the Member for Thirsk and Malton (Mr. Turton), in whose name this new Clause stands on the Paper, has asked me to apologise to the Committee for his inability to be present at the time when it has come on. The Clause deals with the emoluments of the Women's Land Army and calls attention to an anomaly which is apparent there as elsewhere. I will state it in general terms. A girl in the Women's Land Army may live oh a farm, in which case she will receive board and lodging from her employer and a salary in addition. Alternatively she may live out, in which case her money emoluments will be increased because she will receive a board and lodging allowance. Under the Income Tax Acts, if a person receives free board and lodging as part of his or her emoluments, no tax is chargeable on that part of the income which is income in kind, but if the same person, instead of living at her place of work, lives elsewhere and receives an additional allowance to cover the extra cost of her board and lodging that allowance, though it is to meet a quite definite expenditure, becomes taxable. I think the Chancellor will agree with me that not only in this case but in many other cases, the Income Tax law is operating inequitably between one person and another, in the sense that it is discriminating against those who receive board and lodging allowance. If board and lodging allowance were paid direct to a hostel where a woman lived, then that sum might not be included for tax purposes on the ground that it does not at any time pass through the taxpayer's hands.

There is another anomaly apparent in the difference between the treatment of the Women's Land Army and the treatment of the women's Services. I know that the Women's Land Army are civilians and the girls in the A.T.S., the W.A.A.F. and the W.R.N.S. are not. The Government use that argument to justify differentiation of treatment between them. But I do not think any of us are quite happy about this matter, and it is because my hon. Friend has had hard cases brought to his attention—and so have I, in another sphere—that we ask the Chancellor what he intends to do to remove the discrimination.

There is undoubtedly, and there has been for some time, an anomaly—if that is the right word—arising from the fact that if a person gets board or board and lodging, as part of the consideration for work, it is not evaluated in money and taxed as income. The first case that came before the court was that of a bank manager for whom accommodation was provided in the bank. That fact was reflected in his salary. As between him and, say the headmaster of a grammar school living next door, one might have said that that was unfair and you would have upgraded the bank manager rather than scaled the other man down. Undoubtedly the vast bulk of people in this country pay rent after their income has been taxed. That is the general rule. In the special class of cases where somebody gets free board and lodging these people are really getting a windfall. The Royal Commission on the Income Tax suggested that, in the interests of the principles of logic, efforts ought to be made to see that board and lodging was assessed as income and so evaluated. That has never been done, partly because of the great practical difficulties and partly because it has been thought that it was better for a few people to be lucky rather than to introduce great complications.

Take the case of any domestic servant in the country. If you are really going to evaluate on logical principles what she is getting you have to take into account the fact that she gets free board and lodging. That might bring her above the Income Tax limit in these days. Take a man-servant. One man-servant may get so much a year, live in the house and have board and lodging free, while another man has a cottage and gets a larger sum, but has to pay rent for the cottage. It has been found impracticable to deal with the anomalies by scaling up one set of people and trying to assess the value of their board and lodging. The case of the Women's Land Army is simply one case in a very much wider problem and it was realised that my right hon. Friend could not tackle it, certainly not an the lines suggested in the proposed new Clause.

It always happens that when we are lucky we do not realise our good fortune nearly as keenly as we realise our bad fortune when we are unlucky. People in the Land Army or in any other walk of life who get free board and lodging or free lodging without board' are lucky, but it would be impossible to deal with the anomaly by putting everybody who has to pay for board and lodging in the same Income Tax position as the people who get board and lodging free. It may be true to say that some of the Service allowances are treated somewhat more generously than corresponding allowances in civilian life, but nobody would want to alter that position in the middle of the war. My right hon. Friend has stated that when peace comes and the problem is considered again, it can be considered in the light of the position of those who, in the future, may be in the Services, and it may well be found that elasticity has been carried a little further than is fair, having regard to other members of the community.

I do not want to detain the Committee and I do not want an answer from the Attorney-General or from the Chancellor of the Exchequer to the question I have in mind. [An HON. MEMBER: "Then why ask it?"] Because it is desirable to call attention to the matter. The Attorney-General referred to other matters analogous to those arising under the proposed new Clause. Surely, in the future unless the Treasury devise some system in respect of this matter and of the analogous situation, a rather serious sense of injustice may be created. It does not seem to be a sufficient answer to say that this is the line the Treasury have always taken, because it is only within the last two or three years that this mass of wage-earners has come within this category. I imagine that after the war, whether the present basis of Income Tax is continued or not, some system will have to be found of differentiating between those who get the great benefit of living in and those outside, who receive the same wages. Otherwise, a sense of injustice will be created in the minds of the taxpayers.

The real remedy lies in restoring the position which existed with regard to Income Tax before there was this great extension of Income Tax payment. Among the Services, the girls in the Land Army have all along been treated as the Cinderellas and I suggest to the Treasury that, in the future, a sound way to deal with the anomaly will be to restore a much more generous exemption level.

The Noble Lord is quite right. The anomaly, which the Attorney-General admitted, has become much more acute owing to the great rise in the level of Income Tax. I will not press the matter further on this narrow issue of the Women's Land Army now, so I beg to ask leave to withdraw the Clause.

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

Nobody would be more surprised than myself if the Chancellor were to accept this new Clause. Nor do I ask that there shall be any long discussion on it. I have moved it to call attention to the fact that apparently we are simultaneously taxing tea and subsidising it. The Tea Duty, like the tax on sugar, is an ancient Revenue duty which definitely raises the price of the commodity by the amount of the tax. Now, in wartime, the attitude of the Government has changed right round, and it subsidises various commodities in order to keep down the cost of living, Parliament previously having taxed them knowing that it would put up the cost of living. The Parliamentary Secretary to the Ministry of Food said in the House on 13th May that tea was one of the commodities that were subsidised. I therefore put down this new Clause in the hope of eliciting a statement of policy from the Government. It seems to me wrong that we should, in this House, fix a tax on a commodity at a certain level and that then the Government, without coming to this House or necessarily telling the House about it, grant what is in fact a rebate from that tax by a war-time subsidy from the Ministry of Food. I would far prefer that that was done in an entirely open way, by the Chancellor proposing to the Committee that there should be a reduction in the tax. If he says that he is anxious to safeguard his position and his taxation strength for after the war, then I express my personal opinion that this kind of tax is an obsolete kind which we ought to try to get rid of.

I am glad my hon. Friend does not expect the Chancellor to accept this proposed new Clause, but I think he is under a misapprehension as to the position of tea at the present time. As a matter of fact, since January last tea has not been subsidised; nevertheless I will answer his point, because it might well be that some other time the position might arise. I should like to make it clear that in the case of tea there are two reasons for maintaining the tax. One is that there is a preference, and the Government are not free, to go the whole hog and remove that tax so long as the guaranteed preference is given to Empire products.

A preference which my new Clause would retain.

I quite agree. The second thing is that the tax is a permanent part of our financial structure, and there have only been about two or three years during the last 300 years when tea has not been taxed. It is a permanent tax, and although my hon. Friend expressed the view that it is not his idea of a good tax it is part of our age-old system of taxation, and this is not the time, therefore, to withdraw it.

I am sorry that the Mover of this proposed new Clause for the reduction of the Tea Duty moved it, and then said, "For heaven's sake do not take any notice of what I say, because I do not mean a word of what I am going to say. "That is really the essence of the speech of the hon. Member for Lewisham (Mr. Brooke).

I said that I considered that the Tea Tax was in essence a bad tax, but that I did not believe the Chancellor could accept my suggestion to-day to reduce it to-morrow.

The essence of what the hon. Member said is what I have just said to the Committee. The Financial Secretary said that this tax is 300 years old, but because there has been a tax for 300 years that is not to say we cannot find the money from some other source instead of a tax on tea. I want to say just one word, because I am thinking about the old age pensioners and about the widows who after next Wednesday, unless there is a change from the Treasury as well as from the Minister of Health and the Minister of Labour, will still be at the level of 10s., the widows who have never had a penny-piece rise since the war. I saw one last week who has 10s. for herself and 5s. for a child. She has been a widow for 10 years. She has been out charing this week. I want to get this point over. It is no fairy tale that there are old age pensioners who after they have had their tea and stewed their tea—I do not know whether any of you chaps have ever had stewed tea or not——

I had some to-day in the smoke room.

I was going to say they not only have it stewed, but after it has been stewed they take it out of the teapot and dry it again because they have not got the finance. If the tax was reduced to what the hon. Member for Lewisham is asking for, but does not expect, that would be an increase of income, in a sense, to the old age pensioners. I am sorry that the Financial Secretary is harping on 300 years, and that because the tax has been there it has got to go on. Because things were done in the Garden of Eden when Adam and Eve broke the law, that is not to say that these have to be continued all the time. I am sorry that the Treasury is so hard-hearted on this matter.

I think I have made my position quite clear to everybody except the hon. Member for Hemsworth (Mr. G. Griffiths), and I beg to ask leave to withdraw the Clause.

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

I have had correspondence with the Chancellor on this matter, and therefore it can be narrowed down in this Debate before the Committee. Section 38 of the Finance Act, 1924, made certain provision for the remission of Death Duties for Service personnel engaged in the operations of war. If I understand the interpretation which the Treasury puts upon this, it is that as soon as the Forces are mobilised for war every one of them becomes on active service against the enemy. Of course, everyone will agree with this, by being classified on active service against the enemy, every member of the Forces is entitled to this concession. Section 64 of the Finance Act, 1940, extended this to certain sections of the Merchant Service and fishing boats and other categories, who die from causes arising from the operations of war, and Section 46 of the Finance Act, 1941, extended it to civilians who die from injuries caused by the operations of war. I want to call attention to the difference in the language dealing with these three categories. Regarding the Services, the language used is:

"On active service against the enemy."

Under Section 64 of the 1940 Act dealing with classes of the Merchant Service the language is:

"Causes arising from the operations of war."

And with regard to the concession to civilians the language is:

"From injuries caused by the operations of war."

I wish to cite a particular case. It seems to me that here we have a problem of equity. On 7th June, 1942, an R.A.F. plane met with an accident, and the personnel of that plane were kilted. There were R.A.F. and civilian personnel in the plane. The coroner's verdict was very clear: "Death due to multiple injuries to Royal Air Force personnel on duty, and civilian personnel, as authorised passengers in the aeroplane, were also on duty." The estate of a high ranking officer in the R.A.F. who meets with an accident while flying in this country for any purpose, is exempt from Estate Duties. The estate of a high technical research civilian engaged on Government war work, who is refused permission to join the Services and is killed while flying on experimental duties with the officer referred to, is not exempt. The estate of a civilian not engaged on war work, who is accidentally killed by a plane returning from active operations against the enemy, is exempt from Estate Duties, while the estate of a civilian killed by a training plane is not exempt. In view of the time, I do not propose to argue the case at length. I think I have put the issue very clearly. The whole matter is one of interpretation. In each category it rests with the Treasury to decide whether the death arises from the operations of war, and, in so far as I have examined them, I fail to find how the Treasury excludes any of these cases.

I am indebted to my hon. Friend for dealing so briefly with the matter. We have had some correspondence about it, and I have endeavoured to give him some reasons for the conclusions which have been reached as to the payment of certain claims. It is true that when we reach conclusions we have to look at the provisions of the Act of Parliament. It is true that there is a differentiation between people in the Forces and civilians, as laid down by the Act. My hon. Friend is seeking to repeal Section 46, which relates to civilian deaths, and which is applied in the case of injuries caused by the operations of war. My hon. Friend desires, at any rate for the purposes of the discussion to-day, first, to include disease so far as civilians are concerned, and then—I know that this phraseology is very difficult to draft, but it would be more difficult to interpret—

"disease caused by the operations of war or incurred whilst engaged in war work or other duties in circumstances which, in the opinion of the Treasury, involve risks similar to those incurred in the operations of war."

There is this distinction in regard to disease. Members of the Forces are subject to a medical examination before they are taken into the Forces, and so we are able to come to some measure of reasonable conclusions as to whether——

Not very reasonable conclusions.

I hope that my conclusions would be reasonable. I am not referring to the decisions of medical boards or anything like that. It gives some measure of guidance as to whether the disease from which a man may die arose out of war service. But I will not provoke a discussion on whether all the decisions are advisable or not. It would be impossible, in relation to the millions of civilians, to reach a conclusion of that kind at all as they have not undergone any medical examination. I am afraid that my hon. Friend's suggestion that the Treasury should endeavour to come to a conclusion on whether the disease was caused while the person was

"engaged in war work or other duties in circumstances which, in the opinion of the Treasury, involve risks similar to those incurred in the operations of war,

would be extremely difficult to carry out in practice. In the course of my correspondence with my hon. Friend, cases like this arose. You might have a scientist engaged in an experimental flight, on which he meets his death. Under the Clause, it would be for the Treasury to decide whether death was the result of the war or not. In a large number of cases, death might have happened in just the same way in peace-time. It would be difficult to say that it arose out of the war. All sorts of difficulties might arise. I have dealt briefly with this matter, but I hope my hon. Friend will not think that I do appreciate his argument because I have not replied at great length. I shall he glad to talk further with him about this subject. But the Clause would be very difficult to operate.

I appreciate the difficulty of framing an adequate Clause without the proper technical advice. In view of the Chancellor's intimation that he will give me facilities for again looking into the matter, I beg to ask leave to withdraw the Clause.

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

I shall try to telescope my argument as much as possible, because I do not want to detain the Committee. The basic purpose of this Clause is that the voluntary superannuation fund of the National Union of Journalists should have its position so eased as to be able to continue, and, in conformity with the usual practice of this House, I had better say that I am a member of that union, although I have no financial interest at all in the fund. I think that the argument for the Clause is fairly strong. I hope that the Chancellor will think so, too. At any rate, if he agrees that the purpose of Section 31 of the 1933 Act, like that of any other financial provision, is to enable him to collect certain moneys, to do that in an orderly fashion, and to collect it justly, I think I shall be able to show him that if he resists this Clause he will get no money by his resistance, and that he will perpetuate hazardous and fortuitous circumstances and bring injustice, at any rate to a small section of this community. This fund was founded in 1925. It differed from the ordinary superannuation fund in that it was not a joint fund, to which employers and employees contributed, because the union had found it impossible to secure the agreement of the employers.

The editorial side of the newspaper industry is a curious one. There is a considerable section of the industry which comprises free lance journalists, that is to say, those who have no salary attachment to any one employer but are paid by results, and that is the basic reason why a joint fund was impossible. To overcome this difficulty, in 1925, this fund was promoted by the Union under the Industrial and Provident Societies Act, as the law required, and thus secured the exemption from taxation of its investment funds under the appropriate Section of the 1918 Act. But in 1933, under the Finance Act of that year, this fund was compelled to pay taxation. At that time, the Union, having failed to sustain its appeals, tried to set its domes- tic finances in order within the fund, and because the taxation level was only 5s. they were able to reduce their contracting benefits and carry on for a time. But as the taxation level increased, so the difficulties became greater, until—and this is the reason why my hon. and right hon. Friends and myself raise the matter—the fund has had for the last two years to cease recruiting members. Indeed, unless the Chancellor can agree, the fund will have to close down altogether. It must be wound up. That is why I say that, even if the Chancellor resists this new Clause, he cannot secure any moneys from the fund.

It would be bad enough if the Chancellor, in pursuing a deliberate policy, felt that he had so to treat this fund. I hope that I shall be able to persuade him that it is a fortuitous circumstance and that it was never intended that this fund should so be treated. Under Section 31, Subsection (2) of the 1933 Act, the position of this fund changed and it is that portion of this Sub-section that we by this Clause seek to repeal. I could quote at some length to prove that that Sub-section was never intended to deal with this fund. When the then Chancellor of the Exchequer—the late Mr. Chamberlain—introduced this Sub-section, which was the most controversial Sub-section dealing with the undistributed profits of the co-operative societies, he said that they expressed their agreement with the majority of the Royal Commission which reported in 1920 that the amounts arising from trading with members, the so-called mutual trading, should be made chargeable to Income Tax. He went on to say that he anticipated in that year that by this Sub-section he would gain £1,200,000, all of which he calculated would be got exclusively from the co-operative societies. The then Financial Secretary to the Treasury, in piloting this Sub-section through on 31st May, 1933, made the same assumption throughout his speech. He said that there would be no distinction whatever between the co-operative society and the ordinary trader, and he went on to talk about traders and cooperative societies. Plainly, any one who cares could satisfy himself that this Subsection dealt only, and was intended to deal only, with the co-operative societies.

If there is any doubt in the minds of the Committee I would push it aside by saying that the Financial Secretary who made that speech and who piloted that Sub-section through is by coincidence one of the signatories to the Clause which I have moved. He is my right hon. Friend the Member for Devonport (Mr. Hore-Belisha) and he authorises me to say that he regrets he cannot be here and that he is firm and clear in his mind that at no time in these discussions was it ever intended or imagined that this voluntary superannuation fund, for which we presently plead, would be caught up by that Sub-section. So that, as I say, not only will the right hon. Gentleman get no additional funds, but he will be caught up by an accidental turn of his own wheel, and I think I can demonstrate too that he will be perpetuating an injustice. We are really talking about men and not a fund.

Recently the hon. Member for Gorbals (Mr. Buchanan) said in this House that what he called the decencies of life were the concern of democracy. So here we are talking about men who, previously, were excluded from a joint fund because if they had been members of a joint fund, then under the appropriate Section of the 1931 Act, they would have been exempt from this taxation. But because they had no joint contribution, they voluntarily made provision for their reetirement, and the Chancellor, in effect, says, "As you are having to carry one burden, I am going to ask you to carry three burdens." These men must first pay the tax on their own earnings; from their own earnings they have to make a sufficient contribution to ensure a reasonable standard of retirement, and now, they have also to meet this taxation. In 1933 the fund was solvent. It had a balance of £1,077; to-day it has a deficit of £22,720. Naturally my hon. Friends and I are not tied to the actual wording of our Clause. I think I can, with perfect justice, ask the Chancellor to make it possible for this fund to continue. At any rate, if he cannot see his way to do that, I plead with him to devise some amendment so that the bargain which the officials of this Union made with these ordinary, law-abiding, hard-working citizens who have tied themselves to certain contributions in return for certain benefits and who are, many of them, now near retirement, can be kept.

I want to reinforce what my hon. Friend the Member for Greenock (Mr. McNeil) has said. I am not a member of the National Union of Journalists, although I have some association with the profession, and some of my friends in the Northern part of the country have asked me specially to support this plea. I think the main point is a simple and human one. Men were encouraged by the State to enter into these superannuation arrangements, and in every other profession except this it has been possible to enter into this operation in co-operation with employers. But in the chance circumstances of this profession men have not been able to do so, and they are now reaching an age when they cannot enter into new contracts, because they are long past that stage. The circumstances are rather tragic. The men who have made provision for their old age are now approaching what will be a very uncertain future, not because of any fault of theirs, but because of the freakish application of one particular taxation Clause. If this was applied to all mutual assurance of this kind, one could understand it, but when it is not it seems to be unfair. We do not expect the wording of this Clause to be accepted, because it is rather difficult when one is not a Parliamentary draftsman, but I hope the Chancellor will give it favourable consideration.

I would like to congratulate the hon. Member for Greenock (Mr. McNeil) on the excellent way in which he moved this new Clause. I cannot hold out any hopes of agreeing to the proposal on the Order Paper, which, as hon. Members will appreciate, would make a permanent alteration in the law, but between now and the Report stage I will enter into negotiations with those who are interested to examine the latter part of the proposal made by the hon. Member. I realise from what he said that there are people who are interested in this fund—indeed, I know some of them—and I would be the last to do anything harmful to them if it could be avoided. However, as I have said, I and my advisers will consult with those interested to see whether it is possible to do something in the way proposed by the hon. Member in the latter part of his speech.

The Chancellor has met my hon. Friend the Mem ber for Greenock (Mr. McNeil) very fairly in the circumstances, but I would like to impress upon him the fact that several of us wanted to put our points of view before him on this matter, but have refrained from doing so in view of the late hour. I hope he will keep this in mind.

Certainly.

On the Chancellor's assurance of sympathetic consideration I beg to ask leave to withdraw the Clause.

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

The point I wish to put to the Chancellor and the Committee on this Amendment is a substantial one, and although I do not propose to take up a lot of time in elaborating it my argument, briefly, is this: The Chancellor knows that in arriving at the net assessable value of house property and, indeed, all properties under Schedule A tax, the statutory allowance for repairs is deducted from the gross value to arrive at the net annual value for Schedule A tax. That statutory allowance was fixed many years ago—I think it first appeared in the 1923 Act—and it varied according to the value of the property fixed by the tax assessors each year. In the case of small properties under a value of £40 per annum the allowance is one quarter, or £10 per annum. I think even the Chancellor himself, although he may live in a house which is assessed at more than £40 per annum, will agree that it is impossible, and will be impossible for many years after the war, to carry out properly repairs to houses of that kind by an expenditure of £10 each year. If one takes the type of house which I imagine the Chancellor lives in—a house of £100 a year or over assessable value—the allowance for repairs is higher. It is £20 if it has an assessable value of £100, and it is one-sixth for anything over £100. That case is even worse. The bigger the property the less adequate becomes the allowance for repairs. It may be said that this difficulty may be overcome by the alternative which is open to taxpayers to take a five years' average so that the Commissioners can accept that as the actual cost of repairs spread over that five years. But I think this is a difficult and cumbrous operation of the Schedule A tax and, moreover, small taxpayers have a long time to wait.

I believe that those who pay Schedule A tax can actually submit to the tax inspector the cost of repairs year by year, but even that is not quite adequate, because during the war owners of property are not permitted to carry out repairs, because they cannot get materials and labour. So, repairs are accruing, and at the end of the war there will be a heavy bill. The allowance which the Chancellor makes under the Finance Act is inadequate. I hope the right hon. Gentleman realises the force of the point I am putting to him and will be prepared to deal with my Clause in the same way as he dealt with the preceding one. This is a matter which is agitating the minds of house property owners all over the country; we ought to bring our Finance Acts up to date and keep them modern. The statutory allowance for repairs is totally inadequate, and on the grounds of equity to the taxpayer and on the ground of encouraging house owners to keep their property in good repair, we ought to grant a proper allowance.

Taxpayers who are affected by these provisions of the Income Tax Acts are in a favourable position, which, perhaps, cannot be said of all taxpayers. They are in a favoured position for this reason. There is a scale laid down which is deducted from the annual value, whether any repairs are carried out or not. A person may have a new house to which no repairs are necessary for some time, but still get an allowance accruing according to the annual value of the house. On the other hand, if you live in a house which needs repairs over and above this scale, if you take the trouble to keep a record of the money you spend on repairs, you can claim on the actual money that you spend. It would be difficult to see how you could have fairer or more generous provision than that, an automatic scale applied whether you do repairs or not, the actual repairs, taken over an average, I agree, as they must necessarily be, if you think the scale does not meet your case. Therefore my right hon. Friend does not feel that this is a matter which he should undertake to look into further or deal with now.

As the hon. Member said, at the moment one cannot spend anything on repairs, and surely it cannot be the right time to put up the automatic allowance when it is more or less conceded that no one will be able to spend that amount of money. When we get into the times when repairs can be done and the house situation gets more normal, it may well be that the cost of repairs will be found to have gone up, but it may also be that annual values will have gone up too, and they may have gone up to an extent which makes the existing proportion a reasonable one. The only circumstances in which it would be right to reconsider these automatic deductions would be not so much in the interests of taxpayers but in the interest of saving everyone trouble. If it can be shown that, taking the country as a whole, these proportions have fallen, having regard to the various alterations in cost of repairs and annual values, below the general average cost, there would be a case for putting them up. At present there is not and there could not be, because repairs cannot be done. I agree, to this extent only, that these proportions ought to represent the general average of repairs over the whole country. Until it can be shown that they have got out of step with that general average my right hon. Friend does not think it would be right to alter them, and, if anyone is spending more, he has only to take the trouble to keep a record of what he spends and he gets it allowed as a deduction.

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

Having started the day with clergymen, it is perhaps appropriate that I should conclude it with publicans. Last year's Finance Act allowed a rebate of 5 per cent. on publicans' licences only in respect of diminution in supplies of wines and spirts. This was felt in the trade to be inadequate, but no very strong protests were made because the conditions prior to last year were not so bad in view of the existence in most cases of considerable surplus stocks. But it was felt that any concession should also apply to the off-retailer, and the off-retailer in Scotland includes the licensed grocer, who is rather an important factor in this connection. The surplus stocks which enabled the retail licence trade to carry on are now completely exhausted, and at present the proportion of spirits allocated to retailers on their former supplies is not usually more than about 5o per cent, of what they used to get, and on wines only about 3 per cent. So there is an immense reduction in their turnover. In the Finance Act, 1917, Section 7, holders of Excise liquor licences were granted a rebate of three-quarters of the payment in compensation for diminution of supplies of spirits and wines which they received. The diminution is certainly not less in this war. It was recognised by this rebate in the last war that retailers should not be asked to continue to pay an amount of duty out of all proportion to the volume of the trade they were doing. All that I am seeking is to persuade the Government that retailers are now being asked to pay a licence duty out of all proportion to the amount of trade that they can possibly do in view of the supplies of spirits and wines that they are receiving. My Clause seeks a reduction of 25 per cent, in the licence duty, as it were by way of compensation for the reduced turnover, and it is applicable to both on and off holders of retail licences, because it is not fair to discriminate between the two.

My hon. Friend has certainly covered a very wide field to-day in the attention that he gave to the claims of the clergy and, no doubt just as important, the attention that he is giving to the claims of publicans and those who sell retail wines and spirits. In the Finance Act of last year there were two Sections dealing with this problem, Section 13, which dealt with the reduction of duty on publicans' licences in respect of diminution in supplies of wines and spirits, and Section 14, "Relief from duty where trade diminished by war circumstances." I am not quite clear whether he appreciates the effect of the latter Section. It provides Licence Duty relief in view of the shortage of supplies and, except as far as the publican's licence is concerned, the relief is based on the trade done in each separate liquor and applies to each separate licence. The amount of the relief is two-thirds of the amount of the diminution in trade. I am not sure whether I understood him aright. Was he suggesting that it should be three-quarters instead of two-thirds?

Yes.

If that is the suggestion, I am sorry to say that my right hon. Friend cannot accept it.

In view of my hon. Friend's categorical statement, I beg to ask leave to withdraw the Clause.

I beg to move, in page 29, line 13, at the end, to insert:

"140.—(1) A person who has delivered a return or particulars which he has been required under the enactments relating to excess profits tax or the national defence contribution to deliver or furnish and discovers any omission or wrong statement therein, may deliver an additional return or additional particulars rectifying the same, and shall not thereafter be liable to any proceeding by reason of his omission or wrong statement.

(2) A person who has not delivered such a return or such particulars within the time limited may deliver it or them at any time before proceedings for recovery of a penalty, incurred in respect of such non-delivery, have been commented, and thereafter no such proceedings shall be taken."

The Seventh Schedule makes applicable to Excess Profits Tax and National Defence Contribution the penalties for failure to deliver true and correct Income Tax returns which were imposed by Section 107 of the Income Tax Act, 1918. That Act also contained a relieving Section, Section 140, which empowers the taxpayer to amend his return on discovery by him of any omission or wrong statement, and it goes on to enact that the taxpayer shall not thereafter be liable to any proceedings by reason of his omission or wrong statement. It is obviously right and proper that the penalties imposed under Section 107 with regard to false Income Tax returns should be imposed for false returns for Excess Profits Tax and National Defence Contribution, but I think that my right hon. Friend will be ready to admit that as a matter of equity the corresponding relieving provisions of Section 140 should also be applied.

I think that my hon. Friend has put forward a reasonable case. As we have incorporated the major part of the Section, it is fair that what is called the relieving Section should be applied in these cases. In accepting the Amendment, I do not want the matter to be misunderstood by anybody. If anybody is guilty of fraud and sends in a corrected statement afterwards, it will not get him out of his trouble. With that clear understanding I see no reason why this protection should not be equally applicable in these cases as it was in the other. Therefore I accept the Amendment and congratulate my hon. Friend on getting the Amendment into the Bill.