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

This new Clause in the name of a number of my hon. Friends and myself is with respect to dependent relatives allowances. At first sight, it looks very complicated, but I assure the Committee that it is a Clause which has immensely respectable antecedents and, with the assistance of the Committee, I hope to give the allowance even more virtue and substance than it has had before. The Clause is designed to ease the position of a claimant—and there are about a million of them in the country today—who maintains an infirm or aged relative or a widowed mother. There is also a subsidiary class of claimants who are themselves aged or infirm and have resident daughters living with them.

The object of this Clause is to raise the allowance from £50 to £60 and to lift the brackets within which the allowance is payable to £90 and £150 respectively. I think probably all hon. Members who have had anything to do with this matter in public life or who have been Members of the House for any considerable period, will know in detail the history of this allowance and, therefore, I shall not repeat it now. Suffice to say that the allowance was originally recommended by the Royal Commission on Income Tax in 1919 and was for the first time embodied in the Finance Act of 1920. It has been amended and enlarged on a number of occasions since then—in 1927, 1943 and 1947.

May I first make a point about the allowance itself? It appears to me that the £50 is now out of line with the other allowances which are obtainable—for example, the £60 allowance for the child and the £70 allowance for a wife, being the difference between the marriage allowance of £180 and the single allowance of £110. I therefore suggest that the allowance should be raised by £10 to bring it in line with the child allowance. I must point out the anomaly which exists today in that a child who may be incapacitated or invalided and who is under 16 years of age receives £60, whereas the moment he or she passes his or her 16th birthday the allowance drops to £50. I think it is only fair that we should all acknowledge that the cost of maintaining invalid children would, if anything, go up rather than down, with their wider interests as they grow up. The allowance ought to be maintained at £60.

Secondly, with regard to the brackets. The present brackets within which the allowance works are £70 and £120 respectively. Where the income from all sources of the maintained person is £70 or less the full allowance is operative, but when we get beyond the £70 the allowance tapers off pound by pound until, when the maintained person has an income from all sources of £120, it disappears altogether as far as benefit to the claimant is concerned. It seems to me that both brackets are too low today in relation to the cost of living and to the general level of pensions and earnings.

For example, since the last concession was made in 1947 by the present Chancellor of the Duchy the cost of living has risen nine points. I have the figures here in money values and could give them. But the thing is apparent. It seems to me it is miserly—quite miserly—for the Treasury today to stop the allowance when the maintained person is earning £2 6s. a week, which is not, after all, a very princely weekly sum. The Clause, is therefore, designed to help those persons—and, as I say, there are about a million of them—on whom the burden of the maintenance of relatives falls very hardly in these times.

If the Chancellor had been prepared to do something about Purchase Tax this year, that might have been a way in which we could have assisted these people even more notably than in this, but that possibility having been ruthlessly removed by the Treasury we are forced on this side of the Committee to look for ways and means, within the general frame of the Income Tax laws, for assisting these people. I do not know at all what the cost of this concession would be. It may be £10 million or £20 million. If it is £20 million it is only a half of the 1 per cent. of what the Treasury are extracting from the pockets of the people.

I do not know, but it seems to me that the Financial Secretary is unusually unhappy this year. Poor man, he has not been allowed to open his shoulders one little bit in this Committee, whereas under what in many ways was the more unfortunate dispensation of the Chancellor of the Duchy there was usually £30 million or £40 million to play about with on the Committee stage. And I have seen the face of the Financial Secretary glow once or twice during our Debates two or three years ago, when opportunity was given to him by the then Chancellor to make some concession. I do hope that he has so prevailed upon the right hon. and learned Gentleman today, the fourth day of our Debates in Committee on this Bill, as to be able to come down here to give us—who, after all, are trying to represent the state of living of some of these people so desperately hit by the right hon. and learned Gentleman's general financial policy—some concession, and help remove a burden that now exists.

I am sure the Committee will be grateful to my noble Friend for bringing before us this extremely benevolent proposal. My recollection is not quite the same as his regarding the past activities of the Financial Secretary on previous occasions. I seem to recall that the right hon. Gentleman was never given the opportunity of making concessions, but was invariably left on the burning deck in order to resist proposals, and that it was always the role of the Chancellor to take the bows and the applause. Today the Financial Secretary has an opportunity—or the Economic Secretary has—to meet us in this matter.

My noble Friend has pointed out with profound truth that the cost of living has not kept pace with the concessions that have been made during the lifetime of this Parliament under this particular heading; that there has been a further rise; and that it would be right and proper for us to take cognisance of that, and to make an effort, by the adoption of this Clause, to bring the law into line in this matter of aged dependants. They are, as my noble Friend has said, a small but particularly helpless minority. Whereas the concession will be made to the young and active, in many cases the effect of it will benefit those aged and infirm relatives whom they are maintaining.

The other part of the Clause is designed, of course, to help the aged persons themselves. To assist the infirm is, after all, one of the noblest actions of which the human race is capable. I think it would be appropriate and proper if today we were to take regard of the fact that the cost of living, since we last adjusted the matter during the lifetime of this Parliament, has risen, and I hope very much that the Economic Secretary, who, I understand, is to reply to the Debate on this new Clause, will open our proceedings today, the fourth day, in admirable fashion by telling us that the Government have agreed to accede to my noble Friends' proposal.

I think it was a little hard of the noble Lord the Member for South Dorset (Viscount Hinchingbrooke) to say that my right hon. Friend had not so far opened his shoulders during these proceedings, because, as a matter of fact, he did hit two boundaries off successive balls just before we ourselves on this side, strictly in accordance with the rules, I hope, declared the innings closed last night.

It did not cost anything.

I do not think that is correct. The noble Lord correctly rehearsed the history of this particular allowance, and he and the hon. and gallant Member for Holderness (Lieut.-Commander Braithwaite) have spoken very persuasively in moving this further concession. Of course, we would all sympathise with their desire to assist the aged and infirm. However all that both hon. Gentlemen have said could have been said with equal force at whatever level this allowance stood. If we made this concession this year and enlarged the scope of the allowance, it would still be possible to advance very much the same arguments a year hence.

So I am afraid what we have to look at is not simply the merits of this Clause, but the claim of this particular allowance in relation to the other allowances under Income Tax, and, indeed, other claims of remission of taxation. When we do that the first thing which appears, as the noble Lord quite correctly said, is that this allowance has been increased no fewer than three times, and twice in quite recent years. It was increased in 1927, again in 1943, and yet again in 1947.

4.0 p.m.

By the Finance Act, 1943, the allowance was increased from £25 at which it had originally stood, to £50 in any case where the relative's income was below £30, and in those cases where it lay between £30 and £80 the amount of the allowance was to be £50 less the excess over the £30, as I think the noble Lord pointed out. In the Finance Act, 1947, we made a further substantial concession in that we raised the lower limit of £30 to £70 and the higher limit of £80 to £120. I think, therefore, that having gone so far, the case cannot be made out for extending this concession any further unless, indeed, the cost would be trivial. In point of fact, the cost of operating this new Clause would not be trivial; it would amount to £7 million, which is quite considerable. For these reasons I do not think we can accept it this year.

The noble Lord invoked to aid his argument the rise in the cost of living. That is a very natural claim to put forward for the people concerned, but I think the Committee will agree that if the Government were to accept that argument as sufficient in itself for making increases in payments of this kind, or indeed of other kinds, that undoubtedly would be the way to inflation, and it would be out of line with our White Paper policy and our general policy of disinflation.

Has it not always been the policy of this and, indeed, of other Governments to select for protection against the effect of inflation the aged and infirm members of the community in particular?

The Economic Secretary has given a somewhat limp answer to the points which have been made by my noble Friend the Member for South Dorset (Viscount Hinchingbrooke). This is the only new Clause to which I have put my name because I believe it concerns such a deserving cause. Hon. Members are always in difficulty when trying to decide which are the most worthy causes, and my own feeling is that there could be few more worthy causes than this. I say that because I believe that, apart from anything else, it is always highly desirable that as many people as possible should look after the least fortunate in their own families instead of putting them on the State.

The whole principle which lies behind the original measure is a happy compromise in which we have an individual trying to look after the less fortunate members of his family and at the same time the State giving him some reward for doing it. The Economic Secretary has merely questioned the extent to which that reward should be given. My own feeling is that there is a much better case for this Clause than there was yesterday for the two Clauses which were accepted. The Economic Secretary says that his right hon. Friend hit the Opposition and their Amendment for a boundary yesterday, but I should have thought that all he could really say was that he finished up in the dark with a 1s. 3d. cinema ticket and a dog licence. That is confusing sports and entertainment a little, but if that is considered hitting a boundary, I am afraid the right hon. Gentleman could only have had experience on the river rather than with a cricket bat in his hands.

This new Clause is very fair in view of the increase in the cost of living. The Economic Secretary said that the increase in 1943 over the original amount was from £25 to £50. I should have said that there was certainly that increase in the cost of living in that period, and I should say that there has also been a small increase since 1947, as my noble Friend said. I believe that although this proposal would cost £7 million, it is much better that we should do it this way than have a demand for increased social services or something of that sort, because that would seem to be the alternative.

If these people are really going to be put into a difficult financial position, the State has an immediate remedy by making it possible for the National Assistance Board to help them out. Surely, it is much more desirable that individual families should try to help these people and should be given some reward for so doing. My own feeling is that the reward would be much cheaper than would be the case if the National Assistance Board had to be authorised to make good the loss of income owing to the rise in the cost of living. Therefore, I hope that the Financial Secretary will reconsider this matter. If he cannot accept it, perhaps he will go further into it. I certainly believe that it is a highly estimable and desirable new Clause, and I hope the Committee will give it support.

The Economic Secretary's argument appeared to indicate that he was feeling the heat because it was not up to his normal controversial standard. He began by saying that at whatever figure these allowances were fixed an argument could be adduced for raising them. That may be so, but that is no argument for maintaining the present figure. It is no argument for simply ignoring the changes in the general price level since 1947, and it is no argument at all for the present figure. I think the Economic Secretary will agree that he was rather below his standard when he put forward that argument.

The Economic Secretary's much more interesting and important point was in his inflation argument, and I should like to say a word upon it. The hon. Gentleman said, perfectly truly, that concessions of this sort have an inflationary effect, but he did not seem to me at all to face the intervention of my hon. and gallant Friend the Member for Holderness (Lieut.-Commander Braithwaite) as to whether it was his intention and the intention of the Government to apply that doctrine at its most rigorous to the aged and infirm. As I understand the theory in broad terms, it is that we should restrict the amount of spending power generally available in the hands of that part of the community which can look after itself. That is the general argument, whether it be valid or invalid. I should, no doubt, be out of Order if I pursued that question.

I have always understood that every effort had at the same time to be made to insulate from its effect certain special classes such as the aged, war disabled and children. Surely that is the case which is presented again and again from the Box opposite. That is surely directly material to this point. The figure of £7 million which the Economic Secretary gave was lower than that which my noble Friend had intimated was his impression. This comparatively small amount would be concentrated upon the worst hit section of the community—that part of the community who have to maintain aged and dependent relatives. Hon. Members on both sides of the Committee know perfectly well of many cases in which that imposes an all but intolerable burden upon hard working and responsible individuals and particularly upon those individuals whose sense of self-reliance and responsibility leads them to seek to maintain their dependent relatives rather than cast family burdens upon the community.

All hon. Members know of cases of that sort; they are pathetic cases, and I should have thought that the case for giving some limited relief in that direction cannot be met by broad generalisations about anti-inflationary policies. It calls for at least a reply which indicates, as the Economic Secretary's reply did not indicate, that the Government have seriously gone into the merits of this question. It demands a considered reply which indicates the same appreciation of the hardships involved. I trust that the very moderate and reasonable concession for which my noble Friend asked will not be brushed aside with the airy and ill-considered generalisations with which the Economic Secretary regaled the Committee.

Frankly, I was amazed at the smallness of the sum which the Economic Secretary said would be needed for this proposal. I thought it would have been considerably more. I have a very large number of cases of this type in my own constituency; again and again I have endeavoured in one way or another to obtain relief, and on several occasions a considerable amount of relief has been given to these people. In that estimate of £7 million, I wonder whether any deduction has been made in respect of the fact that if it was not for the maintenance given by these relatives a considerable number of the dependants would be obliged to apply for State assistance. These people who take care of their dependent relatives are doing something which in a large number of cases has to be borne by the State.

As has been pointed out by one or two hon. Members on this side of the Committee—incidentally, no hon. Members opposite have taken the trouble to support these old people—these people who take care of their dependent relatives are relieving the State of a large burden, a burden which is quite likely far larger than the £7 million which the relief proposed in this new Clause would cost. That £7 million, of course, would not carry the whole burden but it would be an immense relief to those people who are trying to do their best to look after their own families.

I should like to raise a point which has not been mentioned today. It is not always very easy, especially in these days of housing shortage, to have an aged person in one's house. It is not very easy to have in one's house any of the classes mentioned in the new Clause. In many cases, as a result of the housing shortage, members of the community have taken on this obligation and have tried to help their own families. Very often there is a whole family plus another person in one house, as those of us who know the poorer sections of the community realise, and that makes available a larger amount of accommodation for the rest of the community. This is being done entirely voluntarily by those people for whom we are asking a concession.

4.15 p.m.

This matter of helping one's own family has always been one of the strongest virtues of the British people. It is a matter on which I have heard the Home Secretary make brilliant speeches. Perhaps I ought not to say "brilliant," but doing his best to advance somewhere along the road towards brilliancy. I do not want to exaggerate matters, because I do not think exaggeration is right, but it is an undoubted fact that we should do everything possible to encourage family life. In this case, an enormous job of work is being done by individuals to help the State, a job which carries out the high traditions of our race. Surely some concession might be made in this case. The amount involved is not large.

I understand that the Chancellor of the Exchequer has gone away, or will be going away very soon. Why does the Financial Secretary not take the law into his own hands in the absence of his right hon. and learned Friend? If he will do so we shall back him up, and in all probability, when the Chancellor of the Exchequer returns, he will not sack him but will be thankful for what he has done. For some unknown reason it is only the Conservative minority who speak for these people. It has always been the privilege of our party to be the main defence for the elderly. I am astonished that no Member opposite has so far taken part in this Debate, or has yet turned down this proposal. In those circumstances, it is very wrong of the Government to take this obdurate view towards this proposal.

Cannot the Financial Secretary answer the appeal which has been made to him in one sentence, namely, that owing to the probable rate of national expenditure neither he nor the Chancellor of the Exchequer can abate taxation by one shilling? It would be far more realistic on their part to put that plain fact before the Committee. The right hon. Gentleman has not dared to tell the Committee that, despite the rise in the cost of living and the very strong case of these people, he cannot make any adjustment because no taxation relief can be given until the total volume of national expenditure is reduced. I know that the right hon. Gentleman will ask how the national expenditure can be reduced, but that is not our business but his. I ask him to adopt the maxim of Napoleon to his marshals, that if it is difficult it is done, and if it is impossible it will take a little time.

I hope that the Economic Secretary will forgive me if I do not follow him in the realm of cricketing metaphors. Sporting metaphors are always dangerous. For example, we might have the Solicitor-General indulging in metaphors drawn from his experience on the turf, which would be most embarrassing to many of us. I must confess that I share my hon. Friends' disappointment with the answer that has been given. It seemed to me to be a machine-made answer, with very little if any relevance to the case we are now considering. The stock answer is, of course, that any increase in taxation relief is an inflationary movement. It is true to say that in some degree any release of purchasing power is inflationary in its tendency, but I cannot understand why that argument should be adduced for a proposal such as this, when no such argument is adduced if it is a question of giving £20 million to those who drink beer. I should have thought, speaking both economically and otherwise, that the £20 million to beer drinkers was likely to be the more inflationary.

The fact is, of course, that the Government are now in a position where expenditure is so high that they are unable to give a concession however meritorious or well deserved. The right hon. Gentleman referred to two concessions which were made last night. It is quite true that there were two concessions, but it was not that those new Clauses were more desirable for the sake of human happiness than the many other new Clauses that have been discussed, but merely because the concessions cost no money. It was on that ground and that ground alone, that the Government made them.

I should like to have a little more information on this figure of £7 million. I understood it was a Treasury estimate of the loss of revenue they would suffer, but has there been any attempt to put against that, any decrease in social service payments which might otherwise be made? These people who will benefit are all in low income groups, and cer- tainly the probability is that in most of these cases the rise in the cost of living, which the right hon. and learned Gentleman has said is not to be remedied by taxation reliefs, will have to be met by increased assistance payments. If, as I suspect, the saving by the Treasury in refusing this proposal is to some extent off-set by the increased expenditure which is to fall on some other Department, I would far rather, for the sake of the pride and independence of the people concerned, that the relief, if it is to be given by the Government, should be given in this form instead of in the other form which, however humanely it is done, still has the appearance of charity payments.

The Opposition in dealing with these new Clauses, are always in the difficulty that they are not allowed to select the particular taxation relief to which they give the greatest priority. The eagle eye of the Chair goes through the new Clauses and excludes a number of them, not on grounds of intrinsic merit, but on such grounds as whether they have been discussed in some other form, or whatever the appropriate grounds may be. It means it is not necessarily the case that the particular proposal we are able to put forward, is the one to which we give the highest priority, which is the case here. I would not say, even if the Government by a reduction of expenditure had the money available, that this was necessarily the highest of all priorities, but it is certainly one that is a high priority. As far as I am concerned, unless the Government are prepared to make some concession, I shall go into the Division Lobby to vote against the position in which the Government are now in, that owing to the high rate of expenditure to which they are committed they find themselves impotent to give any concession to any cause however good.

I wish to associate myself with those who comprise our little party representing that part of the United Kingdom from which I come. We get a good opportunity during the Committee stage of the Finance Bill to make our pleas to the Treasury, and I feel that in this matter a case has been made out. We know that the Chancellor of the Exchequer and the Financial Secretary cannot meet all the pleas that are made, but I hope that they will not disagree with this one, because those who have looked after the old and infirm know what a hard task it is in many cases. The suggestion put forward is very reasonable indeed, and I hope it will not be turned down.

There are two points I should like to make. The Economic Secretary said, quite rightly, that a good case can be made out for a concession of this sort at whatever level allowances are standardised. The point is that the allowances are out of line with the allowances given in the case of a wife and four dependent children, and that the Economic Secretary completely failed to answer. It is clear that there is always a good case, whatever the allowance may be, for making it better, but there is certainly a case for making the allowances fair one with the other.

The second point is one that has already been partially made, and that is the consequences of the Chancellor's policy of deflation by taxation. I believe that we should now use the word "disinflation," which I will use because the right hon. and learned Gentleman attaches a particular importance to that fig leaf which I will not snatch away from him. If expenditure is at this level and the Government try to balance things by raising taxation, they are bound to produce a condition where the cost of living rises steadily, as it has risen steadily since 1947 and as it is likely to continue to rise.

The right hon. and learned Gentleman said that what we want to do is to stop incomes and wages rising, regardless of the cost of living. There is something to be said for that, although it is a rather gloomy policy, but what occurs, in fact, is that wages follow the cost of living a small move behind, whereas dependent relatives and people of that sort do not move upwards at all. They are, therefore, ground between the upper and nether mill-stones. We want to put on record that, as a result of the present policy, the faces of people like this are being ground in the dirt.

The tendency, one gathers from reading parts of the Report on Population, is to have more and more elderly people in this country, precisely the sort of people who will to some extent be benefited by this new Clause. It is worth remembering that if these people do not fall on the private charity of the family, they will fall on the charity and assistance of the State. From the national point of view, it must be clear that these small reliefs in respect of dependent relatives will make life very much easier for them than can be the case in an institution, which undoubtedly for many of them will be the only alternative. It is no great concession to make; the alternative is whether the money is to go to honest tax relief or for ignoble public assistance. Perhaps that is an over-simplification, but I hope the hon. Gentleman will give the matter more sympathetic consideration than it has been given hitherto and will accept the Clause.

As serious arguments have been advanced on this point I should like briefly to reply. The hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) said that my main argument for regarding the allowance as being at the correct level at present was that at whatever level it stood, it could be argued that it should go higher. That was my comment on what was said by the noble Lord the Member for South Dorset (Viscount Hinchingbrooke); it was not my principal argument. We have made three increases in the allowance in recent years, two of them in very recent years. It has been said, rightly, that there is a special case for helping the aged and infirm, and we were asked whether it was not our general policy, although following, generally, a disinflationary policy, when the cost of living rose, to moderate its impact on those least able to face it. That is our policy; that is why we have subsidised the cost of living, among other things, and why the work of the National Assistance Board is, as we all agree, conducted along humanitarian lines.

All the arguments about special claims on behalf of the aged and infirm, however, could be advanced equally cogently in the case of the general mass of old age pensioners who are living below the Income Tax level, and of whom I have a large number in my constituency as, no doubt, has the hon. Member for Torquay (Mr. C. Williams). In all the circumstances, I think it would be unfair to make this concession, strong as the arguments are, if we could not do something comparable for the large number of people who are, on the whole, worse off—old age pensioners living below the Income Tax level. Finally, the right hon. Member for West Bristol (Mr. Stanley) said, very candidly, that he did not regard this proposal as having the very highest priority among the taxation reliefs which he and his party would wish to obtain. That is also our position. Having looked at possible reliefs, both before the Budget and since, we agree that in all the circumstances we do not put this in the very highest priority class which we are able this year to accept.

As the Committee wishes to get on, I do not intend to take up more than a few minutes, but I must say that the arguments adduced by the Economic Secretary amount in my view to little or nothing. The hon. Gentleman said that two concessions had been made in recent years, and suggested that this was a reason for doing nothing now. The point is that since the last allowance was made the cost of living has gone up by seven points, so that the time has now arrived to make a further step forward. It may be that if we got this concession now and the cost of living rose 10 or 20 points we should have to try again to get fairness for these people. I should not have asked for a concession of this kind unless the need for it had been due to the deliberate policy of the Government during the last few years.

The hon. Gentleman said we should be justified in doing this only if we were to make comparable concessions to the general class of old age pensioners. In 1947, when this particular allowance was increased, nothing was done for pensioners then; the increase followed something done for pensioners a year or two previously. Is it not reasonable to take things by stages? For various reasons we now want this extra concession for this class of people, and in a few years it may be necessary to do something for the whole class of pensioners. It is not right to suggest that nothing should be done until the whole thing is lined up, because legislation has never proceeded in that way.

The hon. Gentleman made no impression upon me at all in what he said about inflation. If it is the deliberate instruction of the Chancellor that every Amend- ment and new Clause is to be turned down on the grounds that it will cost 2½d., and will lead to inflation, why should right hon. and hon. Members opposite prepare any briefs in connection with specific Amendments and clauses at all. In fact they do not do so. We are finding out that there is no attempt to argue on the merits of any of our proposals.

This concession would cost £7 million. I am not seeking to unbalance the Budget by gaining an exemption of this kind today; I am suggesting that it should be granted, and that the Government themselves should save the inflationary position by reducing their own expenditure. What produces inflation is the aggregate of personal and Government expenditure. It is logical for us on this side to argue that inflation can be held by granting a concession and the Government meeting that concession by the same amount in a reduction of expenditure. That could be done in hundreds of ways, as we have detailed many times and which I would like to develop now if it were not out of Order. I regret that the hon. Gentleman has not been able to meet us, and I can only hope that in the night hours he and the Financial Secretary will reconsider the matter and bring it forward again either on Report or next year.

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

On a point of Order. Before we go any further, Major Milner, could you tell the Committee whether the subject matter of this Clause deals merely with whisky, or whether gin and other spirits come within its scope?

It appears to me that all spirits are included.

I cannot actually claim the indulgence of the Committee in speaking today, but may I preface my remarks by saying that, unaccustomed as I am to speaking in this Chamber, I hope the Committee will bear with me for a short time? It may be of some interest to note that I copied this Clause, except in so far as the amounts are concerned, from a similar Clause moved on 7th July, 1927, by my old friend the late Mr. Fred Macquisten, former Member for Argyll. I wish he were here to perform this task today. He represented, and I represent, a constituency which has perhaps more interest in the whisky trade, along with Banffshire, than any other part of Britain. Both he and I always felt strongly on this matter.

Although I am not a total abstainer the interest of my hon. Friends and I does not lie in the fact that we wish merely to obtain cheaper alcoholic drinks; it is far more than that. Tens of thousands of pounds have been poured into the building of great distilleries; there is the question of local employment—a matter of great importance to our constituents—and also the agricultural side of the problem, distilleries being the best market for the best malting barley that our farmers can produce. In 1927, Mr. Macquisten argued that the rate of duty on whisky in those days, which was £3 12s. 6d. on a proof gallon, amounted to £300 to £350 tax on an acre of malting barley. If that be the case, then the present rate of duty, which is £10 10s. 10d., on a proof gallon, works out at about £900 on an acre of good barley. That is a terrible tax.

Quite apart from that, there is the question of the revenue itself, in which I know the Financial Secretary will be interested because I was present with a deputation which waited upon him at the Treasury a few weeks ago. We had a friendly reception, and I hope the right hon. Gentleman will be equally friendly today. At a deputation in the Treasury the Minister cannot, of course, take any action; he can only listen and reply, all of which the Financial Secretary did with the greatest courtesy. But here, in this Committee, he is in a position to go a step further, and I hope he will not fail to assist us on this occasion.

I am very sorry that the Chancellor himself is not here today, because I am sure he would be kindly disposed towards us. I do not suggest that he is very keen on the absorption of alcoholic liquor, but during the war I had the privilege of working with him for some months when he was Leader of the House and I was then occupying the position occupied today by the Parliamentary Secretary to the Treasury—it is with the greatest difficulty that I can refrain from calling him my right hon. Friend. Although the Chancellor and I did not always agree on everything we were next to being a couple of cooing doves, and I cannot help thinking that if he were here today he would view this proposal favourably. I can only hope that he has left instructions with the Financial Secretary to do what he would have done had he been here himself.

I shall not go into details because my hon. Friends behind me will do that and elaborate this case. I referred to the fact that the duty in 1927 was £3 12s. 6d. per proof gallon, and that I was associated with the former Member for Argyll who, in those days, moved to reduce the duty to 30s. The duty has now risen to over 10 guineas, and, as I think is clear to anyone, the domestic consumption of whisky in particular has dropped steadily throughout the last half century. It is most extraordinary that the Government should adopt their present attitude to our own industry, that is to say, penalise it by excessive taxation while, at the same time—and I am not criticising their action—helping the French wine trade by reducing the duty on wines so as to allow us to have cheaper French wines.

4.45 p.m.

The French, as we know, have always done everything to assist and foster the wine trade in France because it is one of their primary industries. Well, here we have a product of Scotland which I believe cannot be imitated in any other part of the world, yet we do everything in our power, not to foster it but to murder it. In Scotland, when we lay golden eggs we very much dislike having our necks wrung; and I may say that these eggs, as the Financial Secretary knows very well, have been of the purest gold—or they may be paper now—throughout many years.

I shall not go into a lot of detail, but I hope that this new Clause will be viewed with sympathy. It affects local employment; it affects agriculture very materially, and it affects the revenue. If the present duty is maintained it cannot fail to kill this industry, which I am sure we should all view with regret. I know that America produces her own Bourbon and other whiskies; they put a very considerable duty on Scottish whisky, and naturally keep their own Bourbon sufficiently cheap to encourage people to drink it. That is quite natural. I do not know whether the Chancellor can rely upon maintaining this export trade. I believe it to be a maxim that an export trade cannot be maintained unless there is a healthy home industry to back it up. Well, the way things are going today, we shall soon not have any home industry, and I therefore hope that this new Clause will be viewed favourably.

I wish to support this new Clause as strongly as possible. I, with other hon. and right hon. Members who sponsor this Clause, represent an area in which whisky distilling is an extremely important industry. Indeed, in the whisky distilling areas of Scotland this industry is just as important as coal is to the Welsh valleys. As my right hon. Friend has said, whisky production is a basic factor in the economy of our Highland glens, where we are circumscribed by the nature of the country to the growing of two cereal crops, and two only: barley and oats. The outlook for oats is far from encouraging, and we now view with very grave apprehension indeed the outlook for our barley, because the outlet for our barley is in the distillery which is hard by. The barley, in conjunction with the local water and the local climate, is responsible for the production of Scottish malt whisky, which is the finest thing of its kind in the world, and is so estimated.

We hear and have heard a great deal in this Committee about the Highlander and what the Government aim to do to help the Highlander. The Highlander looks upon this duty with a great deal of shrewd suspicion and misgiving, because he sees his one great national industry being murdered by this prohibitive taxation. In pleading for the reduction of the whisky duty, I should imagine that we on this side, in supporting this new Clause, were following on the efforts of the Secretary of State for Scotland, the Minister of Agriculture, and the President of the Board of Trade, for they should be leading the fight for a reduction of this duty. Whisky is all-important to Scottish farming and to our export drive, because it is the greatest single dollar earner, and without a substantial and healthy home trade, whisky exports cannot be maintained.

This is not a question of temperance reform. I am not myself a whisky drinker, but that is entirely by the way. This is a question of the survival of what to us in Scotland is a key industry. Nothing that this Committee can do in the field of taxation can alter the desire for alcoholic stimulants on the part of the people. Taxation, however, can to a very large extent determine what people shall drink. The price of whisky has become quite prohibitive, and its place is being taken by all sorts of concoctions, some of them straight drinks, but others what I might term to be veritable hell brews which are definitely more deleterious to the human body, the human frame and the human mind than whisky.

What is happening in the liquor trade? Let us look at comparative spirits which bear relatively the same duty as whisky. In 1948 we imported 30 per cent. more brandy than in 1938. In 1948 we imported three times more rum than in 1938; in addition, vast quantities of rum were being imported for manufacture into gin. In 1938 brandy imports were 523,000 gallons; in 1948, 702,000 gallons. In 1938 rum imports were 1,737,000 gallons; in 1948 the amount of rum imported for beverage purposes was six million gallons—and that does not include about three million gallons imported for commercial purposes and for distillation into gin. In 1948 the total consumption of whisky in the home market was 2¼ million gallons; it was more than twice that in 1938.

I submit that it is unfair that these imported liquors, which function in more or less the same field as whisky, should bear a duty comparable with that on whisky. Whisky deserves some preference, if for nothing else than that it is a native product from beginning to end. I further maintain that it is grossly unfair that six million gallons of rum should be available for retail sale in this country, while our own native product is restricted to 2¼ million gallons. This Finance Bill gives concessions to French wines, yet this perfectly just case for our own one national beverage is ignored. I think I ought to give these figures for the benefit of the Committee. In 1910 the duty on whisky was 11s. per proof gallon. Today the duty per proof gallon is 210s. 10d.—20 times greater than it was in 1910. Today the full retail price of a bottle of whisky is 33s. 4d.; that is, if it can be got at the price the distillers hope it can be bought for. The, wholesale price is 29s. 2½d., which includes tax of 24s. 7d. The net wholesale price after tax is deducted is 4s. 7½d. At the wholesale level whisky is bearing what is tantamount to a Purchase Tax of 530 per cent.—400 per cent. greater than any other British product has to stand in the home market. That is a matter which the Committee ought to take very seriously to heart.

What of the effect the restrictions at home may have upon our present export drive and our future exports of whisky? Whisky drinking is dying out.

Hear, hear.

The hon. Lady may say "hear, hear," but let us look at this from the purely economic point of view. It is a tragedy. The appreciation of quality is being lost; and any manufacturer knows that in order to maintain the standard of his goods in the export market he must have critical examination and estimation of his quality at home, otherwise it becomes only a name, and the value of that name goes down. There has in recent years been a tendency, following the lead of successive Governments, to increase the duties on imported whisky. There is still a considerable gap between the excessive Excise duties we impose in this country and those imposed abroad; they are still, on the average, twice as great here as abroad. But there is no reason in the world why those countries should not close the gap, and close it instantly. If they did, if they imposed on whisky an import duty comparable with the Excise duty we impose at home, our whisky export business would be killed overnight.

When we ask for a decrease in duty we are asking for something like £2 13s. 4d. a gallon. That will not have such an enormous effect upon revenue returns. After all is said and done, the present amount of whisky which we are selling in the home market is 2¼ million gallons, and if only a small increase were permitted for the home market with a reduced duty the Treasury would not be the loser; but the industry would gain that fillip, that infusion of new lifeblood in home sales which is so vitally necessary for the future.

Many hon. Members may be asking themselves the age-old question: what is the relative value of barley as a feedingstuff compared with barley used for whisky manufacture. I will tell them. One ton of barley yields 105 gallons of proof whisky, which are available in the export field at £2 a gallon and produce £210. That amount of sterling or dollars can purchase 10 tons of wheat at present values.

Much has been said by the President of the Board of Trade and others on the Government Front Bench regarding the favourable treatment that was to be accorded to those industries which were showing the greatest success and endeavour in the export field. I claim that no industry has transcended the efforts and the success of Scottish distilleries in achieving results in the export market. In order to concentrate their available stocks on hard currency countries they have gladly and willingly at the request of the Chancellor, yielded up markets in soft currency countries which they enjoyed for generations. I submit that in common fairness, in return for their loss of those markets in soft currency countries, the Chancellor should use his power to give a quid pro quo by reducing the duty at home and giving an increased liberation of their stocks.

I sincerely hope, for the reasons my right hon. Friend and I have given, that the Chancellor will accept this new Clause. If he cannot go all the way, I appeal to him to let us have at least a token reduction. There has been a succession of increased imposts on this industry for 55 years without a halt. This is a golden opportunity to put the tax machine in reverse, because already this industry has been burdened with the straw which breaks the camel's back. We cannot go further; we must go back if we are to save this industry. In giving us a concession, however small, the Chancellor would be halting that savage and, from our point of view, entirely suicidal onslaught on this industry, which is such an important national asset—a savage onslaught which I regret to say has been participated in by Chancellors of all parties.

I understand, Major Milner, that you have ruled that while this new Clause deals specifically with whisky, it would be in Order to mention gin as well. Perhaps I might make reference to another new Clause on the Order Paper, which deals with the Spirit Duty as a whole.

For the information of the hon. and gallant Member, the Clause to which he has referred will be out of Order.

I was not aware of that, but I gather it is in Order to make some reference to gin on the new Clause which we are now discussing. Before I come to that, may I as a colleague, who sat in previous Parliaments with him, say how pleased I was to hear my right hon. Friend the Member for Moray and Nairn (Mr. J. Stuart), who for many years has confined his oratory to the refreshing suggestion, "That this House do now adjourn" or possibly under very extreme provocation to the Motion, "That the Question be now put."

I desire to support this new Clause not for the same reason as I supported the last, which was on humanitarian grounds, but purely on the grounds of the financial interests of this country. This, of course, is a hardy annual, which has been argued over and over again as the duty has steadily risen year by year, but the main arguments hold good still. There is, however, an additional one which is coming more and more into the picture as the present Government raises the duty. It is that of all people the Socialist Government are imposing a harsh policy of price rationing on what are known as the members of the lower income groups by placing the consumption of whisky out of their reach. I remember when I was a great deal younger than I am now, watching the dockers in Glasgow going to work, and invariably they had a dram early in the morning. Those days have gone. Successive Governments have placed it out of their reach. It is a great pity that the very healthy beverage known as whisky has been priced right out of the reach of those whom we describe, for want of a better term, as the working classes.

At this particular moment in our affairs I am bound to say that while that argument is potent, infinitely more so is the argument advanced by my hon. Friend the Member for Banff (Mr. Duthie) as to the vital importance of whisky in our dollar earnings. The very grave matters which the Chancellor is endeavouring to grapple with at the present time are intimately bound up with this, and surely it is true to say that in proportion to the amount of labour involved in its production, whisky stands high, if not the highest of all, in our list of export industries.

The Financial Secretary may say, "Yes, all these things are true, but we are not raising the duty to consumers in foreign countries. This is merely a domestic proposal." May I submit to the right hon. Gentleman, whom I strongly suspect has hardened his heart in this matter or has had it hardened by his right hon. and learned Friend the Chancellor of the Exchequer, that wherever there has been a rise in the whisky duty here in the country of production it has almost invariably been followed by a similar increase abroad, in countries to which we have exported; so by this proposal of the Government's we are indirectly making it more difficult for our whisky to be consumed in foreign lands.

There is an argument which follows from that, and which I impress upon the right hon. Gentleman. We all know that in the United States, in particular, there has been an increase in the distillation of their own products, and one can say without any offensiveness whatsoever that those home-produced products of the United States are vastly inferior in quality to our Scotch whisky. The higher our prices are, the better is the opportunity for the inferior whisky, and there is the danger of consumption in those foreign countries becoming more and more concentrated on the home and inferior product, so that one day a generation will rise that does not know and has not experienced the supreme quality of our Scotch whisky.

Would the hon. Gentleman say how much Scotch whisky is available to America at the moment? He is talking about the high price, but we have constantly been told here that it is too low.

Does the hon. Gentleman want to know what is the price which is being charged?

The argument, as I understand the hon. and gallant Gentleman, is that if the price of our British product is too high, it will stimulate the production of American whisky, which he says is inferior. For the information of the House, will he kindly tell us what is the price paid for Scotch whisky in America now?

I speak subject to correction, but I understand that it is in the neighbourhood of eight dollars a bottle, which is very much lower than it is here at home.

What does the seller get? What does the producer get when it is sold?

I understand that it is in the vicinity of a dollar a bottle. I do not think that that affects the main argument which I was trying to make, and which I hope the Committee will not think is unfair. My argument was that if we attempt to raise the duty here at home, it has an effect in increasing the price abroad, and there is a danger of the home distilled whisky in those countries ousting the product which we are endeavouring to sell them at this particular moment.

I think my hon. and gallant Friend should make it clear that when he mentions that prices will be raised abroad, it is because of an increase in import duty that those prices have to be increased.

I did say at the outset of my remarks that an increase here was almost invariably followed by a balancing rise in those countries.

I regret that this form of price rationing has placed this product out of the reach of the lower income groups at home, but it is a greater pity that we are in the very greatest danger of striking a blow, in order to raise revenue at home, against our prime dollar earner, having regard to the labour employed, and one of the greatest weapons to our hands to enable us to get out of our present difficulties. Whatever instructions have been given to the Financial Secretary, I trust that, having listened to the arguments, he will meet us in the realisation that this is an important issue at the present time.

I should like to associate myself with the remarks of the hon. and gallant Member for Holderness (Lieut.-Commander Braithwaite) in his reference to the speech of the right hon. Gentleman the Member for Moray and Nairn (Mr. J. Stuart). His speech was so charming and disarming and made with such lucidity that I had the utmost difficulty in restraining myself from jumping to my feet and offering everything he wanted. However, I fortunately restrained myself, and I have now to put before the Committee certain arguments which are conclusive as to why we on this side of the Committee cannot accept this new Clause.

What was said by the hon. Member for Banff (Mr. Duthie) is also true. A very high-powered deputation from the other side of the Committee waited upon us at the Treasury, and we had a very interesting exchange of views. I was sorry that I was not able to meet them in some small way. It is undoubtedly true that the duty on spirits is exceedingly high. It is £10 10s. 10d. per proof gallon, and if this Clause is accepted it would reduce it to £7 17s. 6d. The present duty on a bottle that is sold is £1 4s. 7d., and it is sold at £1 13s. 4d. If this new Clause were accepted, it would mean a reduction of the price by about 6s. 2½d. Even though that may seem a reasonable suggestion to make, the figures which I will give to the Committee in a few moments will show that the total is more than my right hon. and learned Friend can afford. The points made by hon. Members include the one that the demand for Scotch whisky in the home market has declined during the past year. Reference has also been made to the fact that over a long period it was declining. The hon. and gallant Member for Holderness referred to this himself when he said that when he was young, and I gather living in Glasgow—

No, visiting.

When he was visiting Glasgow he noticed that the ordinary working classes started the day with a tot or a dram. That is true, but the duty on whisky was somewhere in the neighbourhood of 2s. 6d. and 3s. 6d. a bottle, and it was available as a drink for the people known as the working classes. Whisky has now been put out of the range of the great mass of people, because of the duty and the price. It is also outside the range of people who normally one might suppose could afford it.

I do not think there is any ground for the suggestion that the reduced amount that now comes on the home market has been a handicap on the export trade. Whisky is one of our best exports, and that is one of the difficulties about it at the present time. The Ministry of Food have to see to it that in the releases for the home market there is enough left for the export market in order to earn dollars, which this country needs so badly now. It is one of the penalties which we have to pay in order to earn dollars, and whether we keep it at home or send it abroad it all goes.

5.15 p.m.

The whisky which comes into the home market is easily sold, as is the whisky which goes overseas. It is more important at the moment that it should go overseas, and we have to take that into account. The Ministry of Food have liberated more barley this year than previously in order to assist the catering for both the home and foreign markets. If the suggestion of the right hon. Gentleman the Member for Moray and Nairn were accepted and the reduction in the duty were limited purely to home-produced whisky, the cost would be about £6 million. The effect of the Clause would also be to reduce the duty on home-made gin as well, even if rum and brandy could be excluded, and if we took that fact into account, the cost of the Clause would be in the neighbourhood of £15 million. If we went further and accepted the suggestion of the hon. and gallant Member for Holderness the cost would be in the neighbourhood of £20 million.

To sum up, the reply I would make to the Committee is that we see no signs at the moment that the fact that the home market has had to be restricted is having any effect on overseas sales or on the limited production—I admit that it is limited—in which the whisky distillers are able at the moment to engage. Even if my right hon. and learned Friend accepted the more modest suggestion of the right hon. Gentleman the Member for Moray and Nairn, it would cost £6 million. If we extended it as proposed, we would have to consider the distillers of gin, who are interested. If we made this concession for all home-produced spirits, it would cost £15 million. I think I have only to mention that figure to show that it is quite beyond our power to accept such a suggestion.

Before the right hon. Gentleman sits down, may I put it to him that the effect on the export drive of a limited home sale is a long-term one? I admit what the right hon. Gentleman says about there being no immediate effect. However, a discriminating taste for whisky is being lost through the inability of the connoisseurs in the North to buy it, and we are thus losing the essential critical taste which gave our whisky its prestige abroad.

I feel rather diffident about addressing the Committee on this subject as I am personally interested financially, being a gin distiller. I propose to approach the subject not from the point of view of any hardship from which the gin distiller may suffer, but simply from the point of view of revenue and leave it to the judgment of the Committee as to what conclusion they reach. I do not think it necessary to consider here whether the drinking of spirits is desirable or undesirable; we are here today to consider the tax purely from the point of view of yield.

I feel bound to warn the Treasury that my opinion is that they are tending to kill the goose that lays the golden egg. The right hon. Gentleman said that acceptance of the new Clause would entail a loss in revenue of so many million pounds and therefore he could not even contemplate it. I tell him this, that the duty on spirits has risen to such a high level that he is in grave danger of not being able to maintain the existing revenue. The duty on spirits has been put up and up, and in time of boom and prosperity it has been possible to carry it, but with the decline in the purchasing power in the hands of the public, the duty tends to defeat its own ends and the yield will tend to dwindle.

To make a reductio ad absurdum, if the duty on spirits were £100 a bottle, nobody would buy spirits; if the duty were 1d. a bottle, there would be a heavy loss to the revenue, and many headaches. Somewhere between the two must lie a figure which will produce the optimum result from the point of view of the revenue, and that figure is not the same in time of boom and expansion as it is in time of depression or recession. I repeat that I am looking at this question merely from the point of view of the yield of revenue, as a taxpayer and as a Member of this Committee, and I repeat that the tax is too high from the point of view of the Treasury. How much it should be reduced I do not venture to say. I think it should come down at least 25 per cent. If we reduced the price of spirits by 1s. a bottle, we would not get much increased consumption but probably an actual loss in revenue. The duty should come down something in the nature of 25 per cent. I believe that we should then make up the loss of duty through increased consumption. We should then be better off than when we started.

I want to say a word in defence of my own trade. It may interest hon. Members to know that the duty on gin is 212s. 4d. per proof gallon and it is sold for 14s. per gallon. Therefore, the villain of the piece is not the distiller. I hope that the Treasury will consider my remarks, and that hon. Members will not think that I am pursuing my own private ends.

I intervene not for the purpose of curtailing in any way this interesting Debate, but because I want to express my own particular difficulties and to point to the sort of arguments which I want to hear. All of us feel that this is a matter which must be put not on the convenience, the comfort or the pleasure of individuals but on the economic basis. If we were merely considering the gratification of the whisky drinker or the gin drinker, we should have to weigh that against the gratification of the smoker or the man who goes in for football pools or other varieties of taxpayer.

There is an economic fact behind the Clause and the arguments of my hon. Friends. I can see that there might be excellent economic arguments for a reduction in the spirit duties, and I wonder if subsequent speakers will produce tax and figures to justify that conclusion. Clearly there would be an economic justification for a reduction of the duties if they were on the same basis as the Beer Duty which we have already considered; that is to say, that the duties were now so high that they were defeating their own ends and that a reduction in duty was the only way of arresting the decline in the revenue and, possibly, of increasing revenue. My hon. Friend the Member for Farnham (Mr. Nicholson), who speaks with great authority on this matter, referred to the effect of what he called the "Spirit Duty" on consumption. I wondered whether he was referring only to the effect the duty was having on the consumption of gin.

This is a very important question. With reference to the restricted allocation of whisky in the home market, I was not attempting to make out any case for whisky, but we are all hoping that one day whisky will be in increased supply on the home market. Then, I believe, precisely the same law of cause and effect will apply in the case of the consumption of whisky as in the case of gin. I do not think that we can separate gin and whisky; I call them both spirits. It is the high duty on spirits which will lead to such a fall in the consumption that the revenue will suffer.

I thought my hon. Friend meant that and that he was devoting his argument not to whisky with which he started, but to the gin to which he was specifically referring. As I see it there is a difference at the moment between the two. We have not yet heard any facts or figures—perhaps we shall later on—to show that the consumption of whisky is falling off as the result of this duty, but I believe that there are facts and figures which show quite clearly that the consumption of gin is falling off. Therefore, at any rate, it may well be that gin is coming in the same category as beer in the case of which a reduction of the duty is necessary if the revenue is to be maintained.

With regard to whisky, I should like to hear from hon. Members who can take advantage of the Debate some facts and figures on what appears to me to be the most important question of whether there is any evidence that the consumption of whisky is falling off as the result of this high duty so that we might say as an economic fact that a reduction of the duty would aid rather than hamper the revenue. So much for the economic effects inside the country.

Now for the question of the export trade. Apart from the rather long-distance matter to which one of my hon. Friends referred, I cannot see at the moment how the high internal duty is affecting the export trade. There again, it may be that hon. Members dealing with that aspect can show that in some way the price of whisky abroad is affected by the high duties which are being put on the sales at home. I agree that the point is an important one but it is a long-distance one. It may very well be that if we reduced the consumption of whisky in this country more and more, when export tends to fall off we may find that we have so small a home market that it will be unable to support an industry which will perhaps still be capable of a considerable export. That is important for the future but it is not an immediate matter at this crisis. I do not think that it has yet been argued that the reduction in duty would lead to some immediate increase in exports which, if it were so, would justify to me a reduction in the duty.

I have expressed to my hon. Friends my diffidence in this matter and mentioned some of the points I should like to have cleared up. As far as I can see, unless it can be shown that a reduction in the duty on spirits would prevent a fall in consumption and therefore a fall in revenue, or it can be shown that a reduction would lead to an increase in our all important exports, I should not feel justified in putting the claims of those consumers above the claims of other consumers between whom we ought to judge if the money was available. Whatever hon. Members who hold strong views on this matter may feel, in those circumstances unless those two points are met, I could not support the Clause or advise my hon. Friends to do so.

I am sorry that attendance at a Committee upstairs prevented me from having the opportunity and pleasure of listening to the speech of the right hon. Gentleman the Member for Moray and Nairn (Mr. J. Stuart). I have no doubt that he very quickly showed the Committee of what it had been deprived by his long occupancy of the Whips' Office. We are all happy to think that we are deprived of it no longer. I want to mention a question raised by my right hon. Friend the Member for West Bristol (Mr. Stanley) concerning the consumption in this country and the effect of the duty upon it. It is impossible to give a definite opinion on that for this reason. The arrangement which was come to two years ago between the Board of Trade, the Ministry of Food and the distillers was that the distillers undertook, in exchange for getting the barley that they required to start the industry up again after the war, to export 75 per cent. of the total production to the dollar area, leaving only 25 per cent. of the total production of whisky—and that included stocks—for the home market.

5.30 p.m.

The result has been that the home market has been deprived of good whisky to a fantastic extent during the last two years. Therefore, in my submission, there is not enough whisky available here to test the home market. The trouble about whisky today is not only that it is far too expensive, but that it is almost unobtainable unless one pays a fantastic price. All I know is that the home consumption of whisky is small, and in the long run that will be bad for the industry because it is only a question of time before the people of this country will lose their taste for it. In fact, it is true to say that the young generation are losing their taste for whisky, if they have not lost it already, and that is a pity because it is a good drink and not an unhealthy drink. The position is different with regard to gin because there has never been a quantitative limitation on that spirit. The consumption of gin is falling, and one can get plenty of gin in any grocer's shop today at the fixed price. Therefore it is a fair test to take the fall in gin but not in whisky.

That brings me to another point made by the hon. Member for Farnham (Mr. Nicholson). It is true that under the new doctrine of taxation inculcated by the late Lord Keynes, tax should be high in times of boom, especially on luxuries, and that it should be reduced with the approach of a depression and lowered pretty sharply when the depression arrives. By "depression" I mean a recession, because I am not talking of a major slump. However, there is no question that we are leaving the sellers' market and entering the buyers' market, and accordingly there is less money about. That in itself is an argument for a remission of this Duty.

The Financial Secretary admitted that the taxation on whisky at present is penal. The right hon. Gentleman said that not only does it put whisky out of the range of the working classes but out of the range of the well-to-do classes as well. That cannot go on indefinitely because, if it does, we shall lose the home market. The right hon. Gentleman said that whisky is a popular drink. I think it has been, but I am certain that it will not remain a popular drink if it is unobtainable either through lack of its existence in this country or through this penal taxation which raises the price to a point at which ordinary people will not be prepared to buy it.

Whisky remains our greatest single dollar earner per unit of labour, and dollars are, as we are repeatedly reminded by the Treasury, absolutely vital to this country at present. I say that if we want to keep it as a good dollar earner, as surely we do, we must take some steps to revive a home market. An export trade can never be conducted without a home market because it is subject to violent fluctuations and, with no home market to fall back upon, there is not sufficient stability for the export trade. Nor, as the hon. Member for Banff (Mr. Duthie) rightly said, have we the connoisseurs who can tell the difference between good whisky and bad. I am absolutely convinced that the definite continuation of this scale of duty will kill the whisky industry, and that would be a disaster for Scotland and a disaster for our dollar trade.

I shall revert to a few remarks made by my right hon. Friend the Member for West Bristol (Mr. Stanley) who drew a distinction between whisky and gin. There I think my right hon. Friend was right, because the question of whisky is complicated by that of dollar exports. His main point was that what we have to look at in this Committee is the effect upon the revenue of anything we may do about these duties. He also called for figures from those concerned in this matter. The trouble about the figures which are published in the "Statistical Digest" is that they relate to the consumption of spirits and do not give whisky and gin separately. However, such figures as have been published are extremely significant.

The monthly consumption of proof gallons in 1938 was 860,000. For the first three months of 1948 the consumption averaged rather over 800,000 gallons, and in March, 1948, it was 870,000 gallons. Therefore, by the first quarter of last year there had not been a heavy reduction in the consumption of spirits in this country. The figures for the first quarter of this year are quite different. In January the consumption was 700,000 gallons, not a large fall. In February it was 490,000 gallons, and in March it was 380,000 gallons. Therefore, by March this year the consumption of spirits was appreciably less than half of what it was last year.

As I understand it, the consumption of gin in this country last year is higher than the consumption of whisky and as there has not been any great decrease in the consumption of whisky here because of shortage of supply, then presumably the decrease in the consumption of gin must have been much more than 50 per cent. In fact the figures indicate that the consumption of gin is running something like one-third of what it was last year. When the wine duty was reduced, we were told specifically that the object was to preserve the Revenue. When the beer duty was reduced, we were told specifically that the object was to reduce the cost of living, but I do not think we were meant to take that seriously, and I take it that in that case too the object was to preserve the Revenue.

The right hon. Gentleman said that if the duty on home spirits were reduced it would cost the Revenue £15 million. I think we are entitled to know on what assumptions of consumption that figure was based. If I am right in supposing that the consumption of spirits will go on declining as it has done in the first quarter of this year, there will be an enormous reduction in the revenue raised from spirits in this country. If that happens, a serious situation will face the Government because this is one of our major revenue earners. We might be entitled to ask right hon. and hon. Gentlemen opposite a question which they always ask us—if they do not raise the revenue from spirits, where will they find it? Looking at these figures, I do not believe that they will raise in the current year from spirits anything like the amount raised last year. If the remedy in the case of wine and beer was to reduce the duty, that must be the remedy also in the case of spirits.

If we are not to press this new Clause, we should have from the Government a statement showing on what the £15 million is based, and what are their assumptions about consumption for the rest of this year. It looks to me as if they are simply assuming that consumption will be the same and that on that basis the cost would be £15 million. My guess is that the cost to the Revenue of going on as we are now will be much greater than that, and if some reduction were made in the duty, the cost would probably be a great deal less.

By a curious coincidence I was entertained at Lords today by a firm of distillers, and I asked them various questions on this topic. I must tell the Committee that they had no idea I was a Member of Parliament. I was introduced quite casually and I asked whether or not sales had gone down in their public houses throughout the country during the past six months. The gentleman speaking to me said that not only had sales gone down but that the Chancellor will be sharply surprised when he finds he will get at least 30 per cent. less than he expects to get from this duty.

Which spirit?

Whisky. He added, "It really makes me laugh when I see all the fuss that is made throughout the country about Purchase Tax at the rate of 33⅓ per cent., or whatever it may be, for here are we taxed at the rate of 530 per cent."

Will the hon. and gallant Gentleman say how many bottles of whisky were going spare on the shelves of those public houses?

No, I could not tell the hon. Gentleman that. What that gentleman felt keenly, and what I feel keenly, is that the tax on this commodity is prohibitive at 530 per cent. above its cost. I heartily support my right hon. Friend the Member for Moray and Nairn (Mr. J. Stuart) who moved this new Clause for some readjustment of the tax in the future to allow the home market to benefit by knowing what good whisky tastes like. At the present moment it is completely denied the opportunity of distinguishing between good or bad whisky because there is none available.

Mr. Hugh Fraser.

I want to ask a question—

The hon. Gentleman can make his speech in a few minutes? I have already called on Mr. Fraser.

I wanted to ask a question.

I should like to add a few figures to try to convince my right hon. Friend the Member for West Bristol (Mr. Stanley) who seems not absolutely convinced. I do not want to have a border foray with the house of Stanley, but Scottish Members feel strongly about this and I think they feel rightly so because their intuition, their touch of Celtic inspiration, is borne out by the figures produced by my hon. Friend the Member for Flint (Mr. Birch). I would draw the attention of the Financial Secretary to some of these overall figures of whisky consumption. In 1900, when I must say that the Republic of Ireland was included, whisky consumption was 38 million proof gallons in this country. In 1948 the consumption was just over five million proof gallons. There is no doubt that in 1900 whisky came into the cost-of-living index. It is undoubtedly one of the tragedies which Scotsmen on both sides of the Committee mourn, that no longer is whisky the drink of the British people as it was in the past.

5.45 p.m.

I would point out that in 1900 duty was 11s. per proof gallon. We went through various epochs and in 1940, when the duty was at 97s. per proof gallon, the consumption was about 9 million gallons. Since then, of course, as the hon. Member for East Aberdeen (Mr. Boothby) pointed out, there have been difficulties about the quantity of barley available. In 1947 and 1948—as far as the distillation carried out in 1940 and 1941 is concerned—approximately the same amount of barley was available, although, as hon. Members will know, there obviously was not the same amount of barley for several years before. The amount of whisky available to the market in 1947 and 1948 was approximately the same, but the actual consumption in 1947, when the tax was 190s. per proof gallon, was just under 7 million gallons; in 1948, when the tax was 210s. per proof gallon, the consumption—this is of whisky alone—was just over 5 million gallons, a drop of approximately 2 million gallons, which has put the Treasury out of pocket by several hundred thousands of pounds.

I want to ask somebody a question; perhaps I may ask my hon. Friend. I find myself in great sympathy with the various whisky Members who are putting the case for Scotland, but I should like to ask this question. We are constantly being told that the consumption of whisky in this country is dropping, and it is a very harrowing and disturbing story. Why is it so difficult to get whisky? I have an order with my local provider for a bottle a week. I cannot get a bottle a week. Every now and then I get half a bottle, and sometimes none. Will some of the Scottish Members explain this mystery?

I explained it just now but the hon. Gentleman was not here.

No doubt that mystery will be explained to the hon. Gentleman later on. I want to pursue my argument into the question of returns to the Revenue. There is absolutely no question that at present the tax gatherers are losing money on this form of taxation. Beyond that, there is absolutely no question that if the weight of taxation on this product remains at the present height, and when, as has been pointed out on this side, there is £900 tax on every acre of barley which is distilled, it will undoubtedly lead—if we start going a bit more groggy economically than at present, which we look like doing—to a growing up, as I hope it will, of a series of stills in the Highlands. It is inevitable, if this penal taxation continues, that if people want the stuff they will get it. What my hon. Friend has rightly said, is that the thing which is being destroyed is the taste of whisky. We are having all sorts of bogus brews—dews of this and mists of that—being put on the market, and I can only suggest that if the Government do not accept the Clause a new one should be christened, called "The mist of Glenvil Hall."

My right hon. Friend the Member for Moray and Nairn (Mr. J. Stuart), who raised this matter, made an admirable speech. We on this side can be gratified at its reception, but we can hardly be satisfied with the response from the Financial Secretary, for he seemed to give no concessions and to hold out not even a promise that he would consider this matter or give any cogent reasons for his refusal. All the arguments in the Debate have, quite rightly, turned not on the hardship to the producer or the consumer, but entirely on the question of the revenue. The Financial Secretary would agree that it is possible to raise taxation so high that it produces diminishing returns. In fact, the Chancellor admitted that when making his reduction in the tax on wines in his Budget.

I should like the Financial Secretary to tell us, first, whether the Government, in their decision to maintain this very high rate of taxation, are guided entirely by the belief that that will produce more revenue. If so, how can the right hon. Gentleman answer the arguments put forward by, amongst others, my hon. Friend the Member for Flint (Mr. Birch), who explained so clearly how revenue was falling on spirits generally, and the arguments of my hon. Friend the Member for East Aberdeen (Mr. Boothby), who suggested that this very valuable revenue producer would be endangered in the future through a lessening of the taste for whisky? The second point I want to ask the Financial Secretary is whether this is entirely a question of revenue, or whether he and his colleagues are governed by the fact that they think they know better than the public the things upon which the public ought to spend their money. If so, what does he think are their qualifications for being the judges in that matter?

Perhaps I might reply briefly to the main points made in this discussion. I have admitted, and the hon. Member for East Aberdeen (Mr. Boothby) has underlined it since, that the duty on whisky is very high. No doubt there are some people who do not drink it, even if they could get it, because the duty is so high. The fear has been expressed that people will lose their taste for whisky. That may be so, but it applies equally to tobacco. The manufacturers of tobacco are equally fearful—[HON. MEMBERS: "We do not export tobacco"]—that the rising generation will not smoke because of the cost of cigarettes and that, therefore, presently that industry will decline and with it, of course, the revenue which the Government now obtain from the sale of tobacco.

Surely, the right hon. Gentleman would agree that that hardly applies in the same way to the manufacture of whisky inside this country and the re-export of a certain amount of tobacco from this country.

All I was about to say was that those factors may or may not be true. The point is, should any Chancellor of the Exchequer, to whatever party he might belong, at this juncture take those facts into account, and do they override the other factors which I endeavoured briefly to put before the Committee when I spoke earlier? To begin with, he must remember that barley, one of the ingredients in the manufacture of whisky, can also be sold, and is needed, elsewhere. Therefore, the amount of barley available is not unlimited. The second point is that we have to consider exports. The hon. Member for East Aberdeen reminded us that whisky is one of our best exports. When we take the number of men employed in this industry and the amount earned by the exports, the export value of a bottle of whisky is tremendous, both in North and in South America and elsewhere, where we want, if we can, to earn hard currency. Thirdly, we must take into account the Revenue.

The Chancellor has to take all those things into account and to balance them. My right hon. and learned Friend has done that and he feels that, as the taxation on whisky does not affect exports; that, as it is essential that the great bulk of what is made now should go abroad, therefore the fact that the duty is as high as it is does not really affect the position at this juncture. It may well be that as the years go by, when things become normal, the Chancellor of the Exchequer of the day may want to pay much more attention to the home market, if he is seeking revenue, than the present Chancellor can afford to do, because he is after exports and must also think of the barley that is consumed.

In reply to the question by the hon. Member for Flint (Mr. Birch), I think he must have got his figures from the Statistical Digest.

indicated assent.

What, I think, he overlooked—I am not complaining about this—is that a Budget was to be opened in April; and that although normally the figures for clearances from bond are a very good guide to consumption, they cannot be considered a good guide just then, particularly for the first three months of the year, because, quite obviously, those who had whisky in bond were not clearing it because they had no notion of what changes might be made in the Budget.

That is not a very valid argument, because the figures show that for 1948 the consumption in January was 800,000 proof gallons, and went up in March to 870,000; whereas, in this year, it went down from 700,000 in January to 380,000 proof gallons in March. The same considerations, surely, applied in both years; in each of them a Budget was to be presented.

For this year, for some reason into which I will not go now, there were great hopes by the public—people were misinformed; hopes were expressed in newspapers and elsewhere—that as last year ended with a substantial surplus, relief of taxation could be hoped for on, perhaps, both drink and tobacco. Although I make the point for no more than it is worth, I can tell the hon. Gentleman that, for the reasons I have given, the figures for the first quarter of this year are not entirely to be relied upon.

The chief proof—the point has already been made and I do not want to labour it—is that whisky is almost unobtainable; every bottle that is produced is sold. I think it was the hon. and gallant Member for Barnstaple (Brigadier Peto) who said that whisky distillers had indicated to him that the consumption in this country was going down. From our Revenue returns, however, we have no figures to show that that is so. On the contrary, our figures show that the Revenue in this matter is—I hesitate to use the word—buoyant; that all the whisky that can be put on the home market is snapped up. [HON. MEMBERS: "Of course it is."] There is a conflict, therefore, between what the hon. and

Can the right hon. Gentleman give us any comparative figures for the period since the Budget? We have already been given the figures for beer consumption in April and, possibly, in May. After people found out that the duties on spirits were not being reduced—after all, the Budget was as long ago as 6th April—did they all drink the Chancellor's health and did consumption go up on last year, or did the downward tendency still continue? This information is very material.

The right hon. Gentleman, surely, will now answer that important question and—

rose in his place and claimed to move,"That the Question be now put."

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

The object of this new Clause is to extend to certain office buildings the initial allowance and the annual allowances given under the Income Tax Act, 1945. That Act excluded all office buildings from the scope of the allowances, and the Committee will remember that the argument used by the Treasury Bench in defence, of that exclusion was that office buildings have a value independent of the production unit with which for the time being they are connected. The head office, or it may be the sales office, of a manufacturing company might be in London, and might not lose any of its value if the factory with which it is concerned closed its doors. There was also the argument that office buildings are very often two or three rooms in a big block of buildings, and it would be very difficult to give the allowances in respect of two or three rooms in a large block of buildings.

That argument had some force in relation to the United Kingdom, which is a small and crowded country, though I was not entirely convinced by it at the time, but the Committee will see the force of the proposition put forward by my right hon. Friend the Member for the Scottish Universities (Sir J. Anderson). We have taken it into consideration in this new Clause, and therefore we have confined the extension of the allowance to office buildings to those belonging to British mining companies operating overseas.

Part III of the Income Tax Act, 1945, gives an allowance to other types of buildings which are erected as part of the equipment of the mine; for example, the building in which the mining stores are kept, the building in which the production plant is housed, the building in which the winding engine is erected; all these buildings get the allowance. What reason can there be not to extend the cover to other office buildings which may be used for the purpose of drawing offices or assay offices, all of which buildings become substantially valueless when the mine is exhausted?

I think the principle of this new Clause was conceded by the Government when we were discussing Amendments to Clause 18, because, with one small exception, the Government said that the site acquired for buildings such as these would rank for the allowances. If we give the allowance for the site, it is really only reasonable to give it for the buildings erected upon the site, and therefore I think that the principle has already been given away on Clause 18. It does sometimes happen that buildings of this type right on the site of operations may have some value when the mine shuts down. After all, there is a housing shortage in other countries as well as Great Britain, and it is quite conceivable that when a mine closes down somebody may wish to take over the office buildings and live in them. If that does happen, the Act takes care of it, and a balancing charge is imposed upon the value for which the building is sold if it is higher than its written-down value.

I therefore urge the new Clause on three grounds. First, on sheer common sense, because there is really no substantial difference between a building which is used for mining stores and a building used for assaying the mineral daily brought up for testing from the mine itself. I think we ought to go further. The whole of the changes which we are urging in the taxation of British overseas mining companies, many of which were embodied in Clause 18, are designed to remove handicaps upon British companies as compared with mining companies of other countries, and this new Clause represents a small but none the less definite handicap to be removed from British companies. We are in no position for American, Canadian and other companies to have advantages over our companies in developing our material resources abroad.

I hope the Government will look beyond the purely legal principle or the Income Tax principles which governed the situation in July, 1945, when we were discussing for the first time the original Bill. We did not then think how keen would be our anxiety to earn every possible sum in foreign exchange. The Chancellor met us to the extent of setting up a Departmental Committee, upon whose recommendations the changes in this Bill have been founded, and I should like to thank the right hon. and learned Gentleman for having let me know that he is prepared to publish the report of that Committee. I am sure it will be of great assistance to mining interests.

I am sorry that we feel that we cannot accept the proposal in this new Clause, and for these general reasons. The considerations which led to the exclusion of office buildings when the 1945 Income Tax Act was being drafted were not legalistic. They were based on the general economic considerations that priority should be given to buildings which could be said to be industrial. The hon. Gentleman moved a very similar Amendment in 1945 to the Income Tax Act of that year, and the Chancellor of that time, the right hon. Member for the Scottish Universities (Sir J. Anderson), opposed it upon the general economic considerations that office buildings were not the sort of buildings designed to be comprehended by the relief provisions of that Act.

That was subject to one qualification. They are excluded from the initial allowance provided by the first part of the Act, which still stands, but when the question of allowances in connection with mining and oil companies was concerned, there was a slight exception embodied in framing that Act, and it was that, although relief could not be given if there was a separate office building, it could be given in the cases where the office buildings formed part of the main industrial production plant, and provided that the expenditure on the office buildings did not exceed one-tenth of the total expenditure on buildings. The Chancellor of the day felt that he could not go beyond that in replying to the proposal which the hon. Gentleman then made during the Committee stage of the 1945 Income Tax Act.

Substantially, the position now is as it was then, and I say substantially because there is, after all, the Committee on Income Tax which has been set up which will take just this sort of consideration particularly into account. It is par excellence the sort of problem with which that Committee should concern itself, and, in asking the Committee to reject the present proposal, I would say that it was rejected in 1945 for considerations which, broadly speaking, are still applic- able. It is just the sort of problem which the Committee now sitting should investigate, and it really would be unwise for us to make a change which amends the general principle upon which the 1945 Act was framed. It is precisely the desirability of such changes which will be considered by the Committee now set up to deal with the question of Income Tax and other questions of the basis upon which profits should be computed for purposes of Income Tax. For these reasons, I recommend the Committee to reject the present proposal and to leave it for the consideration of the Committee which has been set up to consider and report upon it.

I would make one comment on the new Clause as it stands. The hon. Gentleman said that he had limited the new Clause to the case of foreign mining concessions. I speak subject to correction, but, certainly as I read it, it does not have that effect, but has the effect of embodying a general exception to the provisions of Section 25 of the Income Tax Act, 1945. For the general reasons that this matter was dealt with in 1945, that there has not been any radical change in the situation which would justify a departure from the principle upon which that Act was framed, that a Committee has been set up to investigate this sort of problem, I would ask the Committee to say that this new proposal should not be accepted.

I should like to say one or two words on this subject because my hon. and gallant Friend the Member for Camborne (Commander Agnew), whose name is down to the new Clause, is unable to be present. This is a matter of fairly common knowledge to those connected with this kind of industry and one which has existed for a long time. There are one or two instances where companies are working abroad, particularly in tin in Malaya and places like that. Where they have an office which is actually on the mine itself they will get the relief, but supposing that office serves two mines or two or three concerns together, or supposing it does not happen to be so closely connected as far as the location of the building is concerned; then it does not get relief.

There exists, therefore, a definite handicap to those mining industries which are of great value in developing mining abroad and earning dollars. It has been one of the troubles throughout the whole of the Income Tax laws as far as these companies are concerned. I believe it is the desire of every section of the House to help these companies overseas. It has already been admitted that it is essential to provide the relief for the office on the mine. I think it would be wrong if this Clause were withdrawn without some other hon. Member, in addition to my hon. Friend the Member for Chippenham (Mr. Eccles), who put the case strongly, protesting against this position. It is wrong that we should have this blank refusal by the Government to this comparatively small concession, which would be a dollar-earning concession.

The right hon. and learned Gentleman said, "It will come before a committee very shortly." That, of course, is a great help and it is a point as a result of which, to my mind, we should not be forced into the Divisional Lobby on this Clause. It is, however, a pity that the Government are always putting off these small matters, which are of great value to individuals and as dollar earners, and pushing them out to some other body.

If we really wish to develop our mining overseas, especially within the British Empire, a small concession such as this would be important. It is wrong to hit the mines simply because an office does not happen to be on the site. It is probably highly inconvenient in many cases to have it on the site. There may be several mines where it is not possible to have an office on each one of them; it may be the most economical thing to have one office in a central position dealing with all the mines. Surely the practical proposals in all these things should outweigh the other facts. I feel sure that my hon. Friend the Member for Chippenham, who has shown industry and capacity in this, has at any rate done a useful service in bringing it to the notice of the Committee and showing how completely incapable is the Treasury mind of appreciating, even in this sort of thing, how much the Treasury could do to help our industries abroad.

I think it is very unreasonable of the Solicitor-General to pass this off by saying that it will be looked at by the committee. We already have Clause 18, which alters the provisions of Part III of the Income Tax Act of 1945 without reference to this Committee. These alterations were the result of a special Departmental Committee and their Report. There is no logic in giving an allowance on the site but refusing it on the buildings on that site, because it may be that the buildings are worth more than one-tenth of the whole amount of the construction. I think this is a very foolish and an obviously arbitrary thing; and when we see something which should be put right we should put it right at once and, as my hon. Friend the Member for Torquay (Mr. C. Williams) said, we should not wait for the report of another committee.

I believe the Solicitor-General is right and that, the new Clause, as we have drafted it, appears to apply to all mines and not only to overseas mines. A very difficult problem arises in regard to mines in this country because they may have head offices in big cities and may bring up a comparison between the way we treat their offices and the way we treat the offices of other industries. I should be ready to withdraw my Clause, but I should like to put it down again, this time restricting it to overseas mines. If the Committee will agree, that is the course I would advise them to take. I, therefore, beg to ask leave to withdraw the Clause.

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

This new Clause is important, in our view. It is very difficult to understand from reading the Order Paper, but I will endeavour to make the matter clear. The Clause seeks to extend compendiously, in one stroke, the provision of Dominion Income Tax reliefs so as to apply to Income Tax payable in foreign countries. The expression "foreign country" is defined in subsection (3).

There are arguments for and against this important proposal. I have tried to give them careful consideration and I have come to the conclusion that it is right to press this Clause at this time because of the difficulties which face us in our export trade. The Committee will agree that if British companies and citizens are to have equal scope and equal encouragement to trade and earn money in foreign countries with citizens of other industrial countries, then they must not be handicapped by having to bear altogether more onerous taxation than their competitors. That seems to me to be a very clear proposition. Any company which embarks upon a foreign venture does so only if it is satisfied with the prospect of making a profit and also with the proportion of that profit which the taxation in the country of operation and the taxation here in the United Kingdom leaves to it for distribution.

All trade is risky, but there are additional risks in doing business in a foreign country. That means to say that if the profits made by British companies in countries like Mexico or Siam, for example, are first taxed by the local government and afterwards taxed by His Majesty's Government at the standard rate of Income Tax, there will be only a modest fraction of the profit left to the British company. The fact is that the Government of the United States and the Government of Canada give unilateral relief from this kind of double taxation. For example, in the United States of America complete relief from foreign taxes is given up to the full rate of American taxation by Section 131 of the Internal Revenue Code. An American company which is operating, let us say, in Mexico, pays the Mexican Income Tax and can deduct the whole of that payment from its liabilities to United States Income Tax. Obviously, therefore, the attraction of doing new business in a country like Mexico is much greater to an American company than to a British company, since the American company knows that if it makes a profit it will be able to bring home a much larger proportion of its earnings.

It is to get rid of this handicap that we have put down this new Clause. His Majesty's Government have been well aware of the problem for a long time and they have been tackling it on quite different lines. They have been negotiating a series of double taxation agreements with all those countries which were willing to enter into such agreements. Under those agreements the two countries concerned give reciprocal concessions and the scope of the agreements has been extended to cover property as well as income. These double taxation agreements are very useful and thoroughly to be commended. They have been made, or are still in the process of negotiation, with nearly all countries with whom we have a substantial two-way flow of income. It is quite obvious that if there is not income flowing from the United Kingdom to a foreign country, there is not much inducement to the foreign country to enter into a multilateral tax agreement with the Government of the United Kingdom.

We come to the point where there remains a group of countries, of which the majority can be called undeveloped countries, with whom agreements are not being made and are not very likely to be made. Among the most important of these are the following: the Belgian Congo, Brazil, Burma, Colombia, Iran, Iraq, Mexico, Portugal, Siam, Spain and Venezuela. Of those countries it might be said that all except two are too young to make a double taxation agreement and two of them—Spain and Portugal—are too old.

What are we going to do about the great handicap which is laid upon British business because we do not appear likely to be able to make these multilateral taxation agreements with these important countries? There seems to me to be two courses open to His Majesty's Government. Either they can go on hoping that one day or other they will be able to make double taxation agreements with this remaining group of countries or they can rest upon the number of multilateral agreements they have made so far and add a Clause to the Finance Bill of the type of which I am speaking which would give unilateral relief to British citizens in respect of this small remaining group of countries.

I know there are arguments on both sides of this question, but I believe the time has come to adopt the latter course. The Solicitor-General may tell us that it would be unfair to those countries with which we have concluded a double taxation agreement now to rush in and give unilateral relief and encouragement to British traders in all the other countries who have not entered into such agreements. I do not think we should make too much of that argument. There is something rather disagreeable about the fact, but this is a hard world and we have to do the best we can for British trade. My hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) and I feel that we should take some notice of the argument, however, and therefore in our Clause we are not seeking to give the whole relief to the British taxpayer; we are seeking only to apply the provisions of Dominion Income Tax relief to those countries with which we have not a double taxation agreement. That still leaves to our Treasury negotiators some- thing to bargain with if it ever does become possible to make double taxation agreements with this remaining group of countries.

6.45 p.m.

The Committee is probably only too familiar with the exact rates and conditions of Dominion double taxation relief. Broadly speaking, that is the relief which is set against the United Kingdom tax on income, which is either the rate of foreign tax that has been suffered or half the standard rate of British tax, whichever is the lower. I do not know what the rate of tax may be, but if Income Tax in Brazil is 6s. in the £, under Dominion Income Tax relief it is roughly true to say the British company is relieved to the extent of 4s. 6d., being half of the British standard rate. That may not be exactly true, but it is near enough. So we are not even doing in our new Clause what I hope we may do one day, namely, to put British companies on all fours with the United States and Canadian companies in the matter. However, we are going a long way towards it, and it is an important step which I think we ought to take.

It really must appear to the Government, in the present predicament of our balance of payments, that any suggestion which encourages the earning of foreign exchange by this country is worthy of very sympathetic consideration. It is quite clear that we are now entering a phase of international trade where the stocking boom is over, and that there is going to be very keen competition in the capital goods industries of the world to get the contracts to open up new sources of supply, to build harbours, railways, airfields, and things of that sort. There cannot be any doubt that the capital goods industries of the great industrial nations are going to have a hard tussle between each other to see who gets these contracts, and the Americans are as keen as anyone else. Is it right that we should handicap British business compared with American business?

If I thought that the Treasury could negotiate double taxation agreements with all those remaining countries—taking particularly the Middle Eastern countries and Venezuela, where great development is bound to take place—if I thought it could do that within a very short period, I should leave it to the Treasury to do it. If anyone can do it, then I say—because I know them well—that the Treasury negotiators can do it. However, it is not so. Those developing countries do not see what they get out of an agreement of that sort, and so they do not enter into negotiations; or if they do, they pitch their demands so high that nothing ever comes of them. Therefore, as I say, this is one of the steps it is open to the Government to take to encourage foreign exchange earnings, and they ought to consider this proposal sympathetically.

What would it cost? I do not know. I know only that the cost would be a mere fraction of the sort of sums which we place at the disposal of the President of the Board of Trade through the Export Credits Guarantee Department—the vast sums which are now being given to that Minister to spend where he thinks it is possible to back up projects for increasing our earnings overseas. I think it better to equalise the handicaps between British traders and American traders and let them "go to it." I believe that to be much the most economical way, from the point of view of the Revenue, and one that is likely to bring in more foreign exchange.

I apologise for setting out the argument at some length, but obviously this is an important Clause. I hope that even if the Solicitor-General has not the Chancellor's permission to accept it, it may be that he will take this argument seriously, and that between now and Report stage something can be done about it. All our friends throughout the world are asking whether we are doing our best to get on our own feet. Here is something which we can do. I feel that the whole Committee will agree with me that there are no politics in this at all. We just want to make things equal as between Canadian business, American business and British business.

I wish to support every word my hon. Friend the Member for Chippenham (Mr. Eccles) has said. During the last year I have been pressing on the Chancellor of the Exchequer to negotiate something in the way of an agreement to deal with taxation in France, Belgium and this country. Only a fortnight ago I asked a Question on that, and was told that it is very difficult indeed to arrive at a conclusion. How much more difficult is it to arrive at a conclusion with people not in the same advanced stage of business organisation as are those two countries.

At the present moment, some of the greatest exports to which we have to look in the near and the distant future are those comprised in invisible exports. There is no doubt about it that the export of the "know-how," of knowledge and experience, in the near future, when we have a big economic crisis lowering down on us, will be a great potential source of revenue. I believe that other countries will turn to us as the most experienced traders and the most experienced solvers of difficult economic riddles—which we have proved ourselves to be over centuries—for our experience and knowledge.

This great handicap put on the trader, which is much increased, should at this juncture be mitigated and, if possible, brought to an end. It took the Government a year or two to learn what invisible exports are—they did not appear in the Government's programme in their first year or two in office—and then they gave them high priority, especially under the present Chancellor. Just as they were slow to learn what invisible exports are, so must they learn that the extension of our invisible exports at present is of vital importance, and that there is no greater handicap—and I speak as one who has trading posts, so to say, in countries all over the world, from Indo-China to South America—than this harsh taxation, which presses extremely heavily on the working of any public company on behalf of shareholders. It means that directors are faced with a bet of something like four to one on behalf of their shareholders the whole time. Those are difficult conditions, and not what directors can face with any degree of equanimity.

I believe that this Clause is in a way far more important even than it appears to be on the surface. If we are to get more multilateral trade, surely the last thing we ought to do is to handicap and hamstring those people who are able and willing and enterprising enough to undertake trade. If we continue to place such heavy handicaps on them, we shall kill enterprise, or we shall export it altogether, which is the possible alternative. I have very great pleasure in supporting my hon. Friend's new Clause.

We feel, having given very careful consideration to this matter, that really it is undesirable to deal with these questions of foreign taxation otherwise than through bilateral arrangements. One has to remember this, that foreign tax is treated as a deduction in computing profits in this country both for the purpose of Income Tax and Profits Tax. Therefore, with the standard rate at 9s. in the £—if we can take Income Tax and Profits Tax together—approximately already, as the law stands at the moment, without any unilateral relief being afforded as suggested, relief is given to the extent of half the foreign tax. The whole foreign tax is treated as a deduction, and, therefore, relief is given in the respect of foreign tax, and is allowed against profits for Income Tax and Profits Tax.

I do not feel that I really can put the matter any better—perhaps, it would be presumption on my part if I supposed I could—than it was put by the right hon. Member for the Scottish Universities (Sir J. Anderson) during his Budget speech on 24th April, 1945, when he was dealing with this particular topic. He was referring then to the convention at that time recently negotiated between the United Kingdom and the United States. I desire to quote what he said:

"We could, of course, deal with the problem by ourselves if we liked. There is no reason why this House, if so minded, should not provide that income for assets coming under charge to tax in foreign countries should be charged in this country only to the extent that the appropriate British charge might exceed the foreign charge. Such an allowance, no doubt, provides an appropriate solution over part of the field, but the unilateral approach is not in my view the way to tackle the question. Double charges of this kind ought to be eliminated in a regulated fashion which will distribute the cost equitably between the Governments concerned and for that purpose we have to proceed by agreement with like minded foreign Governments."—[OFFICIAL REPORT, 24th April, 1945; Vol. 410, c. 704.]

The case made by the hon. Member for Chippenham (Mr. Eccles) is that, in present-day circumstances, it is urgently necessary to lift from the shoulders of British undertakers operating in foreign markets, so far as we can, the burdens which impinge upon them. It is not as if we had not already made very substantial progress in regard to the conclusion of these bilateral agreements. If it could be said that this had been an extraordinarily slow business, and that we were making very little advance in concluding agreements which included other countries, then there would be more in the argument that we should proceed in this unilateral fashion. However, I think that probably the Committee would be interested to know and have from me a short statement as to the present position in the case of a number of countries. I shall just give the details showing what is the position approximately at the moment.

Agreements have been so far made with the United States of America, Canada, Australia, New Zealand, South Africa, most of the Colonies, and the Netherlands. An agreement with Sweden has been signed but not yet ratified, and an agreement at the official level has been reached with Denmark. An agreement with France is at present being negotiated, and that was one of the countries the hon. Member for Bury (Mr. W. Fletcher) mentioned. Discussions are continuing with Belgium, which I think he also mentioned, and also with Burma. Draft agreements have been put to the Governments of Norway and Indonesia, and, in the Commonwealth, to India, Pakistan, and Ceylon. The first approach has been made to Finland.

With regard to South American countries, which the hon. Member for Chippenham rather put in the forefront of his argument, the position is that we have recently concluded an agreement with the Argentine restricted to shipping and air transport, and we propose to follow it up with negotiations for a more comprehensive agreement not limited to those particular industries. Brazil, which I think he also mentioned as one of the countries he had particularly in mind, has expressed willingness to enter into discussions, and proposals will shortly be sent to Brazil. The hon. Gentleman also mentioned Venezuela, and Venezuela has also been recently asked whether it will negotiate an agreement of this sort.

Has there been any answer?

An approach has been made. It has not yet said it will, so far as I know from the note before me. However an approach has been made.

What I am concerned to show is that substantial progress has been made, and I am attempting to argue that there would have been more force in the hon. Gentleman's case if such progress had not been made. But as I have established, as I hope he will agree I have established, that we have really covered a great many of the countries already, and that we are taking active steps to go further with this policy of bilateral agreements to include other countries with which we conduct international trade, then really the case which he submitted instead is much weaker than it may appear at first sight.

7.0 p.m.

As he said, there are two schools of thought. The question is: should we try to have an overall arrangement which embraces all the countries and which shares out the burden of expense equitably between the countries concerned in the negotiations, or should this country take it upon itself to afford relief unilaterally and at its own expense? I would remind the Committee of what the then Chancellor of the Exchequer said in 1945. We think that is right, and we do not really think that the situation can be said to have altered from what it was when he used, in relation to it, the words which I have quoted. An important consideration to bear in mind is that the burden really is only approximately half of what it was, as I understand from the argument of the hon. Member for Chippenham, because already there is taxation relief as to half the foreign tax. For those general reasons I hope the Committee will agree that the considerations against unilateral relief, on the whole, outweigh the considerations in favour of unilateral relief, and will therefore agree with the submission that I make that this new Clause ought not to be adopted.

There is a factor in relation to double taxation which the Solicitor-General has not appreciated. The United States have been the pioneers in making double taxation agreements, and in 1944, when this country was very reluctant to enter into a double taxation agreement, it was due to the initiative and the arguments of the United States delegates that we were persuaded to enter into that first great agreement. Although the United States are the pioneers of double taxation, they also have a section in their law to which this new Clause approxi- mates, namely, Section 131 which is a very well-known provision in the realm of double taxation.

This new Clause has a different object and a different result. It does not conflict in any way with the system of making bilateral agreements with foreign countries. Section 131, like this Clause, is designed to save people a certain amount of tax because it is felt that it is unfair to charge them tax twice over. The object of a bilateral double taxation agreement is to benefit the citizens of both countries; we give up some tax to a foreign country and they give up some tax to us. The Americans have kept it quite distinct. They have had Section 131 in their law for many years and they are also very anxious to conclude as many bilateral agreements as possible.

Putting it in layman's language, the Clause says that if a person has paid some tax in a foreign country and he is assessable to British Income Tax, he is entitled to set off the amount of tax he paid in the foreign country against his British tax, but, following the line of British Dominion tax relief in relation to Section 131 of the United States Code, he does not get the whole of it; he gets either the British standard rate or another alternative which I have forgotten for the moment. [An HON. MEMBER: "Or the foreign tax."] I am obliged to my hon. Friend. That is quite a different object. I ask the Solicitor-General to consider this Clause from that point of view. It does not affect foreign countries in the least. A foreign country which realises that America has Section 131 does not say, "We will conclude a bilateral agreement." An undeveloped country which is not anxious to conclude a bilateral agreement is not affected one way or another by the principle of Section 131.

The answer of the Solicitor-General, that foreign tax is deducted in computing profits and Income Tax, is not correct. A simple mathematical computation will show that if a person earns £100 abroad, after paying British Income Tax he gets a profit of £55. If a foreign country imposes a tax of 20 per cent., the present method is to charge 45 per cent. on £80, because £100 less £20 is £80. Suppose that this was a straight Section 131 principle; one would charge 45 per cent. in England, the man would be credited with having paid 20 per cent. abroad; he would pay 25 per cent. in England and 20 per cent. abroad, which is 45 per cent., and he would have 55 per cent. left, exactly as if he had paid 55 per cent. in England. That is the object of Section 131. The foreign tax rate is reduced to half the standard rate or the foreign rate whichever is the least.

There is no antithesis between Section 131, which is the easy United States method, and double taxation agreements, The advantages are those set up by my hon. Friend the Member for Chippenham (Mr. Eccles). It encourages British subjects to export to those countries where they would get the benefit of what corresponds to Dominion tax relief. It is fair because they paid tax in a foreign country, and, instead of just getting the advantage of the foreign tax being counted as an expense, it would be counted as a credit against the tax which they paid here.

There are still many reasons for concluding double taxation agreements, because with a system of Dominion taxation reliefs there are many anomalies and injustices on the taxpayer. In the British-American Agreement, there is a liberalisation of the tax systems of the two countries. For instance, professors and lecturers who go to the United States and who are domiciled in this country do not pay any more or any less Income Tax. It is levied on them here, and the same applies in the reverse case. That is very different from saying that a lecturer who pays American Income Tax should be entitled to credit it against his British Income Tax. The situation is quite different. In the case of American Corporation Tax, that is levied on corporations and, therefore, is attributable to each share in an American corporation.

Under the double taxation agreement the Americans have let off British subjects—I use that expression to illustrate persons domiciled in this country and so on—paying that tax because they feel that it is a liberalisation of the economic relations between the two countries. One could go through the British-American double taxation agreement and find many instances where we have given up the tax for persons who came over here—for instance, persons other than those in the entertainment industry who spend less than 168 days in England. Those people are let off the tax. We get a corresponding advantage. People who go to the United States are let off the American tax. The double taxation agreement works the same in both countries. It says, "We in England will do so-and-so to your people if you will do so-and-so to ours."

All that this provision says is that if our people have to pay tax abroad they will get a credit. I ask the Solicitor-General to consider this Clause from that point of view and to appreciate that it is not a question of bilateral agreements against unilateral agreements. They are not in opposition. We are proposing a relief to our people who trade abroad, to encourage them to trade, and to develop invisible exports so that these people will receive, not more profit than if they had traded in England, but at least as much. A man who can sell for £100 profit in England gets £55. After a lot of trouble in exporting and so on, let us assume that he gets £100 in the Argentine. If he pays £20 in Argentine tax he only gets 45 per cent. of £80. Why should he go to all that trouble if he can sell in this country? We want him at least to be able to make as much in foreign markets as he makes in this country. To penalise a man who trades in a country where he has to pay foreign tax cannot be sensible. There is no question of party politics; this is a technical matter.

I would refer the Solicitor-General to some very learned articles and proceedings in the two Congresses of the International Fiscal Association, which has been adopted as one of the societies working under United Nations. They have done a lot of study on this, and in one of their proceedings it was pointed out that Section 131 of the United States code was a very enlightened Section when passed. It has been of very great benefit to the Americans, and all we are asking is to give us half of that back.

I must say that my hon. Friend the Member for Northwich (Mr. J. Foster), who has very great knowledge on this particular topic, has put up a formidable case, and I trust that some further answer will be given from the Treasury Bench. As he says, this is not a matter which raises any party division. It is a technical matter, and with the general object I think we are all agreed. We want to give to the industrialists trading abroad a fair deal compared with their fellow industrialists who trade in this country. It is, indeed, the avowed object of this Government to make it, on the whole, more advantageous to trade abroad than to trade at home. Therefore, I think that all of us start with a desire to clear up this anomaly, unless there are very grave reasons against it.

I admit straight away that I was impressed by the Solicitor-General's speech. If it is true that there is a complete antithesis between the method proposed in this new Clause, the method of unilateral legislation, and the method which has been pursued now for three or four years, then all of us would prefer the method of bilateral agreements so long as that method still has a chance. It is quite clear that if we fall back on that method alone, a time will come when bilateral agreements have been completed with all the countries with which we are likely to be successful, and then, presumably, we legislate for the rest. The Solicitor-General produced a not at all unsatisfactory list of agreements which have been concluded or are being discussed, and he made a good case for saying that this bilateral method is still going well, even if finally we have to deal with the residue by legislation, and that we ought to give the treaty method a chance for a bit longer. That, of course, depends on there being this antithesis between the two methods.

The purpose of my hon. Friend's speech was to point out that experience shows that no such antithesis exists in America, the country which is the pioneer in this field and which has on its statute book the type of Clause we are proposing here. It is that argument, from experience and not from theory, that no antithesis exists which right hon. Gentlemen opposite have got to meet. I must confess that, unless they have some answer to the proved fact that the United States, devoted as they are to the methods of bilateral agreements, have yet found it necessary and advisable and in no way disadvantageous to have a Clause of this character, that fact will certainly guide me in my action upon this Clause.

We are all looking for the same thing, and we do not want to press this to a conclusion now, if the Solicitor-General wishes to look at the matter again. It is certainly a matter of considerable importance to which at some time or other we must have an answer, which we all hope will be a favourable one.

I fear that I did not make my argument completely clear, thus producing the impression that there was an antithesis. What I was trying to convey is that there are two methods. There is the Section 131 method, which puts the whole of the cost of relief on the country which gives the relief, and there is the bilateral method, the method by which each country shares the cost, which is the method we prefer. The only antithesis is that the methods differ in that respect. We think, as the right hon. Gentleman the Member for the Scottish Universities (Sir J. Anderson) thought, that it is in the long run desirable that the bilateral method should be adopted. When the right hon. Gentleman used the words I quoted, he had fully in mind Section 131 of the American Code. That has been part of the American Code for a long time, it was part of the American Code before the right hon. Gentleman made his speech in 1945. I have not the smallest doubt that, with his great experience of these matters, he must have considered it. He was particularly talking in relation to the American Convention which had been concluded.

The two systems are, in a sense, complementary, but we think we should aim at the cost of this taxation relief being equally borne. The case I have tried to make is that we have made substantial progress along that path. I did not mean Members opposite to understand that the relief which is obtained from the fact that foreign tax is relief against expenses is as advantageous as the relief afforded under either system to the taxpayer. On the contrary, foreign tax is treated as deductions both for Profits Tax and Income Tax purposes, with the result that there is relief, not in respect of the whole of the foreign tax, but in respect of half—that is, crediting the Profits Tax and Income Tax at 9s. in the £. I used that argument, not to destroy the argument which was used against me, but to submit that it would have less force if any relief were given under the existing law. For these reasons, notwithstanding the invitation extended to me, and in spite of the arguments of the hon. Member for Northwich (Mr. J. Foster), we feel that we must adhere to the decision we have given. Therefore, I invite the Committee to reject the new Clause.

I am sorry, but I think that there is a fallacy underlying the Solicitor-General's argument. The relief in a double taxation convention is not shared by both countries. In a double taxation convention each country gives relief to its own people, and under Section 131 agreements one country gives relief to its own people. The cost is never shared under bilateral agreements.

My right hon. and learned Friend has just said so.

If he said so, he is wrong. Without giving away any official secrets one can say that the attitude of the Treasury at that time was very much against double taxation, and there was a great deal of difficulty in persuading them. Take the British subject who owns £100. He pays £20 in the Argentine and is taxed on the £80. Section 131 gives him relief in the sense that he pays tax on £100 and gets credited with the £20 he has paid in the Argentine. It is difficult to work out the fraction, but it means that a British subject has relief of tax to the extent of about £7 or £8. If a bilateral agreement is made with the Argentine they will not take £3 10s. They will say, "We shall let our own people have £7. In certain other cases, where you tax Argentinians and we tax British subjects, we will give you relief and you will give us relief."

In the case of royalties, following the British-American pattern, the English would say, "We shall not tax Argentinian authors" and the Argentine would say, "We shall not tax British authors in the Argentine." In any case British and Argentine subjects would share the relief given by the British to British subjects. There is no question of that. The British are saying, "We do not care for a moment what other countries are doing; we think it only fair that British subjects should pay taxes abroad and have that amount of relief against English taxes." In other words, 45 per cent. of the £s will be what they gain.

The Section 131 principle, divided by half, has been working for many years in the Dominions. There is no question of Australians and us sharing relief given to United Kingdom people who have to pay Australian taxes. If the Australians do the same to their own people, that is no concern of ours. There is no question of the cost we incur being later taken over by a double taxation agreement with other countries. I press the Government to say that the Section 131 principle is a good one and that it encourages our export trade and should be introduced in this country on the principle of extending to foreign countries relief which we think is right for our people who suffer taxation in the Dominions.

We put down this Clause with the object of equalising the handicaps between business men of Britain and other countries. I am sure that Members on all sides of the Committee will agree with that object. The only reason for withdrawing the Clause would be if the Solicitor-General had convinced the Committee that the adoption of the principle of Section 131 would make it much more difficult to conclude double taxation agreements. Personally, I like such agreements; they cover a wide range of things and I think they are a good thing. The Solicitor-General has not put forward any argument to show that the adoption of the Clause would impede the Government's negotiators any more than Section 131 has impeded the American Government's negotiators. That being so, I hope the Clause will be pressed to a Division.

The Solicitor-General quoted a speech made by my right hon. Friend the Member for the Scottish Universities (Sir J. Anderson) some time ago, and said that the situation today was very much the same as it was at the time that speech was made. We differ from that suggestion. My hon. Friend the Member for Bury (Mr. W. Fletcher) pointed out that the importance of invisible exports is now realised, and that there is a growing realisation of their importance. That being so, what is involved is not only what is made as profit in this country but profit made by means of royalties on what is sold abroad, such as books. The Debate has shown all reasonable and right-minded people that this is an important point, and it is very unsatisfactory that the Government should say that the situation today is as it was when my right hon. Friend made his speech, and allow the matter to go by default.

I deplore the fact that the technical aspect of this matter should be stressed so much. We should come back to the commonsense point of view. We should all agree that there ought not to be double taxation, that invisible exports should be encouraged and that people who use their energy to create these exports should not be put at a disadvan-