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New Clause—(Depreciation Of Commercial Buildings)

Volume 477: debated on Tuesday 4 July 1950

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Section eight of the Income Tax Act, 1945 (which defines an industrial building or structure for the purpose of Part I of that Act) shall be amended by the insertion in subsection (1) thereof, after paragraph ( f), of the following paragraphs:—

"(g) for the purposes of a trade consisting in the sale or distribution of goods or materials;
(h) for the purposes of a trade or profession in the provision of services;"

and subsection (3) thereof shall be amended by the omission of the words "retail shop, showroom, hotel or office," in both places where they occur, and in connection with any building or structure described in paragraphs (g) and,h) above, the limitation of the balancing charge provided in subsection (5) of section three of the Income Tax Act, 1945, shall be reduced as if the words "or exceptional depreciation allowances" were omitted from the said subsection.—[ Mr. Eccles.]

Brought up, and read the First time.

3.50 p.m.

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

This Clause stands in the name of my hon. Friend the Member for Edgbaston (Sir P. Bennett) who is, unfortunately, delayed, or he would have moved it in his usual convincing manner. It falls to me to take his place. Last night the Solicitor-General resisted our new Clause to give the depreciation allowance to temporary premises in blitzed areas. The right hon. and learned Gentleman rested his case partly on the ground of principle, reminding the House that the Income Tax Act, 1945, confined the allowance for buildings to industrial buildings, whereas the new Clause we were moving last night would have brought in shops and offices. I then suggested that a better opportunity would arise today to debate the large principle of drawing an arbitrary line between the industrial buildings and other buildings which are used for the purposes of a trade or profession; and that is the purpose of this new Clause—to extend the principle embodied in the 1945 Act.

The general underlying idea of the 1945 Income Tax Act is that the cost of any asset acquired or provided for the purposes of a trade and used up or depreciated in that trade should be allowed as a charge for tax purposes over its useful life. I think that there is no dispute in the House that that is a sound principle. Where it is necessary to purchase a machine, a tool, or a building—all that comes into the costs of production, and if it is right to give an allowance upon one of the factors of production, it is right to give it upon all of them.

However, Sir John Anderson, when he introduced the Act in 1945, made a deliberate exception from that principle of buildings other than industrial buildings defined more or less as they are in the 1929 derating Act. There was no logic in the distinction drawn by Sir John Anderson, and he freely admitted that during the Debates upon his Act. He was attacked from all sides of the House at that time. Some hon. Members said that there was no point in withholding the allowance from an asset, a building, which was as essential as anything else in the long process of converting raw materials into the finished goods in the hands of the final consumer.

They instanced the case of a factory which attracted the allowance and had a head office in a neighbouring town which did not attract the allowance. They pointed out that it was necessary to have a sale room in which to exhibit goods and from which to sell them which did not attract that allowance. They pointed out that such buildings as garages were very necessary in modern times for the service of capital goods, and that there was no logic in excepting these buildings from the allowance. Sir John Anderson was also attacked for withholding the allowance from hotels. It was said then in 1945—and it has surely been borne out since—that the hotel industry was one way by which this country could earn foreign exchange.

Sir John Anderson was also attacked, especially by Members of the Labour Party at that time, on what I suggest one may call general social principles, and that attack was lead by the present Minister of Health. The right hon. Gentleman first of all drew a picture of his own experience as a butcher's errand boy at the age of 12, and of the distressing conditions under which he worked, and he said:
"There is another argument which I think ought to be conclusive. We ought to encourage shopkeepers and distributive organisations of all kinds to modernise their buildings if only for the sake of the people who are employed in them. I do not see why, assuming that the advantages supposed to be conferred by this Bill are beneficial, the very large number of workers engaged in the distributive industry should be denied those benefits."—[OFFICIAL REPORT, 27th April, 1945: Vol. 410, c. 1163.]
My recollection is that the right hon. Gentleman was loudly applauded by his own side at that time, and I hope that that will mean that we shall be supported in bringing forward this Clause today.

Sir John Anderson resisted the principle of the Clause which I am moving on two grounds. First, he said that production had a clear priority over distribution. I think he was right. There is no doubt that in 1945 the essential thing for this country was to re-establish the volume of production. There were very few difficulties in selling anything that we could produce, and I myself agreed with him at the time. His second point was that the administrative difficulties of extending the allowance to non-industrial buildings were so great that we should not put this added burden upon the Inland Revenue. Either he or the Financial Secretary, my right hon. Friend the Member for Leeds, North (Mr. Peake), I forget which, told us that the introduction of P.A.Y.E. was causing such a burden of work that we ought not to go further than he did in his original Bill. That, I think, was also a sensible point.

The administrative difficulties which he talked about then—and I have no doubt we shall hear of them again today—were. for instance, the difficulty of dealing with a shop which is also a dwelling house; the difficulties of defining what is a hotel and what is a boarding house. Also there would be, no doubt, difficulties in discovering whether a building is 50 years old, and what was the original cost of a shop that was built in 1901. All this we fully admit, but we do not think the difficulties are by any means insuperable. Sir John Anderson was right to stop where he did at that time, and I made two or three speeches during the debate on that Measure in modest support of what he was doing. He was right because production was of such vast importance, and also because it is a sound principle to introduce large reforms by stages. If the present Minister of Health had followed that principle with the National Health Service, we should have a better and cheaper Health Service today. Although Sir John Anderson had my full support at that time, he did not say that the restriction he was putting upon this allowance was something which he considered should be final.

4.0 p.m.

In the last five years the Government—and I think the Solicitor-General himself—have argued as though this restriction of the allowance to industrial buildings was something of a sacred and untouchable principle, and they have often based their arguments on the words of Sir John Anderson at that time. Now that is a complete misconception, as I can very easily show by quoting a few words used by Sir John Anderson on 27th April, 1945. He said:
"I submit to the Committee that hon. Members must really make up their minds whether they are prepared to have this, which everyone admits is good so far as it goes, and be content for the time being to stop there."
At that point in the Debate Sir George Schuster intervened and put this point to the then Chancellor of the Exchequer:
"If I could get from my right hon. Friend an assurance that he recognises the principle, and that we are merely being asked now to take a first step, an extension of which may perhaps be considered later, then, speaking for myself, the whole position is changed."
Sir John Anderson gave him that assurance, and the Debate ended with these words from Sir George Schuster:
"I am satisfied with that. We have established the case, and I beg to ask leave to withdraw the Amendment."—[OFFICIAL REPORT, 27th April, 1945; Vol. 410, c. 1181-2.]
The principle of that Amendment was precisely the same as that contained in the new Clause which I am proposing today. I have troubled the House with this little matter of history because it is not right to argue that in the beginning this was considered a final settlement of the allowances upon buildings.

Where are we now? We are in a different position than we were in in 1945. Production has almost caught up with demand; salesmanship is now of supreme importance; the servicing of our goods is one of the ways in which we shall maintain the markets that we got very easily in the early years after the war; and I think the whole House would agree that the hotel position is acute. We know that the hotel position is acute, and to realise its importance we have only to think of 1951 and the Festival of Britain.

Therefore, my view is that the reasons which were good in 1945 for stopping at industrial buildings no longer hold, and I ask the House to look at this as a sensible proposition designed both to assist the earning of foreign exchange and also to reduce the final cost of goods to the consumer. There is no doubt at all that many of our shops are old-fashioned; many of our hotels are old-fashioned, and we should be wise to encourage a "scrap and build" policy. As there was no logic in 1945 in giving an allowance to one part of the whole chain of costs of production, so there is no logic now, and I hope that in moving this new Clause we may have the general support of the House.

I beg to second the Motion.

It seems to me that this is one of those matters which so often arise in the course of a Finance Bill, where there is a principle generally accepted by both sides of the House and yet difficulties of practice are raised by the Government spokesmen. I think there must be agreement on the principle, which is surely this: that where any capital asset is used up in the course of earning a profit, that profit is not a true profit, and in order to ascertain the true profit a deduction must be made equivalent to the amount of wastage of the capital asset. That principle was applied by the 1945 Act to industrial buildings but not to commercial buildings, and I do not think anyone could defend its restriction to industrial buildngs on any grounds of principle or theory. It can be defended only on grounds of practical difficulty.

The two arguments of practical difficulty which have been advanced in the past are those to which my hon. Friend the Member for Chippenham (Mr. Eccles) has referred. First, there is the question of what Sir John Anderson called priorities, and secondly, there is the question of practical administration. On the question of priorities, I would argue that there has been an undoubted shift between 1945 and 1950, between the emphasis on physical production and the emphasis on costs, and particularly distributive costs, and also the emphasis on the importance of services—commercial services, hotel services, and so on—to our balance of payments. I would ask whoever replies for the Government to give some estimate of the amount that this new Clause would cost the Treasury, because that will assist the House in arriving at some estimate of the priorities involved.

Certainly it is true that since 1945 the question of the cost of living and the cost of goods has acquired very much more prominence. We have heard many speeches from hon. Members opposite about the importance of reducing distribution costs, and obviously one of the best ways of encouraging a reduction in the costs of distribution is to encourage improved distributive equipment. After all, equipment is needed in distribution, perhaps not so much, in degree, but certainly as well as in production. Indeed, if rumour and the "Sunday Observer" are accurate, the question of reducing distribution costs will be one of the major appeals to be placed before the country by the party opposite at the next General Election. Well, here they have a wonderful chance of proving that they really mean what they say by a practical measure designed to assist in the reduction of distribution costs.

The second practical objection is based on the difficulty of distinguishing between, for example, the part of an individual building used for dwelling purposes and the part used for shop-keeping purposes. I wonder whether that objection has quite the same force now as it had in 1945? Is it not true, for example, that on a number of occasions it is necessary to distinguish between the value of the shop part of the premises and the value of the dwelling part of the premises for the purposes of the Rent Restrictions Acts? If that can be done for those purposes surely it can be done for purposes of depreciation allowances.

If the objection is based, not on the difficulty of doing it at all, but on the amount of work involved in doing it for all the shops in the country, will not that problem have been made simpler by the new centralised arrangements for the valuation of property by the Inland Revenue themselves, which are being introduced as a result of recent legislation? On those grounds, it seems to me that the practical objections to the extension of this unassailable principle have diminished very much in force since 1945, and for that reason I second this Motion.

I wish to support this new Clause, so ably proposed and seconded by my hon. Friends. Hon. Gentlemen opposite make frequent use of the hotels in my constituency, and have shown their appreciation of Scarborough, so they will not be surprised if my interest is particularly in the hotels' participation in this new Clause, as that is the chief industry in the constituency I represent. Hoteliers have to spend a lot of money on equipment and on modification and modernisation of their buildings if they are to maintain their position, because they are dependent upon constant variations in public taste, and the smaller hotels often consist of converted houses which must continually be altered and improved to be brought up to date.

The hon. Member for Chippenham (Mr. Eccles) referred to the difficulties which the hotel industry is in today; and that is very true. There is a contraction to some extent in public spending which they are unable to offset by any drastic reduction in their own expenditure. Wages used to take about 12 per cent. before the war of their gross receipts. Today, wages are taking about 25 per cent. The Catering Wages Act has added, not only in wages but in the necessity for extra staff, a very great deal to the expenses of hotel-keeping. Unlike shops which can buy equipment free of tax, they have to pay Purchase Tax on all they buy. For all these reasons, it is very difficult for hotels to reduce their expenditure and to increase their net profits so that they can pay out of net profits for these improvements.

Bearing in mind what a great contribution the hotels can make in obtaining foreign currency through the tourist trade, and the necessity of seeing for that purpose that they are really up to date, I add my plea that the Financial Secretary will consult with the Chancellor of the Exchequer to see whether sympathy cannot be given to this very important industry.

I should like to support the plea for the hotel industry. I make it a practice when I see United States citizens on a visit to this country—and I travel with them a good many times—to find out what sort of time they have had, how they have enjoyed themselves, and whether they have been comfortable. As soon as one gets to know them a little, they generally come out in the course of conversation with some criticism of our hotels; and there is no doubt that, generally, the standard of comfort and luxury demanded by the visitor and tourist in the United States is higher than we have here. United States visitors are also apt to say that hotels on the Continent give a better standard of comfort than our own.

When I meet hoteliers and managers in this country and ask them how it is that they cannot improve their hotels and bring them up to something like the standard of those in France or the U.S.A., the answer is "Taxes and the fact that depreciation is not allowed to us." I am quite certain that any help that the Chancellor of the Exchequer can give to our hotels will probably mean an increase in the amount of dollars spent in this country, which is most essential to us, and greater friendship and greater ties between the United States and ourselves.

4.15 p.m.

I want to add my plea to what has been said on this subject. I hope that the right hon. and learned Gentleman will have something favourable to say on all three aspects of this question in relation to shops, offices and hotels. There is no doubt that today the retail trade is suffering under a very heavy burden and finding it extremely difficult to distribute the goods produced from the factories. Any easement of these burdens which can be given will, I think, add to the prosperity of the country.

Apart from the retail trade, I want to refer particularly to the hotel industry because that is one body on which it is admitted on all sides of the House we depend very largely to increase our dollar earnings. It is unnecessary to repeat the arguments which have been used on this subject. There is no doubt whatever that the hotels of this country are suffering from heavy burdens, particularly in relation to Purchase Tax, because a large number of things which it is necessary for them to buy are subject to very heavy Purchase Tax. They are suffering from other disabilities which not all other industries have, particularly as the result of the Catering Wages Act and the regulations made thereunder. That legislation has thrown a discriminatory burden on that industry, and it is rather surprising that an industry to which the Government attach so much importance is selected for treatment in this way.

The principle, as the hon. Member for Chippenham (Mr. Eccles) has pointed out, has been admitted in relation to factory production. I hope that the right hon. and learned Gentleman will realise that in the tourist trade, which has such an important part to play in our economy, the hotel is the factory, and if this benefit is already extended to the factory, it should equally be extended to the hotel which plays no less important a part in our prosperity.

I do not want to repeat the arguments already used, but I would remind the House that 10 days ago we devoted a whole Friday to a Motion moved from the other side of the House which met with very general approval. The purpose of it was to ask His Majesty's Government to give better facilities to the hotels, boarding houses and the holiday industry generally. It was not then possible for the Government to make any statement which would give any satisfaction to those interests. They were unable to indicate that they would reduce Purchase Tax, ease the burden on the industry, facilitate transport or do any of the other things which we ask them to do. They were unable to indicate a quick settlement of the catering wages difficulty which is familiar to all of us.

The day ended with an appeal from all sides of the House to the Government, in the words of the Motion," to facilitate this industry," and to facilitate holidays, and that, of course, meant facilitating the operations of all those engaged in the industry. As they were unable to do anything to meet the wishes of the House and particularly the wishes of their own Members on that occasion, cannot they now take advantage of this opportunity to do something?

In all our constituencies there are many small distributors on whom this country must rely to help in the even flow of trade. Many of them sink the whole of their capital in a small shop. They want to keep abreast of the time in order to help the local community to buy their goods in pleasing surroundings and as well as possible. Yet they are not helped by the Government, and there are some who are unable to raise sufficient capital to buy their shops. All they can do is to buy the leases of the shops, and as they are unable out of their gross profits to provide for depreciation for that purpose, they have to do it out of net profits, and when the lease comes to an end they have nothing left. I hope that the Government will take that into consideration.

The principle on which the 1945 Act was fixed was very fully canvassed during the discussion upon it in the 1945 Parliament. The hon. Gentleman who moved this new Clause referred to certain passages in speeches which were made in that Debate. He conveyed the impression that the matter had been left rather in this way: That it was on the whole illogical to select these industries for initial relief and to exclude commercial buildings, and the Chancellor of the Exchequer found difficulty in defending the position he had taken up. If that was the impression that the hon. Gentleman intended to convey, I do not think it was a fair summary of what took place. The then Chancellor of the Exchequer, Sir John Anderson, adopted a very clear principle, which I should like to read out in the words in which he expressed it. He took as the basis of his argument these remarks, which he uttered on the Second Reading of the Income Tax Bill:

"Let me, at this stage, say quite frankly, that I know there will be some disappointment that the new allowances for buildings are to be confined in general to buildings used in productive industry and that, for example, offices and hotels are excluded; but I made it quite clear in my Budget speech of last year that my proposals would be deliberately framed in this way, in order to benefit productive and creative industry. The reasons that have led me to make this distinction will, I think, commend themselves to the House. I propose to the House that we should, as an act of conscious policy, deliberately weight the scales in favour of those forms of capital investment which are most necessary to the industrial strength of the community. It is productive or creative industry that provides in the main industrial employment and is the foundation of our national prosperity."—{OFFICIAL REPORT, 14th March, 1945; Vol. 409, c. 258-9.]
In framing Section 8 of the 1945 Act, he worked upon that basis, saying that the industry which was entitled to the allowance was the industry which could be stated to be part of the manufacturing, processing or extractive industries or part of the transport, water and power industries. He did not leave the matter in any uncertainty. He was not hard pressed to justify something which was an illogicality. When he said this it was broadly speaking true, and I submit it is just as true now. [HON. MEMBERS: "No."] Broadly speaking, it is.

I am not suggesting that there are not certain changes in the situation, but, broadly speaking, it is true to say that it is the re-equipment of those industries which is still most pressing. I do not believe that any Member of the House would differ from me if I say that, as between new industrial buildings, such as mills, factories, power stations and so on, and commercial buildings, such as shops, offices, hotels and so on, there cannot be the least doubt that it is the former, which are by far the most important in our national prosperity and in the building up of our national resources. That was true in 1945, and that was the reason which actuated Sir John Anderson then It is still true now.

I quite agree with the hon. Member for Chippenham (Mr. Eccles) that salesmanship now is more important, because there are much more things to sell but—and this is the whole point which this Debate raises have we reached the stage at which we can and ought to depart from the principle that our major effort must still be concentrated in the equipment of our basic industries?

If the hon. Gentleman will allow me to finish my argument I will give way in a moment. As I was saying, the question is, ought we to depart from the principle that our major effort must still be concentrated on the re-equipment and capitalisation of those basic industries to which I have referred? That should be the first charge on our resources. We have gone a long way to re-equip and recapitalise, but we have still a long way to go, and I would urge upon the House that the moment has not arrived when we can properly and with due regard to the national interests, extend allowances to the large extent which it is proposed in this new Clause.

The Clause would have the result of extending the allowances to shops, showrooms, offices, hotels, and even things like cinemas. These are all very necessary in themselves, and most of us are cinema-goers, but the question is still one of priorities. It was proposed in the Debates in 1945 that the allowance should be extended to hotels. The hon. Member for Chippenham and some of his hon. Friends slightly misconceived the reason which was given against the proposal to extend allowances to hotels. It was not so much an administrative difficulty. It was suggested that the reason we should extend the allowances to hotels is that hotels were very important dollar earners, and that is particularly the case now. The difficulty is that if this is applied to hotels, to which foreign visitors with dollars in their pocket resort, it is very difficult administratively to end it there.

Indeed, as a matter of justice as between one hotelier and another it is not possible only to give the relief to those hotels which entertain foreign visitors. It has to be extended generally, and to the boarding house as well as everybody else. Therefore, as a matter of justice between one hotel proprietor and another, the relief would have to be given to all sorts of hotels, including boarding houses, and if one is committed to that, then one is committed to the question—has the time arrived when the function for which all hotels generally stand—not only the dollar earners but everyone of them—is such that it has reached the necessary high order in the list of priorities?

This is a fallacy which the Government have used in argument before. Is it not a fact that the more the relief that is given to these hotels, the more hotels will qualify to attract dollar tourists. This is the sort of relief which a certain number of hotels, which do not attract dollar tourists now, require in order to equip themselves to attract dollar visitors.

I promised earlier on to give way to the hon. Member for Scarborough and Whitby (Mr. Spearman) and I will do so after I have answered the hon. and learned Member for Hove (Mr. Marlowe). If this relief is given it has to be extended to boarding houses and to such other establishments, which would be most unlikely ever to be used by foreign visitors. The hotel industry is a very large one and we could not limit any relief in the sense suggested. I quite agree that if the relief is extended more hotels would qualify in point of attraction and amenity to draw foreign visitors, but a very large number of them—and I do not know how many roughly but very much more than has been suggested, because there are a limited number of foreign tourists to this country—would never entertain foreign tourists with hard currency in their pockets.

If one were to concede the principle that hotels should come within the purview of relief, might we not have to go much further than the national interests could possibly justify at the present moment? I am not suggesting that Sir John Anderson, in the course of his speech, meant to imply that this was a final or immutable principle. It was not so at the time, and I am not suggesting now that it is a principle to which we must always adhere hereafter. The point that I am putting to the House is that the moment has not arrived yet when we should diversify the number of buildings which qualify for relief by extending them in the very large sense which this new Clause proposes.

The House should remember that so far as offices are concerned, they are already to some extent within the purview of the Act, because an office which forms part of an industrial building qualifies for the allowances, if the cost of its construction does not amount to more than one-tenth of the cost of the construction of the whole of the building. So office accommodation in industrial buildings is, subject to these limits, accommodation which already qualifies.

I was asked what the cost would be. If the Act were extended in the sense proposed, we think the cost would be in the region of £10 million, which is a substantial amount, but the basic answer which I make to this is not that this is one of administrative difficulty or any- thing of that sort but whether we can still afford the relief mentioned. The House must bear in mind that there has been very substantial increases in the initial allowance in the case of industrial plant. We have gone very far, but we cannot afford the relief in the wide sense that this Clause proposes, because the first call upon our national assets in the matter of capital re-equipment must be industrial buildings in the productive and creative sections of industry. It is for that general reason that I regret to say that we feel we cannot accept this Clause. I promised earlier to give way to the hon. Gentleman the Member for Scarborough and Whitby, and I will do so now.

4.30 p.m.

I thank the Solicitor- General very much for his courtesy, which we are accustomed to expect from him. I want to ask him whether he has had in mind the amount of labour that would be saved in the modernisation of hotels, which would thus release labour for other purposes. Shortage of labour is the great deterrent to production in the country today.

We have borne that point in mind. Of course, if we afforded the relief and there was large- scale equipment of hotels, that would absorb a large amount of the labour in the first place. Wherever we could afford relief, it would eventually have the effect which the hon. Gentleman indicated. All those matters have been borne in mind. I have advanced reasons which,.at the moment, seem to us to lead inevitably to the view that the proposed new Clause cannot be accepted. I do not say that they are reasons which will always prevail or that there are the same conditions now as existed in 1945. The question is whether conditions have so changed that we can, consistently with the national interest, depart from the principle, which was to prefer the basic, creative and productive industries. I suggest that that point has not arrived.

The Solicitor-General is always very courteous but I do not know why he was put up to make that speech. It was not on a legal point at all. The right hon. and learned Gentleman talked about "this relief." That is being subsidy-minded. We are discussing Income Tax.

We are discussing additional allowances in computing profits for Income Tax. I should have thought it was generally described as a relief.

That is using the term "relief" in the sense of a subsidy. Income Tax is a tax on income. In arriving at a man's income we should deduct all the charges against him. What Sir John Anderson said in 1945 or what Gladstone said in 1867 has no bearing on the matter. Sir John Anderson thought it was right to grant a kind of subsidy for certain branches of productive industry. The attitude of the Solicitor-General is that the time has not yet arrived to give this relief to other sectors of industry.

The complication of the Income Tax system arises from the difficulty of defining income. There are marginal cases. Certain charges against a business would be allowed if the proposed new Clause were passed and which are disallowed now. In other words, we are taxing income which is not true income but is hypothetical income. As far as is humanly possible a man or a corporation ought to be taxed on the true income and not on some creation of the law.

The Solicitor-General talked about hotels to which people go with hard currency in their pockets. I do not know what my hotel would do if I tried to pay my bill in dollars. They would not know what to do with them. They would probably ring up the Treasury. The black market rate in New York is different from what it is here. These matters ought to be argued on principle, and the principle is that a man ought not to be taxed on something which is not income but is an expense. That is the fundamental principle behind this Clause, which has been rejected. There are 10 million reasons, and each of them counts for £1.

I agree with my hon. Friend the Member for Croydon, East (Sir H. Williams) that it is very strange how the Solicitor-General is put up to deal with economic problems. The Debate has largely turned on the tourist trade, and I should have thought that that was more within the purview of the President of the Board of Trade than of anybody else.

The right hon. and learned Gentleman did it very well.

He always does these things very well, but they do not always satisfy us. The argument is very nicely balanced on the proposed new Clause. I listened to the Solicitor-General with much attention to see what line he would take.

I very well remember the Debates in 1945 in the time of Sir John Anderson. Time has marched on. That is two Parliaments ago now. The principle which the then Chancellor of the Exchequer sought to introduce into legislation was one of priorities, the first of which was, broadly speaking, of relief for creative and manufacturing industry. In April, 1945, when the war was still going on, that was obvious. Any reference to the tourist trade was not well treated at that time by hon. Gentlemen opposite. If they would like to be really amused I suggest that they should read a speech by the hon. Member for Aberavon (Mr. Cove) on 27th April of that year, when he made use of these phrases after my hon. Friends had been talking about the need for developing the tourist industry after the war:
"It shows a complete lack of virility"—
I do not know why it should show that—
"to depend upon foreigners coming to our hotels in order to benefit foreign exchange and the standard of life of our people. What nonsense. What a defeatist attitude to take towards the future."—[OFFICIAL REPORT, 27th April, 1945; Vol. 410, c. 1197.]
We have had nothing but appeals in later years from the Government that tourists should come here. We are glad to see that they are coming in increasing number.

The Solicitor-General must not fall into the error of thinking that it is only a matter of the large and luxurious hotel. We find more and more that visitors are not the millionaires of years ago but people of medium or almost lower range incomes who want to come and study this country and who, because of the nature of their income, mut live in humble hotels or even in boarding houses. Let us not try to make a distinction between one kind of hotel and another kind which will receive visitors.

Although the Debate has largely turned on the question of hotels, of course, as the Solicitor-General has pointed out, the proposed new Clause is much wider than that. It touches offices, shops, showrooms, cinemas and a variety of other buildings. That is what brings me into some personal difficulty. I wish we could find some way of helping the hotel industry, because that is one of the good ways of earning foreign exchange. We all agree from our travels up and down the country—there is no hon. Member who does not have to stay in a hotel at some time or other in the course of his public duty—that there is room for considerable improvement in our hotels. That is not the fault of the individual hotel owners but of the run-down during the war and of the difficulty of re-equipping and modernising them in keeping with what is required in 1950, which is not what was required in 1920, 1910 or 1800.

The House must be very careful not to go too wide in present circumstances. That is why I was rather surprised when the right hon. and learned Gentleman estimated that the cost of the proposed new Clause would be £10 million in the first year. As I understand it, the rate is 10 per cent. in the first year and therefore £10 million would represent a building programme of £100 million in the first year, which I should have thought highly improbable. However, the right hon. and learned Gentleman gives that figure. I merely query it, but I do not put my argument on that.

I will give my view. I am afraid that it may displease some of my hon. Friends, but I ask them to consider this. When my hon, Friend the Member for Chippenham (Mr. Eccles) was saying that it was wise to encourage a "scrap and building policy" now for shops and hotels, I agreed. I should like to encourage a "scrap and building policy" now for shops and hotels in order to modernise them, but when I reflect upon the complete failure of the Government to deal with houses I am left in some doubt whether at the moment we ought to go too far in encouraging the provision of new shops and new hotels. Indeed, I know that we ought to concentrate far more on the building of houses.

That is, of course, within the scope of the Minister of Health and not that of the right hon. and learned Gentleman, but it brings up in a very vivid form, if I may call that in aid to the argument, the question of what are the right priorities. While, again, we all admit that just as better hotels are more necessary now so is salesmanship more important than it was in 1945, although I am not so sure that it is salesmanship at home which is so very much more important. It is selling our goods overseas which is the vital issue today, and probably shops at home can manage for a little longer if as a result of their holding back their claims and our not passing the Clause today more can be done for the housing of the people.

The right hon. and learned Gentleman did not close the Government's mind to the problem. As I understood it, he was merely saying that whereas in 1945 it was right in his view, as it was in our view—and we were all working together in the same administration—to limit the first benefits of the Act to creative industry, so now the time had not yet come for a relaxation, but I do not think that he said anything to demonstrate that in the view of the Government it should not be done sooner or later. That is certainly our view. We should like to see this extended as soon as may be, but whether this is the right moment or not I do not know. One can dogmatise on these matters, but my feeling is that it would not perhaps be right this year to insert a Clause like this in the Finance Bill.

I should like the matter to be kept very much in mind, and I should like the Government to say whether there are other ways in which they can assist the hotel industry in particular. As my hon. Friend the Member for Morecambe and Lonsdale (Sir I. Fraser) said, we had a Debate on this subject within the last fortnight and nothing at all was forthcoming about it from the Government's Front Bench. If the Government would devote some attention to the main objective which my hon. Friends have had in mind in their speeches today, which is to help modernise the hotel industry so that it may be able to attract more tourists, and if they can find some other ways of dealing with this—there are other possibilities but it would not be in order for me to discuss them—and, above all, say that they intend to try to seek some alleviation of the industry's difficulties within the next 12 months, I should be satisfied to leave the matter where it is.

However, I am certain that the time is not far distant when a Clause on these lines will, in common fairness, have to be put in the Finance Bill. It was not that Sir John Anderson turned it down: he merely said that it was not appropriate in 1945 when we had other problems and other priorities. My opinion is that in view of the deplorable handling of the housing situation I should not like by inserting this Clause to give the Government a means of blurring their responsibilities or their failure in that direction.

Therefore, let us all accept what the Solicitor-General has said, not that he turned us down and not that he thinks this is wrong, but merely that he does not think that it is right to do it this year. If he persuades the House in that direction, which he may well do, I think that the least the Government can do is to put on their thinking caps, if they have any, and see what they can do to help the hotel industry during the next 12 months, because that is really at the bottom of the arguments which my hon. Friends have put forward. I hope that my hon. Friends will not press the Clause today beyond the point to which they have carried it.

4.45 p.m.

I am in some confusion about this matter. We heard elaborate arguments adduced in the interests of hotels and shops by the supporters of the right hon. and gallant Gentleman the Member for Gainsborough (Captain Crookshank) and then at the close of the race he tells us that he differs very considerably from them. I do not know whether his hon. Friends are persuaded by his eloquence and wish to withdraw the Clause, but it seemed to me that there was much cogency in what the right hon. and gallant Gentleman had to say. While I would not agree with him that the Government's housing policy has been so lamentably poor as he seemed to imply, I would agree with him if he meant that we should devote our energies and resources primarily to the building of houses rather to the developing of hotels and shops.

Several hon. Gentlemen said that the poor condition of our hotels was due to the heaviness of taxation. These complaints about the inferior condition of our hotels which are said to come from overseas visitors are a very hardy annual. I remember that my compatriot, the great novelist, Arnold Bennett, compared the miserable conditions which he saw in hotels in this country with the conditions in France and other parts of the world. These complaints cannot be firmly based on the failure of the Government to reduce taxation in this way.

I agree that the time has not yet arrived when productive and creative industry has done all the work that we wanted it to do and when we should switch over to the modernising of our shops—the hon. Member for Chippenham (Mr. Eccles) used the word "scrap"—and when we should go in for a big capital expenditure programme at the seaside or elsewhere. Certainly, a great deal of improvement is necessary in our hotel and lodging accommodation, but it is not a new state of affairs. The people in the trade are doing pretty well in terms of income today—many of them are doing better than they have ever done before—but they are not doing as well as they might do in present circumstances.

Despite the shadow-boxing of the Opposition, which is done for obvious purposes, I hope that the Government will stand their ground and not give way.

Question put, and negatived.