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New Clause—(Relief Of Profits Tax On Reserved Profits)

Volume 466: debated on Tuesday 28 June 1949

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Subsection (2) of section thirty of the Finance Act, 1947, as amended by section seven of the Finance (No. 2) Act, 1947, shall be amended by the omission of the word "fifteen" and the insertion of the word "twenty-five."

And in subsection (3) of section thirty-six of the Finance Act, 1947 (which as amended by subsection (2) of section seven of the Finance (No. 2) Act, 1947, contains an incidental reference to the rate of tax) for the words "fifteen per cent.," there shall be substituted the words "twenty-five per cent."

And subsection (3) of the said section thirty shall be amended by the omission of the words "at the rate of fifteen per cent. on the amount of the difference" and the insertion of the words "at a rate equal to the rate of non-distribution relief obtained on those profits." For this purpose the excess of the net relevant distributions over the profits chargeable to profits tax for any chargeable accounting period shall be deemed to have been distributed out of the profits of the next preceding chargeable accounting period on which non-distribution relief was obtained and if those profits are insufficient then out of the profits of the next but one preceding chargeable accounting period in which non-distribution relief was obtained and so on as may be necessary.—[ Mr. R. A. Butler.]

Brought up, and read the First time.

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

This raises an important issue to which we drew attention when we were discussing depreciation allowances earlier in the course of this Bill. We were all obliged then, and indeed grateful, to the Chancellor of the Exchequer for the depreciation allowances to help industry in its very important task which he has recognised by making those allowances. We also acknowledge that an inquiry is taking place into the cost of depreciation, or wear and tear, which we put in the course of those Debates as being some three times what it was in 1938. We then said we were reserving for this new Clause the main issue of some special allowances to enable industry to meet this very heavy burden. This Clause does not provide for a special allowance—it provides for the relief of profits tax on undistributed profits.

The first question that we need to ask, therefore, is whether there is a case for State help in this sphere. My answer is that the equipment of industry, the provision of the newest machinery and tools, influences more than any other issue our competitive power in the export markets. I put it to the Government as follows: if the State does not help in the type of way we suggest in this Clause, it will have to help in another way. Therefore, the burden will have to fall on the taxpayer at some time or other, at any rate in a large section of the industrial front. If the Financial Secretary does not believe my words, I draw his attention to what has already happened in the cotton industry, where in the spinning side a substantial subsidy has had to be provided to re-equip that industry. It is not impossible that similar State help will have to be provided in the weaving side at some date. The matter has got out of the control of the organisers and owners of the industry, and the State has had to step in and impose an extra burden on the taxpayer, involving a substantial sum.

There is also the point of view of the workers. Without proper equipment and new tools the workers cannot compete as they should, nor be relieved of toil, nor enter into competition with the foreigner by employing the latest shift systems, or in any other way. Whichever way one looks at it, the question of the replacement of the machinery and tools of a business is one of vital interest to the State, and in at least one major instance—which I have quoted—has come on to the State as a very considerable burden.

If I have proved that there is a need for State help, I should then like to ask what the State does in regard to undistributed profits, the major object of collecting which is to meet these very problems of depreciation and replacement of machinery. The State first asks the business man, or employer, to limit his dividends, and in the vast majority of cases— as the Chancellor would be able to state if he were here—there has been a satisfactory response from industry in regard to this limitation of dividends. At the same time, the Chancellor says to the business man, "While you are limiting your dividends, and doing what I say about not distributing your extra profits"—although in equity the shareholders have, in our view, a right to greater dividends—"yet I am going to tax these very undistributed profits which you ought to keep for replacement of your machinery and plant."

In the United States we find that while they have larger allowances for the smaller businesses than we have, they also have less taxation than we do on undistributed profits. We see, therefore, that there is a strong case for relieving undistributed profits designed to be put back for the depreciation of plant and wear and tear. Without going into details, our Clause is so drafted that there can be no hanky-panky about first putting money to undistributed profits and then distributing it. At least that is what was in our minds. The situation has not been made easier by the language of the Economic Secretary to the Treasury in the earlier Debates on this matter. He put forward the astonishing argument that if there was to be any removal of tax on undistributed profits it would do away with profit-sharing between employer and employed. I regard that as a very impertinent remark from this Government, after they have done away with some of the most notable among profit-sharing schemes when they nationalised gas.

We on this side have genuine interest in proper profit-sharing. It would be regarded as impertinent by any section of the working population if we were to tell them that the tax on undistributed profits was equivalent to a proper profit-sharing scheme. I hope that demolishes the argument of the Economic Secretary. It is said that profits put to reserve have increased since 1938. Looking at the national income White Paper, it is the case that the figure this year is substantially larger than the figure for 1938.

11.15 p.m.

I give credit to the hon. Member for Norwood (Mr. Chamberlain) who raised this matter when I was speaking before. I have since had the opportunity to look into it more closely than I had on that occasion. According to the White Paper, the figures are as the hon. Member stated. First, I would remind the Committee of the remarks of the Chancellor of the Exchequer at Workington, which I quoted earlier, that a large part of the so-called profit it not a pure surplus, but must be put to reserve to pay for the replacement and repair of plant and machines, and for industrial expansion to meet the new production needs.

I quote this again because that is exactly our case. We have to look at the Chancellor of the Exchequer when he is in the role of talking sense about profits and when he is in the role of talking nonsense, as he did on the Second Reading of the Finance Bill in this House. We have to look at him when he is trying to get votes for his Party, and when he is the honest man whom we prefer to see. We have to acknowledge that the speech he made in his honest guise at Workington gave us the whole of our case. I could examine at length the position regarding undistributed profits. The President of the Federation of British Industries recently estimated the deficiency in the need for creating a sum for depreciation allowance in 1948 at about £300 million. If we take that figure—and I could quote a much larger figure from another authority—it reduces the £545 million figure alloted to this in the White Paper to £250 million.

Taking still another independent source—the Bulletin of the London and Cambridge Economic Service—the amount required to maintain the volume of supplies at the increased prices in industry is about £150 million in 1948. If we add these two figures together, we find that the amount being put to undistributed profits and reserves in 1948 is £100 million, compared with £170 million in 1938. That is the answer to the hon. Member for Norwood, who interrupted me in a previous Debate. These arguments, so loosely used, about there being an absolutely indefinite well of undistributed profits and reserves, are not borne out by the facts.

The main fact facing industry today is the great increase in costs. When I last spoke on this matter I said that the increase was approximately three times the cost of 1938. One is criticised when one makes a statement like that; but since I made that statement, I have received many letters and indications supporting the view I expressed, that costs are between two and three-quarters and three times those of 1938. When I take my figure, that is, after putting £150 million to maintain the volume of stocks, and after putting the figure which I did for the deficiency in the creation of a pool for depreciation allowances of £250 million, we find that, in fact, despite the need for a production drive, there is less being put to reserve by £70 million now than there was in 1938.

We claim, therefore, that despite the attempt of the Chancellor of the Exchequer to help industry by depreciation allowances, there is, in fact, a severe problem for the industrial world facing us at this moment. We have therefore thought it right to take the opportunity offered by the Finance Bill to put forward this argument in a legitimate manner, and to ask the Government to try to meet us on a tax which we think is not equitable, and is not serving the proper needs of production by giving incentives to those who are doing their duty by the Chancellor of the Exchequer.

The point here is really a very narrow one, if I understand the right hon. Gentleman aright. As I understand him, the object of the Clause he has moved, is to provide that the Profits Tax shall be removed altogether from undistributed profits. As the Committee knows, the Profits Tax at present is 25 per cent., with a relief of 15 per cent. for the profits which are not distributed. Hon. Members opposite were reminded a short time ago by the hon. and gallant Member for Holderness (Lieut.-Commander Braithwaite), and his right hon. Friend has just said, that, over a very wide field, industry has responded to the request of my right hon. and learned Friend the Chancellor that dividends should be limited; and that, I think, is quite true, but I cannot see what that has to do with this particular matter.

Here, as I have said, we are dealing with a very narrow point. The question of whether profits not distributed should, in effect, escape Profits Tax altogether, is one which I do not think could be described otherwise than as important. After all, the profits have been made, and the mere fact that they are not distributed does not make them anything but profits. Furthermore, all of us have to bear our share of what is, admittedly, heavy taxation on what we make, or what we receive, unless there is special reason, and undistributed profits should bear their share of this taxation. Reserves are of no use unless they are put to some use in the business. It may well be that where profits are not distributed, and are just left to reserve, neither good nor harm will result.

The right hon. Gentleman obviously realises that by the way in which he has worded his Clause, and by the remarks which he has just made. The question arises whether, when profits are not distributed, as the Chancellor and, I think, most thinking people desire, they are put to proper use by being ploughed back to re-equip with new buildings or new plant and machinery the particular organisation concerned. It is the view of my right hon. and learned Friend that this difference of 15 per cent. is not only an incentive to the company concerned not to distribute, but also an incentive to use it in the way in which it should be used, namely, to instal new plant and machinery.

The right hon. Gentleman the Member for Saffron Walden (Mr. R. A. Butler) did mention what we are doing in Clause 16, and I think that there are limits to what can be done to help industry in this direction. I was taught that temperance in all things is desirable, but right hon. and hon. Members opposite do let some of their views run away with them. When it comes to the taxation of profits, we are already giving a 15 per cent. relief and if they use the money as they should, to re-equip their industry, we have made a further concession by doubling the initial allowance in this very Bill; but, like Oliver Twist, they come back for more, asking for undistributed profits to be wholly exempted.

We cannot ask for more in the case of depreciation allowance, but the allowances under Clause 16 are in no sense a gift. They are also an advantage to the big firm, rather than the small firm. The Chancellor has made no gift to industry; he has simply made an advance.

It is nevertheless a gift. It is an allowance which, if the provision were not there, industry would not get, and that money would in fact flow into the Exchequer instead of remaining in industry. It is true that over a long period they will not get any greater allowance than otherwise they would have got, but that they are getting an allowance is beyond question and that they are getting a double allowance in the initial period is obvious. To pretend that industry is getting nothing is quite absurd. One last point: the proposal, if accepted, would cost £105 million or £58 million when Income Tax is taken into consideration. I hope that I have only to mention those figures, to show the Committee that it is quite impossible for the proposal now put forward to be accepted.

I just cannot understand the Government's attitude on this matter at all. The attitude they are taking now is that this proposal will cost £58 million. A little while ago they turned down a proposal because it would cost £3½ million. It does not matter what sum it is, we always find that the increased cost will hit any concession the Government might give. Cannot they understand for one moment that industry must have much more material assistance at the present time? Such an allowance as would be given here, if the Government had the sense to provide it, would most definitely be used for the benefit of taxation as a whole because industry in this country today needs much more help to be able to plough back and build up machinery and resources.

At the present time we are being completely over-taxed. There is hardly a business which is not paying 60 per cent. in taxation. Unless this concession is eventually given by the Government, in the end we shall be put into a quite impossible position and will lose our export markets. There can be no doubt about that. Industry is suffering at the present moment, as many of us are, from complete over-burdening by taxation. Suggestions have been put forward for concessions by this side of the Committee for help to assist industry. We have been appealing for a very large section of traders but we have had no assistance and no help has been given by the Government of any kind whatever. If the Financial Secretary does not believe us perhaps he will tell us.

I know that the hon. Member has not been in this Parliament from its commencement but if he will go into the Library and look at the Finance Acts he will find that they are littered with Sections which give help to industry.

With the greatest respect, I know I have not had the great privilege of having served as long as many other hon. Members but I have had to put into practice a job of work in industry. If the Government had given the concessions to which the right hon. Gentleman has referred—and I challenge him to show anything substantial in the last few years—one would have felt it in industry. They have not. The Government will not face up to the fact that in the last 12 months the position has become increasingly more difficult. That is why industry, whether small or large, needs more financial concessions from the Government.

The Government are taking a very short-sighted view and are doing great harm to industry and the country. In the end they will find that because of this lack of assistance and the non-granting of any single concession we shall be losing export markets in one country after another. I appeal to the Government to realise that they must not take a short-sighted view. Will they please study the industrial situation? We have no one there who looks at it from an industrial point of view. That is what we want. We do not want legal arguments on whether we can dodge this or that on the question of expense. Sometimes expense can be put on one side when one takes a long-term view of the situation.

11.30 p.m.

I do appreciate the desire which has been shown by the Committee to carry on with its business as rapidly as possible but I would represent with great respect, that this is a matter of great importance as demonstrated by the number of hon. Members who want to speak on this subject. But I will try to be as brief as possible. When the Financial Secretary referred to us as coming forward like Oliver Twist for a second helping did he mean to suggest that Oliver Twist did not deserve a second helping?

We would not mind if hon. Members opposite only came for one second helping, but they always want everything that they can lay their hands on.

There is a great difference of approach on the two sides of the Committee, and that, we on this side, certainly recognise. I would urge hon. Members opposite to try to approach this matter in a judicial spirit of inquiry, and I suggest that they discuss this matter with some of their hon. Friends who are actively engaged in running a business enterprise today, such as the hon. Member for Ipswich (Mr. Stokes) or the hon. Member for one of the Hull Divisions who was here a moment ago, or possibly the hon. Member for Blackley (Mr. Diamond), or one of the two hon. Members for Bolton, all of whom know that we are not here in any grasping manner to try to get more and more for industry, but that we are trying to plead for a proper retention in industry of unspent earnings which are to be ploughed back into the business.

Just because for the purposes of tax computation, or out of the habits of the past, certain moneys accruing in an industry are called profits, it is no reason for hon. Members opposite to laugh or sneer at them. They represent earnings which are not spent on wages or raw materials—earnings which, although they may be subject to tax on the basis of Inland Revenue computations, are, nevertheless, desperately required for the improvement of the business itself. On all sides of the Committee we recognise the need for ploughing back what are called profits. What are called undistributed profits are indeed unspent earnings which are required today under three separate headings. The first is the "replacement of plant and machinery." That is a popular phrase with hon. Members opposite at the moment, but plant and machinery represent by no means the only requirement for which money is needed. There are also new buildings, which are to be specifically denied any relief under the terms of Clause 16, which affords nothing more than a short-term tax-free loan. That is certainly not a gift although the Financial Secretary has tried to make out that it is.

Then there is the difficult problem of the increase in the value of stocks, which have occurred in the last few years and for which the money is required. Without blaming anyone for the inflation which has taken place—and I am giving the Government credit where credit is due for damping down inflationary tendencies—the fact is that there have been inflationary tendencies and industry has "taken it on the chin." Do give industry a chance to finance new stocks on new plants, and a chance to meet the cost of the increased work in progress. Due to many causes—not only the congestion in the shops and the slower rate of output—more money is generally required to maintain assets, to keep businesses as good, going concerns.

These unspent earnings, which should be used for that purpose, are taxed at a time when the Lord President of the Council says that enterprises must be enterprising, taxed at a time when the Lord President of the Council—never himself a very great adventurer—calls on all men to be great merchant adventurers. One thing which annoys us on this side of the Committee is the constant exhortation by Members opposite to industry to be enterprising. When hon. Members on this side ask for the means, we are greeted with sneers, taunts and jeers of the Financial Secretary regarding industry as an "Oliver Twist." If they go on this way much longer, industry will be little more than an Oliver Twist.

As I have been challenged, I should like to add a little to the Committee's discussion, particularly with regard to what the hon. Member for Altrincham and Sale (Mr. Erroll) has just said. I think his mind is completely confused. There is a great difference between money required for development and financing stocks. So far as my experience goes, on the whole, the increased money required for financing stocks is taken care of by rising prices. The hon. Member for North Croydon (Mr. Frederic Harris) said that the Government had done nothing to help industry. In my 27 years' experience as a production engineer, no Government has done more to help industry than the present Government.

The particular commodities have not been subjected to any form of price control.

On the contrary, all through the war I worked constantly to get a form of costing more adequate than that in which the then Government indulged. A more enlightened Government got rid of that type of control and now I am free to go my own way. But I do not regard this point as very important. The observation made by the hon. Member for North Croydon was that the Government have done nothing to help. It simply is not true. No Tory Government in the past did one quarter as much to help industry, and we now find ourselves in an entirely different position in the manufacturing world.

Would the hon. Member give me two really good instances in which the present Government have really helped industry?

To start—never before have we had any real provision for writing off our buildings and premises. None whatever.

The provision was made under an Income Tax Measure brought in by my right hon. Friend the Member for the Scottish Universities (Sir J. Anderson). Will the hon. Member please not talk nonsense?

That was a beginning, but it has got much better since. Certainly, it was a joint effort, but it must have been due to the inspiration of my right hon. Friends in the Government. Secondly, depreciation allowances are much better than ever before. If hon. Members will add that up they will find that this country today is as well off as the Americans in depreciation allowances and provisions out of profits. We are really, for the first time in my industry, what I call "fighting on par" with our American competitors.

Is the hon. Member really expecting to get away with this, because what of the cost of a replacement?

I know all about what is happening in America, too. Does the hon. Member really think that that antiquated system of monopoly competition is allowing prices to remain stable? Not on your life. Prices over there are soaring right through the roof and the hon. Member knows it perfectly well. If one tries to buy a machine tool in America today, he buys it at just about three times the price it was at the end of the war. I do not think it is germane to the discussion. The honest fact is that the present Government have managed to keep prices reasonably down, have increased allowances, and industry today is better provided for by the Chancellor of the Exchequer in the provisions of the Finance Act than before.

I should like to follow the hon. Member for Ipswich (Mr. Stokes). He says he knows all about what is going on in America, and if I may take that in a literal way, I think I can refute that. My nephew brought me back last night by air the "Gazette" from Montreal and as the hon. Member is so familiar with the attitude in North America, he might be interested to hear what the leading article said:

"It is questionable, however, whether capital investment is to be broadened and encouraged by cutting down the amount of capital available for investment. Yet this seems to be the Labour Government's aim. 'We have certainly got to reduce prices,' Sir Stafford has said in the House of Commons, 'and that we can do by a greater degree of efficiency and a smaller degree of profits.'
The fact is, however, that the machinery needed to increase efficiency can come only out of profits. And the profits at present left after taxation are far from sufficient for this job."

Before the hon. and gallant Member sits down, will he point out to me one single unit in the heavy engineering trade where the advantages, in fact, are not indeed much better today than they were three years ago?

I am prepared to do that. There is no difficulty about it. We have got, as the Financial Secretary said, this 40 per cent. allowance, which is something in advance, as it were, on allowance depreciation. But the Member for Ipswich knows perfectly well that the replacement value on equipment, plus—and I think it is very important in view of the lectures we have had from Ministers opposite—modernisation of plant, and the utilisation of research which may require a complete replacement of equipment, has all to be taken into consideration when we are assessing the amount of money that will be required in international competition. He has dealt with the heavy side of the industry, and, knowing the business man he is, he will not find fault with me I know for taking a light equipment for an example.

Take, for instance, spun glass which now we know can be converted into glass tape. That will revolutionise the manufacture of television sets and radio equipment. It is within measurable distance when we shall have little portable sets almost the size of a post-card, largely due to that, and when I say that we require more money in research for replacement, I am also thinking of modernisation of plant and taking advantage of research and invention. But, as I said, I tried to follow directly upon the hon. Member for Ipswich, because he stated to the Committee that he knew all about the position in America and I wished therefore to quote the leading article from the "Gazette," Montreal.

11.45 p.m.

It seems to me that there are considerations of principle and expediency here. The hon. Gentlemen opposite who spoke, including the right hon. Gentleman who opened the discussion, have been dealing with the matter entirely in terms of expediency. It is fairly easy for those of us who have industrial experience to get a reputation with hon. Members opposite for being practical men if we forget our principles. I want to show that it is not necessary for us to do so, for the very good reason that, as has been clearly shown through the whole Debate, the differences between us on this matter of principle are very great indeed.

On every single issue, on every Amendment and on every new Clause the Opposition have been trying to revoke the tendency the Government have put into operation of redistributing the national income and the national wealth. In the whole discussion one would not have thought that profits were going to come into the pockets of individuals. The facts are that the gross profits of companies at the present time, as shown by the "Economist" sample index, is over 15 per cent. on the real capital value of shares. Profits have gone up from 12 to 17 per cent. of the national income in the 10 years before 1948. These profits represent a very high rate on turnover; even more important from the point of view of competition and the standard of living. They represent at the moment something like 16 per cent., which I believe is about double the rate of gross profit for turnover applying to similar companies in the United States. In the end, the ordinary shareholders are going to reap the benefit.

It is difficult to see how much the ordinary shareholders have benefited over the last 20, 30 or 40 years.

From the figures it looks as if the value of the assets from which the dividends to ordinary shareholders are paid have gone up three times on their original nominal value. I have a list of 15 large public companies taken at random, and looking at the figures over the last 15 years, I find that the average value of ordinary shares is one and a half to nine times the nominal value, and I do not know how many bonus shares have been issued. Only five companies during that 15-year period, which includes the whole of the war period, have gone below the nominal value of the shares and today two-thirds stand at over three times the nominal value. On the present value of the shares capital appreciation for individuals takes the place of dividends paid to individuals.

On the question of benefit, if we are to continue the principle of the redistribution of wealth and income, I do not think the Members of the Opposition have any argument at all. On these very high prices for shares—the average dividend is 8 per cent.—5 per cent. after tax. This goes to the ordinary shareholders in public companies, who play no part whatsoever in the business of these companies.

On the grounds of expediency, on which Members opposite have based their arguments, there is sufficient for replacement, if not for expansion. The net current assets of these 15 companies have gone up from £395 million to £422 million, including an increase of reserves of £33 million, and we know that the White Paper indicated an increase in company reserves in the last year from 4.9 per cent. to 5.6 per cent. of the national income. At the present time reserves for replacement are made from current profits and the Chancellor of the Exchequer has already dealt generously with the difficulty of replacement due to increased costs during the war. I have just read an article in the "Economist" which points out that in actual fact it will be equivalent to an interest-free loan of £650 million. I presume that the interest is therefore a free gift to industry.

Again quoting the "Economist," which is not really very favourably disposed towards redistribution of income and, on the whole, takes the view that we should return to the days of rather greater differentiation between the wealthier and poorer sections of the community, it says that there are no signs of strain. I presume that means, as my hon. Friend the Member for Ipswich (Mr. Stokes) has pointed out, that industry is not really short of reserves, at any rate for replacements. The question of expansion is another matter.

If the Opposition really mean what they say about a property-owning democracy, I should have thought that they would have supported the idea that industries should go to the market. There is no difficulty about industry raising capital in the market at the present time. If there is, there are other ways by which money can be raised.

I do not get the hon. Member's point. I was dealing with large public companies. Hon. Members opposite brought forward a Clause to relieve the smaller private companies. I believe that this is a matter which might very well be dealt with by the Profits Tax Committee, and I believe that there is some justification for looking at the matter afresh. On the general question of the major part of our industry, the large public companies, there is no justification whatever for a reduction in profits tax.

I admit that there is some substance in the point put by the hon. Member for Edmonton (Mr. Albu), that at any rate a proportion of the profits put to reserve ultimately come into the hands of the shareholders, but I should have thought that if it is considered necessary to deal with it on the grounds put forward by the hon. Member—of redistributing wealth and the national income—the way would be to increase the tax on distributed profits at some later date. That point does not seem to have any bearing on the Clause or constitute any answer to what we are proposing.

I only intervene because the attitude displayed by the Government, and particularly by the Financial Secretary, rather shocks me. One of the reasons why the Government introduced the principle of dividend limitation—not the only reason but certainly one of them—was that they wanted profits to be ploughed back into industry because they considered that was a right and good thing from the point of view of the country. It is true that they have given some assistance in that direction by means of the different rates of Profits Tax chargeable on distributed and undistributed profits, but now that we come along and ask them to give some more assistance, they refuse to do so, apparently on the principle enunciated by the Financial Secretary that temperance is something to be encouraged in all things.

I would only remind him that we are running into difficult times, and that the prospects of maintaining employment, the social services and everything else depends on the success of industry. To suggest in those circumstances that temperance is a thing which ought to be encouraged in deciding how much assistance one should give to industry seems to display an absolutely fantastic and utterly deplorable outlook.

The remarks advanced by the Opposition for the Clause, voiced largely by the hon. Member for Altrincham and Sale (Mr. Erroll) were to the effect that industry is in need of extra funds for the purpose of capital investment. That is the broad general case. I know the hon. Gentleman referred to stocks, but a good deal of his emphasis was in relation to capital investment. I do think the Opposition ought to take the Committee into their confidence in this matter. If it be so that industry requires this terrific amount of extra money for capital investment it must mean that the Opposition are committed in favour of increasing the capital investment programme, a programme which is at the moment absorbing something like 22 per cent. of the national product.

This is something we can never get from the Opposition. If what the hon. Gentleman says at the moment is perfectly true, it means the Opposition wants to enlarge the £400 million which in the 1947 plan was to be devoted to capital investment during the current year, by another £50 million or £100 million. This is rather odd coming from the Oppo- sition, because when unemployment was standing at 365,000 Lord Woolton said that there should be a drastic cutting-down of capital investment in this country. Unemployment now stands at about 325,000. Is it the attitude of the Opposition now that we should increase capital investment, or, in fact, decrease it? Would the hon. Gentleman the Member for Altrincham like to answer that point initially?

I was referring to the drain on industry rather than to capital investment.

The hon. Gentleman's remarks are on the record, and he referred to the necessity for replacement and for new buildings. Hon. Gentlemen cannot really have it both ways. One of the very droll things about the Opposition in matters of this kind is that for some reason they seem to think they represent industry. "These things are an insult to industry," they say, as if industry consisted only of directors and owners. Industry consists of the workers, managers, and technicians as well as directors and owners, and it certainly does not lie in the mouths of the Opposition to arrogate to themselves the right to refer to a few limited people as being industry as such.

From time to time they pride themselves, with certain justification, that industry—and they mean the owners—is using considerable self-restraint in the declaration and distribution of profits. The Chancellor of the Exchequer has already referred to this many times, and he says, by and large, industrialists are adhering to the arrangement proposed by the Prime Minister in the White Paper of 1947. But the Opposition seem to claim this as a virtue. They seem to suggest that if industry really liked, and voluntary discipline was relaxed, it would distribute more dividends than has been done. But in fact, as everyone knows, industry is indeed very well served with profits at the present time. Moreover, the funds at the disposal of industry for the replacement of assets are quite adequate enough to enable that measure of replacement to take place within the Government's capital investment programme, which has not been criticised up to now by the Opposition. In fact, the Opposition still do not know whether they want to increase it or decrease it, and until they make up their minds, they should not put down Clauses of this kind.

12 m.

The Financial Secretary has said that reserves are no good unless one actually spends them on replacement, implying that the only function of reserves, and the only justification for building them up, is that one should spend them immediately, or within a measurable time, on replacement of obsolete machinery. I want to tell him of a business—which I do not want to identify, although I do not mind telling the details of it if I am pressed—which I know very well, where the reserves have another and very important function. It is a business that makes high profits, higher than it has been making for many years past, but the directors would be immeasurably glad if they were able to make the modest and regular profits they made before the war, and which they have made for over 100 years, and if they were able to set aside in their reserves a sufficient sum to guarantee them against the hazards of this coming year. The higher profits they have been making in the past two or three years are no safeguard whatever to them.

This business uses an expensive and valuable material. The price of it may be some hundreds of pounds a ton, and it has been rising rapidly over the past three or four years. The nominal capital may be £500,000. Normally a certain stock of this raw material is required to take care of the failure of shipments, or because the business cannot be sure always of getting what it wants at the time it wants it. But in addition, a substantial stock, in normal times valued at some hundreds of thousands of pounds, is in the process of being converted from one thing to another; it is called "intermediate" because it is intermediate between the raw material and the finished product. In the last few years the whole picture has changed. Higher profits are made on a rising market; the same dividend is declared; and there is nothing left by the time the firm has paid taxation, to put to reserve to take care of the fall in the commodity which is the basis of its business life.

The business is faced with an enormous fall which has already begun in the United States, is travelling round the world, and, in spite of the efforts of the Government to keep it under control has begun to fall here. Some hundreds of pounds a ton will come off the value of this material, leaving the industry with three or four times its nominal capital in raw material, against which it has no reserves, and there is no free market in which it can hedge. The only way we can have our anxieties relieved is by being able to create reserves, which theoretically inure to the benefit of the shareholders, but which in fact will be used for the purpose of saving us acute embarrassment when this fall comes in the next year.

It may or may not be a good thing to tax profits at 25 per cent.—I do not want to argue that now—but I am convinced that it is not in the national interest to tax reserves. They may theoretically be the property of and may in the end inure to the advantage of individuals. That in itself is not a crime. It is an advantage. The more individuals there are who have wealth and profits and potential profits, the more there is to go round, and the more employment and development there is. But be that as it may, the primary purpose of these reserves is not to make individuals better off, certainly not at the moment, but to make industry more capable of competition in the world's markets.

The case for this new Clause is based on the need for reserves in our businesses, and not upon any selfish desire by shareholders or directors to have more for themselves, or for those whom they represent. It is a case of acute anxiety. Someone has said that there is plenty of money about, and that one can get plenty of capital if one wishes. It causes the greatest difficulty to small businesses to consider how they are going to finance themselves in the forthcoming year, which augurs so ill for industry.

It is not true to say that there is abundant money about, or that it can be obtained. The loss of confidence which has been spread through the financial policy of this Government, and of Mr. Truman's Government, the financial uncertainty and the approaching recession, make it extremely difficult to get capital. If they are going to take all the reward out of the lending of capital for risky or enterprising businesses they are going to make it all the more difficult to get capital. The whole point of lending money on a risky venture is the hope of getting a high reward.

Hon. Members seem to forget that the developments of the past four years, of which they are so proud, are being financed by the risk-taking of our forefathers, by the accumulated wealth of previous generations, as well as by loans from the greatest capitalist state of all.

Rising prices, said the hon. Member for Ipswich (Mr. Stokes) made it easy to finance stocks. The hon. Member is wrong on both counts. First of all, rising prices do not make it easy to finance stocks, and secondly, prices are not rising. He also said that the present Government had done more to help industry than had any other Government. But almost everything which the Government have done has been an embarrassment and a handicap; and the greatest service the Government could render to industry would be to leave it alone and to allow the law of supply and demand to help us to get out of our troubles.

I have listened to the speeches from hon. Members opposite and I wondered what the Chancellor of the Exchequer would say at this moment if he could have heard them. I assume that the Chancellor is not with us for reasons which we all understand, and that somewhere or other the right hon. and learned Gentleman is discussing the terrific strain upon the sterling exchange. The sort of speeches which we have had from the hon. and gallant Member for North Portsmouth (Major Bruce) and from the hon. Member for Edmonton (Mr. Albu) would have sounded lunatic at any meeting which was discussing the actual strain upon our pound. What does the hon. Member say? He asks whether we are prepared to say whether we want the capital investment programme enlarged or made smaller. Does the hon. Member know anything about what is happening? The whole question is whether the existing programme can be financed in any way for the next 12 months.

An hon. Member upon this side of the Committee mentioned that the hon. Member for Edmonton had something to do with industry. But if he had any remote connection with it does he not know that even a mere whisper, for instance, of there being an Imperial Tobacco issue the other day caused indigestion on the market? Does he not know that it is impossible to underwrite even first-class issues in the City? Does he know anything about the state of the market?

How is it that this new Clause was put down as recently as this new situation arose?

There we have an opinion from one who claims to be an economist, or someone of intelligence in the industrial world; an opinion that it is new to say that we are running into difficulties in meeting our balance of payments. What is happening? We have had a boom, with four years of almost full employment and that is the best thing for industry at any time; nobody is more ready to admit that than I. But, when one looks at the percentage of profits of industry taken by this Government in peacetime, then we find that it is greater than that taken by any other Government. We have managed to carry it because we have been in a boom situation; many industries have increased profit margins because they have had to bear such a heavy taxation and that, I submit, is bad for the country, and for the consumer.

What are we going to do now about our employment policy, and dealing with our problem of paying for our food and raw materials? When we discussed this in the time of the Coalition Government, it was said that it will not be possible quickly enough to detect the signs of a slump and take the necessary measures to stimulate industry in order that, before the thing gets out of hand, it can readjust itself and spend more on capital equipment and take up the slack. That is one of the things we always discussed. We said we should have to put back into industry more purchasing power in order that, in time, it might meet the trade recession. All the arguments about the level of profits over the last three years do not apply. What matters is how we get through the next 12 months.

It is a considerable proposition to put industry into the heart of getting on with re-equipment against the background of falling profits; and let nobody think that profits will be the same over the next 12 months as in the past year. Government policy, if it wants a reduction in profits, must give some offset of this nature. This is the sort of thing which it is sensible to do, but owing to the principles and theories of the hon. Member for Edmonton and his hon. Friend, we are not to put into practice the sensible precautions for dealing with a trade recession; I, like my hon. Friends, say there may well be a recession. I am concerned to see that there is some wealth to distribute.

What is the question which the Chancellor is talking about now? He is concerned with the very serious trade and payments position with which we are faced, and I say that this Clause will help him. The people from whom we import are no longer willing to spend that sterling in this country, saying that our prices are too high. That is why we have meetings in Brussels, and Paris and everywhere else. People earning sterling here are not able to find the goods here in competition with other countries which they want, and no patching up the matter with the Americans will settle this problem. It goes very much deeper over the whole range of trade and payments problems. Now here is one of the things we might do.

12.15 a.m.

Here is one way which would stimulate industry and get its costs down. Hon. Members may say that they do not believe in the crisis and do not think we shall have a foreign exchange collapse. Next year they will have to take things far more drastically if they do that. I say that an intelligent House of Commons would start to anticipate the events which anyone can see—anyone, that is, who has knowledge of what is going on and can see what the Chancellor sees. It is time we stopped arguing at an academic level and took more interest in the real crisis before us.

As I understand the hon. Gentleman's argument, it is that we have now reached a period of economic deflation and, therefore, it behoves us to increase purchasing power. Will he tell us why the only suggestion of hon. Members opposite for increasing purchasing power is to increase profits and not increase wages?

It is fascinating to hear the hon. Gentleman ask something like that because it shows how far we are from reality. Here is a proposition which does not increase profits at all. It puts into the hands of a business more money out of the smaller profits it is going to make and allows it to keep a larger proportion at a moment when it is necessary to do all we can to keep capital investment going. We know by the difficulty of raising money that one cannot get money by the ordinary way. That is not increasing inflation at all, but making it possible to finance the capital investment programme which hon. Gentlemen opposite wish to see financed. Perhaps they will consider, when their chickens come home to roost, where the money is coming from to finance these things. If we do not take some steps in time I can assure them that they will have to take harder and more brutal steps before the Winter is here.

I should like to refer to the speech of the hon. and gallant Member for North Portsmouth (Major Bruce) who attacked Lord Woolton. Does he not realise that in a condition of full employment we have to discriminate between the directions in which money can be spent on the capital programme? We have to think whether it is necessary to spend it on things that are going to produce more or of the effect of spending it on things that are not going to produce material results. If the Government are unable to devise a better plan, they had better fall back on the old-fashioned plan of raising interest rates.

I did not say what I thought Lord Woolton said but I said what he did say. He said in October, 1947, that in these days of over-full employment there must be a drastic tightening of capital expenditure. If the hon. Member does not like those words and wants to alter them, as no doubt the Front Bench opposite would like to do, he had better get on with it.

I would say that 1947 is not the same as 1949. I was more interested in the speech of the hon. Member for Ipswich (Mr. Stokes). It is interesting to know in which of his favourite occupations he is going to indulge. We do not know whether he is going to attack the Conservative Party or his own Front Bench and we do not know until the end of his speech whether he has not attacked both. It seemed to me that the Financial Secretary was a little confused when he said that this Clause would bear hardly on Income Tax payers. What is the connection between a concession of this nature, where money is not going to be spent, and a concession in Income or Purchase Tax where it is going to be spent? I hope the Government will explain whether they are under that delusion? Quite obviously there are advantages in this Clause in that it would strengthen reserves of companies and enable them at the appropriate moment to improve their equipment. What is the objection if they spend it on capital expenditure? The Government have their own means of seeing that it is spent wisely, and if it is spent wisely it must have a beneficial effect on any inflationary tendency.

But if this Clause is accepted, it will mean that my right hon. and learned Friend will get £58 million net less than he would otherwise receive. That means that he would have to get that amount from someone else, possibly the workers, possibly the Income Tax payers. If I could get that into the head of the hon. Gentleman I think we might get on.

That is exactly the point which is so disturbing to large sections of the country which are not exactly opposed to the Socialist Party. A concession which costs £58 million but does not increase purchasing power does not matter at all. Far beter diminish the Budget surplus by that amount than by £1 million which would increase expenditure.

The estimated Budget surplus for this year is only £14 million. I do not see how we can diminish £14 million by £58 million and still have a surplus.

But the whole point is to sterilise purchasing power when demand is in excess of supply. If the right hon. Gentleman cannot realise that, I hope he will make it abundantly clear so that the Press can report it and the country as a whole can know how completely out of date the Government are in their views. We have all noted a fall in Government stocks in the past few weeks. That could not possibly be caused by normal indigestion in the market. One reason why it may have been caused is that industrial companies are having to dispose at a great rate of their reserves because, owing to taxation methods, they cannot finance extensions out of profits, and therefore they have to use their reserves to replace their equipment which today is so much more expensive than it was before the war. If that is not the reason, I would remind the Financial

Division No. 190.]


[12.25 a.m.

Adams, Richard (Balham)Ewart, R.McGhee, H. G.
Albu, A. H.Fairhurst, F.McGovern, J.
Alexander, Rt. Hon. A. V.Farthing, W. J.Mack, J. D.
Allen, A. C. (Bosworth)Fernyhough, E.McKay, J. (Wallsend)
Attewell, H. C.Fletcher, E. G. M. (Islington, E.)Mackay, R. W. G. (Hull, N. W.)
Awbery, S. S.Follick, M.McKinlay, A. S.
Ayrton Gould, Mrs S.Foot, M. M.McLeavy, F.
Bacon, Miss A.Forman, J. C.Macpherson, T. (Romford)
Baird, J.Fraser, T. (Hamilton)Mallalieu, J. P. W. (Huddersfield)
Barton, C.Freeman, J. (Watford)Mann, Mrs. J.
Bechervaise, A. E.Freeman, Peter (Newport)Manning, C. (Camberwell, N.)
Berry, H.Gaitskell, Rt. Hon. H. T. N.Mellish, R. J.
Beswick, F.Ganley, Mrs. C. S.Middleton, Mrs. L.
Bing, G. H. C.Gibson, C. W.Millington, Wing-Comdr. E. R.
Binns, J.Gilzean, A.Mitchison, G. R.
Blackburn, A. H.Glanville, J. E. (Consett)Monslow, W.
Blenkinsop, A.Gordon-Walker, P. C.Morris, Lt.-Col. H. (Sheffield, C.)
Blyton, W. R.Griffiths, D. (Rother Valley)Morris, P. (Swansea, W.)
Braddock, Mrs. E. M. (L'pt. Exch'ge)Guest, Dr. L. HadenNally, W.
Braddock, T. (Mitcham)Gunter, R. J.Neal, H. (Claycross)
Brook, D. (Halifax)Guy, W. H.Nichol, Mrs. M. E. (Bradford, N.)
Broughton, Dr. A. D. D.Haire, John E. (Wycombe)Nicholls, H. R. (Stratford)
Brown, George (Belper)Hale, LeslieNoel-Baker, Capt. F. E. (Brentford)
Brown, T. J. (Ince)Hall, Rt. Hon. GlenvilNoel-Baker, Rt. Hon. P. J. (Derby)
Bruce, Maj. D. W. T.Hamilton, Lieut.-Col. R.Oldfield, W. H.
Burden, T. W.Hannan, W. (Maryhill)Orbach, M.
Burke, W. A.Haworth, J.Paget, R. T.
Butler, H. W. (Hackney, S)Henderson, Rt Hn. A. (Kingswinford)Paling, Will T. (Dewsbury)
Callaghan, JamesHenderson, Joseph (Ardwick)Palmer, A. M. F.
Carmichael, JamesHerbison, Miss M.Pargiter, G. A.
Castle, Mrs. B. A.Hewitson, Capt. M.Parker, J.
Chamberlain, R. A.Hobson, C. R.Parkin, B. T.
Champion, A. J.Holman, P.Paton, J. (Norwich)
Chetwynd, G. R.Holmes, H. E. (Hemsworth)Pearson, A.
Cocks, F. S.Horabin, T. L.Peart, T. F.
Coldrick, W.Houghton, A. L. N. D.Popplewell, E.
Collins, V. J.Hoy, J.Porter, E. (Warrington)
Comyns, Dr. L.Hubbard, T.Porter, G. (Leeds)
Cook, T. F.Hudson, J. H. (Ealing, W.)Price, M. Philips
Corbet, Mrs. F. K. (Camb'well, N. W.)Hughes, Emrys (S. Ayr)Proctor, W. T.
Cove, W. G.Hughes, Hector (Aberdeen, N.)Pryde, D. J.
Crawley, A.Hughes, H. D. (W'lverh'ton, W.)Randall, H. E.
Crossman, R. H. S.Hynd, H. (Hackney, C.)Ranger, J.
Cullen, Mrs.Hynd, J. B. (Attercliffe)Rankin, J.
Daines, P.Irving, W. J. (Tottenham, N.)Reid, T. (Swindon)
Dalton, Rt. Hon. H.Jay, D. P. T.Rhodes, H.
Davies, Edward (Burslem)Jeger, G. (Winchester)Ridealgh, Mrs. M.
Davies, Ernest (Enfield)Jones, D. T. (Hartlepool)Robens, A.
Davies, Harold (Leek)Jones, Elwyn (Plaistow)Robinson, Kenneth (St. Pancras, N.)
Davies, Haydn (St. Pancras, S. W.)Jones, J. H. (Bolton)Rogers, G. H. R.
Deer, G.Keenan, W.Ross, William (Kilmarnock)
Delargy, H. J.King, E. M.Royle, C.
Diamond, J.Kinley, J.Sargood, R.
Dobbie, W.Lang, G.Segal, Dr. S.
Dodds, N. N.Lavers, S.Shackleton, E. A. A.
Driberg, T. E. N.Lee, F. (Hulme)Sharp, Granville
Dugdale, J. (W. Bromwich)Leonard, W.Shawcross, C. N. (Widnes)
Dye, S.Levy, B. W.Shurmer, P.
Ede, Rt. Hon. J. C.Lindgren, G. S.Silkin, Rt. Hon. L.
Edwards, W. J. (Whitechapel)Logan, D. G.Silverman, J. (Erdington)
Evans, Albert (Islington, W.)Longden, F.Silverman, S. S. (Nelson)
Evans, John (Ogmore)Lyne, A. W.Simmons, C. J.
Evans, S. N. (Wednesbury)McAllister, G.Skinnard, F. W.

Secretary that it must be because there is a lack of confidence in the ability of the Government to preserve the economy of the country—a fact which is disturbing a great many people.

Question put, "That the Question be now put."

The Committee divided: Ayes, 235; Noes, 111.

Smith, C. (Colchester)Tolley, L.Wilkes, L.
Smith, S. H. (Hull, S. W.)Tomlinson, Rt. Hon. G.Wilkins, W. A.
Snow, J. W.Ungoed-Thomas, L.Willey, F. T. (Sunderland)
Sorensen, R. W.Vernon, Maj. W. F.Willey, O. G. (Cleveland)
Soskice, Rt. Hon. Sir FrankWallace, G. D. (Chislehurst)Williams, J. L. (Kelvingrove)
Stokes, R. R.Wallace, H. W. (Walthamstow, E.)Williams, Ronald (Wigan)
Stross, Dr. B.Warbey, W. N.Williams, W. T. (Hammersmith, S.)
Stubbs, A. E.Watkins, T. E.Williams, W. R. (Heston)
Sylvester, G. O.Webb, M. (Bradford, C.)Willis, E.
Symonds, A. L.Weitzman, D.Wills, Mrs. E. A.
Taylor, R. J. (Morpeth)Wells, P. L. (Faversham)Woodburn, Rt. Hon. A.
Thomas, D. E. (Aberdare)West, D. G.Wyatt, W.
Thomas, George (Cardiff)Wheatley, Rt. Hon. John (Edinb'gh, E.)Yates, V. F.
Thomas, I. O. (Wrekin)Whiteley, Rt. Hon. W.Younger, Hon. Kenneth
Thomas, John R. (Dover)Wigg, GeorgeTELLERS FOR THE AYES:
Timmons, J.Wilcock, Group-Capt. C. A. B.Mr. Collindridge and Mr. Bowden.


Amory, D. HeathcoatGates, Maj. E. E.Odey, G. W.
Assheton, Rt. Hon. R.George, Lady M. Lloyd (Anglesey)Peto, Brig. C. H. M.
Astor, Hon. M.Gomme-Duncan, Col. A.Pickthorn, K.
Baldwin, A. E.Grimston, R. V.Poole, O. B. S. (Oswestry)
Beamish, Maj. T. V. H.Harden, J. R. E.Prior-Palmer, Brig. O.
Birch, NigelHare, Hon. J. H. (Woodbridge)Raikes, H. V.
Boles, Lt.-Col. D. C. (Wells)Harris, F. W. (Croydon, N.)Rayner, Brig. R.
Bowen, R.Haughton, S. G.Renton, D.
Bower, N.Henderson, John (Cathcart)Roberts, Emrys (Merioneth)
Boyd-Carpenter, J. A.Hinchingbrooke, ViscountRoberts, H. (Handsworth)
Bracken, Rt. Hon. BrendanHollis, M. C.Roberts, W. (Cumberland, N.)
Braithwaite, Lt.-Comdr. J. G.Howard, Hon. A.Robinson, Roland (Blackpool, S.)
Buchan-Hepburn, P. G. T.Hudson, Rt. Hon. R. S. (Southport)Ropner, Col. L.
Butler, Rt. Hon. R. A. (S'ffr'n W'ld'n)Hurd, A.Ross, Sir R. D. (Londonderry)
Carson, E.Hutchison, Lt.-Cm. Clark (E'b'rgh W.)Scott, Lord W.
Challen, C.Hutchison, Col. J. R. (Glasgow, C.)Shephard, S. (Newark)
Channon, H.Keeling, E. H.Spearman, A. C. M.
Clarke, Col. R. S.Langford-Holt, J.Stanley, Rt. Hon. O.
Conant, Maj. R. J. E.Legge-Bourke, Maj. E. A. H.Strauss, Henry (English Universities)
Corbett, Lieut.-Col. U. (Ludlow)Linstead, H. N.Stuart, Rt. Hon. J. (Moray)
Crookshank, Capt. Rt. Hon. H. F. C.Lloyd, Selwyn (Wirral)Taylor, C. S. (Eastbourne)
Crosthwaite-Eyre, Col. O. E.Low, A. R. W.Teeling, William
Crowder, Capt. John E.Lucas, Major Sir J.Thomas, J. P. L. (Hereford)
Cuthbert, W. N.Lucas-Tooth, Sir H.Thorneycroft, G. E. P. (Monmouth)
Davies, Rt. Hn. Clement (Montgomery)McCorquodale, Rt. Hon. M. S.Thornton-Kemsley, C. N.
Dodds-Parker, A. D.McFarlane, C. S.Thorp, Brigadier R. A. F.
Drewe, C.Mackeson, Brig. H. R.Turton, R. H.
Dugdale, Maj. Sir T. (Richmond)Macmillan, Rt. Hn. Harold (Bromley)Vane, W. M. F.
Eccles, D. M.Macpherson, N. (Dumfries)Wadsworth, G.
Eden, Rt. Hon. A.Maitland, Comdr. J. W.Wakefield, Sir W. W.
Erroll, F. J.Marples, A. E.Walker-Smith, D.
Foster, J. G. (Northwich)Maude, J. C.Ward, Hon. G. R.
Fraser, H. C. P. (Stone)Mellor, Sir J.Wheatley, Colonel M. J. (Dorset, E.)
Fraser, Sir I. (Lonsdale)Mott-Radclyffe, C. E.Williams, C. (Torquay)
Fyfe, Rt. Hon. Sir D. P. M.Neven-Spence, Sir B.York, C.
Gage, C.Nicholson, G.
Galbraith, Cmdr. T. D. (Pollok)Noble, Comdr. A. H. P.TELLERS FOR THE NOES:
Galbraith, T. G. D. (Hillhead)Nutting, AnthonyCommander Agnew and Mr. Digby.

Question put accordingly, "That the Clause be read a Second time."

Division No. 191.]


[12.35 a.m.

Agnew, Cmdr. P. G.Corbett, Lieut.-Col. U. (Ludlow)Gates, Maj. E. E.
Amory, D. HeathcoatCrookshank, Capt. Rt. Hon. H. F. C.George, Lady M. Lloyd (Anglesey)
Assheton, Rt. Hon. R.Crosthwaite-Eyre, Col. O. E.Gomme-Duncan, Col. A.
Astor, Hon. M.Crowder, Capt. John E.Grimston, R. V.
Baldwin, A. E.Cuthbert, W. N.Harden, J. R. E.
Beamish, Maj. T. V. H.Digby, Simon WingfieldHare, Hon. J. H. (Woodbridge)
Birch, NigelDodds-Parker, A. D.Harris, F. W. (Croydon, N.)
Boles, Lt.-Col. D. C. (Wells)Drewe, C.Haughton, S. G.
Bowen, R.Dugdale, Maj. Sir T. (Richmond)Henderson, John (Cathcart)
Bower, N.Eccles, D. M.Hinchingbrooke, Viscount
Boyd-Carpenter, J. A.Eden, Rt. Hon. A.Hollis, M. C.
Bracken, Rt. Hon. BrendanErroll, F. J.Howard, Hon. A.
Braithwaite, Lt.-Comdr. J. G.Foster, J. G. (Northwich)Hudson, Rt. Hon. R. S. (Southport)
Buchan-Hepburn, P. G. T.Fraser, H. C. P. (Stone)Hurd, A.
Butler, Rt. Hon. R. A. (S'ffr'n W'ld'n)Fraser, Sir I. (Lonsdale)Hutchison, Lt.-Cm. Clark (E'b'rgh W.)
Carson, E.Fyfe, Rt. Hon. Sir D. P. M.Hutchison, Col. J. R. (Glasgow, C.)
Challen, C.Gage, C.Keeling, E. H.
Channon, H.Galbraith, Cmdr. T. D. (Pollok)Langford-Holt, J.
Clarke, Col. R. S.Galbraith, T. G. D. (Hillhead)Legge-Bourke, Maj. E. A. H.

The Committee divided: Ayes, 110; Noes, 235.

Linstead, H. N.Peto, Brig. C. H. M.Taylor, C. S. (Eastbourne)
Lloyd, Selwyn (Wirral)Pickthorn, K.Teeling, William
Low, A. R. W.Poole, O. B. S. (Oswestry)Thomas, J. P. L. (Hereford)
Lucas, Major Sir J.Prior-Palmer, Brig. O.Thorneycroft, G. E. P. (Monmouth)
Lucas-Tooth, Sir H.Raikes, H. V.Thornton-Kemsley, C. N.
McCorquodale, Rt. Hon. M. S.Rayner, Brig. R.Thorp, Brigadier R. A. F.
McFarlane, C. S.Renton, D.Turton, R. H.
Macmillan, Rt. Hn. Harold (Bromley)Roberts, Emrys (Merioneth)Vane, W. M. F.
Macpherson, N. (Dumfries)Roberts, H. (Handsworth)Wadsworth, G.
Maitland, Comdr. J. W.Roberts, W. (Cumberland, N.)Wakefield, Sir W. W.
Marples, A. E.Robinson, Roland (Blackpool, S.)Walker-Smith, D.
Maude, J. C.Ropner, Col. L.Ward, Hon. G. R.
Mellor, Sir J.Ross, Sir R. D. (Londonderry)Wheatley, Colonel M. J. (Dorset, E.)
Mott-Radclyffe, C. E.Scott, Lord W.Williams, C. (Torquay)
Neven-Spence, Sir B.Shephard, S. (Newark)York, C.
Nicholson, G.Spearman, A. C. M.
Noble, Comdr. A. H. P.Stanley, Rt. Hon. O.TELLERS FOR THE AYES:
Nutting, AnthonyStrauss, Henry (English Universities)Major Conant and Brigadier Mackeson
Odey, G. W.Stuart, Rt. Hon. J. (Moray)


Adams, Richard (Balham)Ewart, R.Lyne, A. W.
Albu, A. H.Fairhurst, F.McAllister, G.
Alexander, Rt. Hon. A. V.Farthing, W. J.McGhee, H. G.
Allen, A. C. (Bosworth)Fernyhough, E.McGovern, J.
Attewell, H. C.Fletcher, E. G. M. (Islington, E.)Mack, J. D.
Awbery, S. S.Follick, M.McKay, J. (Wallsend)
Bacon, Miss A.Foot, M. M.Mackay, R. W. G. (Hull, N. W.)
Baird, J.Forman, J. C.McKinlay, A. S.
Barton, C.Fraser, T. (Hamilton)McLeavy, F.
Bechervaise, A. E.Freeman, J. (Watford)Macpherson, T. (Romford)
Berry, H.Freeman, Peter (Newport)Mallalieu, J. P. W. (Huddersfield)
Beswick, F.Gaitskell, Rt. Hon. H. T. N.Mann, Mrs. J.
Bing, G. H. C.Ganley, Mrs. C. S.Manning, C. (Camberwell, N.)
Binns, J.Gibson, C. W.Mellish, R. J.
Blackburn, A. R.Gitzean, A.Middleton, Mrs. L.
Blenkinsop, A.Glanville, J. E. (Consett)Millington, Wing-Comdr. E. R.
Blyton, W. R.Gordon-Walker, P. C.Mitchison, G. R.
Braddock, Mrs. E. M. (L'pl. Exch'ge)Griffiths, D. (Rother Valley)Monslow, W.
Braddock, T. (Mitcham)Guest, Dr. L. HadenMorris, Lt.-Col. H. (Sheffield, C.)
Brook, D. (Halifax)Gunter, R. J.Morris, P. (Swansea, W.)
Broughton, Dr. A. D. D.Guy, W. H.Nally, W.
Brown, George (Belper)Haire, John E. (Wycombe)Neal, H. (Claycross)
Brown, T. J. (Ince)Hale, LeslieNichol, Mrs. M. E. (Bradford, N.)
Bruce, Maj. D. W. T.Hall, Rt. Hon. GlenvilNicholls, H. R. (Stratford)
Burden, T. W.Hamilton, Lieut.-Col. R.Noel-Baker, Capt. F. E. (Brentford)
Burke, W. A.Hannan, W. (Maryhill)Noel-Baker, Rt. Hon. P. J. (Derby)
Butler, H. W. (Hackney, S.)Haworth, J.Oldfield, W. H.
Callaghan, JamesHenderson, Rt Hn. A. (Kingswinford)Orbach, M.
Carmichael, JamesHenderson, Joseph (Ardwick)Paget, R. T.
Castle, Mrs. B. A.Herbison, Miss M.Paling, Will T. (Dewsbury)
Chamberlain, R. A.Hewitson, Capt M.Palmer, A. M. F.
Champion, A. J.Hobson, C. R.Pargiter, G. A.
Chetwynd, G. R.Holman, P.Parker, J.
Cocks, F. S.Holmes, H. E. (Hemsworth)Parkin, B. T.
Coldrick, W.Horabin, T. L.Paton, J. (Norwich)
Collins, V. J.Houghton, A. L. N. D.Pearson, A.
Comyns, Dr. L.Hoy, J.Peart, T. F.
Cook, T. F.Hubbard, T.Popplewell, E.
Corbet, Mrs. F. K. (Camb'well, N. W.)Hudson, J. H. (Ealing, W.)Porter, E. (Warrington)
Cove, W. G.Hughes, Emrys (S. Ayr)Porter, G. (Leeds)
Crawley, A.Hughes, Hector (Aberdeen, N.)Price, M. Philips
Crossman, R. H. S.Hughes, H. D. (W'lverh'ton, W.)Proctor, W. T.
Cullen, Mrs.Hynd, H. (Hackney, C.)Pryde, D. J.
Daines, P.Hynd, J. B. (Attercliffe)Randall, H. E.
Dalton, Rt. Hon H.Irving, W. J. (Tottenham, N.)Ranger, J.
Davies, Edward (Burslem)Jay, D. P. T.Rankin, J.
Davies, Ernest (Enfield)Jeger, G. (Winchester)Reid, T. (Swindon)
Davies, Harold (Leek)Jones, D. T. (Hartlepool)Rhodes, H.
Davies, Haydn (St. Pancras, S. W.)Jones, Elwyn (Plaistow)Ridealgh, Mrs. M.
Deer, G.Jones, J. H. (Bolton)Robens, A.
Delargy, H. J.Keenan, W.Robinson, Kenneth (St. Pancras, N.)
Diamond, J.King, E. M.Rogers, G. H. R.
Dobbie, W.Kinley, J.Ross, William (Kilmarnock)
Dodds, N. N.Lang, G.Royle, C.
Driberg, T. E. N.Lavers, S.Sargoed, R.
Dugdale, J. (W. Bromwich)Lee, F. (Hulme)Segal, Dr. S.
Dye, S.Lee, Miss J. (Cannock)Shackleton, E. A. A.
Ede, Rt. Hon. J. C.Leonard, W.Sharp, Granville
Edwards, W. J. (Whitechapel)Levy, B. W.Shawcross, C. N. (Widnes)
Evans, Albert (Islington, W.)Lindgren, G. S.Shurmer, P.
Evans, John (Ogmore)Logan, D. G.Silkin, Rt. Hon L.
Evans, S. N. (Wednesbury)Longden, F.Silverman, J. (Erdington)

Silverman, S. S. (Nelson)Thomas, John R. (Dover)Wilcock, Group-Capt. C. A. B.
Simmons, C. J.Timmons, J.Wilkes, L.
Skinnard, F. W.Tolley, L.Wilkins, W. A.
Smith, C. (Colchester)Tomlinson, Rt. Hon. G.Willey, F. T. (Sunderland)
Smith, S. H. (Hull, S. W.)Ungoed-Thomas, L.Willey, O. G. (Cleveland)
Snow, J. W.Vernon, Maj. W. F.Williams, J. L. (Kelvingrove)
Sorensen, R. W.Wallace, G. D. (Chislehurst)Williams, Ronald (Wigan)
Soskice, Rt. Hon. Sir FrankWallace, H. W. (Walthamstow, E.)Williams, W. T. (Hammersmith, S.)
Stokes, R. R.Warbey, W. N.Williams, W. R. (Heston)
Stross, Dr. B.Watkins, T. E.Willis, E.
Stubbs, A. E.Webb, M. (Bradford, C.)Wills, Mrs. E. A.
Sylvester, G. O.Weitzman, D.Woodburn, Rt. Hon. A.
Symonds, A. L.Wells, P. L. (Faversham)Wyatt, W.
Taylor, R. J. (Morpeth)West, D. G.Yates, V. F.
Thomas, D. E. (Aberdare)Wheatley, Rt. Hon. John (Edinb'gh, E.)Younger, Hon. Kenneth
Thomas, George (Cardiff)Whiteley, Rt. Hon. W.TELLERS FOR THE NOES:
Thomas, I. O. (Wrekin)Wigg, GeorgeMr. Collindridge and Mr. Bowden.

I beg to move, "That the Chairman do report Progress, and ask leave to sit again."

I say at once that I am not doing this for the ordinary reason. It is customary at this time of night on one of these late Sittings to move this Motion in order to ascertain from the Government what their intentions are with regard to the progress of the Bill. We know that they desire to reach the conclusion of the Bill, and although it would have been very much for the convenience of the whole Committee if at an earlier stage the Leader of the House had agreed to a proposition which I made that we should have an extra half day, which would probably have avoided a great deal of the inconvenience which we are suffering, he refused it, and we accept the position that the Bill has to be finished tonight.

12.45 a.m.

My purpose in rising is quite a different one. It is to explain to the Committee, and particularly to hon. Members opposite, a dilemma and a difficulty, a difficulty in which I am going to appeal to them for their help. Those who were present in the Committee last night will have heard a remarkable speech by the Financial Secretary to the Treasury in which he laid down on behalf of the Government a definite new policy with regard to the Sittings of the House. He laid down the policy that either in future the House would rise by 12.30 a.m.—before the trains ceased to run—or if we were unable to do that, to sit on until 5.30 or 6 a.m.—until the trains began to run again. That was apparently to be quite independently of any business the House had to discuss, and it was to depend entirely on the question of transport. We accept that—we have gone past 12.30 a.m. and now we have got to sit until 5.30 or 6 a.m.

I have been through the business which remains, and I must tell hon. Members that as far as we are concerned we do not feel it is possible to meet the Government's wishes and keep the business going until 6 a.m. We shall certainly do our best, but I warn the Patronage Secretary that I have considered it carefully, and I do not think we shall be able to accomplish that which he desires. Therefore, I appeal to hon. Gentlemen opposite to help us. If they are prepared to take their share, to play their part, then I think we can hope to meet the new wishes of the Government. We have not had very much help from them so far. It was a little bit better on the last Clause, but if I may say so, not quite good enough. There are too many signs of one or two odd people being told by the Patronage Secretary to get up and speak, even if they have nothing to speak about. I do not think that that, even with our assistance, will be enough to meet the Patronage Secretary's point. There is the dilemma. We shall do our part, but I sincerely assure the Committee that by ourselves we do not think we can succeed, and therefore whether or not the Government's wishes are to be met must depend to a large extent on the action of their own supporters.

Never was a retreat more skilfully masked than in the speech to which we have just listened. For last night, a little earlier than this, the right hon. Gentleman assured us that having gone through the Order Paper he had reached the conclusion that if we sat until about 3.30 a.m. last night and tonight we could reach the end of the business. We rose without doing any more last night, and therefore on that calculation we should last through until 7 o'clock this morning. He has found that he has made a miscalculation. The statement made by the Financial Secretary last night was nothing new, for I recollect making it as long ago as 1923 when I occupied the seat at the moment occupied by the hon. Member for Torquay (Mr. C. Williams). I have always thought it was an exceedingly foolish thing for hon. Members to be put to the maximum of inconvenience in order to do the minimum of work, and that is precisely what happens when we go on to 3.30 a.m., which was the time selected by the right hon. Gentleman in the speech he made last night. I am quite sure it will be a matter of regret that this miscalculation should have been made by the right hon. Gentleman.

We had better continue the sitting and do the best we can. At any rate this can safely be said, seven assuming we do not sit until 6 or 7 o'clock, it will be better to have had one night in bed than to have had two nights sitting until 3.30, because two successive nights on that basis always seemed to me about the worst possible strain on Parliamentary tempers and to result in the least business being done. Having listened to the Debate for some considerable time, I should not so easily have despaired of my supporters, had I been sitting in the right hon. Gentleman's place, as he appears to have done. In the elegant language used by the noble lord last night, it would appear that they are beginning to lack Parliamentary guts. The right hon. Gentleman and his friends will no doubt do their best. I do not advise my hon. Friends to help them, because I do not share the late Mr. Ramsay MacDonald's passion for a Council of State. The best thing to do is to conduct the Debate in the usual way and see how well we get on. [Interruption.] I do not know what the objection is.

The late Mr. Ramsay MacDonald was my constituent. I cannot understand what the right hon. Gentleman thinks he is doing by throwing mud at him tonight.

For an ex-Chief Whip to call the allusion I made to Mr. Ramsay MacDonald "throwing mud" shows a quite new definition of Parliamentary controversy.

We did not run away from him, he ran away from us. I suggest we should now proceed with the business and see how we get on and see how much better a judge of Parliamentary business the right hon. Gentleman is tonight than he was last night.

I do not want to be misunderstood about this. I am not responding to the right hon. Gentleman's appeal. I think it worth while to intervene to say two things. I heard what the right hon. Gentleman said, and it appears he has considerable difficulty now in using the time which he insisted on having. If that is so, it becomes a little difficult to understand why, in the speech he has just made, he repeated his demand for a still further half-day.

The hon. Gentleman must not carry misrepresentation to unaccustomed limits. What I said when I raised the question last week was that if we had had an extra half-day given it would have obviated the late sittings we have had.

The right hon. Gentleman has proved me right, because he and his supporters have just proved that they cannot use the time they have got. The only other thing I want to say is that I had a rather different understanding of what occurred last night. I thought that there had been some kind of understanding to stop about midnight, and that the right hon. Gentleman's supporters wished that to happen, but nevertheless wished to deprive hon. Members on this side of the benefit of it, and so pursued a perfectly idle discussion for 40 minutes to see that nobody benefited by the early hour.

I must intervene at once to tell the hon. Member that, as usual, he is completely wrong. He has no justification, and the Patronage Secretary will bear me out, for saying that there was any agreement to stop at 12 o'clock last night. I hope that the hon. Member who has now accused me of breaking an agreement, will, with the authority of the Patronage Secretary, withdraw that remark.

I have not accused the right hon. Gentleman of either making an agreement or breaking an agreement. I know what I said, but let me say at once that if that I was accusing the right hon. Gentleman of breaking an agreement he had made, I withdraw that at once, because I had no intention of giving such an impression. What I did say was, that hon. Members behind the right hon. Gentleman pursued, consciously and deliberately, a course which had that purpose.

The hon. Member and the Home Secretary carried out a game with my right hon. Friend by accusing him of miscalculating, by some hours, how long the Sitting would last. I think that what they failed to realise was that several Closures have been moved on the discussion this evening, and, as far as I know, none of these Closure Motions has been moved from the Opposition front bench. Perhaps they will be good enough, in future, to take that into consideration if they attempt, which I doubt they will do, to make a fair statement.

I have made my point. I thought I would have an immediate response. But we shall have to see what happens, and I only moved this Motion to be able to raise that point. Having moved the Motion, I beg to ask leave to withdraw it.

Motion, by leave, withdrawn.