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Clause 30—(Abolition Of Duty On Bonus Issues Of Securities)

Volume 466: debated on Monday 27 June 1949

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

The Financial Secretary to the Treasury complained earlier that we did not often enough congratulate the Chancellor of the Exchequer on what he does. I said then that we were always ready to congratulate the Chancellor when he was right: the trouble was that he was right so seldom. Here is another occasion where he is right and, therefore, we are prepared to congratulate him. I think that for the last two years we have taken every opportunity to point out the absurdity of the tax which is now being repealed. During the whole of that time no cogent arguments, except those of prejudice, have ever been advanced in favour of it. The Chancellor now says that it has served its purpose. No one could ever discover its purpose.

If bonus issues were undesirable then bonus issues could be stopped, and no doubt were stopped, by the Capital Issues Committee. The addition of this tax had no meaning at all. Therefore, we are glad that the Chancellor has taken this step. We would urge him once again to take as his maxim the indisputable fact that, if ever he is in a dilemma, if he chooses the course exactly opposite to that adopted by his predecessor as Chancellor of the Exchequer, he can always be certain that he will be right.

The Government Front Bench might well have expected that little bouquet. I am sorry if I am not throwing what could be described as a bouquet, but at least the Chancellor knows that he has the most enthusiastic support of hon. Members opposite. I suppose that I must also apologise for breaking into the pleasant little timetable arranged between the Government and the Opposition. However, there are rights for hon. Members other than those on the Government and Opposition Front Benches, and that is why I propose to make a few remarks on this Clause.

I want to ask why at this time of stringency and difficulty the Chancellor should elect to make this concession? He is making it at a time when he calls generally, and rightly, for sacrifices from the people. Why does he choose this moment to annul a duty which falls certainly not on the working classes—it is not something from which they have to be relieved—but on the better off—and in many cases the moneyed interests? I appreciate that there are exceptions, but in general this is a duty which would be borne by the wealthier and by the moneyed interests.

7.30 p.m.

This step would be understandable if industry had been having a bad time or had been going through a thin period. I could understand then that the Chancellor might want to make some kind of concession to industrialists to help them over the stile. Whatever can be said by the Opposition, or indeed by the Chancellor himself, nobody in any part of the Committee attempts to argue that industry and business generally has not had a royal, and indeed a golden, time for the last few years. Therefore, I cannot find a reason why industry needs help and assistance. If this was a Budget in which considerable concessions were being given to the workers, if there was a distribution of largess generally, perhaps we might then understand this concession being given at this time, but I think everybody without regard to Party agrees that this is an austere Budget. At a time when, so far from concessions being given to the people in the mass, new burdens in fact are being placed upon them, it seems entirely incomprehensible to me that that should be the moment when this bonus issue concession is made.

Whatever one may think about the technical merits or demerits of bonus issues, this at least is certain: these bonus issues, now coming out in full spate, are being given from reserves which were accumulated very largely during and since the war. After all, during the war period and during the period of blood and sweat and tears, great profits were made, as they always are during war-time, and, since the war, it has been a time of difficulty, necessity and shortage. Whether the great profits now being handed out in these bonus issues came from the period of the war or the period after the war, we know that in both cases they derive from the needs, the difficulties and the necessities of the people. They were prohibited in war-time. Why is it then, in a time which, financially and in many other ways, is almost as grave, they are not only allowed to have free sway, because that is what is happening, but that time is also chosen to end the small duty of 10 per cent., without any adequate reason being given?

The predecessor of the Chancellor of the Exchequer, the present Chancellor of the Duchy of Lancaster, described bonus issues in 1947 as "sheer money for jam." I know that the Chancellor of the Duchy is unpopular with the Opposition and I am glad of it and I honour him for it, for it is a very bad and dangerous thing when we have a Chancellor of the Exchequer who is popular with the Opposition. The present Chancellor knows perfectly well, as does the Chancellor of the Duchy, that bonus issues, in general, are "sheer money for jam," but, whereas the Chancellor of the Duchy was quite frank and candid about it, the present Chancellor of the Exchequer is very far from frank and candid on the subject.

Since the announcement of this concession was made, I have taken some note of what has been its effect already, and I have here a list of no fewer than 50 cases of bonus issues, mainly on a large scale and going up to as much as £6 million, in the intervening 2½ months. In 39 of these cases, I have been able to trace the exact amount which has been handed over as "sheer money for jam," that is to say, the cases in which no money payment was made at all for the bonus issues. In these 39 cases, which are of the "sheer money for jam" type, I have ascertained that the amounts involved total up to about £14,250,000, which is being handed out to the shareholders. I suppose that, on that basis, the 50 cases might reasonably involve about £17 million handed out, but I know quite definitely that in these 39 cases the actual amount is £14,250,000. In fact, the real value of what is being distributed is greatly in excess of that, and I can readily prove it in regard to a number of the cases I have mentioned, with figures and information which I have here. In numbers of cases——

I think the hon. Gentleman must not go into the amount involved. He may object to the duty being removed, but he cannot go into an explanation showing how many million pounds have been distributed in this way.

I quite appreciate that, Mr. Bowles. I was only trying to illustrate what I think is a valid point—that there has been this pent-up desire to give out this "sheer money for jam." It has been held up until now, but now it is coming out in full force—in one case to which I have referred it is to the extent of £6 million.

I must ask the hon. Gentleman not to continue on those lines any further.

I will not go into further details, because I have already given particulars of the largest instance, but I think I am entitled to say that the Chancellor of the Exchequer estimated that his loss of revenue would be about a million pounds in the current year. I think I am also entitled to say that the bonus issues already handed out represent far more than a million pounds, although I know that he might well argue that these amounts would not have been handed out if the 10 per cent. duty had not been removed. If my right hon. and learned Friend argues that way, then I would say that it makes the case worse than ever, because all this largess has been held up until the moment arrives when the Chancellor, no doubt on the advice and with the pressure of City interests, removes this duty. Now the flood is in full spate, and I want to know why it has been allowed.

The Chancellor, in his Budget speech, gave his reason for his action, and if the right hon. Gentleman the Member for West Bristol (Mr. Stanley) does not know the reason, it is quite clearly given in this passage. The Chancellor, speaking of this 10 per cent. duty, said:
"That duty has, I think, performed the task of controlling bonus issues when the ban was first relaxed, for which purpose it was very properly imposed, and it can now advantageously be discontinued. In future, such issues will be controlled in the same way as any other form of capital issue."—[OFFICIAL REPORT, 6th April, 1949; Vol. 463, c. 2088.]
One thing is very clear, and that is that the Chancellor said that "it can now advantageously be discontinued." Advantageously to whom? To the big vested interests, certainly to the City of London, for I think we can see here the pressure of the City interests on the Chancellor of this Labour Government. Is it really true that this little duty, at this time of difficulty and stringency, can now "advantageously be discontinued?" The Chancellor went on to say that these issues will be controlled in the same way as any other form of capital issue. What we know clearly about the work of the Capital Issues Committee is that it does not properly and adequately control the matter at all. If the Chancellor now says that we do not now need this control but that he can rely on the control of the Capital Issues Committee, my comment is that it is no control at all, and the spate of 50 issues to which I have referred already shows quite clearly that the thing has become virtually uncontrolled.

I regret to have to make this criticism, particularly after the delightful bouquet which the right hon. Gentleman the Member for West Bristol handed to the Government, but I hold very strongly, and I am sure every real Socialist does, in the light of the facts which I have already given, that the cancellation of this duty is entirely unjustified at the present time and will inevitably lead to inflation and to swollen prices, because, in case after case, of which I have the records here, it has been quite clearly intimated that the same level of dividends will hold good after this watering of capital. If that is not largess, if it is not a measure of inflation, and if it does not lead to swollen prices, I just do not know what does.

Furthermore, there is the actual loss of revenue. We may dissent as to the amount involved, which the Chancellor himself estimated at a million pounds. I have already shown that it is far more than that, and that at a time when the Chancellor is looking here and there for little bits of revenue and putting little duties on match-boxes and such things. In my view, to allow this concession is entirely reprehensible and wrong. Taken all in all, I think it is entirely unfair to the bulk of the people, when they are told that they must surrender this and that, to have additional burdens placed upon them, and that this largess, however technically justifiable, should be given at this time. I know the argument about being technically justified, and I could talk of many other things that are technically justified, but the Chancellor is refusing to do these other things because he says the time is not ripe. What about the people with Post-war Credits who want them encashed? They have been told that although they have a right to have them encashed, that right cannot be exercised at the moment. But this technical right of these companies to water their capital is conceded, and, in all the circumstances, I think a good deal of explanation about the whole matter is called for before some of us will be satisfied.

When my attention was drawn to the fact that this was really a proposal for taking off 10 per cent. of the taxation on bonus issues. I was extremely surprised. I had heard about the putting on of 10 per cent. in connection with the pools betting, but I did not hear a great deal of protest about this 10 per cent. on bonus shares except, of course, from hon. Members opposite, from whom we always expect to hear protests although, as a matter of fact, we do not take very much notice of what they say. On the other hand, we do take notice of what we hear in our constituencies and throughout the country. So far as my constituency is concerned, I had quite a number of letters about the 10 per cent. being put on pools betting, but I did not get a single letter about the 10 per cent. placed on bonus shares. I really thought that the Chancellor was putting on another 10 per cent., and I fully approved of such action. I was astonished to find that I was wrong. It seems to me after about 20 years in the movement an extraordinary thing that a Socialist Government with a Left-Wing Chancellor of the Exchequer, the chap who wanted to hoist the Red Flag over Buckingham Palace, can do a thing like this.

The phrase, "hoist the Red Flag over Buckingham Palace," was used by a gentleman who has been dead for many years, and the present Chancellor of the Exchequer is certainly not dead.

He may not be dead as a Socialist, but it certainly seems to me that he is dying as a Left-Wing Socialist. However, I accept the correction, although I think my hon. Friend well knows that the phrase has been fathered on my right hon. and learned Friend more than once. In any case, I do not know that it is not true; after all there is a housing shortage, and there are a lot of spare rooms there. My hon. Friend ought not to have interrupted me; he has put me off.

I can quite understand right hon. Gentlemen opposite approving of this Motion, but that very fact makes me exceedingly suspicious. Throughout my short membership of this Parliament, I have never found myself able to go into the Division Lobby on the few occasions when Members of the Government Front Bench and right hon. Gentlemen opposite have been mixed up together. It sometimes seems to me, in my elementary way, that there might be some good reason for the fraternisation, but, as a matter of fact, my feet just will not carry me into the same Lobby as that used by Opposition Members. I do not feel convinced by the arguments put forward by the Opposition this evening. Their spokesman suggested that the Capital Issues Committee could always control this matter, but, if my investigations are correct, the Coalition Government in May, 1940, totally prohibited the issue of bonus bonds. That committee only came into the picture when some sort of cash consideration was attached to the transaction. Therefore, I do not think that right hon. Gentlemen opposite have quite got the full story in regard to this particular matter.

It seems to me an extraordinary situation that here in 1949, for the first time since 1940, this Parliament is giving up all control with regard to this matter. It was not until the Budget of April, 1947, that the ban was relaxed, and it was only relaxed on the clear understanding that there should be a 10 per cent. duty on bonus issues. That was the price exacted by the Labour Government for the concession they gave with regard to the Measures passed by the Coalition Government. Speaking on 7th June, 1948, the present Chancellor of the Exchequer indicated that, in his opinion, it might be suitable to impose some restrictions of this sort during a period of potential inflation, but that when we had emerged from that period it might be possible to discontinue that type of measure.

7.45 p.m.

I ask the Government whether, in their opinion, we are now running out of the period of "potential inflation." Is that really the Chancellor's case? I think we are entitled to be told because, as I said, in 1948 the Chancellor advocated this sort of legislation because of the danger of inflation. Are we to understand that, because this duty has been withdrawn, there is no longer any danger of inflation in this country? If that is the case, then I fully agree with what was said by my hon. Friend the Member for Norwood (Mr. Chamberlain). In my opinion, there are a great many more worthy recipients of a bonus of this sort than the people who issue bonus shares. My hon. Friend the Member for Norwood mentioned the people holding post-war credits and the fact that the Chancellor had more than once said that he could not repay those credits at the present time. It seems to me that he might well have kept on this 10 per cent. duty on bonus issues and repaid some of the Post-war Credits.

Has it occurred to my hon. Friend that it may be the Chancellor's object to encourage bonus issues because, in their absence, it might well be that money which in other circumstances would be reinvested in the company and put to reserve would be distributed by way of dividends?

That may be the explanation of the attitude of the Chancellor, but, if it is, it seems a most extraordinary one. It is not the sort of argument to which I should have expected the Chancellor to agree in view of the country's present situation. But the argument does not only apply to Postwar Credits; there is also the question of the Purchase Tax which is levied on a considerable number of commodities.

I am sure the hon. Member will appreciate that he cannot discuss the Purchase Tax.

I was only using it as an example, and if we are not allowed to use that sort of example, how can we drive home our point? However, I think the Committee quite understands what I was saying. There is a number of people in this country who could do with a million or so far more, and could use it far better, than the people who are to receive the advantage of the relief of duty on these bonus shares.

I do not propose to say very much more because I understand that there is some sort of timetable in respect of speeches. I certainly do not wish to stay here until three in the morning if it can possibly be avoided, but, of course, if it is to the advantage of the country, and if the Committee think that the country can be better governed by our staying here until the early hours of the morning, I am quite willing to stay. Before sitting down, I wish to quote a passage from a speech of the previous Chancellor of the Exchequer—not the Left-Wing Chancellor but the ordinary Chancellor—which he made on 23rd April, 1947. He was defending the imposition of this tax. What he said is true, and I think it will appeal to the people of this country. It appealed to them then. It appealed to the Members on this side of the Committee at that time, even to the junior Member for Bolton (Mr. J. Lewis). He said this:
"Is it not really better that I should have put a tax on bonus shares if that is one way in which we can get relief for the families of the Income Tax payers?"—[OFFICIAL REPORT, 23rd April, 1947; Vol. 436, c. 1200.]
That is just as true today as it was in 1947, and I very much regret that it is a Labour Chancellor of the Exchequer who is taking action of this sort. It is unnecessary, it is dangerous and it disregards the needs of the ordinary people of this country.

I think I can reassure both the proposer of this Amendment and my hon. Friend the Member for Mitcham (Mr. Braddock).

There was an Amendment on the Order Paper, and I was unaware that my hon. Friend the Member for Norwood (Mr. Chamberlain) was not speaking to the Amendment.

There was an Amendment, and as I understood that it was not to be called I made my speech on the Question "That the Clause stand part." It amounts to the same thing.

I should like to reassure both my hon. Friends that no pressure has been brought by the City on my right hon. and learned Friend the Chancellor of the Exchequer, and that if they know anything of his character they should feel assured that even if such pressure were brought it would have no effect upon him whatsoever. He would treat this matter purely on its merits, and I can assure the Committee that that is exactly what he has done.

I could talk on this subject for quite a long time and I am positive that even if I did I should not succeed in convincing either of my hon. Friends. However, I would say that this tax right from the beginning has not been looked upon as the kind of tax that one would retain before any other. So long as we get the revenue that we desire and so long as it is just and fair, I see no reason why this tax should be retained simply because certain people think that it should be kept on the Statute Book. It was extremely useful at the time when it was levied by my right hon. Friend the Chancellor of the Duchy of Lancaster, a period which one might describe as a time of boom; but I should like to say this—and this is all I really have to say—that we still have in existence the Capital Issues Committee, that it is extremely active, that when applications are made to it it judges those applications on their merits, and that it is quite immaterial to the Capital Issues Committee whether this extra stamp tax on bonus issues is in existence or not.

All that we have done and all that we are doing by repealing Sections 60 to 62 of the Finance Act, 1947, is to bring once more into the free area the raising, by those who desire, of £50,000. Anything above that, in spite of this Clause, will still have to go to the Capital Issues Committee, and that Committee will carry through, as it has done up to now, the policy laid down by the Government with regard to these issues. I think, therefore, that what my right hon. and learned Friend is doing is not in any sense a going back on his beliefs as a Socialist Chancellor of the Exchequer, neither does it mean that he has poured money into the laps of vested interests, as has been alleged—far from it.

Is not my right hon. Friend aware that there has been a definite spate and flood of these things since this matter was announced, and does he not agree that it is purely inflationary and a strong tendency to high prices?

There is one thing I would like the Minister to deal with. He heard my hon. Friend the Member for Mitcham (Mr. Braddock) read out what had been said by the previous Chancellor of the Exchequer as the reason for maintaining this 10 per cent. When the Chancellor of the Duchy of Lancaster was Chancellor of the Exchequer and he made that speech he had the full backing of the Financial Secretary and the full backing and enthusiastic cheers of hon. Members on this side of the Committee. There is not the slightest doubt about that. Can the Financial Secretary now tell us that the situation has changed in this country from what it was as described by the then Chancellor of the Exchequer in the speech which has been quoted by my hon. Friend? My hon. Friend the Member for East Coventry (Mr. Crossman) on Thursday last told us that there had been a Socialist revolution in this country and that the bonus shares, which had been referred to by the hon. Member for Birmingham——

I beg the hon. Member's pardon. I always associate the name "Chamberlain" with Birmingham. The facts that he put before us here made it clear that the Socialist revolution that has taken place has been of a very peculiar character. I want the Financial Secretary to say whether he accepts this fiction which was presented by the hon. Member for East Coventry, or whether he is of the opinion that the situation described by the then Chancellor, who is now Chancellor of the Duchy, as contained in the quotation made by my hon. Friend on my right—the hon. Member for Norwood, who is pretty much to the left—applies to the conditions today, or whether those conditions have changed and that quotation does not apply any more. Are there not, as the then Chancellor said, more deserving methods of giving taxation relief than the method proposed in this Clause? Would the Minister say what it has cost him to change from his support of the previous Chancellor to the support of the present Chancellor?

Question put, and agreed to.

Clause ordered to stand part of the Bill.

Clauses 31 to 33 ordered to stand part of the Bill.