House of Commons
Wednesday, November 3, 1915
Treaty Series (No. 11, 1915)
Copy presented of Agreement between the United Kingdom and France concerning the Exchange of Money Orders between the British and French Possessions and Protectorates in West Africa; signed at London, 22nd September, 1915 [by Command]; to lie upon the Table.
Government Chemist
Copy presented of Report of the Government Chemist upon the Work of the Government Laboratory for the year ended 31st March, 1915, with Appendices [by Command]; to lie upon the Table.
War
New Writs
Members Killed in Action
For County of Lancaster (South-East) (Heywood Division), in the room of Captain Harold Thomas Cawley, killed in action.—[ Mr. Gulland. ]
For Borough of Cardiff, in the room of Lieut.-Colonel Ninian Edward Crichton-Stuart, commonly called Lord Ninian Crichton-Stuart, killed in action.—[ Lord Edmund Talbot. ]
For County of Middlesex (Uxbridge Division), in the room of Lieut. the Hon. Charles Thomas Mills, killed in action.— [ Lord Edmund Talbot. ]
Oral Answers to Questions
Questions
Baltic Operations (British Submarines)
asked the First Lord of the Admiralty whether there has been received any report of operations in the Baltic from any British officer of a British vessel operating there under Russian command; if so, whether such Report has been made through the Russian commander or otherwise; and whether he can explain the delay of making known officially in this country reports of British war vessels' achievements which have been officially announced abroad?
The assumption underlying my hon. Friend's question that the reports received from officers in command of British submarines operating in any naval theatre of war can with advantage be made public is incorrect. These reports are in the main technical, and must of necessity be regarded as confidential.
As I have already explained to my hon. Friend, the Russian Government announce officially and, as far as I am aware, without delay, what can properly be made public as to the operations of our submarines in the Baltic, and these announcements appear almost concurrently in the British Press.
Can the right hon. Gentleman say what was the number of the submarine that sank the "Prinz Adalbert"?
No.
Boy Scouts (Coast Watching)
asked the Secretary to the Admiralty what is the pay granted to boy scouts employed on coast watching duty; whether they are in receipt of any ration allowance in addition to their pay; and, if not, whether he will consider the question of granting them some allowance of the kind?
A grant of 14s. a week for each boy employed is made to the Boy Scouts Association, the expenditure of the Grant being left entirely to their discretion. The Grant covers the cost of food and maintenance ( e.g., clothing, pocket-money, etc.), the association making all arrangements in connection with the drafting, clothing, and maintenance of the boys. The Admiralty have also accepted liability for medical attendance in cases of injury or illness attributable to the employment of the boys in assisting the Coastguard, and, where possible, have provided housing accommodation for them.
I understand each boy gets 2s. a day?
No, the Grant is 14s. a week, and the expenditure is left entirely to the discretion of the association.
Contraband
asked the Under-Secretary of State for Foreign Affairs whether his attention has been called to the agitation in the United States of America against the action of our Prize Courts in respect of cargoes of meat products as being based on Orders in Council and not on international law; and whether he intends to regularise our position and satisfy American opinion by proceeding on the lines of extending our list of absolute contraband to cover all edible meat products?
I understand that some of those whose goods were condemned by the Prize Court as having been intended for the German Government and its armed forces have been endeavouring to create an agitation against the decision, but as an appeal is pending the point is not suitable for diplomatic or other discussion at this stage. I would, however, point out that, as to three out of the four ships, the judgment proceeded on the assumption that no Proclamation applied at all, and that in all four cases the President held that the goods were condemnable as contraband in accordance with the established rules of international law, independently altogether of the Proclamation. The agitation is, therefore, founded on a misapprehension as regards the Proclamation, and there does not seem to be occasion to take the action suggested in the question.
Am I to understand that all such goods referred to in the question are now declared to be absolute contraband of war?
No, Sir; they are conditional contraband of war, and were condemned on that ground.
asked whether, when any article is placed on the contraband list in Great Britain, it is simultaneously placed on the contraband list of all our Allies in this war?
Additions to contraband list are made, so far as possible, by mutual agreement between His Majesty's Government and the Governments of France, Russia, and Italy. Whenever it can be arranged, the additions take effect simultaneously in the four countries.
Is everything that is declared contraband in this country always declared contraband in Allied countries as well?
I think the hon. and gallant Gentleman may be assured it is so, but perhaps if he requires a further reply he will put down a question.
Queensland Meat Works Bill
asked the Secretary of State for the Colonies whether he is aware that the Government of Queensland is promoting in the Queensland Legislature a Meat Works Bill giving power to that Government not only to appropriate all meat works there but to extinguish the rights of owners and mortgagees without compensation; and whether the Imperial Government asked for a Bill on these lines?
I have seen a copy of the Bill referred to. It is, I understand, intended to give the Queensland Government greater powers with regard to the control of the meat supply than those which they have hitherto possessed and have been exercising, at the wish of, and in consultation with His Majesty's Government, but it was not introduced at the request of His Majesty's Government.
Army Headquarter Dispatches (Members of Parliament)
asked the Under-Secretary of State for War what remuneration is paid to those Members of Parliament who carry dispatches to and from headquarters?
They are paid as staff captains—that is to say, they receive £400 a year from Army funds.
Is the right hon. Gentleman aware that this is done for nothing by those who carry dispatches to the Navy?
No, Sir.
Recruiting
Position of Clergymen
asked the Under-Secretary of State for War if clergymen and ministers of religion of military age are being canvassed for the Army under the new recruiting scheme?
asked whether Lord Derby's letter is being sent to all clergymen of all denominations who are eligible so far as age is concerned?
I think the correspondence between the Archbishop of Canterbury and Lord Derby, which has already been published in the Press, will explain the position. I may add that Lord Derby has personally seen representatives of other denominations, and has explained the position to them.
Can the right hon. Gentleman say whether clergymen of all denominations, including Roman Catholic and Anglican, have got those letters, and are unstarred, as well as Scottish Presbyterians?
Yes, Sir.
Married Men
asked whether, in the event of Lord Derby's recruiting scheme being unsuccessful, in the sense that a considerable proportion of eligible single men fail to offer themselves, compulsory service will be introduced and substituted for Lord Derby's scheme before the married men who have volunteered under the scheme are called up?
I think this point was fully dealt with in the statement made yesterday by my right hon. Friend the Prime Minister.
Will the right hon. Gentleman give an undertaking that some statement shall be issued from his Department, definitely setting forth that the men concerned will not be called up in the event of some other scheme being necessary to supplement the present one?
As far as I understand my hon. Friend, he would desire that a statement should issue from the War Office, emphasising the statement of the Prime Minister yesterday. I will consult with Lord Derby and see if that can be done.
Agricultural Labour
asked the Under-Secretary of State for War if his attention has been directed to a circular, dated the 28th September, 1915, signed by the President of the Board of Agriculture and addressed to farmers and occupiers of land in England and Wales, with reference to recruiting amongst the agricultural population; and if the War Office, before sanctioning the arrangement referred to, considered its effect upon recruiting in rural districts?
Yes, Sir; my attention has been called to the circular in question. As I stated yesterday in reply to the hon. and learned Gentleman the Member for York, arrangements are being made by which men improperly put on the starred list will be transferred to the unstarred list. My Noble Friend the Secretary of State of course recognises to the full the necessity for keeping farmers supplied with essential labour.
Will the right hon. Gentleman say who has been responsible for this starring?
The starring was undertaken by a Joint Committee of the Department of Agriculture, the Local Government Board, and the Board of Trade.
Police Battalion
asked the Home Secretary the total number of police in London and the various forces of the country, the number of those who have enlisted, and the number of men of military age who remain; how many of those willing to serve have not been allowed to do so; whether he intends to provide, in the case of London, for the liberation of these men and to advise that the same policy be followed in the rest of the country and to recommend that a larger number of special constables not of military age should be enrolled to permit the enlistment of those desiring to serve their country at the front; and, if so, whether he will arrange with the War Office that a special battalion of police officers should be formed?
In the County and Borough Police Forces of England and Wales, out of a total strength of 36,656, 8,008 had joined His Majesty's Forces up to the 20th Sep- tember last, and since then, I believe, several hundreds more have enlisted. In the City of London, out of a force of 1,162, 304 have joined the fighting forces. In the Metropolitan Police, out of a total of 20,834, 5,437 have either joined the Navy or Army, or are now serving under the War Office or Admiralty, on intelligence work, or in the guarding of dockyards, military stations, stores, and munition works. The Home Office has always advised that as many constables should be allowed to enlist as could be spared, consistently with the carrying on of essential police duties, including the numerous and responsible duties imposed on the police in connection with the War. I believe that in some forces more men can still be spared, and I am taking steps to promote their enlistment; but in most cases the limit to which the withdrawal of men can be safely carried has been reached, or nearly reached. This is peculiarly the case with the Metropolitan Police, whose duties in connection with the War have been specially heavy, and who must always retain a reserve of men ready for the special demands which have been made by the War Office or the Admiralty. Their numbers are now so reduced that in a district with a population of 7,500,000 less than 2,000 men are available for street duty at any hour during the day, and I fear it is impossible to permit further withdrawals. The question of forming a special police battalion has been discussed with the War Office more than once, but the decision was against the proposal, among other reasons, because of the large proportion of constables who are specially qualified to provide non-commissioned officers for the battalions which they may join.
Starred Forms
asked the President of the Board of Trade if he will lay before the House the instructions drawn up by his Department, in consultation with the Ministry of Munitions and the Board of Agriculture, under which the starring of the forms for men of military age has been carried out; and whether, in framing such instructions, he has been guided solely by military considerations and the production of munitions and equipment, or whether he has had regard to the necessity of continuing commerce and industry for the sake of preserving the financial stability of the country?
I am not in a position to lay before the House the instructions referred to, but I can assure my hon. Friend that, in dealing with this vital and difficult matter, His Majesty's Government fully recognise the importance for the purpose of the successful prosecution of the War of retaining in civil employment not only the men needed for the production of munitions of war, but also such irreplaceable men as are indispensable to the carrying on of essential industries on which the maintenance of the economic strength of the country depends.
To whom have the instructions been issued?
I should like to have notice of that question; I am not quite sure of the precise title of the official.
Enlistment Statistics
asked the Prime Minister whether the figures for enlistment in Ireland, announced by the hon. and learned Member for Waterford at Dublin, were official figures; and whether he can give corresponding figures for Scotland?
My right hon. Friend has asked me to answer this question. The hon. and learned Member for Water-ford explained in his speech yesterday the source of the figures he used. The issue of official figures is not contemplated in the case of either Ireland or Scotland, or England or Wales.
May I ask whether the figures which I gave in my speech last night were not quoted the other day at a conference in Dublin by the General Officer Commanding the troops in Ireland?
I dare say that is so. If my hon. Friend says so, I quite accept the statement.
Will my right hon. Friend supply for Scotland on the same kind of authority figures relating to Scotland?
I think my hon. Friend had better put that question to the Secretary for Scotland?
Will the right hon. Gentleman supply similar figures for Wales?
It is part of the policy of the office I represent not to give figures for individual portions of the Kingdom, and it is very undesirable.
Why is Ireland picked out for special treatment?
I think the answer to that question was supplied by the hon. and learned Member for Waterford.
Is it the fact that the general commanding in Scotland would be able to give similar unofficial figures to those given by the general commanding in Ireland?
Lord Derby's Scheme
I desire to ask the Prime Minister whether I may put down my question again on the Notice Paper: To ask whether the same information can be given to the House with regard to enlistment that was given to a small group of Members belonging to the Labour party?
Yes, Sir. I have no power to say what my hon. Friend should put down on the Notice Paper.
May I, as a matter of explanation, say that when the question was down upon the Paper, the Minister of Munitions, answering for my right hon. Friend, said that doubtless in the Prime Minister's speech yesterday he would bear my question in mind. As it seems to have been overlooked, may I put it down upon the Paper again?
No, Sir; I did bear it in mind.
Will the right hon. Gentleman say whether when the private information was given by Lord Kitchener to certain sections of the Labour party, the Prime Minister was not present?
No, Sir; I was not there.
May I ask whether the Members of this House who received that information about recruiting promised the Government that they would address recruiting meetings?
Questions
Aircraft Raids
asked if, under instructions from the War Office, orders to open fire on aircraft can only be given by field officers; and if in most cases the Zeppelin ships have passed out of range before the necessary authority to open fire upon them can be obtained from a major or colonel?
No, Sir. It is not the case that orders to open fire on aircraft can only be given by field officers. Any officer may order the troops to fire.
Will the right hon. Gentleman have an inquiry into this case, because I have numerous cases sent me, where airships have got out of range because there was no authority to open fire upon them?
I can assure the hon. Gentleman I have fortified myself by seeing the orders which have been issued from the War Office to the various commands. They contain the order which I have stated in my answer.
Serbia (British Troops)
asked whether any British troops have arrived in Serbia; and, if not, whether they have received orders to proceed there, and when?
Yes, Sir.
Can the right hon. Gentleman say at what date the orders were given to proceed to Serbia?
If my memory serves me right, it was the day last week when I answered a similar question in this House.
Army Senior Captains (Promotion)
asked the Under-Secretary of State for War whether his attention has been called to the block in promotion of senior captains in the Regular Army; and what steps he intends to take to remedy this situation?
I am informed that the promotion of senior captains in the Regular Army to the rank of major has been extraordinarily rapid, and I am not therefore clear as to what the hon. Gentleman means by his reference to a block in promotion. No special steps are contemplated.
Increment Value Duty
asked the Chancellor of the Exchequer (1) if he will say in respect of how many transactions the question of the payment of Increment Value Duty has arisen and the liability to duty or its amount has not yet been determined; and (2) the amount of Increment Value Duty which the Treasury estimate will be payable when the outstanding cases of liability to that duty have been settled?
I am informed by the Board of Inland Revenue that up to the present time liability to Increment Value Duty has arisen in under 2 per cent. of the occasion cases dealt with, and that of the sum of £180,000 assessed, not more than £120,000 has as yet proved collectible. The necessity for completing the original valuation as soon as possible after 30th April, 1909, to which date it relates, combined with difficulties arising out of judicial decisions, the postponement of remedial legislation, and finally the promise given on the outbreak of War by my right hon. Friend the Minister of Munitions to allow unsettled valuations to remain open until the end of the War, have resulted in an accumulation of cases. On the basis of past experience it may be anticipated that an effective claim to duty aggregating some £200,000 might emerge in about 12,000 of these cases, but so long as the factors above-mentioned continue to operate it is only possible to make partial progress. Full account of these, as of all other relevant considerations, has been taken in fixing the strength of the valuation staff.
Do I understand that a Return is made quarterly to the Treasury with regard to the number of claims outstanding, and will he issue a Return of past statements made and give the figures from all the various offices all over the country?
Can my right hon. Friend say whether there is any statutory authority for the promise given by the Minister of Munitions not to collect the duty, and, if so, is his Department acting contrary to the law?
Perhaps I had better have notice of that question.
Finance (No. 3) Bill
Excess Profits Tax
asked the number, names, and qualifications of those who are proposed to be appointed as Referees under the Excess Profits Clauses of the Finance (No. 3) Bill, and where it is proposed that they shall sit?
I hope to be in a position to give the particulars asked for before the Bill leaves this House.
asked whether, in the event of persons not being able to pay sums due by them under the Excess Profits Duty, it is proposed that such persons shall be liable to punishment for non-payment; if so, to what punishment they will be liable and if in any such case it would include imprisonment; and if their household furniture would be liable to seizure?
The Commissioners of Inland Revenue may in any case where they think fit allow the duty to be paid in instalments of such amount payable at such times as the Commissioners direct. The provisions as to recovery of duty are contained in Clause 40 (3). Under Clause 34 (3) a set-off or repayment is allowable in respect of deficiencies of profits in an accounting period as compared with the pre-war standard of profits.
Would the right hon. Gentleman be good enough to answer the part of the question as to what would be done in the event of a person being unable to pay; whether any punishment would be inflicted upon them; what the nature of that punishment would be, and whether it would include seizure of household furniture?
I can only refer my hon. Friend to the Clause of the Bill. If he will read that Clause he will see what the penalties and conditions are.
Is it intended to give discretionary power to the Commissioners of Inland Revenue?
No; discretionary power always exists.
Amalgamation of Banks
asked on what ground the Treasury Committee on new issues refused sanction to the issue of shares in connection with the amalgamation of the United Counties Bank with Messrs. Barclay and Company, Limited, although no appeal to the public for cash was involved, and it was not proposed that the shares should be put on the market till after the War; on what principles, if any, the Treasury Committee's decisions are founded; whether he is aware that discontent exists in the City about the apparent arbitrariness of these decisions; and whether he will order a Return giving particulars, in the case of each application since the establishment of the Committee, of the names of applicant companies, the countries in which they operate, the amount of capital for which sanction was requested, whether the application was sanctioned or refused, and why?
The Committee consider it in the public interest that approval should not be given for any issue of importance that could be avoided for the present unless the issue is definitely desirable for the purpose of the successful prosecution of the War. In view of the standing and wide financial experience of the Members of the Committee, I trust that their judgment will be generally accepted. As regards the last part of the question, I would point out that the information is confidential, and I may refer my hon. Friend to the answer given on Thursday last to the hon. Member for Westmeath North.
Has the right hon. Gentleman any statutory authority for the action that has been taken in this matter?
I do not think statutory authority is needed.
Income Tax (Companies in India)
asked whether the provisions of the Finance Act, 1914, making liable to Income Tax thereunder all income derived from securities, stocks, shares, and rents received in any place outside the United Kingdom, whether or not remitted to the United Kingdom, is held to make liable in like manner to such Income Tax income derived from business concerns carried on under the like circumstances, such as indigo factories in India, or whether in such cases only that part of the income derived from rents proper from indigo factories or lands is held to be liable?
The provisions of Section 5 of the Finance Act, 1914, do not apply to profits immediately derived from the carrying on of a trade or business outside the United Kingdom. They would apply to income arising from shares in companies carrying on business in India, from rents of lands or buildings used for the purposes indicated, or from securities charged on the property or the profits of the business.
Questions
Edinburgh Park-Keepers (Bonus)
asked the First Commissioner of Works whether the park-keepers employed in Edinburgh by the Board of Works have received any War bonus?
The Board, with Treasury sanction, have been able to grant an increase of wage to labourers at Holyrood, but no bonus has been granted to park-keepers either at Holyrood or in the London parks.
Does my right hon. Friend intend to consider the question of the bonus at all?
It has been considered by the Treasury, who have decided that the park-keepers do not come within the category of those who are entitled to the bonus.
Are those only entitled to bonus who have sufficient electoral influence to bring pressure to bear upon the Government?
Local Education Authorities (Classes for Soldiers)
asked the President of the Board of Education whether he can make any statement with regard to the advantage that is being taken by soldiers under Cd. 7712?
Up to the period ending on 31st July last the number of local education authorities who had instituted classes Under the Regulations referred to was sixty-two. In some cases large numbers of soldiers attended the classes. Certain classes have naturally been affected by the movement of troops from one area to another, but the Board are satisfied that there has been a substantial demand for such classes, and that satisfactory results have been generally obtained from the courses and classes held.
Dardanelles Campaign (Soldiers' Parcels)
asked the Postmaster-General if few letters and no parcels accepted by the Post Office for delivery to the troops in the Gallipoli Peninsula ever reach the addressees, and if thousands of parcels for the troops have been for months accumulating at Alexandria, where they are being spoilt; and, if so, will the Post Office refund the postage paid for work not done, and notify the public not to send parcels so addressed in the future, and thus save loss to the senders and disappointment to the troops?
The special inquiry which has been made on my instructions into the delivery of letters and parcels to the Mediterranean Expeditionary Force has now been completed. The service has necessarily been slow, as it has been largely dependent on the ordinary transport service, which is carried on under conditions of considerable difficulty. Steps are now being taken, however, which will, I hope, result in the acceleration of the time of transmission of both letters and parcels to the Dardanelles by about a week. It is believed that only one mail bag has been lost while under the care of the Post Office since the service began. The chief cause of the failure to deliver parcels is the inadequate packing. The parcels have to be transhipped to and from ships, lighters, and shore a number of times, and under conditions which make careful handling impossible. In spite of frequent notices to the public a very large number of parcels are so badly packed that they are found on arrival to be undeliverable. I am issuing a leaflet containing instructions as to packing which will be handed to every person who presents a parcel at a post office for transmission to the Dardanelles. Careful tests have been made which indicate that thefts of parcels are infrequent. In the case of men wounded at the front and sent into hospital every effort is made to discover the address of each man and to forward his correspondence, a large staff being employed for the purpose; but owing to the very large number of casual- ties, it has often been difficult and sometimes impossible to do so in every case, and a considerable number of letters and parcels have proved undeliverable from this cause. Although there has frequently been delay owing to the circumstances which I have mentioned, there has been, so far as I can ascertain, no failure to deliver to soldiers who are still with their unit letters which are properly addressed and parcels properly addressed and adequately packed. There is no accumulation of parcels in the Alexandria Post Office. I can give the assurance that every effort is being made, not only by the Post Office, but also by the naval authorities, who are responsible for transport, and by the military authorities, who are responsible for the actual delivery of correspondence at the front, to maintain the service at as high a standard of efficiency as the conditions allow.
In order to set at ease the minds of the parents who have been sending every week to their boys, as proved by evidence which we have in our possession, will the right hon. Gentleman take steps to see that those parcels are immediately delivered? It is a fact that there are hundreds at Alexandria.
Will the right hon. Gentleman look into the case of parcels sent to the Devon Regiment; the letters have reached them but not the parcels?
I shall be very glad to do so if the hon. Gentleman will give me particulars. It is often thought that parcels have not been delivered because they have not arrived within a short interval after letters dispatched at the same time. Parcels take several weeks longer than letters to deliver, and the consequence is that complaints are made in the case of many parcels which are ultimately delivered.
What becomes of undelivered parcels?
A very large number are sent back to the senders.
When will the instructions to which the fight hon. Gentleman has referred be obtainable—they have been expected for some time?
The instructions have already been circulated in the Press, and the leaflets have been printed. They will be obtainable almost immediately.
Munitions
asked the Minister of Munitions how many controlled establishments there are; whether his Department has taken over any Government arsenals or workshops other than Woolwich; and how many new establishments are now in working order?
The total number of controlled establishments is now 1,346. The Ministry of Munitions has taken over the Government establishments at Waltham and Enfield, as well as most of the Government establishments at Woolwich, since the 23rd August last. I do not think it would be desirable to give the information asked for in the last part of the question.
asked the Minister of Munitions whether he is now in a position to make a full statement with regard to the progress made in providing an adequate supply of munitions for this country and our Allies; whether he is satisfied with the organisation now existing; and whether he has a sufficient number of employés for the purpose?
I hope to be able to make a statement very shortly.
Food Production (Fertilisers)
asked the Secretary for Scotland whether his attention has been called to the prices which Scottish farmers are being charged by manure merchants for fertilisers; and what steps, if any, in view of the national importance of increasing the production of food in Scotland during the War, he contemplates taking to enable farmers to obtain such fertilisers as they require at reasonable prices?
In addition to steps previously taken as to regulation of export by licence, a Committee has been appointed and is now sitting to make arrangements to ensure the objects desired by my hon. Friend.
Is the right hon. Gentleman aware that there are many thousands of tons of fertilisers awaiting delivery to farmers for which transport cannot be obtained, and will he take steps to facilitate the transport of these fertilisers with a view to the farmers getting them before the seeding time is over?
That is a matter for the consideration of the Committee, and I have no doubt that they will do what they can.
Street Accidents (Metropolis)
asked the Home Secretary whether he has information to show that there has been an increase in the street accidents which have occurred since the increased reduction of Metropolitan lighting at night; whether any special thoroughfares or places have proved especially dangerous; and what precautions are being taken against the greater dangers of movement in the streets after dark?
I would refer my hon. Friend to the reply which I gave to the hon. Member for Devonport yesterday, and to my written reply to the hon. Member for the Shipley Division on the 19th October. Figures for October are not yet available. In addition to precautions already stated, additional police have been placed on traffic duty at specially dangerous points; the local authorities have in many places whitened the kerfs and constructed new refuges; and omnibus and tramway authorities have been requested to modify their schedules to permit of reduced speeds.
Is the right hon. Gentleman aware that the new regulations issued yesterday are apparently of no value whatever?
No, I am not aware of that, and I shall be greatly surprised if that is so.
Would it not be advisable to have the same limit of speed in the streets by night as there is in the parks by day?
The hon. and gallant Gentleman will see that a statutory limit of speed is only of value if some machinery is possible for detecting those who break it. It is difficult enough to detect breaches of a speed limit at night at any time, but it is impossible when the lighting is as low as it is at present. Therefore, we must proceed by other and more practicable means.
Will the right hon. Gentleman, in considering the statistics of accidents, bear in mind the fact that the traffic in the streets at night now is much less than when normal lighting was employed, and that therefore the real percentage of accidents is far higher?
Metropolitan Special Constabulary
asked the Home Secretary if he has any official information showing that a German with an American passport, whose brother is interned as an alien enemy, has been or now is a special constable for London; if any naturalised persons of enemy birth are special constables; and, if so, will he take steps to have them removed from that position and to prevent any such persons from being in future enrolled as special constables?
The Commissioner of Police informs me that he has no knowledge of any such case as the hon. Member refers to. If the hon. Member will give me any reference to the case other than an anonymous paragraph in a Sunday newspaper I shall be obliged. Naturalised British subjects are not enrolled as special constables unless they were naturalised at least ten years before the outbreak of war and are fully vouched for to the satisfaction of the Commissioner of Police. I see no reason for altering the present practice in the matter.
Enemy Aliens
asked the Home Secretary whether he is aware that one Elise Groschel, residing at the Lodge, Darlington, in a prohibited area, recently made application for exemption from repatriation, which was refused by the tribunal; whether she was ordered to leave for Germany about ten days ago; and whether such order has been rescinded and, if so, will he say why this was done?
I have personally inquired into this case, and was satisfied from material, some of which was not before the tribunal, that this was a case in which repatriation might properly be suspended. Miss Groschel is a lady of forty-three, who has lived in this country since she was nineteen, is devotedly attached to England, and has no friends to whom she could go or means of livelihood in Germany. To deport such a woman to a country where she would be friendless and penniless and exposed to suspicion and insult on account of her affection for England, would be an act of extreme harshness. She is not living in a prohibited area.
Has the right hon. Gentleman communicated with the local authority?
Certainly.
And do they approve of the right hon. Gentleman's action?
The hon. Gentleman will understand that I take full responsibility both for cases in which I think it right to intern those whom the Committee has thought should be released, and those cases, such as this, where it seems to me right to postpone the repatriation order although it has been recommended. Of course, I communicated with the local authority.
asked the Home Secretary whether the 471 male enemy aliens residing in prohibited areas are so residing after full consideration and with the assent of the police of the respective districts?
Yes, Sir. No enemy alien can reside in any prohibited area except with the special permission of the chief officer of police of the district. No such permission is given without the fullest consideration, and, if there is any room for doubt, the military authorities are consulted.
Was not the lady in the previous case residing in a prohibited area?
The hon. Gentleman did not do me the honour of listening to my answer, the last sentence of which was, "She is not living in a prohibited area."
I said "was residing." She has moved out of the area now.
The lady is not in a prohibited area, and consequently it does not seem to me that any rule about prohibited areas would apply to her.
asked the Home Secretary how many female enemy aliens are residing in prohibited areas?
I shall be glad to give the hon. Member the figures when a final census of the alien enemies remaining in the several districts has been taken; but for reasons I have already explained, that must wait for a few weeks.
asked the Home Secretary how many German enemy aliens, apart from Austrians, are now residing uninterned in the Metropolitan and City police areas?
Five thousand four hundred and seventy-seven males and 5,252 females (excluding British-born wives).
Railway Servants' War Bonus (Ireland)
asked the President of the Board of Trade whether the Irish railways belonging to the London and North-Western and the Midland companies have been taken over by the Government as well as their English lines; if so, why has the same war bonus granted on the controlled lines in England not been extended to the controlled lines in Ireland; is the bonus paid in Great Britain 5s. a week, while in Ireland it is only from 1s. to 2s.; is he aware that there is also a discrimination as to wages on different parts of the controlled lines in Ireland, for instance, London and North-Western, North Wall, 7d. to 8d. an hour, and Dundalk 6d. an hour; and will he inquire into the reason for such differences?
The Government have not taken over the Irish railways mentioned, or any other railways in Ireland. The points raised in the latter part of my hon. Friend's question do not, therefore, arise.
Live Stock Traffic (Dublin)
asked the President of the Board of Trade whether he has been able to arrange that through bookings for live stock shall be available viâ Dublin, as permitted through other Irish ports?
As I informed my hon. Friend in reply to a question which he asked on the 16th September, the Board of Trade have no compulsory powers in this matter. I have, however, made further inquiries, and I learn that, in view of the existing abnormal conditions of transport, the restoration of through bookings for live stock viâ Dublin is still regarded as impracticable.
Dutch Cotton Trade
asked the President of the Board of Trade whether his attention has been called to the Dutch Board of Trade figures recently published for the first nine months of this year showing that the imports of cotton were 112,294 metric tons, as compared with 84,777 tons in 1914, and that this total includes 91,270 tons from America as against 10,038 tons in 1914; whether the exports of cotton from Holland for the first nine months of this year were 96,138 tons against 60,830 tons in 1914, and whether of these exports 93,221 tons went to Germany as against 42,108 tons in 1914; and if he will state how much of the cotton imported into Holland and exported from Holland was imported and exported during the first six months of the period, and how much during the latter three months of the period?
The figures quoted by the hon. Member are correctly reproduced from the Dutch Trade Accounts. The imports of raw cotton into the Netherlands during the first six months of 1915 were 104,000 metric tons, and the exports 95,000 metric tons. The imports during the ensuing three months were 8,500 metric tons, and the exports 335 metric tons.
Raw Cocoa (Imports)
asked the President of the Board of Trade whether his attention has been called to the increase in the import of raw cocoa from foreign countries and British possessions for the nine months ending September, 1915, as against the nine months ending September, 1914, total 166,753,521 lbs. as against 70,991,743 lbs.; and what steps he is taking to prevent any of this cocoa reaching the enemy as re-exports either in the raw or manufactured state?
The imports of raw cocoa in the first nine months of 1915 amounted to 162,362,000 lbs., as against 71,033,000 lbs. in the corresponding period of 1914. The exportation of both raw and manufactured cocoa is prohibited to all neutral countries in Europe other than Spain and Portugal, except under licence issued by the War Trade Department.
Exports to Algeria
asked the President of the Board of Trade if he is aware that in consequence of the War the French textile mills are at present unable to supply the wants of Algeria, with the result that there is an enhanced and urgent demand for Manchester goods for that country; whether he is aware that shipments are being delayed by the necessity of obtaining licences under the late Proclamation; and what is the reason why greater precautions should be necessary in shipping merchandise to Algeria, a French colony, than to the Mediterranean ports of Spain?
I understand that there has been a diminution in the exports of cotton manufactures from France to Algeria since the beginning of this year; cotton manufactures, being included in the restricted list of exports from the United Kingdom, cannot be exported to Algeria except under licence, and it is considered impracticable to alter the list by exempting Algeria. There is not, so far as I am aware, any unnecessary delay in the issue of licences.
Is it not strange that we cannot export readily and quickly to the Colonies of an Ally when we do send readily and quickly to Spain, which, though a friendly nation is not an Ally-both being in the Mediterranean?
I do not think, when the circumstances of the case are considered—and I shall be very glad to discuss them with my hon. Friend—that there is any real occasion for wonder under the circumstances.
Oil Imports (Scandinavia)
asked how much oil was imported into Scandinavian countries from all sources in 1913, 1914, and up to date in 1915, respectively?
I propose to publish the information asked for in the OFFICIAL REPORT.—[ See Written Answers this date. ]
Will it distinguish between different kind of oil—there are twenty different kinds?
Yes, as far as possible.
Kitchen Committee (No-Treating Order)
asked the right hon. Member for the Epping Division, as Chairman of the Kitchen Committee, whether it is intended to conform in the House to the No-treating Order which is now in force in every other part of London?
The following Resolutions of the House of Commons Kitchen Committee, 3rd February, 1897, still hold good:—
"EXTRACT FROM MINUTES, 3RD FEBRUARY, 1897.
That, in the opinion of the Committee, the supply of wines and spirits as carried on for a great many years in the Palace of Westminster is for the convenience of the Members of the House and of the public who are called to attend as witnesses on Committees, and on other matters of business.
That a restriction of the sale of wines and spirits to Members of the House would not be practicable, or for the convenience of those who are called upon to attend at various hours of the day or night.
That the restriction and conditions imposed by the ordinary licences and under the Licensing and Excise Acts are wholly inapplicable to the circumstances under which refreshments must be supplied in the precincts of the House."
I am informed by competent legal authorities that they do not think this No-treating Order applies to the Houses of Parliament as matters stand. I did, however, put this particular No-treating Order before my Committee, which, though not unanimous, were largely in favour of not applying it to the House. They were, however, quite ready to assist in carrying it out elsewhere. I may, perhaps, be allowed to add that if my right hon. Friend is himself a victim of any attempt to evade the Act I shall be very glad to make inquiry.
But would it not strengthen the hands of the Board of Control if this House by a self-denying ordinance were to adopt the practice of no-treating, even in the extreme case of a Member visited by constituents?
I should be very loth to attempt to create a self-denying ordinance on the part of the House, and I think it would be better to leave the matter to the discretion of hon. Members themselves.
Does not the right hon. Gentleman realise that it is a cause of much dissatisfaction to the Board of Control that this House should be a party to imposing restrictions on other people to which hon. Members themselves do not submit?
Is it not a fact that this House never was a party to the No-treating Order?
War Loan Lotteries and Newspaper Competitions
asked the Prime Minister (1) whether, in view of the fact that an attempt was recently made to organise a lottery on the War Loan from Switzerland, he will reintroduce the Post Office (Illegal User) Bill introduced last Session; and (2) whether, in view of the desire expressed by the Government for the practice of economy and of the sums which are being spent by the public on competitions organised by certain newspapers for private gain and in view of the fact that such competitions have been condemned by a Parliamentary Select Committee, he will consider the propriety of reintroducing the Newspaper Competitions Bill, which passed its Second Reading and Committee stage last Session, or of dealing with them in some other way?
If my hon. Friend can assure me that there is no opposition to these Bills I shall be prepared to consider his suggestion.
National Insurance Acts
Disablement Benefit
asked the Prime Minister if he will give an opportunity for discussing the new scheme for allowances to dependants from Army and Navy funds, in view of the fact that it attempts to deprive persons insured under the National Insurance Acts of the disablement benefit for which they have paid in weekly instalments?
There will be an opportunity for discussion on the Vote of Credit next week. The statement in the latter part of the question is inaccurate, as my hon. Friend was informed yesterday.
Is the right hon. Gentleman aware that the statements made to me were evasions rather than corrections? Has he not been made aware that the effect of this decision is that persons who paid for a distinct benefit and advantage will not receive that benefit and advantage over those who have not so paid?
If the hon. Member wishes I will inquire further into the matter.
Is the right hon. Gentleman aware that parents who are partially dependent on a soldier are to receive a pension and allowance, both combined, of 5s., and if they get the disablement benefit it is to be deducted from the pension?
If that is so, it seems a very fit subject for discussion in Committee.
Questions
Yeomanry (Infantry Equipment)
asked the Undersecretary for War whether, as regiments of Yeomanry are now being embarked for active service overseas to act as Infantry, their reserve regiments and depots may be supplied with sufficient Infantry valise equipment to enable the men to be exercised in route marching under active service Infantry conditions previous to embarkation?
The reply to the hon. and gallant Gentleman's question is in the affirmative.
Bankrupt Estates (Scotland)
asked the Chancellor of the Exchequer whether his attention has been called to the fact that his Department in Scotland insists on payment of Income Tax on deposit receipt interest on sums lodged after the bankruptcy by trustees of bankrupt estates, even where such interest is a very small sum and the only income of the bankrupt estate, and that the Accountant of Court in Scotland, who is a Government official under whom these trustees work, insists that such Income Tax payment is not permissible; and, if so, will he take means to make clear in his present Budget whether such interest on deposit receipts of bankrupt estates is to be exigible in future, so that the trustees on such estates may not always be liable to surchrge by one or other of the different Departments of State?
I am advised that there is a legal liability in the case referred to by my hon. Friend, and that the Accountant of Court neither disputes the liability nor surcharges trustees for meeting it.
Orders of the Day
Business of the House
May I ask the Prime Minister upon what day next week the Vote of Credit will be taken?
I will say tomorrow. I hope early in the week.
Ways and Means
Considered in Committee.
[Mr. WHITLEY in the Chair.]
Income Tax
Taxation of Non-Residents
Motion made, and Question proposed,
(1) That it is expedient to amend Section forty-one of the Income Tax Act, 1842, so as to make non-resident persons chargeable to Income Tax in the name of any branch, or manager, as well as in the name of any factor, agent or receiver, and to made them so chargeable although the branch, factor, agent, receiver, or manager may not have the receipt of the profits or gains of the non-resident person chargeable in the name of the branch, factor, agent, or receiver, or manager in respect of any of the profits or gains of the nonresident person arising, whether directly or indirectly, through or from the branch, factorship, agency, receivership, or management."
(2) That it is expedient that a nonresident person carrying on business with a resident person should be chargeable to Income Tax in the name of the resident person as if the resident person were an agent of the non-resident person in cases where it appears that, owing to the close connection between the resident person and the non-resident person or otherwise, the course of business between those persons can be so arranged, and is so arranged, that the business done by the resident in pursuance of his connection with the non-resident produces to the resident either no profits, or less than the ordinary profits which might be expected to arise from that business.
(3) That in charging a non-resident person to Income Tax in respect of any profits or gains, those profits or gains may, where it appears that the true amount thereof cannot be readily ascertained, be taken to Mr. McKenna. ]
I have to introduce a new Resolution for a purpose which I am sure will be received with sympathy and approval by the Committee. There has been, not, I am sure, with any design or intention on the part of the persons carrying on the business in the way I am about to describe, but there has been for many years an escape through the net of the Income Tax, which everybody will agree ought not to be allowed. Suppose, for instance, a foreign firm employs an agent in this country and provides that agent with price lists and all the machinery for receiving orders, and the agent of the foreign firm then takes orders in this country and remits the orders to his principal abroad, although in substance that agent has been carrying on trade in this country, either wholesale or retail, as a matter of fact on the profits of that trade, inasmuch as no effective receipt of money or acceptance of an order occurs in this country, the profits of that trade escape Income Tax. A rival British trader, carrying on trade under precisely the same conditions, is bound to pay Income Tax, but the foreign firm, although doing business in every particular in this country, escapes. He escapes by reason of a technicality in the law. What we propose is that we shall look behind the technicalities at the substance of the business and that where we find that this foreign firm is really carrying on through its agent here the substantial business of a wholesale or retail trader, that means should be taken to secure that Income Tax is obtained upon the real profits of such trading.
made an observation which was inaudible in the He-porters' Gallery.
I do not desire to mention the names of any firms. It is better not to do so. We are making no charge against any firm, and are not alleging that they are carrying on business in this way to escape Income Tax. We are merely dealing with a certain technical construction of the law, which will have to be set right. Therefore I beg that names will not be mentioned. Then there is a second kind of business. There may be a great foreign exporter who exports his commodities, not in this case to a technical agent in this country, but to apparently an independent firm carrying on business here, but, owing to an arrangement between the exporter and the trader here, the goods or commodities are invoiced to the trader in this country at or so near the price at which the trader can retail his goods or commodities to the public that the trader in this country makes no profit, and although the foreign exporter and importer here may be making a gigantic profit the whole of those profits, which are really made in this country, escape. I think they ought not to escape, and that machinery should be devised for the purpose of bringing them within the meshes of the Income Tax.
There is still another case, and this case really is the most worthy of consideration of all. You may have goods manufactured in this country. Those goods may never leave this country; they may be sold within 20 miles of the place where they were manufactured, and yet, by an ingenious arrangement, the whole profit on the sale of those goods may escape Income Tax. They may be sold by the manufacturer to a foreign firm, and the foreign firm may resell them to the retailer, but at such prices as to show no profit except to the foreign firm abroad, and thus Income Tax is escaped. I think that is a case with which we ought to deal. We are therefore proposing a Resolution which will cover these two classes of business. We propose that in the assessment for Income Tax the tax should be imposed on a recognised percentage of output or turnover. The price at which the goods are sold, or the price at which the goods are invoiced, is no indication of the profit in the circumstances I have named. I do not like to use the words "collusive price," but the price is really a price which is arranged or settled without regard to the market conditions, but upon a basis which would apparently exclude profit. We propose that in those cases we should have power to settle or to determine the profits in relation to a percentage of the output or turnover, and to make them amenable to Income Tax. For that reason I shall ask the Committee at this stage to accept the Resolution which will be read, and we shall introduce an appropriate new Clause into the Bill in order to establish this new system.
I have not had an opportunity of reading the Resolution, or of hearing the whole of the right hon. Gentleman's speech, but the Resolution seems to me to go very far indeed. I do not know whether I am right in thinking that the origin of the Resolution is an attempt to bring into the Income Tax net certain people resident in America who have set up agencies here, chiefly for the selling of meat, and have paid their agent here a salary and let all the profits go to America, so that the profits made have evaded Income Tax. Is that one of the reasons?
I do not think it is necessary to refer to individual firms in this business. We are proceeding upon the principle that where goods are invoiced to this country practically at retail prices, so that on sale they show no profit, we think that is an evasion of the Income Tax, and that the true profit on the business should be taxed.
I dare say the principle is right—I do not contend that it is not—but the Resolution is very wide and covers a very large ground, and it is always a mistake, because there is a wrong, to endeavour to right that wrong unless you are quite certain that in righting the wrong you are not going to commit another wrong. I suggest to the right hon. Gentleman, as there is no very great hurry for this, and it is a very important matter, he should allow the Resolution to be printed and adjourn the further stages of it—say, till Tuesday—so that the Committee may have an opportunity of reading the Resolution, because it is quite impossible for anyone to understand what is being done now. I will move the Adjournment of the Debate.
This is the customary procedure of Committee of Ways and Means. I do not think I should be justified in accepting such a Motion, and I hope that the hon. Baronet will not press it at this stage at any rate.
I am quite aware that it is the customary procedure and I am not in any kind of way objecting to it, but it is not like an ordinary Resolution which imposes a duty by which goods might escape, if the Resolution was not acted upon at once. It is an entirely new principle. I am not saying it is not right, but the Resolution is an extremely long one, and though, of course, on your request I will not press the Motion, I trust that one or two other Members of the Committee will support it, and without its being moved the right hon. Gentleman may accept it.
I would point out to the Committee that this Resolution of Ways and Means merely empowers the Government to put down on the Paper a new Clause, and at that stage effective discussion in the Amendment of the Clause really arises.
I wanted to ask whether there is not some danger of the opposite result occurring—that is to say, that now that this ingenious method of evading the tax has been largely advertised, there is a distinct danger that many merchants would make large contracts in the intervening time between the passing of the Resolution and its becoming statutory. I would ask my right hon. Friend whether it would not therefore be wise to say it is expedient that the Resolution shall have statutory effect as from to-day. It is only an empowering Resolution and it enables them to enforce it if necessary, but I should not like it to be the result of our deliberations this afternoon that we advertised widely a method of evasion which during the next few weeks would be largely adopted.
I should like very seriously to support the appeal which has been made by my hon. Friend (Sir F. Banbury). It is not unreasonable. I have to thank the Chancellor of the Exchequer for an opportunity of seeing the Resolution. I have often protested, and I believe my right hon. Friend himself has often protested, against this method of taking Resolutions without printing them on the Paper.
Never; I never protested.
My right hon. Friend forgets the old days when, instead of sitting on that Treasury Bench he sat here, and I am supported by my hon. Friend whose memory none will question, that he and I repeatedly made the charge against a Government of different political principles from our own when they brought forward long, difficult and complicated Resolutions without giving the House an opportunity of seeing them. I have never heard a case in my experience of the House where it seems to me so desirable that this should be done as in the present instance. It is evident that two feelings are excited in the House about the explanation which my right hon. Friend has given. One is that this is a most simple and desirable thing to do. That was illustrated by the hon. Member (Mr. Denman), who says we ought to hasten to give effect to it. Another has been suggested by the hon. Baronet (Sir F. Banbury), who says it is a large and complicated interference with the trade of this country, and therefore we ought to have an opportunity of looking at the terms of the Resolution before we plunge into what really may be a revolution of the business methods of this country. The fact that these two views are taken in the first two speeches in regard to this matter greatly strengthens the appeal that I am making that we should be allowed a little time to consider it. Will the Committee remember for a moment the explanation we have had. We have had three classes of businesses referred to. I ask the Committee to believe that when I read the Resolution I thought it was perfectly innocuous. I did not know what it referred to, but I thought it must be a harmless thing. It said something about non-residents, and I thought it referred to managers of branch shops, or something like that, and I hoped that I should not have to raise any objection to it at all. But what have we heard? We have been told now that three forms of business are affected. The first is the business of the agent of a foreign firm in this country. Does it apply to Colonial firms as well? The Chancellor of the Exchequer does not reply. Surely he might say yes or no. Does it apply to the agents of our Colonies who are living in this country and doing gigantic business here? My right hon. Friend does not answer. Surely that question must need a reply or it must not. Why should there be any secret about it? Is this embargo, this tax, going to be put on Colonial agents, the representatives of firms in our Colonies, with whom we want to draw closer together? If we do it for foreign firms, we have got to do it for Colonial firms.
And Indian firms
Exactly. Is it going to be done or not? My right hon. Friend does not answer. He has not made up his mind about it, or he does not wish to be quite candid with the Committee. That is not a fair way to treat the Houses of Commons. Every day now we are having examples of this sort of treatment, things being rushed through which are somewhat different from what we think them to be. As regards the agent in this country, the object is, I think, if he makes money in this country, to make him pay Income Tax on that money. I think that is a reasonable thing, and; subject to understanding it fully, I would not be found to oppose it. But I go a step further. The right hon. Gentleman goes behind the agent of the foreign firm—and here again I would say of the Colonial firm also, and it may be. of the Indian firm or any firm abroad—and he says they are making money out of what they sell in this country. Of course they are. I am never made uncomfortable by the fact that people abroad are making money, or that anybody is making money. I am glad of it. If we cannot make any money ourselves, let us rejoice that someone else can. If anyone abroad makes money out of anything that someone in this country imports into this country, it is the importer into this country who really benefits. He imports these things because it is good for himself and the people of this country, and if he makes money out of them that money becomes the legitimate subject of taxation. It is a very far-reaching matter which the right hon. Gentleman now seeks to introduce. It means beginning to apply our Income Tax to foreign traders, and perhaps to Colonial traders and Indian traders, on the goods they send here.
There is another important point. My right hon. Friend, almost like the moving pictures that we see or hear of, has suddenly taken another class of case altogether. He says there are home firms, astute home firms, great manufacturing firms in this country, who manufacture something and then transfer it abroad and it comes back here, and the retailer distributes it here. Therefore, he says, somehow the manufacturer evades the meshes of the Income Tax. That is a very large charge to make. It raises a very big question. It is really a stigma on these home manufacturers.
indicated dissent.
At any rate the Chancellor of the Exchequer did not conceal that there was evasion. He used that word. When a suggestion of that kind is made—it is too often made in this House at the present time, and I think it is always regrettable that it should be made from the Treasury Bench—it should be made on ample evidence. The House should have time to consider the question of these large-businesses, and these firms, of whose existence we have heard for the first time, and they should hardly be put under a penal law without our taking the necessary steps in a deliberate manner. I cannot say how far this proposal goes, but will the Committee look at the third point which the right hon. Gentleman mentioned. He sees the difficulty of ascertaining the profits that the foreigner may make, or that this home manufacturer, "who evades the meshes of the Income Tax," may make. He sees the difficulty of getting at the profits. Perhaps there may be a loss. How does he get over the difficulty? He says he will put the tax on the turnover. He will put a percentage on the Import Duties. Then that is a Tax on imports. I tried to rouse the sympathy and get the support of my right hon. Friend here. I said, "It is a tax on imports." He said, "I am glad of it." I apologise to the Committee for mentioning that private remark. Here is where the difference comes in between us. My right hon. Friend, and perhaps many Members in the House will be delighted with such a tax, but it may be a very heavy tax, a percentage on the value of the article. This tax on imports may be as heavy as the Chancellor of the Exchequer may make it. I will ask the Chancellor what is the rate of percentage. I will give way to the right hon. Gentleman if he will inform me on that point.
Finish your speech.
What will be the rate per cent? Surely the Committee will see that these are most immense questions.
Hear, hear.
I suggest to the right hon. Gentleman that this is an after-thought since the Budget was introduced. It was not dealt with in the greatest Budget this House has ever had to deal with. We have been buried under great proposals contained in the Budget. We have not been thinking of these things, and now suddenly our attention is turned violently in this direction and we are asked to pass a Resolution which we have not read, which no-one understands, and the effect of which will be far-reaching as regards British commerce.
made a remark which was inaudible in the Reporters' Gallery.
I hope my right hon. Friend will keep an even temper. He may think I have been rather extreme in my views. I support the appeal of my hon. Friend (Sir F. Banbury), and I ask the right hon. Gentleman at this stage, not to abandon his opinions or to give up his scheme, but that he will print this Resolution on the Paper. We ought to think in this matter not only of ourselves as to whether we are satisfied but of the public outside, who are watching our proceedings. There ought to be one day's notice, at least, of this Resolution, and I think it ought to be left over until Tuesday. I appeal to the right hon. Gentleman to put the notice on the Paper and defer further consideration until we have had time to examine it.
I have no desire to stand in the way of the Chancellor of the Exchequer raising any money he can find. Wherever he can find something which attracts Income Tax, by all means let him find it, and I will do all I can to help him, but that is a very risky thing that we are going to try. I think I can satisfy the Committee that it amounts to a new Import Duty. The question arose some years ago in respect to a champagne firm. They had an office in Mark Lane. I remember the case being tried. The agent was a resident in this country, and he got orders from large wine merchants and sent them across to his firm in Epernay. The Income Tax people wished to claim Income Tax from the profits that the Epernay firm made upon those orders. What happened? They said, "Very well, we will not have a resident agent. We will send a traveller across, at the proper season, and he can live in an hotel, and go round to these merchants and get orders." In a case like that what are you going to do? It amounts to this: that if a man is the agent of a foreign firm, and he takes an office and becomes a resident here, you want to get at the foreign firm, but if the firm takes the wise course, as this firm thought it was the wise course, of sending a man from time to time over here as a traveller, who is perfectly well-known in the trade, and who lives in an hotel, how are you going to enforce that Income Tax? You cannot go to the Epernay firm and say, "Show us what you turnover is." They would say, "Get out. We will not make any return to you." What are you going to do in such a case? Are you going to stop the stuff as it comes in?
Tax it.
Tax it! No; you cannot take Income Tax off a bottle of champagne.
An HON. MEMBER: Put more duty on.
4.0 P.M.
Put more duty on! That is the only way to do it. I have shown that in the first case my right hon. Friend cannot get it except by an additional Import Duty. Take the reverse case, and suppose he is going to impose this Income Tax. Suppose he succeeds, and gets the foreign firm to pay the English Income Tax on the profits which they make by selling the stuff exported from France; are they not going to retaliate on every English merchant carrying on business in France?
They do it now.
Only by an Import Duty.
No; the Income Tax law of France provides that an English company trading in France is taxed in accordance with its turnover in England and France, and where that company makes a profit or a loss in France it still has to pay a tax by reason of its making profits in England.
That is precisely what we do with our Colonies. Now we know that in America they do not deduct tax from any Britisher there at all as Income Tax. But if an American firm are to be charged on the profits which they make by selling their stuff in England, simply because they keep an agent here, America will immediately retaliate on us with respect to the goods which we sell to them. We cannot avoid it. We must make this into an Import Tax if it is going to be effective. With regard to that this is not the time to go into the principle of the thing or how it is going to be worked out, but I only want to show that this is a very dangerous business. Take the last case which was referred to by my right hon. Friend. How are you going to get at that man's turnover? How are you going to tax in this country the man who sells to the foreigner goods which come back again? You cannot get at the turnover without a full inspection of his books, and you cannot ascertain what are the profits of the foreigner on selling to the retailer in this country without an examination of his books or making him make a return. How are you going to compel a man in Holland, France, or America to make a return of the profits which he makes in this way? You can only work this by a duty, by taking a percentage. There is very great danger of serious retaliation, and altogether I think this is a most dangerous thing to do.
I hope that the Committee will agree with the Chancellor's proposal; he certainly made out a prima facie case. There will be ample opportunity of discussing this Resolution. It will have to come up on Report stage. As you mentioned, Sir, it will come up on the Clause, which must be brought up, and after that the Chancellor will have to move that the Clause be read a second time in this House, and then that Clause will have to go through the Committee stage. Therefore there would be ample opportunity to discuss it. In reference to the complaint of my hon. Friend opposite, that this Resolution was not printed to-day, may I point out that that would give an opportunity to people who want to evade the new law to take steps to make their sales immediately. I have always understood that the object of the Chancellor on a Budget day in not making known the Resolution before he makes his speech is to avoid this. We pass the Resolutions on the night of the Budget in order to prevent taxes being evaded after they become known. I sincerely hope that the Committee will consent to this Resolution being adopted now. This is only the first stage, and there will be other opportunities for discussing the matter.
I do not agree with my hon. Friend the Member for Sheffield and the hon. Member for Carlisle. It seems to me that in your ruling just now as to the usual practice of the House you were referring to the normal Resolution to which the House has been accustomed. I think it is perfectly clear, from the speeches which have already been delivered, especially those by the right hon. Gentleman the Member for Islington (Mr. Lough) and by the hon. Member for Aberdeen (Mr. Henderson), though we make no complaint as to the clearness with which you read out those Resolutions, yet it is quite clear that it is an absolutely novel procedure on the part of the Treasury, that they are introducing a new method of taxation, a new subject of taxation, which has not only not been considered by the House, but of which the right hon. Gentleman the Member for Islington said—as far as we know he is the only member of the Committee who has had the opportunity of reading the Resolutions—that when he first read those Resolutions they seemed to him to be perfectly innocent and to be a small matter to which he could easily agree without demur. In the course of his speech his own eloquence showed him that there was a great deal more to be said than even he had intended first to say. The few remarks which the Chancellor of the Exchequer made in Committee bad been quite sufficient to open his eyes to begin with, and towards the end of his remarks he began to see, what I think is quite clear to the Committee, that this is a novel proposal to raise Import Duties by means of applying our Income Tax to the produce of foreign countries. That may be a proposal which I should be quite glad to accept from some points of view, but I do support most heartily the view of the hon. Baronet the Member for the City of London that we should at least have an opportunity of reading these novel Resolutions and considering them, at any rate, for twenty-four hours before even the principle underlying these Resolutions, which is such a novel departure from cur past practice is admitted by the Committee. There is one form of domestic industry which is included in the Resolutions of the Chancellor of the Exchequer to which I may refer. It is the business carried on by manufacturers in this country who sell, under what can only be called "bogus invoices," to an agent or foreign firm who again transfers it to a retailer within 20 miles of where it was manufactured, and so conceals the real profit which was made upon the manufacture of the articles Do we require any Resolution whatever of this House to deal with any such cases as that? If the Income Tax Commissioners at present have reason to suppose that a certain balance sheet conceals the profits and is a bogus balance sheet containing a series of bogus transactions—
indicated dissent.
What else is it if the real profits are concealed? The whole argument, so far as it could be appreciated by the Committee, was that the selling price was not a genuine selling price at all. If that is so, the Commissioners of Income Tax have ample power now to assess any firms so concealing their profits, so that there was no need for this Resolution at all. I therefore beg to support the proposal of the hon. Baronet the Member for the City of London, as modified by the right hon. Member for Islington, that we should have at least until to-morrow to consider these Resolutions before voting for them.
Perhaps I may be allowed to say one word in explanation of what I am sure is a real misunderstanding. I cannot now print and lay upon the Table of the House the Clause by which we propose to carry out the object which we have in view. It may be that when the Committee see the Clause they will not like it. If so, they can ask me to withdraw, and I shall do so. But what I ask for now is power to tell the Committee what the Clause will do. Until this Resolution is passed I have not got that power. How will the Committee be advantaged by adjourning the Debate and simply postponing my power to tell them what I want to do? The right hon. Gentleman who made such an excellent, and, if I may say so, so amusing a speech in opposition to the Motion, said that, subject to proper restrictions, he was in favour of the tax.
The first one.
Yes; and I desire an opportunity of telling him what the proper restrictions are.
Tell us now.
No, I cannot yet lay it on the Table. It must be in black and white. It can be done if he allows me to have the Clause. Everybody agrees that something ought to be done. We have got two traders side by side carrying on the same business, one paying Income Tax and the other not. The hon. Gentleman who spoke last entirely misunderstood. Everybody knows that there is a notorious case of a German firm which for years was escaping Income Tax in this country. It was manufacturing here and showing no profit on the manufacture, because the goods were sold to a firm in Germany practically at cost price, and they were again sold by the firm in Germany to the retailer here practically at the price at which the retailer was selling to the customer; so that no profits were shown either by the manufacturer or the retailer in this country, and they escaped taxation. It is not a duty on imports. It is a duty on profits made in this country which are concealed. I can only explain all this in Committee after putting it in black and white, as I shall do when I have the Clause. I should be glad if the Committee will let me have the Resolution now.
The right hon. Gentleman has been perfectly fair. He wants to give all the information which he can to the Members of the Committee, and in order to do that it is necessary to have this Resolution carried. When that is done, my right hon. Friend (Mr. Lough) will have every possible opportunity of discussing the matter, and he will also be able to deal with the Clause in connection with the Resolution. The right hon. Gentleman (Mr. McKenna) has said that he will give every opportunity for discussion, and I think that, after that, objections to it are going too far.
Question put, and agreed to.
Mineral Rights Duty
I beg to propose,
2.—"Where the amount payable to any person as rent (including royalties) in respect of the right to work minerals or of any mineral way leaves varies according to the price of the minerals, and the amount so payable in respect of any working year ending on any date after the commencement of the present War exceeds the prewar standard of that rent, there shall be paid as an addition to the Mineral Rights Duty payable by that person an amount not exceeding fifty per cent. of the excess."
This second Resolution has arisen out of the discussion which has taken place on the Excess Profits Tax. It has been pointed out in the course of the Debate that there is one source of profit which arises directly from an increase in price and yet is not included in the Bill. I refer to the mineral rights royalties in respect of which excess profit is being made, due entirely to the fact that as the price of the coal or the ore has risen so has the royalty. Everybody will agree that where the profit in that way is made directly by the increase of price and enjoyed during the War the Excess Profits Tax ought to apply. It might be said that it should be applied by the application of the Mineral Rights Duty, which already provides for assessing the profits where it is actually received. There are so many hands through which it passes that it is more appropriately applied to the Mineral Rights Duty than the Excess Profits Tax. We propose to apply the same principle as we apply to the Excess Profits Tax to the Mineral Rights Duty.
My right hon. Friend is probably aware that in the Cumberland district the price being paid to royalty owners to-day is about 8s. a ton. I am told that one owner, I do not mention his name, of course, is receiving £150,000 a year in increased royalties alone because of the high price of hematite ore. The price of hematite iron alone is greater than the basis figure on which they have to pay 50 per cent., and I do not think that the proposal in any way meets the case. If you are only going to take the amount of 5s. a ton you only get half a crown and the royalty owner will get the new increased royalties, which have accrued largely owing to the policy adopted by the Admiralty, who have forced up the price of iron in this district. I ask the Chancellor of the Exchequer to see that he gets the whole of the increased price, to which I am sure he is legitimately entitled. Owing to the action which the Admiralty have taken, the prices have gone up and royalties have increased, and the right hon. Gentleman should take not merely 50 per cent. but the whole 100 per cent.
I had put down an Amendment dealing with this subject, and I was very glad of the announcement which-the Chancellor of the Exchequer has made this afternoon.
I warmly support the Resolution of my right hon. Friend the Chancellor of the Exchequer. I also have an Amendment down on the Paper, and I have privately drawn the attention of my right hon. Friend to the fact that royalty owners are enjoying, owing to the War, largely increased incomes from royalties by reason of the royalties, fixed on a sliding scale, having risen according to current prices. It would be most unfair if they were excluded from the operation of the Excess Profits Tax. My right hon. Friend the other night in the House said he proposed to bring forward this Resolution, and it is perfectly true that it will require consideration so that it shall apply fairly and equally, and be sufficiently wide in its scope to contain every class of royalty or mineral owner in the country.
I have sympathy with the object of the hon. Member for Mansfield, but I am afraid he cannot accomplish it merely by the application of this tax on excess profits. I cannot see why these institutions should not be made controlled firms, and I would ask my hon. Friend whether these firms in the west of Cumberland and in Lancashire are not now controlled firms. A report which reached me privately is that this has taken place on the West Coast. It seems to me that the right hon. Gentleman should be bold enough to go right through with this matter. At present he deals with the iron making and machine-tool making firms, and now he is going to deal with blast furnaces and steel firms. If the right hon. Gentleman goes further and deals with the iron ore mines and royalty owners, and let them be controlled by the State, and settle what is fair remuneration for capital in the industry, then I think he will satisfy the requirements of the case. But I am perfectly sure that there will be great dissatisfaction if you take over large institutions and make them controlled firms, allowing 6 per cent. on capital, at the very time they are purchasing at enormous prices raw material, which is practically a monopoly created by the Government demand. I trust before the Resolution is passed the right hon. Gentleman will be able to say what is the dividing line between controlled firms and the institutions in the same trade which have only to pay on Excess Profits Tax.
I think that in dealing with royalties it would be found rather a difficult process to control them, in view of the fact that the owners of them are doing nothing but receive money. I am quite in favour of this tax, but I am afraid this case has not been included in the Resolution. There are cases where the price has not risen, but where the royalty owner, instead of getting a royalty on 10,000 tons, is getting a royalty on 100,000 tons. Because the demand and output have been so enormously increased, there are very much larger royalties and the owner is better able to pay. I should like to see not only the man who gets an increased income out of the increased royalty pay this tax, but I should like also to see that the Chancellor of the Exchequer gets something out of the enormously increased royalties arising out of the increased number of tons upon which he receives royalties. I think it is only fair that the revenue should get some of the increased amounts going to royalty owners owing to the enormous increase in the amount of coal and iron used.
The district of Cumberland, to which I referred, produces 1,350,000 tons per annum of hematite ore, and on Lincolnshire stone the royalty is doubled as well. The State itself created these prices, and the right hon. Gentleman might adopt the suggestion of the Member for Pontefract by making these businesses controlled firms. The royalty owners have been already receiving a very large amount in respect of the increased output of iron ore.
I was perfectly astonished sitting here at an earlier stage to-day to hear the statement made that 344 additional firms have become controlled businesses in the last week, and that there are 1,346 controlled firms. The object of controlling these firms is to tax the excess profits, and I want the Chancellor of the Exchequer to tell us, if he can, the effect of this policy in regard to excess profits in the case of controlled firms side by side with other firms subjected to this tax.
This tax in the present year cannot apply to any controlled firm. No controlled firm came into existence before 2nd July; it could not have done so, because the Act was not passed. I am only speaking of this year, and we want to see in practice how the Munitions Act really works. My hon. Friend suggested that these people are dealt with under the Munitions Act; all I can say is that I had a deputation of firms which come under the Munitions Act, and the impression they left on my mind was, I think, that the proposal in this Bill would operate in the long run to take more profit than would be taken from them otherwise. It is a question of percentage between the two Acts, and we have as yet no experience of what has happened under the Munitions Act; but when we have that experience, before next year, I hope to be in a position to give my right hon. Friend all the information for which he asks. My hon. Friend the Member for Mansfield holds the view that 50 per cent. in this case is insufficient. We cannot take a particular class of profits and charge it a higher rate than we propose for other classes of profit. My hon. Friend is quite consistent throughout, as he said all through he did not think 50 per cent. was enough. We cannot make an exception here, because he thinks in this particular case it is not enough. We might accept his policy throughout, and put 80 per cent. upon all excess profits, but we cannot distinguish between one trade and another, and therefore I suggest that we adopt the same amount in this case as in all the others.
Question put, and agreed to.
Resolutions to be reported to-morrow (Thursday); Committee to sit again To-morrow.
Finance (No. 3) Bill
Considered in Committee.—[Progress, 27th October.]
[Mr. WHITLEY in the Chair.]
CLAUSE 35.—(Trades and Businesses to which Excess Profits Duty Applies.)
The trades and businesses to which this Part of this Act applies are all trades or businesses (whether continuously carried on or not) of any description carried on in the United Kingdom, or owned or carried on in any other place by persons ordinarily resident in the United Kingdom, excepting—
( a ) husbandry in the United Kingdom; and
( b ) offices or employments; and
( c ) any profession the profits of which are dependent mainly on the personal qualifications of the person by whom the profession is carried on and in which no capital expenditure is required, or only capital expenditure of a comparatively small amount,
but including the business of any person taking commissions in respect of any transactions or services rendered, and of any agent of any description (not being a commercial traveller, or an agent whose remuneration consists wholly of a fixed and definite sum not depending on the amount of business done or any other contingency).
It may be for the convenience of the Committee if I point out that certain Amendments which stand in the names of several hon. Members in varying form and dealing with subsidiary companies do not appertain to this Clause. I observe that the Government have put down an Amendment to the first Schedule dealing with this particular point, and that is the place at which any other proposals may be brought up and considered, but not on this Clause. The first four Amendments on the Paper (proposing to insert the words "professions, occupations") involve a charge beyond the Resolution passed in Ways and Means. The fifth Amendment on the Paper is in order, and I call upon Mr. Dickinson.
On the point of Order. I think you promised us at an earlier stage that when we came to this Clause we could have the opportunity of dealing with the professions and occupations which might come under the Bill. You alluded to the Resolution passed in Committee, and I think you said that it was wider than the Bill, and that it might be possible that occupations not included in the Bill were covered by the Resolution. The words as to "profits or gain arising from any trade or manufacturing concern" surely allow us to discuss the question whether there are not very profitable concerns in the country which are expressly excluded from the Clause,
The right hon. Gentleman says that he meant to propose to include something that is not covered by the Resolution in Ways and Means. It is quite true that in the latter part of this Clause there are words dealing with agencies, and when the right hon. Gentleman comes to that no doubt there will be opportunity for discussion as to whether all such agencies are included in the Bill.
I beg to move, after the word "trades" ["are all trades and businesses"], to insert the words "manufactures, concerns in the nature of trade."
I propose this Amendment because I am anxious to make it perfectly clear that the businesses to which this Bill refers include all that the Resolution passed by this House includes. The words of the Resolution were "any trade, manufacturing concern in the nature of trade or business." The words I now propose would merely put into the Bill the actual words of the Resolution. I felt ever since these three Clauses were introduced that the proposals were very much more limited than those which we had anticipated, and which we had been entitled to expect from the statements and announcements that were made by the Government. The exclusion of these words with the exceptions which are specifically mentioned later down whittle away a very considerable portion of the operative effect of the Excess Profits Tax. The Chancellor of the Exchequer has remedied to a certain extent that state of affairs by the Resolutions which he has proposed to-day, as he brings in what was not originally included,-namely, excess profits on royalties. I and other Members put down Amendments to extend the same principle to rents and other things. I regret very much he has not seen his way to bring forward a Resolution affecting rents in the same way as royalties. The main reason why I suggest to the Chancellor that he ought to make the effect of this Clause as wide as possible is that the expectations throughout the whole of last year were that all excess profits, either due to the War or arising during the War, would all be brought in for the benefit of the State. We know very well that it is not merely a question of raising money. It is a question of doing justice between class and class.
When difficulties about labour arose in the House on various occasions, one of the great complaints put forward on behalf of the working classes was that there was nothing suggested by which the undue profits, the excess profits of capitalists, would be taken over by the State. It was always understood that that injustice was to be remedied in some form or other. We have the proposal now in this Bill. It comes very late, and I think it would have been very much wiser from all points of view if the Government a year ago had started this policy of annexing a portion of the excess profits. However that may be, it is all the more important, in my opinion, that we should see that this scheme is as far as possible universal. The sole justification for such a tax as this is that it should fall upon everyone alike. The moment you begin to make such exceptions as are suggested in this Clause, you are departing from the firm foundation on which the tax rests. I cannot help thinking if the tax is adopted in the limited way now proposed the disappointment throughout the country will be very great once they realise that it is not a tax upon the excess profits of capitalists generally, but upon the excess profits of a certain section of those persons, and that numbers of the persons are going to get off.
This Amendment I assumed to be merely of a drafting nature, intended more specifically to explain this Clause as a definition Clause, and not one on which it was open to the right hon. Gentleman to review the general merits of the proposal.
I was about to finish my remarks. The omission of these words, and especially "concerns in the nature of trade," must considerably reduce the operation of the Clause and the effect of the Resolution passed by this House. I hope that the Chancellor may put in the words contained in the Resolution, and leave them to be construed as part of the Act which will define the persons who are to pay excess profits.
I do not propose to follow my right hon. Friend into the second and third part of his argument, that is the second relating to the subsequent exclusions, all of which will be debated on Amendments now on the Paper, and the third relating to the whole question whether the Clause should stand part. I confine myself to the first part of his argument which relates to the Amendment on the Paper. We believe that we have put into the Bill the widest possible words. We define the trades and businesses to which this part of the Act applies as all trades or businesses of any description, and we believe that those words are so wide as to include the words suggested in this Amendment. My right hon. Friend wishes to insert the words, "manufactures, concerns in the nature of trade." I am advised that those words would add nothing to the Clause, and would be mere surplusage. On that ground I am advised not to accept the Amendment. If the Committee think otherwise, as they do not alter the effect of the Clause, except possibly to mislead the judges, who may say that Parliament in its wisdom would never have had inserted those words unless they intended them to have some special meaning, if the Committee will run that risk, I do not object to the words, but I would recommend the Committee to leave the words in the Clause as they stand, because they are so wide as to include all the objects which my right hon. Friend has in view.
I hope that the Chancellor of the Exchequer will accept the words proposed by my right hon. Friend, and that, as well, he may add after the words, "in the nature of trade," the words "and gains." Why should the Bill have a less wide definition than the Resolution upon which it is based? My right hon. Friend thinks that it has not; but the words "and gains" inserted in the Resolution in addition to the word "profits" must have some meaning. If "profits" included "gains," why should the words "and gains" be inserted in the Resolution?
The difference between the Resolution and this Clause is that in the Resolution there were the words referred to by my hon. Friend, but there were not the words "of any description" which are inserted in the Bill. We are advised that by inserting the words "of any description" we get a fuller meaning, or at any rate as full a meaning and a clearer meaning than was contained in the words of the Resolution. We do not go outside the Resolution; we should not be authorised to do that; but we think we get the meaning of the Resolution more clear by the insertion of the words "or any description" than by putting in the words suggested by my right hon. Friend.
I thank the Chancellor of the Exchequer for his explanation, which certainly alters the position. I did not realise that the words "of any description" were not in the Budget Resolution. With his explanation that the interpretation of this definition will be as wide as that of the Budget Resolution, I, personally, am satisfied.
Amendment negatived.
With regard to the Amendment standing in the name of the right hon. Member for North St. Pancras [after the word "businesses," to insert the words "including the taking of rents and royalties and the letting or chartering of vessels"], the first part involves a charge beyond the Resolution in Ways and Means.
May I submit that the taking of rents is part of the trade in very many cases?
Then it is included?
Precisely so. I think there must be many cases in which the taking of rents is included in a trade. In that case, I want to be allowed to suggest the expediency of mentioning it; otherwise the question will be very doubtful indeed.
If it is a question of definition and interpretation as to what is included, the Amendment is in the wrong place. The last six lines of the Clause deal with the definition of the matters included. The right hon. Gentleman had better bring up the Amendment again when we reach that point, and I will then consider it.
I beg to move to leave out the words "or carried on" ["or owned or carried on in any other place"].
I have put down this Amendment in order to call attention to the real purpose and meaning of this Clause as drafted. The Clause as it stands states—
"The trades and businesses to which this part of this Act applies are all trades and businesses (whether continuously carried on or not) of any description carried on in the United Kingdom, or owned or carried on in any other place by persons ordinarily resident in the United Kingdom."
By those words I take it that the Chancellor of the Exchequer intends to throw his net wide enough to catch excess profits earned by companies carrying on trade in any part of the world, provided that, although they may be owned, as far as their shareholders are concerned, by foreigners, by citizens of the Colonial parts of our Empire, or by anyone else, they are businesses carried on technically in accordance with our company laws. I want the Committee to realise exactly what that means. There have been decided this year one or two cases—one in the Court of Appeal and one in the Admiralty Court, over which Sir Samuel Evans presides, the judgment in which was reported in the "Times" of the 5th May. One case concerned a so-called British company, constituted in this country in 1912, and having 1,250 shares, of which 1,244 were owned by alien enemies, four others by alien enemy directors resident in Germany, one by the secretary, who also was an alien enemy, and the last and only one by a person reputed to be a French citizen. The business was carried on in this country by a manager who was a British subject, named Frank Morton. The goods of that company were not treated as belonging to an alien enemy, because they belonged to this company incorporated under our company laws. I refer to that in passing in order to show what the present state of the law is.
The Chancellor of the Exchequer seems to be proceeding on the basis that we are not to alter that anomalous position, in spite of the appeals made by such distinguished jurists as Lord Lindley and others. The Chancellor says, "If a whole body of aliens, owing to our company laws, can be incorporated in this country and protect their property even in time of war, in proposing my Exess Profits Tax I will certainly, no matter where the business is really done, include the words 'or carried on,' which cover the case of a company which is merely technically a British company." I want the Chancellor of the Exchequer to realise exactly where that leads us. My hon. and learned Friend the Member for Warwick (Mr. Pollock) and I have had occasion in other years to point out not the risk that is run, but what has really happened in respect of Income Tax levied on companies which are dealing entirely with foreign trade, owing to the fact that we do not allow for a proper depreciation of wasting assets. The companies we specially referred to were companies owning and working nitrate deposits, where, owing to their being unable to write off any proper depreciation for those steadily wasting assets, the Income Tax upon their real profits has amounted to 5s. or 6s. in the £. Such companies say, "Much as we should like to have our registered offices in England and be a British company, it is impossible for us to do so; we will go to Chili." Is the Chancellor of the Exchequer quite sure that in trying to catch these profits of what are to all intents and purposes foreign trading concerns, he is not running a very great risk of losing not only his Excess Profits Tax, but the power of collecting Income Tax at the source— which is the only way he can make sure of getting the Income Tax—from all these companies? They will go and register themselves elsewhere. Take, for instance, a Bombay waterworks company, or a Buenos Ayres electric lighting company. What real interest has such a company in being registered in this country? It is true that it is the most convenient, that it is the best centre from which to carry on the business of the world, and so forth; but if such companies, after having, perhaps, three or four bad years, suddenly find that they may have to pay 50 per cent. of any excess profits, subject to certain conditions provided in the Bill, is there not very serious risk that they will think it too expensive a luxury to continue to be a company registered under our company laws, "carrying on business in this country"? Would not the Chancellor of the Exchequer be well advised to leave out these words, which I am confident are put in to include these companies, suggest the initiation of legislation which will make the company laws suitable to our conditions, so that it will really depend upon whether the substantial owners of a company are alien enemies or British citizens, and deal with the alien enemy, not by putting on an Excess Profits Tax, but by the much more stringent method which we have already passed in this House? I think that, in trying to make the best of a very unfortunate state of affairs, and, by collecting the Excess Profits Tax over a wide field, to get back a little bit of our own in the case of companies which are really alien enemy owned companies, many of which merely have their habitat in London for the sake of convenience and are perfectly able to transfer their offices and their management to Bombay or Buenos Ayres, the right hon. Gentleman is running very serious risk of losing a great deal more than he is setting out to gain.
5.0 P.M.
My hon. Friend has stated his case very clearly, and I have no excuse for misunderstanding his point. It is quite deliberate: we do intend to apply the Excess Profits Tax to companies which are carried on outside the United Kingdom by persons ordinarily resident in this country. The test will be not that, as my hon. Friend put it, for some reason of convenience or merely by accident they happen to be registered here, but that the brains of the company are here and in some cases the capital has been originally subscribed here. I think he is putting the case very moderately when he says that companies are registered in the United Kingdom for the sake of convenience. There are other reasons why companies are registered in this country. In some cases applications for subscription of capital have been made in this country. I am very doubtful whether, if a company had been registered in Timbuctoo, or some other remote place, British capitalists would have been quite so ready to subscribe. My hon. Friend proposes by his Amendment to make a very great change in our existing Income Tax law. While I readily admit that when the whole Income Tax law comes to be reconsidered, as it must be—
Is not the right hon. Gentleman going altogether beyond my Amendment by saying that it proposes a change in the Income Tax law? It is only omitting three words from this Clause.
I say so on the ground that it is equally applicable to the ordinary Income Tax, and I could not admit the argument of the hon. Member without admitting also that that argument would apply to the Income Tax as a whole. While, I say, we recognise that there are many imperfections in the Income Tax law, and that those imperfections ought to be, and must be, the subject of consideration and amendment, I do not think that we can propose any great change at the present time in our Income Tax law. I am afraid, therefore, that I must recommend the Committee to adhere to the words of the Clause.
I hope that the Chancellor of the Exchequer will give this matter more consideration. If I follow aright what he has said, he means that we are going to apply the Income Tax law as it now exists to this Excess Profits Tax. If that is so, well and good. Let us understand that it is not intended to be an Extra Profits Duty for the purpose of intercepting a portion of the profits which have been made by businesses which have been fortunate during the War. Let us understand from now that the meaning of this Excess Profits Duty is that this additional Income Tax is imposed upon businesses or companies who may have made profits at an increased ratio since the War, but the increase of which is in no sense due at all to the circumstances of the War. If that be so, how far does this Clause carry us? If I understand the principle under which Income Tax is levied upon businesses which are carried on outside the country, the principle is this: that if a substantial holding, or substantial business, or brains are used or carried on within the United Kingdom, they are liable to Income Tax. Suppose we consider a case where, not only because the capital has been subscribed here, not only because the brains are obtainable here, but also because this is a convenient place in which to carry on the business, that the City of London has been selected as the head office of the country. That company may be carrying on business far away, either in our Colonies or in foreign possessions. The business that is carried on may be in no way affected by the War. It may be the case of a rubber company or other company, which has come recently into the productive state of its existence when a large return is made far beyond the return which is made in either of the two previous years that it is allowed to take as its standard. It is intended that those profits should be intercepted? If they are, the burden that the Chancellor of the Exchequer puts upon businesses centred in the City of London is a very heavy one.
While we are considering how to raise money for the War, we must not forget what will possibly happen after the War; that a good deal of the riches may have parsed into other hands, possibly into other countries. It may be that the attractions of the City of London, as compared with other bases like the United States, for the purpose of the head office of the country may be much more nicely balanced than ever before. If the system as indicated in this Sub-section is maintained we really are announcing to the world that from the passing of this Bill the City of London is no longer an attractive place in which to carry on business because of the excessive burdens which this new Profits Duty lays upon all persons who come within the ambit. The matter is one which certainly requires great consideration. For my own part—this is a technical matter with which I am sorry to trouble the Committee, and I am not going to trouble them at any length—I think the effect of these words will be that a great many companies carrying on business, and who have business in foreign parts or abroad, will find themselves subjected to two Income Taxes in addition to Excess Profits Duty. On these grounds, while the Chancellor of the Exchequer may fairly enough say that his desire is to spread his net wide, I hope before the Report stage he will listen to some representations on this matter, in order that we may see, while spreading his net wide, he does not do what may prove to be a lasting injury to businesses in this country.
I should like to support what has just fallen from the hon. and learned Gentleman opposite. As the hon. and learned Gentleman says, we have not only to raise the money for the War, but we have also to consider what our financial position is going to be when the War is over. We shall not have done paying for the War when peace is declared. As a matter of fact, we shall not have done paying for it in the lifetime of hon. Members or of the children of hon. Members. If we are going to assist in a tax which possibly may, and I think probably will, materially diminish the wealth of the country in the years to come, we are proposing a scheme of killing the goose that lays the golden eggs. My right hon. Friend spoke of this matter as if it were inexplicably bound up with the Income Tax law. I do not think it is. I will try to put this point to him: The hon. Member for Devizes said that companies were established in this country merely for convenience. Perhaps "convenience" is hardly the right word. They are established in this country because they get certain advantages as compared with their establishment in countries abroad. It is not necessary they should be established in this country. For instance, it is not necessary that the Buenos Ayres Great Southern Railway should be established in this country. As things stand, it is the balance of convenience between this country and others. If you put an enormous tax on, you may turn the balance of convenience the other way. For instance, too much taxation upon a concern of a character which need not be in this; country except for the purpose of convenience raises the question of how much taxation it can bear. If you put on too much you will drive the companies away. My right hon. Friend spoke, for instance, of companies coming here for the convenience of raising capital. Everyone will admit that is so, but when the War is over, will there be so much convenience in raising the capital? Will capital be so very conveniently raised?
After all, one great convenience is the greater security we have under our laws; but when the various foreign countries to which reference is made have progressed in civilisation and their laws are brought to a higher standard, that convenience, to that extent, disappears. I should like to put this to my right hon. Friend: that this nation does derive very solid advantages from the fact that the management of these companies is located in this country. It is not merely the case of the owners of the company obtaining benefits and advantages; the whole community benefits. This happens: the directors, engineers and experts are English people brought up with English ideas, and they naturally tend to order their goods in the English market. Every one with any experience of these things must know perfectly well that if the head office of a large concern of this character is moved out of this country there is a great and increasing tendency for all the orders for goods to be placed in foreign countries. That is at the bottom of all the scramble for concessions that is going on between the civilised Powers. Once the experts get there, the orders are placed in their country—where the head office is—for various reasons, including those of language, and weights and measures. I submit that the right hon. Gentleman ought very carefully to consider the proposals which are now under discussion. He ought carefully to consider whether it may not do his own Exchequer a great deal more harm than good by putting a severe penalty—it is a severe penalty!—upon people who are carrying on businesses abroad, which merely, on the balance of convenience, might leave this country and be carried on in some other place.
I should like to support what has been said by the last speaker. I happen to know a company that was registered in London, the business being carried on in South America. While that company was in London, the directors naturally placed their orders for the supplies of that company in London. Owing to the Income Tax the company has been removed to another country—as a matter of fact, to Canada. The requirements as to supplies for the company could be met here or in the United States equally well, but there has not been a single order placed in this country since the headquarters were removed to Canada. They have been placed in the United States or in Canada. That is one example of what takes place, and that has taken place while the Income Tax was at a more moderate figure than now. We are proposing to add to the Income Tax of such a company an Excess Profits Tax which would make the reasons for removal greater than before. I can add to what was said by an hon. Member who spoke recently about the treatment we give to such companies in connection with depreciation. That is another reason why certain companies are removing, because we do not treat them fairly in this matter. This point specially occurs in connection with nitrate and oil companies. We are talking about businesses carried on "in any other place." I would like to ask if the Clause could not be stopped at businesses of any description "carried on in the United Kingdom:" it then seems to me to cover what the present Income Tax applies to. It is true that an Argentine Railway Company, because it has its board of direction in London, is considered to be a business carried on in the United Kingdom. That applies to a great many other foreign concerns. Practically all are held liable to Income Tax if they have their board here, or if their direction is here.
Note the addition to the words "carried on in the United Kingdom," of the words "or owned or carried on in any other place by persons ordinarily resident in the United Kingdom." Is that an extension of liability as compared with the present liability to Income Tax? It appears to me on the first reading that this is bringing in to the Excess Profits Tax a certain class of subjects which are not at present liable to Income Tax. If so, it appears to me that it will be exceedingly difficult to assess them. If they are not liable to Income Tax, I do not see how you are going to assess them for Excess Profits Tax. I do not understand why, if that is not the intention, it has been found necessary to add the words, "owned or carried on in any other place by persons ordinarily resident in the United Kingdom." For example: a man has been a shopkeeper in Sydney. After years of work he has retired and has come home to the United Kingdom to live. He leaves a partner in the establishment at Sydney. So long as he is a resident in this country and only a sleeping partner in the business and does not intervene in any way in the management of it, he is not liable to Income Tax for his share, of the profits unless he brings them to this country. That is the present position under the Income Tax law. But the position, with the addition of these words, "or owned or carried on in any place by a person ordinarily resident in the United Kingdom," appears to me to bring him in for the Excess Profits Tax upon his share in the business for which he is not now liable for Income Tax. If the Chancellor will assure us that these words will not extend liability in the way I have suggested we will be reassured, but I do not understand in that case for what these words are intended. I should like to ask the right hon. Gentleman to give us a clear answer on that point.
I can assure my hon. Friend we do not propose, and the words do not in fact impose, a charge upon a business not carried on from the United Kingdom, and which is only partly owned in the United Kingdom. Where a business is wholly owned in the United Kingdom, then it is subject to charge both under the ordinary Income Tax law and under the Excess Profits Tax. Where it is carried on in the United Kingdom it is subject to charge both under the ordinary Income Tax law and the Excess Profits Tax. We do not propose that the Excess Profits Tax should be imposed where the Income Tax is not imposed.
I do not think that the right hon. Gentleman should pass this matter over so lightly. It is true that companies have an advantage in being registered in the City of London, but, having regard to the fact that Income Tax is now 3s. 6d. in the £, I would bring to his mind the case of the De Beers Company. I do not remember the details, but I remember reading of the case going to the House of Lords in which the De Beers Company appealed against an assessment made on them, their offices being in Kimberley and a board of directors occasionally meeting in London. A sum of £200,000, I think, was involved, and the company had to pay. As a result, the office in London was closed, and I believe the directors now meet on the Continent, and thus avoid this very large sum of money. When the Income Tax was the small amount of 8d. or 9d. in the £ it did not very much matter to companies, but when it is 3s. 6d., and there is this additional tax, it must have the effect, I think, which my hon. Friend has stated, namely, of driving these companies out of the United Kingdom. We have got to look rather further than to-day. We must look into the future, having regard to the fact that not only ourselves but our children will have to pay a tax probably not much less than we are paying to-day. For this reason, I would ask my right hon. Friend, although I do not press him to give a decision to-day, whether it is wise, having regard to the future, to drive capital out of this country by levying a tax which inevitably will have that effect. I hope, therefore, before the final stages of the Bill my right hon. Friend will give the matter his consideration.
I should like to support this Amendment. Our concerns abroad have got to compete with American, Dutch and other important concerns, where the money in past years has been found very largely in Germany, and where German banks and other large institutions have got very big interests. There are a number of cases within my own knowledge where concerns carried on in foreign countries, neutral countries, and also in the Colonies, have got to compete with these other undertakings. Now it is per- fectly obvious that if, in order to meet our financial difficulties, we impose a tax which is going to be a tax on our particular undertakings in foreign countries and which the competing undertakings escape, we are going seriously to handicap the future enterprise and success of this country. I think that should be the last thing which we, at this particular juncture, ought to do. A great outcry is made from time to time about the necessity of British trade being extended. Many of us who are interested in these undertakings abroad have found that in these foreign places and the Colonies we are up against Germany in particular, and anything in the nature of a discriminating tax which would fall simply upon our undertakings, and not upon those other undertakings which escape altogether, would be a serious one, not only to the existing undertakings, but would be particularly difficult for future enterprise and future success.
May I point out to the right hon. Gentleman this consideration? It frequently happens in a foreign country that the owners of properties which are capable of being advantageously developed look about for capitalists, either in Germany, America, England, France, or elsewhere, to take a substantial interest. I know cases myself where they have declined to agree to the suggestions coming from London because of the existing Income Tax, and I can very well imagine that if we impose a tax of this description at this juncture it would not only seriously handicap the existing undertakings, but would be a very serious detriment when we, and other people like us, who are doing our best to spread the trade and enterprise of this country in foreign parts, find ourselves up against other interests not equally affected. I have no reasonable hope that the Chancellor of the Exchequer will listen to an Amendment of this kind to-day. I do not expect he will. He is out to get his tax from people who are supposed to have the money at the present moment, whether it is right or wrong. But I do suggest to him this is a very important consideration in the interests of our trade and enterprise as it affects British people, British trade, British transport, British shipping, British supply of all the articles which these different concerns and companies use. The ramifications which are affected by considerations of this kind are serious, and, in support of the Amendment, I do respectfully venture to commend these observations to the consideration of the Committee.
I hope the Committee will not think I am opposing an obstinate resistance to an argument which, upon the face of it, is so reasonable and so forcible. Nobody appreciates the force of the arguments, for instance, of my hon. Friend the Member for Hexham (Mr. Holt), more fully than I do, and nobody is more conscious than I am that with an Income Tax at 3s. 6d. in the £ many anomalies which have been allowed to grow up from the start of the law become intolerable, and become, in their ultimate effect, detrimental to the true interests of the State. I am as fully conscious of it as any Member in this House, and if my hands were free, if the House continued its support, nobody would so gladly undertake the task as I would of endeavouring to reform our Income Tax laws. The present proposal strikes at the very root of our law in its present form, and it is impossible now at this stage and in the midst of war, as my hon. Friend who spoke last recognised, for he knows all the difficulties as well as I do, to make these radical changes. I do not think, so far as the Excess Profits Tax is concerned, that the amount involved in these particular words is very great, but certainly it is nothing like as detrimental in its effect on one side of the argument as the Income Tax. All the assurance I can give to the Committee is that on the very first opportunity the Government will devote itself to the express object of making a reform of our Income Tax law.
I used the incidence of the Income Tax merely incidentally in the course of my remarks on this Clause which deals with the Excess Profits Tax, and I am going to ask the right hon. Gentleman whether he is right in assuming as a matter of course that, in putting a perfectly new additional tax upon excess profits enjoyed during the War period, he is necessarily right in following precisely what has been held to be reasonable, although he now knows the disadvantages of it in respect to Income Tax. The second thing I want to say to him is this: He said just now, in answer to an inquiry by the hon. Baronet the Member for Elgin and Nairn (Sir A. Williamson), that he could assure him—the case quoted was that of the owner of a shop in Sydney— that businesses partly owned here are not liable to Income Tax but only if wholly owned, and precisely the same rule was followed with regard to Excess Profits Tax. I think that shows me, at any rate, quite clearly, and I think probably it ought to show the Committee, that if that is the rule the Chancellor of the Exchequer has so clearly enunciated, he has never considered the question of its incidence in respect of those companies which are registered in this country and consequently are held to be carried on here. How does it work out in their case? I have quoted already to the Committee a. case showing how the law stands in regard to these companies. In the case of companies, in contra-distinction to property and businesses owned by individuals, the Chancellor of the Exchequer is going to apply his Excess Profits Tax to companies 99 per cent. of whose shares are owned by Colonials or foreigners, if carried on by a person—one would be all that is necessary—who is ordinarily resident in this country. If it fulfils those conditions, although it is owned by 99 per cent. of persons, the Chancellor of the Exchequer has in no way any power to tax because they are the citizens of a foreign Power, yet if that company is registered here and has a managing director—some one person who is ordinarily resident in this country—to look after its affairs, the Chancellor of the Exchequer is going to apply the Excess Profits Tax. In view of the statement of the Chancellor of the Exchequer, and what the incidence of the Income Tax is, and what he intends to be the incidence of this Excess Profits Tax, I do not believe he ever contemplated that state of affairs.
Amendment negatived.
The next Amendment standing in the name of the hon. Member for Plymouth (Mr. Shirley Benn) proposes to leave out all the rest of the Clause after the word "Kingdom." I do not apprehend what his purpose may be. I would only point out that there are separate Amendments dealing with the different paragraphs later on, and it would be a pity to attempt to discuss them twice over on the same point. But, of course, he may have some point which does not arise on the other Amendments.
I beg to move, to leave out the words
"excepting—
I will explain in a very few words why I put down this Amendment. The Chancellor of the Exchequer told the House that the country needed money, and that the easiest and least hurtful way of getting it was to take a portion of the excess profits of those enjoyed by people in prewar days. The victims have, I think, shown the country that they are quite prepared to do their share, and they have not raised any undue alarm. A great many of them, however, ask why you should make exceptions. They say, "If we are going to have our excess profits taken, why should they not be taken from everybody else?" Under my Amendment "husbandry" will be brought in—and why not? If the country is short of food and these people make excess profits, surely they ought to give them to the country in the same way as others. Offices and employments are also exempted, and I know of companies making large profits, and paying their managers very large salaries, larger than before the War, and why should they not contribute? Another exemption applies to people making money through their personal qualifications. Those persons are very much more valuable to-day when their competitors are at the front, and surely they ought to pay their share. For these reasons I move the omission of this part of the Clause, and I hope it may be the feeling of the Chancellor of the Exchequer that everyone should pay his share, and that there should be no exceptions. If there are severe cases, the right hon. Gentleman has already promised us a tribunal before which they can appear.
There are many other points raised in subsequent Amendments, and I want to avoid a Debate taking place upon them twice over. The Committee may either debate them all on this Amendment or deal with each point as it arises.
I think it would be unfair to those who have put Amendments down on special points to wipe them out in this way, and perhaps the hon. Member for Plymouth will withdraw his Amendment.
The Amendment of the hon. Member for Plymouth is quite in order, but I will put it in a form which will not knock out the other Amendments.
I think it would be better to have no Debate on this Amendment.
I hope that the general feeling of the Committee is that we should take the Debate on each separate proposal. I have an Amendment down to delete paragraph ( a ), and other hon. Members have Amendments on the Paper which are covered by this proposal. Therefore I think it would be better if the Debate on this Amendment was allowed to drop.
In the circumstances, I ask leave to withdraw my Amendment.
Amendment, by leave, withdrawn.
I have already dealt with the next Amendment on the Paper, standing in the name of the hon. Member for Barnsley (Sir J. Walton), dealing with royalty owners. The Amendment of the hon. Member for Oldham (Mr. Denniss), relating to trade or business operations in the British Dominions or Colonies or in India, is in the wrong place. The hon. Member will observe that the matter can be dealt with in better form at the end of Sub-section ( c ).
My Amendment relates to trades and businesses, and to put it after the word "exception" would scarcely seem to me to be right.
I think the hon. Member will see that if Clauses were drafted on that principle they would be all parentheses, and that is what I try to avoid. The next Amendment in order is that standing in the name of the hon. Member for Islington (Mr. Lough).
I beg to move to leave out paragraph ( a ).
I think this is a matter to which the Committee ought to direct its serious attention. I am not in favour of including agriculture and other like matters under this tax, but the Committee must scrutinise very closely the exemption which the Government propose. At the beginning of our Debate on this question I expressed the opinion that this matter must be dealt with very broadly, because it is more like an Income Tax than a special tax that could be confined to trades or businesses. Now we come to a part of the Clause in which the Government define very broadly trades and businesses. They include trades carried on in every part of the world, and yet the Government which has been proceeding on that line proposes to leave out "husbandry." Why on earth should that be left out? If there is one subject which has been discussed more than another since the War broke out, it is the high price of food. Now food is produced practically by husbandry, and the profits derived from the high price of food must have gone largely to this great business. If you wanted to take the particular business which undoubtedly the War has had a great and beneficial effect upon you would have to point to husbandry. I know that in agricultural districts it is hard to get recruits, and there is a great deal of sympathy with those who complain that people are being drawn away from husbandry. While those districts have been denuded of the men, they are subject to this heavy tax, and this great industry which has been benefited so much is exempted entirely. If we accede to the Government's proposal and exempt businesses, we at once plunge into a series of anomalies which the House ought really to look at very carefully. We have been talking about the difficulties of this tax at every stage. The right hon. Gentleman now proposes to exempt husbandry, but I will mention some trades which will not be exempted. Horse dealers or cattle dealers, or any persons who make profit by selling the produce of husbandry, will not be exempted; whereas the producer, who will get the large profit made on the high prices which now obtain, will be exempted. Persons who sell British as against foreign timber will be exempted if the timber is produced in the United Kingdom. The same applies to cattle breeders and cattle dealers, although dairymen and those who sell milk and butter will be included. This opens up a series of most extraordinary anomalies, and therefore the House ought to consider the question most carefully. I would like the right hon. Gentleman to consider whether he cannot make this proposal so that it will work more smoothly and reasonably, because I am afraid it will have very serious effects.
I will put the Question, "That the word 'husbandry' stand part of the Clause."
The FINANCIAL SECRETARY to the TREASURY (Mr. Montagu) rose—
It was understood that the Committee were to be allowed to debate all these points on the proposal to delete paragraph ( a ), and surely the Financial Secretary ought to hear what we have to say before he replies.
I wish to give the reasons which led the Government to exempt husbandry in the United Kingdom, and I desire to explain this, point now, because I think it may meet some of the arguments that may be put forward; but I am quite in the hands of the Committee. The reason is that husbandry within the United Kingdom has been subjected to particular taxation under this very Budget, and the farmers have taken that taxation with the greatest public spirit
So have the trades.
Consider how tremendously severe is the new taxation upon husbandry. It not only brings them within the ambit of those people who are now taxed and who were not assessable before the War, but it trebles the assessments upon those who were under the Income Tax law before, and as a consequence of the lowering of the level of abatements it not only makes them pay that tax, but a great proportion of the farmers are deprived very largely of any allowance for children. The timber merchant and the horse dealer is not affected in this way, but the farmer and the market gardener has been called upon to pay a very large increase of taxation which the Government consider was a sufficient burden to put on all at once, and a burden which might be taken as a substitute for the Excess Profits Tax. Schedule B has always been devised to meet the case of husbandry, because it is notorious that farmers do not and cannot keep accounts in a large number of instances. I think the result of trebling the assessment is likely to make them keep accounts in the future, but for the purpose of collecting the Excess Profits. Tax on the farm it would be necessary to have a new set of accounts which would be very difficult to work out. I agree that all exceptions ought to be most carefully considered, but I suggest, in the light of the alterations of the Income Tax imposed upon farmers, that those exceptions will stand the severest criticism and investigation of the Committee.
My right hon. Friend has told us of the enormously increased taxation that has been imposed upon farmers, but I would remind him how absolutely unfair has been their contribution in Income Tax in the past. They have been let off by the payment of one-third, and the addition is simply an equitable change which compels them to pay, approximately at any rate, at the same rate as all other Income Tax payers in the country. It balances up the farmers and the rest of the community so far as Income Tax is concerned. I do not see, therefore, that it does anything more than place us all on an equality; but a large number engaged in trades and businesses of any description, if they have excess profits, are to pay 50 per cent. of those excess profits into the Treasury. Why on earth a section of the community engaged in farming and earning, as they are to-day in many cases, enormous profits out of the increased prices they are getting for their production should be let go scot free, while the rest of the community are to be taxed, I cannot understand. I thought that the Chancellor of the Exchequer was a great exponent of the principle of the equal incidence of taxation. We know that the whole country raises no objection to this Excess Profits Duty, provided it is levied equally all round, but there is a very strong feeling in many sections that this is not being done by the present proposal.
I am aware that there is one consideration, and in my judgment one consideration only, that might influence us. It is urgently necessary that we should increase the production of food in this country. Therefore, I would not deal with them too drastically or act unfairly towards them and discourage them in increasing the production of food by the imposition of too enormously increased burdens of taxation. That is the only argument, perhaps, in favour of giving them some differential treatment in order to encourage and stimulate them to that greater production of food which is so urgently necessary if we are to be made less dependent upon imported food supplies. Many of those engaged in trade and business called upon to pay this large contribution to meet the financial needs of the nation are willing to pay provided all others enjoying increased income arising out of the War are also made to pay, but as it stands they do feel that a great injustice is being done and that the Government are largely departing from the principle of the equal incidence of taxation.
I must take exception to the suggestion made by the last speaker that the agriculturists of this country are making enormous profits. I do not think that is really so from what I know of them in the Eastern counties. There is no doubt that they are doing very well, but there is no sign so far as I can see of such enormous profits as some coal owners and other people are making in this country at the present time. We must remember, whilst it is quite true that all the farmer has to sell at the present time has increased in price—his corn, his roots, his potatoes, and his cattle—that at the same time he has been called upon to pay out a good deal more. He is paying a much higher rate of wage than he did. I do not say that he is paying in some districts as much as he ought to pay, but at any rate he is paying a much higher wage, and he is paying very much more for all feeding stuffs, and that is a very important item in good farming. He is also paying, very much higher for his manure. Therefore, when you set one account against the other, the most you can say is that the farmer is doing very well at the present time. I do not myself see any of these enormous profits, and I am a little bit of a farmer and know something of what I am talking about. It is quite true, as the Financial Secretary to the Treasury has said, that you have put a very much larger increase of Income Tax upon the farmer under this Bill than you have put upon any other section of the community. It is perfectly just and it was very much overdue, but at the same time it is about as much as he can stand for one year. The result, of course, of Schedule B means that whereas farmers who were previously farming 500 acres of land and paying £l per acre rent did not pay any Income Tax at all, they will now be called upon to pay upon £500, less their abatement. Their abatement would be £100. The Financial Secretary to the Treasury said that they would not get an abatement for their children, but I think that is not so. They will get the same abatement for their children as any other Income Tax payers.
I meant that the farmer who used to get an abatement for his children when he paid Income Tax on a third of his rent will now, when he pays on the whole of his rent, come above the £500 limit, and will, therefore, get no abatement.
That, of course, only refers to a very small number. The great bulk of the farmers will get the same abatement for their children as other Income Tax payers. Of course, it means that the farming community, as we were told by the Treasury officials, are going to pay an additional £2,000,000 this year in Income Tax. My own impression is that it will be more than that amount. At any rate, that is a very substantial contribution from the agricultural community, and I venture to suggest to the right hon. Gentleman the Member for Islington (Mr. Lough) that is as much as they may reasonably be asked to pay, at any rate this year.
I earnestly agree with the hon. Member who has just sat down, and I am quite certain if more taxes are put on the farming community at the present time that a great many small farmers will find themselves in a very difficult position. There is one point which has not yet been mentioned. The farmers at the present time have great difficulty in some parts of the country in getting any labour at all.
What about traders?
We have been told to produce as much food as we possibly can for the country, and that is what the farmers have been trying to do and have been doing extremely well all over the country, but if more taxes are put on the farmer at the present time it will be very difficult for many of them. Very great difficulty is being experienced by farmers as regards labour, and I am not so sure that in all parts of the country farmers are doing so very well as is represented. They are not doing badly, but it must be remembered that there has been a good deal of difference in the weather in various parts of the country. [Laughter.] The hay crops have been exceedingly bad this year in some parts of the country. Hon. Members who know nothing about farm- ing may laugh at such things, but it is not a laughing matter for the people concerned The weather has been different in different parts of the country, and the present taxation will touch up the farmers in certain parts of the country very seriously. I am very glad that the hon. Gentleman mentioned feeding-stuffs, because the price of feeding-stuffs in this country has gone up tremendously. People may have sold stock, and may have sold it very properly, but it has got to be remembered that in order to keep that stock up before selling it feeding-stuffs had to be bought, and the price of feeding-stuffs at the present time is very high in this country. I do hope hon. Members will not go away with the idea that all the farmers in this country are making fortunes, because it is not the case. The farming industry has been doing better in the last few years, and is doing fairly well at the present time, but, taking the rough with the smooth, I can assure hon. Members that farmers are making nothing like the profits that some hon. Members are making who are trying to put extra taxation on their shoulders at the present time, when they are simply holding their own and doing fairly well. I thank the Government for saying that they are not going to put this extra taxation on the farming industry, and I hope with all my heart that they will stick to their guns.
The arguments to which we have just listened are, of course, familiar, but they seem to me to have little relevance to the point we are discussing. If the farmers are not doing well they will not make excess profits, and if they do not make any excess profits there will be no tax to pay. Therefore, the argument of the hon. Member who last spoke is beside the point. I was not myself convinced by the argument addressed to us by the Financial Secretary to the Treasury. It has been admitted—and nobody can deny the fact—that the increase in the Income Tax taking place this year is really something that ought to have taken place years ago. Then take the question of accounts. Under this Bill as it is drafted every form of trade or business except husbandry is subject to this tax. There are thousands of small trades and businesses in this country in which the, accounts are in just as unsatisfactory a position as in the case of farming, and in which there will be the same difficulty.
They have been making returns every year for Income Tax.
6.0 P.M.
It is perfectly true that they have made Income Tax returns, but I do Dot think that their accounts are kept in a form that they will be found easy to deal with under this Bill. I do not know whether the hon. Gentleman has gone into the question of what accounts will be necessary, but I have, and you will really go into a form of accounting entirely different from anything hitherto done. It will involve very complicated and difficult calculations, and will really require accountants. At any rate, a number of people in small businesses will find it just as difficult as farmers. The only argument really is that we want them to produce more food; but we want to produce more munitions, and it seems to me therefore a very illogical argument. That is another point of view; but might I point out that we are not merely excluding farmers, we are excluding market gardeners and flower-growers, a very large and useful branch of agriculture. Market gardening to-day is one of the most remunerative industries going, and therefore, the argument that might apply to the ordinary farmer, or stock grazier, cannot apply to the market gardener. I would ask the Government whether the term "husbandry" cannot be sub-divided. Why not make a difference between people who carry on business as market gardeners or nurserymen and those who go in for wheat raising and stock grazing. It is a kind of misnomer to include all the different farming operations tinder one term and to treat them on the same basis, and I would suggest that, if the Government cannot see their way to abandon this impost on agriculture generally, they might see their way, on the Report stage, to introduce an Amendment differentiating between the different kinds of farming.
Does "husbandry" cover market gardening and fruit growing?
Yes.
Does this cover the case of a farmer who ostensibly farms, but who makes a great deal of profit by stock grazing and by dealing in cattle or horses? There are a great many men who farm, perhaps, 100 acres; they grow a certain amount of corn and so forth, but really that is not their business, which is to buy and sell cattle. They make large profits in that way, and I want to know whether you get at them under this provision.
The right hon. Gentleman who spoke just now said the increased Income Tax now put on the farmer ought to have been put on him some years ago. I do not know whether that is so or not. I think the original idea of assessing the farmer on one-third of his rent was that he paid a very large share of local taxation, and this concession was consequently given to him as a relief. It has now been taken away, and, at the present moment, the farmer is paying a very largely increased Income Tax—a much larger increase than is cast upon any person or business in the community. It is quite true he can be assessed at his option on his actual profits, and, of course, the actual profits are always larger, in ordinary times, than one-third of the rent. There is, therefore, not very much to be said for that. It is really no concession, because it would involve the farmer paying more in Income Tax than before.
The right hon. Gentleman has told us that if the farmer has not made any excess profit, there will not be any tax for him to pay. That, of course, is quite true. But the right hon. Gentleman apparently forgets that the farmer will be called upon to make a return. In my judgment he will find it very difficult to do so. I believe, too, the Treasury will find it will entail a great deal of labour, while the result will be very meager. The profits of farmers have been very much exaggerated. I do not know whether that matter has been dealt with, because I was not in Committee a few moments ago, but it must be remembered that the fanner has had to meet the greatly increased cost of food-stuffs and of labour. In many cases my own tenants have been practically without any labour, excepting a few women and boys, and therefore I think the farmers cannot have made any very enormous profits. The idea that they have done so is quite erroneous.
Again, it is very difficult to say what is a farmer's capital. How can anybody tell what capital there is in the business? It can only be got at by making a valuation, and that too often is entirely guess-work. Valuers come round every year and value everything I have on my land—hay, straw and stock. There are very few farmers who adopt that course, but even where it is adopted you cannot tell whether the amount of the valuation can be realised. It is, therefore, very difficult to ascertain what is the amount of capital upon which the 6 per cent. or whatever sum it may be, is to be charged. Although I do not deny for a moment that on the face of it it seems to be illogical, I think under the circumstances the Government were right to leave out the farmers. I do not believe they would get anything from them, and they would only put them to a considerable amount of trouble. The burden put on the farmer during the last year or two has been very great. I need not enlarge on it. Everybody knows the trouble farmers have had to get their land ploughed and their crops sown, and they ought not to be subjected to additional worry, which cannot bring in any great revenue to the State.
Admitting everything advanced by the right hon. Gentleman opposite in support of the Amendment, I think we should be landed in a much more illogical position if we accepted it. I agree with everything which fell from the last speaker. I want to put in one short word. You have given the farmer the option of being assessed either upon his rent or upon his actual profits. If he accepts the former, the excess profits are not likely to be declared. But this Clause takes away the option altogether, and, although the farmer may be assessed on his rent, he will have to make a return under Schedule D; he will have to keep accounts, and all the ordinary procedure under the Schedule will have to be gone through, in order to arrive at the sum on which he is to be charged the Excess Profits Tax. It might be very much better for all farmers to be assessed under Schedule D, and, perhaps, when they have had experience that system will become more general, but as matters stand now I think it is entirely illogical to offer him the option on one hand to be assessed on his rent, and then to require him to go through the whole process involved by assessment under Schedule D.
I admit at first sight there is a great deal to be said for allowing husbandry to come within this tax, if and when it makes an excess profit. But the Debate has brought prominently out every kind of injustice and difficulty which would result from the adoption of that course. As has been pointed out by the hon. Baronet the Member for the City of London (Sir F. Banbury), the origin of this arrangement of assessing farmers on one-third of their rent was to be found in the fact that they had borne so large a share of local taxation. The Debate has also brought out another fact—that is, that so many farmers are so unaccustomed to keep accounts and to make accurate valuations that in almost all cases, certainly in a great many cases, they will be forced to accept the option of being taxed under Schedule B, rather than take the trouble to bring themselves into a position to be assessed under Schedule D. The difficulty of proving their actual incomes will probably lead them to prefer to accept the alternative, although so doing may not be to their advantage.
There is another point which I believe has not been mentioned in this Debate. There is considerable anxiety on the part of a good many people, and certainly on the part of the Board of Agriculture, to induce farmers to break up grass land and to grow more wheat. The Board have been showering leaflets about, trying to persuade farmers to do this, and, personally, more from patriotic motives than because I believe it to be profitable, I have to a certain extent followed that advice. I confess I have done so with very much misgiving, owing to the fact that I foresee considerable difficulty in getting adequate labour to cultivate the land. The right hon. Gentleman the Member for Islington has rather suggested that recruiting has been less successful in agricultural districts than elsewhere. I entirely differ from him. I have done a good deal of recruiting in agricultural districts, and I venture to assert that those districts have done far and away better than most of the urban districts, for the obvious reason that the pay and separation allowances have proved more attractive to agricultural labour than to labour of other classes. If you want to induce farmers to break up their grass lands and grow more wheat, the only way you can do so is by leading them to believe that they may make increased profits; and if you are going to couple with this request the suggestion that they must pay an Excess Profits Tax if they succeed in making increased profits by growing more wheat, instead of continuing to maintain their grass lands, you will have to consider what the effect will be upon them. In my opinion that effect will be very different to what you anticipate.
I do not think that justice has been done to the impracticability of the proposed Amendment. Everything said about the profits agriculturists are at present earning is entirely beside the point. All that has to be considered is the profits earned in 1914 by comparison with the profits earned in any two of the three preceding years, and anybody who knows anything of farming will be aware that it is impossible to recover the profits of 1914. A more impracticable Amendment I hope we shall not see on this Bill.
I was very interested in the speech of the hon. Member for the Tamworth Division of Warwickshire (Mr. Newdegate), which I presume was an argument in favour of this Amendment. I understood the burden of his argument to be that no farmers would be touched by this tax if they were brought under the Bill, except one or two who had been extraordinarily blessed by Providence in the shape of good weather.
The argument I was desiring to put before the Committee was that the hon. Member and other hon. Members who sit near to him have the very erroneous idea that the farming industry is making enormous profit at the present time. There may be a few instances, but the profits they are making are only reasonable, and in the majority of cases the farmers are in very great difficulty.
I am sorry to have troubled the hon. Member to make a second speech. Accepting his argument, I believe it to be perfectly good, therefore the hon. Member is quite free to vote for this Amendment, because it will not touch any farmer. That was my impression. I may be wrong, but I listened to him exceedingly carefully. The only instances he gave us were one or two in which farmers had made some profits, but that was on account of the weather. I should have thought that if a very small number of these farmers had made extraordinary profits on account of good weather, they would be willing to show their gratitude to Providence for watching over them by making a small contribution to the State. I want to ask the Government two questions. First of all, the Secretary to the Treasury on previous Amendments has kindly favoured the Committee with estimates of what the Government would lose if some alterations were made, but he did not in this case tell us how much they would gain if this Amendment were passed. I am sure he is just as willing to advise the Committee on this question as on the others. My hon. Friend near me (Mr. Leif Jones), representing a rural constituency, suggests that he does not know enough to make a definite estimate, but I believe the right hon. Gentleman has a great deal more ability than my hon. Friend gives him credit for. I would like him to inform the Committee what is the estimate, not merely for this particular year, but for a good average year during the War, of the amount the Exchequer would gain if husbandry were not exempt.
My second point is that the exemption of all those who have not made a profit of more than £200 entirely relieves all the small farmers, and I cannot understand anyone exempting husbandry on that ground. It is as much as to say that this poor hard-working farmer who has made more than £200 extra profit does not really wish to stand by his fellows. I think he does. There were very few of them in 1914. I should like my right hon. Friend to convince me on this point. I would have voted for the Amendment much more freely but for his supporters in the Committee. The arguments they have adduced against the Amendment rather tell in favour of it, so I am rather perplexed. If the right hon. Gentleman were to speak again perhaps I should be with him. Surely we are entitled to ask that this should not be finality. Are we always to have some very wealthy, prosperous farmers exempt from the Excess Profits Tax because of some difficulty in the way that they render their accounts? While that may prevail to-day, and, perhaps, for a few years, it cannot prevail for ever. Farmers now are educated men and are taught book-keeping, and as time goes on these big farmers, to whom £200 increased profits is quite a small thing, will come under the tax, without your having to pick out excuses on the ground that they are bad book-keepers.
I will not repeat my previous argument, because I was so successful in my former attempt that I am afraid I shall not be so successful if I repeat it. The hon. Member for West Aberdeen-shire (Mr. J. M. Henderson) asked whether cattle dealing was a business. Cattle dealing is a business. If a man deals in cattle and pretends to be a farmer we hope very much to be able to get at him. We are dealing not only with businesses which are carried on continuously, but whether they are carried on continuously or not. Timber growing is not husbandry, therefore it is not included in the exemption. [An HON. MEMBER: "What about market gardening?"] That is husbandry and is excluded. With regard to an estimate, I have not brought one, partly because I ventured to think that, on examination, this Amendment would not be likely to find favour with the Committee, and therefore it was not worth while to form one, and partly because the hon. Member himself admits there would be a very small number of exemptions.
I would like to ask a question of the right hon. Gentleman in further explanation of what he has just said. There is a large number of people in different parts of the country who buy store cattle, fatten them and sell them at an increased price. Are we to understand that people who do that are not to be treated as agriculturists?
They will be where it is part of the normal work of the farmer, namely, husbandry. If a man is a horse dealer or a cattle dealer simply, he is really carrying on a trade.
I am sorry I was not in the Committee when this discussion first began. I will ask the permission of the Committee to say a very few words upon this question, because it is one with which I have been connected for years, and in which I have taken a very active part in the past. When the Committee talk about the excess profits of farmers, farmers throughout the country will wonder very much what excess profits are spoken of. [Laughter.] I hear laughter from the other side. There is no reason whatever to doubt that farmers will wonder what the excess profits are. Hon. Gentlemen opposite seem to forget altogether what has happened to the farmers in this country in the past. It is not so very long ago that we were discussing the question of their Income Tax being trebled. What was the excuse for that? The excuse given for that was that their rates had been lessened by the action of Parliament. Why were they lessened? Because the Royal Commission appointed by Mr. Gladstone, with a large majority of Radicals upon it, recommended that inasmuch as the farmers were rated so grossly unfairly as compared with all other classes it was necessary, in fair justice to them, to reduce their rates by three-quarters. Parliament accepted that verdict so far as this, that it reduced them one-half. All that which was given in aid of the farmers on the bare ground of justice, and more than all that, you seem to forget has already been wiped out by the proposals to treble their Income Tax. That is an absolute fact. I have heard hon. Members opposite say that farmers ought to have shown their gratitude for the way they are treated. I think they have done so already. I have heard no general complaints made by farmers, and no general demand to be excused from having the Income Tax trebled, yet that wipes away all and more than all that was done for them when the recommendations of the Radical Royal Commission were carried out in Parliament and their rates were reduced. How do they stand now? They stand worse off very considerably than they were before, yet that concession was made to them on grounds the justice of which was never disputed, although I remember that we were kept up night after night to prevent the passing of the Agricultural Rates Act—
I must have some regard to the width of this discussion. If we are going back so many years we might have a general Debate upon all the Acts that were passed at that time. We had better keep to the simple point whether or not in this definition husbandry should be exempt.
Yes, but that involves the whole of these questions. Husbandry means the condition in which the farmers have been placed by past and present legislation. I am trying to make out a case on behalf of farmers which I believe I am justified in attempting. I will endeavour to follow as closely as possible what you, Sir, think is desirable in the course of this Debate, and I will only say this now with regard to the past, then I will pass to the immediate present. All I know is that both sides of the House of Commons have every year been agreed that farmers are so unfairly rated in comparison with all other classes that both parties have maintained up to this hour the Bill which was carried in order to give them relief in that important respect. I go on to point out that that relief has been more than wiped out by the legislation which is proposed to-day. In addition to that, endless promises of reform in the same direction have been made again and again Both parties are bound by promises of that kind. They have never been fulfilled. Now we come to additional proposals. We are now discussing whether or not farmers should be exempt from additional proposals for taxation, or whether this tax should be placed upon their excess profits. I say without hesitation that if you take into consideration what has happened to agriculture during recent years—first of all, the most terrible period of depression that was ever known, then moderate prosperity since—and when you remember the fact that the great majority of farmers in England have not yet recovered the position they occupied before those years of intense depression, I do think it is going too far, when the Government comes forward day after day and makes all kinds of proposals to the farmers to increase the food of this country by all possible means—which they are perfectly willing to do if you will only enable them to do it without great loss to themselves—it is rather too much, after the question has been treated in that way, that you should come forward again and tax them upon alleged excess profits, which I believe you will never be able to prove, and of which the farmers themselves are unaware. I do not know how far your accounts are to go back in arriving at what these excess profits are. We have had twenty-five years of the most serious depression that was ever heard of. Now, on three years of profits farmers are to be taxed. I affirm that farmers have made no profit which will justify you in attempting to include them in legislation which will charge them on the excess profits they are alleged to be making at the present time.
Question, "That the word 'husbandry' stand part of the Clause," put, and agreed to.
I beg to move, after the word "husbandry" ["( a ) husbandry"], to insert the words "including fruit and vegetable culture."
I have heard what the Financial Secretary has said, that the words I propose to include are included in the definition of "husbandry." I only rise to ask the Chancellor of the Exchequer, as there is no definition Clause in which that is clearly stated in the Bill, on what he relies, so as to be quite sure there will be no question that the whole industry, whether carried on under glass or in the open, of raising fruit and vegetables is considered under this Bill to be an integral part of the operations of husbandry?
The word "husbandry" is always construed, and will be con- strued, by the Inland Revenue Commissioners to include fruit and vegetable culture. If the hon. Member inserts these words in the Bill, the effect would be quite different from what he thinks. Inasmuch as fruit and vegetable culture are included in the term "husbandry," specifically to include them would imply a doubt upon every other form of agriculture being intended to be included under husbandry. As I understand the hon. Member's purpose, he wishes to make quite sure that the definition of husbandry is as wide as possible. His Amendment would make it as narrow as possible; therefore I hope he will not press it.
Is there any definition of husbandry in any of these taxing Acts on which you can rely for the purpose of including fruit culture in these words? Because the difficulty is this: If it is merely the practice of the Inland Revenue for the moment it does not follow that the next Board of Inland Revenue would adopt that same definition. The Board of Inland Revenue is not bound by a definition which its predecessors have followed, and how can the right hon. Gentleman ensure that future Boards will follow the same definition as the present? It would not be a bad thing to consider between now and Report whether you could not put a definition in the definition Clause which would include all forms of agriculture, and would also include the species of industry to which my hon. Friend refers.
I could not recommend the Committee to include any specific form. It is no good saying "husbandry, meaning thereby all forms of husbandry" or "all forms of agriculture," because they mean the same thing. That would be mere verbiage. The moment you get away from all forms you throw doubt on all the other forms of agriculture, and it is far best to use a wide word which is interpreted under the ordinary rules of common sense by this and all Boards of Inland Revenue.
The right hon. Gentleman cannot possibly say that horticulture is generally understood to be included in agriculture, and he has just used the word "agriculture." The thing I want to cover is certain forms of horticulture, including fruit and vegetable growing, whether carried on under glass or in the open. He has not answered me specifically on that point.
Yes, they are included.
May I ask whether poultry raising, for instance, would be included in the definition of husbandry?
Poultry raising, as a part of husbandry, would certainly be included in the definition of husbandry. I can conceive that there might be conditions under which poultry raising would be carried on as a business, where it would not be husbandry, but that would not arise under this definition. It would not arise now.
Amendment, by leave, withdrawn.
I beg to move to leave out the words "in the United Kingdom" ["( a ) husbandry in the United Kingdom"].
Here is another anomaly. Why, if it is good to exclude husbandry, is it not right to exclude it all over the Empire? A different line is drawn entirely with regard to husbandry in the self-governing Colonies and in India from that which is used in the United Kingdom. How is it to be justified? If you take the justification which we have had from the Financial Secretary about the Income Tax, many of these Colonial enterprises are oppressed by a double Income Tax. They pay Income Tax in the country in which they are carried on as well as here and therefore are much more hardly hit, and they are much more hardly hit in another respect. There is no question about these enterprises having their accounts, but you are going to ask them to reopen accounts which were closed two and a half years ago and pay 50 per cent. of the profits under certain circumstances. It is an anomaly very difficult indeed to reconcile with the general exemption. I am also greatly worried by the definition of husbandry given by the Financial Secretary and the Chancellor of the Exchequer. Does my right hon. Friend remember the definition in Shakespeare?
We shall never get business done if we are to go back on preceding Amendments. The right hon. Gentleman must keep to the point.
Certainly, I will obey your ruling entirely. With regard to that, may I point out that I refrained from speaking a second time when I was withdrawing the other Amendment just because I wanted to bring this point before the Chancellor of the Exchequer. The point is a very weighty one, and I should like to move in order to hear what my right hon. Friend says.
The Committee has already accepted words in the Clause which apply the tax to any trade or business of any description carried on in the United Kingdom or carried on in any other place by persons ordinarily resident in the United Kingdom. That would cover the case of the company which the right hon. Gentleman has in view. We are now making an exception for husbandry carried on in the United Kingdom, for reasons which have been very fully stated. Not one of those reasons applies to husbandry carried on elsewhere, therefore there is no ground for making an exception to the rule which the Committee has already accepted
Amendment negatived.
I beg to move, at the end of paragraph ( a ), to insert the words "the sale or distribution of agriculture products; and"
I move this Amendment in order to ask a question. It is the definition of husbandry again. The matter is really in considerable doubt. I should like to know whether it includes the sale or distribution of agricultural products throughout the United Kingdom?
Here again I can conceive that the sale and distribution of agricultural products might be carried on by a merchant or shopkeeper carrying on the ordinary business of a merchant or shopkeeper. It is quite impossible to give a general rule because it would depend upon the circumstances of each case. We mean to exclude husbandry, covering under that word all the operations of husbandry, and, of course, therefore, including the sale of his cattle by a farmer or the sale of potatoes by a farmer, but we do not mean to exclude the business of a potato merchant or the business of a butcher. I do not know that I can make it clearer to my right hon. Friend.
Amendment negatived.
I beg to move, at the end of paragraph ( a ), to insert the word "shipowning."
I desire to show that if any employment or profession whatsoever is excluded from this Excess Profits Tax, that of shipowning has far greater claims to exemption. Shipping since the outbreak of the War has contributed more largely to the needs and welfare of the country and to the Exchequer than any other trade, industry or occupation by reason of the very large number of steamers which have been requisitioned by the Government at rates of freight which are very low indeed compared with what are obtainable on the open market and the rates which neutral tonnage is commanding, Hon. Members know very little of the hardships and difficulties under which steamship owners are at present working. The existence of this nation is dependent upon merchant shipping. For instance, four-fifths, I believe, of the food-stuffs consumed in this country are brought from overseas and nearly the whole of the raw materials for our manufactures and for consumption in every direction, with the exception of coal, is also carried from overseas by our mercantile marine. The existence of the nation and, in fact, of the Empire, depends upon her merchant shipping, and it has never received any aid from our Government to help us in our fight with foreign shipping, which does receive such aid. The whole of the successful prosecution of this War depends upon merchant shipping. The Prime Minister yesterday said:—
It is difficult to obtain correct information regarding the number of steamers taken by the Government, but I think I am fairly safe in saying that about 4,000 vessels of all classes belonging to the merchant service have been taken The Admiralty, in correspondence with myself, has admitted that of certain classes of ships 75 per cent. of those classes have been taken, and of regular liners whole fleets have been taken with the exception of some of the older and smaller vessels. Within the last month the Government has taken up shipping to the extent of 500,000 tons of cargo space, and this at a time which synchronises with the blocking of the Panama Canal, holding up eighty-four ocean steamers on both sides, representing about 400,000 tons of cargo capacity. The total number of steamers on the British register of 1,000 tons net and upwards is 3,767, representing a net registered tonnage of about 10,500,000 tons. Out of these 3,767 vessels there are only 2,662 ships of 2,000 tons net register and upwards. These are the figures up to 31st December last year. Since then, of course, we have had losses by submarines, and perils at sea. I wish to point out that out of these 3,767 vessels the Admiralty appear to have taken something between 1,500 and 1,800 ships, leaving the remainder to carry on not only the whole service of the overseas trade of this country, the export trade, the import trade and the foreign trade, but, under the direction of the Admiralty, supplying the French Government with transports, with food-stuffs, and military requirements. Is it surprising that, under such circumstances as these, we have had the great increase of freights which we have seen of late, and which hon. Gentlemen opposite appear to think is due to the greed of the shipowners? It is nothing of the sort.
The demands are so great for the free tonnage that the steamsip lines whose ships have been taken away from them by the Admiralty for military purposes are compelled to go into the market to try to charter tramp tonnage against the merchants and shippers who are also competing for it, with the result that there is an enormous demand and great competition for the very limited tonnage available. In the case of the liners, the regular liners, this disorganisation of their trade may result in the total loss of their business and their trade to neutral shipowners. My point, and the most serious feature of the situation, is the extravagant and wasteful use of ships by the Government. I do not suppose I shall be in order in giving many instances, but I shall give one or two. There is, I believe, at the present time—certainly it was so up to quite recently—lying at harbour in the Ægean Sea a steamer of over 10,000 tons gross register, the hire of which amounts to £10,500 a month, and that steamer has been lying there for some time simply for the occupation and the accommodation of forty military and naval officers. She is now known as the "United Services Club." That is one instance of the frightful waste and extravagance that is going on. Other ships are kept lying idle for months, when they might be making voyages across the Atlantic and bringing home food, and thereby reducing the cost of food in this country. Fast passenger ships have been requisitioned by the Government and sent out to the West Coast of South America for nitrates. I think the hon. Member for Hexham (Mr. Holt) will be able to confirm this. One would have been under the impression that those nitrates were required for military purposes—for explosives. I am given to understand, however, that the material is to supply the farmers with fertilisers. Then again, hay is brought from Buenos Ayres for the French Government, and the Government are offering 27s. 6d. per ton for hay, while others are offering 85s. for wheat. Therefore, it is not very likely that the Government will get their offer accepted. I would like to emphasise the mischievous feature of the Government handling tonnage like this. The merest tyro in shipping would have combined the nitrates from the West Coast of South America and the hay from Buenos Ayres, utilising the weight and the measurements to reduce the price of both.
I will not prosecute this question any further, beyond maintaining that neutrals are benefiting far more than British shipping by the protection of our Navy, and by the advantages which they enjoy over and above ourselves in the various trades of the world. It is useless for the Prime Minister to come down and talk about economy—economy of the Government, and economy of individuals—when such waste as this exists in Government Departments. I protest most strongly against the shipowner being made the scapegoat of the laches of the Government. Members of this House appear to look upon the shipowner as a greedy harpy who cares about nothing but profit, when, as a matter of fact, in many instances he is not making any profit at all. I am referring to those concerns where there were pre-war contracts at low rates of freight which had to be carried out. The shipowner is bound to carry out those contracts between neu- tral contractors. We cannot treat these contracts as scraps of paper, but we have to carry them out at great sacrifice. It does not mean that because some shipowners are making large profits all shipowners are doing so. It would be just as unfair to say that because some workers in the shipyards are making £10 and £12 a week at the present time, who formerly only got £2 a week, that the whole of the working classes are making £10 or £12 a week, or that because some workers are shirkers all the working men are shirkers. In many instances shipowners are making very large profits, but in other instances they are not. I want to know why "offices, employments and professions" should be exempt from this tax. I presume it is because they do not employ capital; they simply employ brains. Does not the shipowner require brains as well as these professional gentlemen? If a shipowner makes a mistake, he has to pay the cost of the mistake, and has to bear the loss of capital. If a lawyer makes a mistake his client suffers, and if a doctor makes a mistake, his patient suffers very often in silence. My reason for moving this Amendment is not that I have any selfish desire whatever that the shipowner should escape the burden which we ought all to bear—every one of us has to bear this burden—but I simply move the Amendment as a protest against anyone being excluded from the purview of this Excess Profits Tax. Everyone of us will have to contribute to the best of his ability if we are to carry this War through to a successful and victorious issue. None of us ought to be allowed to escape. Shipowners are just as patriotic as any other class in the community. Having made my protest against the exclusion or exemption of any section of the community from this Excess Profits Tax, and having made a protest against extravagant waste of public money, I beg leave to withdraw my Amendment.
I beg to move the Amendment standing in the name of the hon. Member (Mr. Houston).
Really it is an abuse of procedure for an hon. Member to take up time in making a long speech in proposing an Amendment—which, of course, I assumed to be a serious one—and at the end of his speech not to move it.
I did not understand that I was in any way transgressing. I have said that I move my Amendment as a protest against the exclusion of anyone from the purview of this tax. If I have transgressed I can only apologise to you and the Committee for making the mistake.
It is a well-known Rule of the House that an hon. Member must conclude with a Motion. Perhaps I misunderstood the hon. Member. He may have said that he would later withdraw his Amendment. He appeared to me to wind up his speech by saying that he withdrew the Amendment before he moved it. I shall put the Motion, therefore, to the Committee.
I would suggest to my hon. Friend that we should take the hat round in the street and in this House for the poor shipowner.
I did not say the poor shipowner.
My hon. Friend was pointing out how badly shipowners have done by reason of all the difficulties which he enumerated. What has actually happened? Before the "War in July, 1914, freights on coal to Genoa were 7s. a ton. I presume the cost would be about 6s. per ton, which would leave about 1s. per ton profit.
No profit at all.
What are the rates to-day? They have increased from 7s. to 45s. a ton. What is the extra cost to the shipowner? Even supposing that the cost is double, there is a very big margin. Take the case of Marseilles. From Cardiff to Marseilles the freight was 8 francs per ton before the War. To-day it is 53 francs. That is an increase of over six times in the cost of freight to-day compared with what it was before the War. If the hon. Member says that half the tonnage has been withdrawn, and he is getting six times the freight on the balance of his steamers, I think he is in a flourishing position.
I have not asked for any exemption.
7.0 P.M.
I think the hon. Member moved his Amendment simply in order to make an attack on the Government in regard to the way it has mismanaged the shipping business. I take it that the real object of his Amendment was to attack the maladministration of the Government in this respect. What I want the Chancellor to tell us is how much he-is going to get out of this particular tax. The Government must have formed some estimate.
£30,000,000.
How much front the shipowners?
I cannot say.
There must have been a Treasury estimate of the amount.
On that question of the estimate I have seen it stated in a technical journal that probably the whole of the £30,000,000, which it was estimated by the Chancellor of the Exchequer would be yielded by this tax, will be exceeded by the shipowning firms alone. It is quite clear that the shipping freights from the Argentine and from the United States on imports to this country went up by 650 per cent., and in the case of Holland and Scandinavia they went up by 900 per cent. The extra expenses were not more than 4s. or 5s. a ton. That being so, I think the case for commiseration which was put before the Committee by the hon. Member for Liverpool is one with which the Government cannot agree. The taking of 1,800 ships of the 3,767 he seemed to wish the Committee to believe was a hardship. It was a hardship in this respect, that the owners could not get 650 per cent. profit more than before the War. But they did get paid, and well paid, by the Admiralty. They were paid the price which was agreed upon by those shipowners, and with regard to those whose ships have been taken I am convinced that the ships have been given cheerfully and loyally by the shipowners for the use of the Government. They have acquiesced in every requisition which was made on them, and they have been paid sums with which, in the circumstances of the War, they have been perfectly satisfied. They have made a far larger profit out of the Admiralty than they were making before the War in freights. I saw in a technical paper the other day that the mercantile marine of this country, which I quite agree has performed the most valuable services to the country in this time of war, instead of being depleted by the submarines, comprises at present eighty-eight more vessels, with a tonnage of 431,000 tons more, than there were in the British mercantile marine before the War. If that is correct, and as I saw it in a shipping paper I suppose that it is, it is most gratifying.
The hon. Member for Liverpool seems to think that these large freights that were paid to shipowners were forced upon them by the people who wished to use the ships for shipping their goods. He said that it was due to the demand. I saw it stated in a shipping paper that shipowners were in a very difficult position. Shippers who wanted to send goods to this country were bidding against each other to such an extent that freights were forced up to an enormous extent, and the shipowner simply said, "What am I to do? I must take the money; I must take the highest bid, naturally. I am in a very unfortunate position, but if I do not get it the foreigner will get it." And so far they are perfectly right. They have taken these great freights because they were obliged to take them, so that the foreign competitor could not take them. But having taken them, having made these enormous profits, they are fit and proper subjects for the Excess Profits Tax, almost more than any other class in the Kingdom. The hon. Member for Liverpool talks about the hardships of some shipowners who have made no profits through the extra charge for wages, bunker coal, and so on, being so great. These people will not be affected by this tax. They will not have to pay any Excess Profits Tax at all. It is only those shipowners who have been fortunate enough to make large profits but did not wish to make them in time of war, and only had to take them so that they would not get into the hands of foreigners, and who have taken freights which have raised the price of bread upon the people of this country to the extent of at least 1½d. a loaf, who will have to pay. Those profits which they are so unwilling to take they can now return to the Government to the extent of 50 per cent., and I am very glad that the other 50 per cent. will be left in their hands to build extra ships, and so increase the register of British shipping after the War is over.
I cannot understand how any fair-minded man can listen to the discussion on this Amendment and retain any doubt in his mind as to the similarity of the positions of the farmers, whose case for exemption has been urged, and the shipowner. First of all we were told that the farmer ought not to pay this tax be-cause the raw material of his industry, which is chiefly food-stuffs, is costing him more. But the corresponding raw materials of the shipowner—coal, oil and zinc, are also costing more. That is an argument which is applicable to one business as it is to the other. We were told not long ago that agriculture ought not to pay as the wages of labour have gone up. That is as true of the shipowners as it is of the farmers. We were told some time ago that the farmers ought not to pay because they were so cruelly treated in the matter of certain special expenses. Look at the shipowners who have certain special expenses, such as the light dues. Anyone will see that the two businesses are carried on by inherently the same operation and that they ought to be treated in the same way. What is the object of the businesses? The object of both businesses is to produce precisely the same result What do we get out of the farmer? We get food, including drink [Laughter.] Yes, you get cider as well as the material out of which whisky and beer are produced. A very large part of the industry of the farmer consists in raising sheep which produce the material for clothing The farmer also produces cattle and other animals, timber, vegetables, food, tobacco and sugar.
The whole business of the shipowner is to produce precisely the same articles. It is quite true that he does not carry on precisely the same portion of that business. One causes the thing to grow out of the ground, and the other carries it from the place where it is grown out of the ground to the place where it is going to be consumed. These are different portions of the same operation, and why the man who performs one portion of the operation escapes taxation, whereas the man who performs the other portion of the operation has to pay, I cannot for the life of me conceive. There is only one reason for exempting husbandry which does not apply to shipowners. It is, as the hon. Member for Carlisle pointed out, owing to the fact that farmers have not kept accounts that it is almost impossible to put a tax upon them. Against that we ought to remember that in the case of the shipowners they have been exposed to having their property ruthlessly destroyed by the enemy and their servants killed. [An HON. MEMBER: "They are insured."] Certainly a great deal of it is insured, which the Government compel them to do. No fair-minded man can see the slightest reason why shipowners should not be exempt when any other class of traders is exempt.
Amendment negatived.
I beg to move, after paragraph ( a ), to insert the words "( b ) insurance and underwriting."
I want to move this Amendment in a very serious spirit. I think that insurance is a very peculiar business, and if anybody looks into it he will surely see that it is not a fit subject for a tax of this character. Take the case of the underwriter. The underwriter is a man who makes it his business to go to people who are liable to certain catastrophes and to undertake in consideration of the payment of a fixed sum to make good if the catastrophes occurs. These catastrophes occur in all sorts of haphazard manners, and that is the sole reason which induces the people who are liable to be injured by them to insure. It is perfectly obvious that the accounts of the underwriter must show a great fluctuation comparing one year with another year. That is the essence of his business. It is quite different from any other business in that respect. The ordinary business man expects to make a profit of something like the same character year after year, but the very essence of an underwriter's business is that he expects to make a profit which is very large one year and possibly low the next, because it is his business to average out circumstances which are in themselves exceedingly fluctuating.
To go to a man carrying on a business of that kind and say, "Because in three definite years you were unfortunate and had a run of bad luck, therefore we are going to take half your profits in the year when your turn of good luck comes," the alternation of luck and good luck being an essential part of the business, seems to be an impossible proposal. What underwriter can possibly average out the good and the bad if whenever the good comes you are going to say to that man, "You have got to hand over half your good to me"? Surely it is quite plain that the only effect will be to compel the underwriters to put up their premiums, because it is not suggested that the underwriting is spread over a period of years. I would suggest to my right hon. Friend that he ought carefully to consider, if he will not accept the Amendment, to keep the whole of this business outside the scope of the Bill—what he is going to do with this particular trade—so as not to put it in such a position that it shall be paralysed, simply because during the three pre-war years the risk which they took happened to turn out in a very unfavourable manner.
I hope that my hon. Friend will not press this Amendment. On principle I do not think that profits made out of insurance and underwriting ought to be treated differently from profits made out of any other business. Therefore I ask him not to press the Amendment excluding" those businesses from the Bill. But I quite recognise that there are considerations affecting the datum line for insurance companies, and considerations affecting the manner in which you reckon the profits which ought to be taken into account. A life insurance company, for instance, might show upon ordinary rules an excess profit during the last year, whereas, in fact, owing to the depreciation of its capital, there would be in truth a very real loss. We mean to deal with that difficulty at an appropriate time, and I hope that my hon. Friend will be satisfied with that assurance.
Does that apply to all insurance?
Yes, to all insurance companies. I mentioned life insurance because it was so obvious that they had a loss, and that there were no profits, although they appeared to have profits. That is a case which anyone can appreciate. With regard to marine insurance, there also we think that there might be some special provision dealing with that trade, but not excluding it. There are circumstances which require special treatment. We do not think that profits made in marine insurance, when they are genuine profits, ought to be excluded from taxation any more than profits which are genuine profits made by a shipowner.
They do not ask it.
But both cases will now receive attention, and it is only the stress of business to which I have been subjected which has prevented me placing the appropriate Amendment on the Paper. I will do so at an early date.
My right hon. Friend is going to give special consideration to insurance businesses in regard to depreciation of assets. Surely that applies to every business in the country.
dissented.
I beg pardon. I know cases in which the assets have depreciated enormously.
I did not state that we were going to deal with the question as the hon. Baronet has put it. What I said was that in regard to insurance companies there are very special Income Tax rules which do not apply to ordinary businesses. My hon. Friend must not assume that there is to be a general taking into account of the depreciation of assets. There are special rules in regard to insurance companies which do not apply to other businesses.
Merchants may make a big loss in certain years, and they expect to gain in another year what will make up the average. Marine insurance companies, I would point out, have been making very heavy profits—very much heavier profits than people engaged in other businesses, and why they should be given special consideration I am really at a loss to know.
I have an Amendment on the Paper dealing with this question, but I shall speak upon this one which is to be withdrawn, as mine might afterwards be ruled out of order. I do not think the Committee have been quite fairly dealt with. How we shall be able to raise the question at a later stage my right hon. Friend is not able to say. The Chancellor of the Exchequer on this important subject has cut the ground from under our feet by telling us that he is going to deal with it because of the exceptional circumstances. I think we ought to have had some intimation as to the nature of the Amendment which is to be framed to meet this case, and where it will come in the Bill. I do not know whether the Committee is aware of the great difficulty of this matter of insurance, and of the great importance of it to all great mercantile proceedings in this country. An account is presented to the underwriters at the end of a year, but the final account and the checking of profits is made at the end of every three years. During those three years the money is held up, because those people who go into this business not only risk a large deposit of cash, but they may lose everything they possess. There is no limit to the liability these people have to take in this business in order to enable the great mercantile business of this country to be carried on.
I am not at all interested in this business myself, except that, as importers, my firm are requiring every hour of the day insurances to be effected. Somebody asks us to get an insurance, and we have at once to send a telegram. If the slightest check were put upon that business, and if any interference arose in connection with it, it would put the greatest difficulties in the way of the import of food and of the necessaries of life in this country. It is a most subtle matter to deal with in accordance with what I call the crude provisions of this Bill. What account are you going to take your 50 per cent. on? Are you going to take an account which cannot be completed until the end of three years? Are you going to treat this as a profit which is only got provisionally, and is not to be received for three years to come? How are you going to deal with the matter of great risks that may arise at a later stage? Anybody acquainted with the business will recognise that I have stated nothing but what is true with regard to it. I do think that when we are asked to withdraw the Amendment we ought to have a more full statement from the right hon. Gentleman as to when and on what stage the Government will bring up the matter. The right hon. Gentleman tells us that the Government have been too busy to draw up the Amendment, but are we to remain idle all the time until it is drafted? I think we should have the Amendment in a proper shape on the Paper, so that we can deal with it. My right hon. Friend said that it would be reached much later—
The Amendments will not come much later. The one as to insurance will come on the Fourth Schedule, and the one relating to underwriters will come on Clause 38; both will be placed on the Paper in ample time.
I think that they are so important that we ought to have all the time that can be given to us. It is of the greatest importance that we should have the statement of the Government that these Amendments will be put upon the Paper, so that we can have an opportunity of putting down Amendments to them before they come up for discussion.
With regard to marine insurance, I have put down an Amendment to the Fourth Schedule, and I want to know whether it can be considered. The views of the under- writers have already been transmitted to the Treasury. My Amendment would come in after paragraph 6 of the Schedule.
It is open to my hon. Friend to raise his Amendment on the Schedule. I do not propose to accept his Amendment as at present advised. I propose myself to put down another Amendment on Clause 38.
I would like to make one observation with regard to the depreciation of assets. I understand that the Chancellor of the Exchequer proposes some special arrangement in certain cases, but I venture rather to deprecate that, because the Bill as it stands seems to me to very admirably govern the case. In Sub-section (3) of the next Clause, particularly in connection with the Fourth Schedule, it is quite clear that the Commissioners of Inland Revenue can take into account any exceptional depreciation of assets due to the present War.
I do not mean that, nor do I think I said that. All I said was that the assessment of insurance companies and underwriters is under special rules which do not apply to other businesses. We have to apply the Excess Profits Tax in relation to those exceptional rules. That was my only point; I did not talk about general depreciation of assets.
The point is of importance, because you are asking the owners of all businesses to exercise faith in the administration of the Clause by the Inland Revenue. I am absolutely willing to show that faith, and I think other people will. I have had a good many questions put to me by business people intimately affected by this particular point, and I have always said that this power with regard to depreciation of assets will be fairly administered by the Inland Revenue; and, if the Chancellor of the Exchequer will say that is the case, a great many difficulties would be removed from the minds of those interested.
I think we are under an obligation to the hon. Member for Hexham for enabling us to have this short discussion, and I believe it will facilitate the progress of the Finance Bill in its later stages. I do not propose to repeat what I said the other evening, either on the general question or with regard to marine insurance in particular, but I do say that naturally we have some concern in regard to the Government's proposal, but it will be received sympathetically, and I think if it could possibly be made the means of reconciling the special difficulties of this business with the main purpose of the Finance Bill, we should be only too happy to fall in with it. Of course, generally speaking, with the large life and fire companies the position is quite easy, and there is no necessity for pressing the Chancellor of the Exchequer further than he wishes to go. He will forgive me for saying that the marine insurance companies and the marine underwriters are in a position of special difficulty, and all they ask is that, when the tax is levied and paid, it shall fall upon them just as evenly and as fairly as upon other kinds of insurance.
After what has fallen from my right hon. Friend, I ask leave to withdraw my Amendment. I agree with what my right hon. Friend the Member for Islington said, that it is not very convenient to withdraw an Amendment when the Government themselves admit that their proposal as it stands is not really satisfactory. We have not seen what the amended proposal is, and we cannot quite appreciate it as my right hon. Friend explained it. I might suggest that the proposed Amendment should take the form of a new Clause, so that it will be on the Paper a very much longer time before we come to its discussion. That might really be a convenience to the Committee. I hope the right hon. Gentleman will give a good deal more time to consider what is really a very intricate problem. I ask leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
I beg to move, to leave out paragraph ( b ).
This relates to offices and employment. It is clear that offices and all employments are included in the part of the Clause already passed referring to all trades and businesses of any description. Therefore it becomes necessary to put in a special exemption as regards offices and employment, and then later in the same Clause, after exempting employments, we have the tax made again to apply to agencies of any sort or kind which are paid percentages or commissions. In regard to offices and employments, I think we need a much clearer definition than is contained in this paragraph as to which are the offices and employments which are to be exempted from the Excess Profits Tax. There is, as my right hon. Friend knows, a very strong feeling in the commercial community in the country that this Excess Profits Tax should be levied with due regard to the equal incidence of taxation. I am glad that the right hon. Gentleman has made a step forward in making it apply to royalty owners, and if he would make further steps forward in that direction it would end in the tax being imposed much more fairly and equally on a large majority, at any rate, of those who during the War enjoyed increased incomes than it will be if the Finance Bill, and especially Clause 35, remain unaltered. What offices are included? We know the urgent necessity for the reduction of national and private expenditure, and I should have thought at any rate that the members of His Majesty's Government should have given the nation a lead in this matter. I ask why should members of His Majesty's Government who are in the enjoyment of increased incomes arising out of war conditions not remain liable to pay Excess Profits Tax as well as everybody else? We recognise, and the nation recognises, the sacrifices which some members of His Majesty's Government are making in giving their services without remuneration in the Government—men like Lord Lansdowne and Lord Curzon. They are the only two members of the Government who have set an example to the nation in the matter of the reduction of public expenditure and the practice of economy. I want to know how soon other members of the Government who are enjoying increased incomes during the War are going to follow the excellent example that has been set to them by the two members of the Cabinet to whom I have just referred.
The question is, who are included in offices and in employments, and who are to be exempted? I think it is impossible to give a definition that would operate fairly and that would make clear who are to be included and who are to be excluded. The word "employment" covers almost everything, all trades, businesses and agencies; and almost every occupation is included, including husbandry, which unfortunately is to be exempted. I think that this matter of giving exemptions deserves the most serious consideration of the Chancellor. I know that it is his wish and intention that the extra taxation proposals included in this unprecedented Budget should be imposed with some regard to the equal incidence of taxation. But I am afraid that his intention and his wish is not as fully given practical effect to as he himself would desire in the case of this Clause. I move the Amendment in order to receive from the Chancellor some statement as to the definition of the words "offices and employment," and as to which are to be exempted, and also to ask from him the assurance that he will give serious consideration to the objections that are raised in regard to all these exemptions, so that if possible everybody in the Kingdom enjoying increased incomes during the War period shall equally be called upon to pay Excess Profits Duty.
I am very glad of the opportunity of answering the question put forward, as there has undoubtedly been a good deal of criticism upon these proposals, because professions and offices and service are not included in the operation of the tax. Since this tax was first proposed, I suppose the greater part of the time of my right hon. Friend the Financial Secretary and myself which has been available for questions relating to the Budget, has been spent in interviewing persons who felt that exceptions ought to be made on special grounds in their cases. Generally speaking those special grounds in the majority of cases turned upon the point that capital engaged in business had not yet become properly remunerated, or that capital has been used up specially fast in making the excess profits, and that in estimating those excess profits there was no proper allowance made for that capital. We have accordingly in the Bill provided for various exemptions in order to do justice to the subjects. We have set up a Court of Referees in order to deal specifically with the question of the rate of interest allowable for the capital. My hon. Friend may ask himself what has this got to do with this subject. It has, I think, everything to do with the question in hand. What datum line are you going to take in the case of the professional man? How are you going to put him in the same position as the owner of capital? The professional man makes his profit—how? He does so by spending excessively his capital, and his capital is his energy and his brain power, his health. In no case can the professional man have made excess profits except by the exceptional expenditure of his personal capital. How can I allow for that?
Everybody else does the same.
No, no! I quite agree there is the element of exceptional effort in the case of all business men; but where a man is employing capital and under the circumstances of the present time is getting a higher remuneration for that capital mainly owing to the increase in prices, that is different from the other case in which there was no possible scheme open to me whereby I could institute a fair datum line for the professional man. It is equally true of the office holder, of the clerk, and of the working man. None of those classes are making excess profits except by the expenditure of their own blood. How can I compensate them for that when there is no datum line possible in their case? Moreover, from the Exchequer point of view, there was no money in it. From the point of view of justice I think it would have been wrong and unfair, and from the point of view of the Treasury I should have got no revenue. The exemption of £200 practically cuts out employments of clerks, Civil servants, and all those who had rises in salary. Take the professional classes. What doctors or barristers have been better off during the War? [An HON. MEMBER: "Doctors have."] No, no! Where any doctor or professional man has made a larger income during the War, that is not due to higher fees, his expenses have gone up, but no barrister for instance has had a higher scale of fees, and therefore in these cases no rise of price has affected them. If, say, a barrister has made a larger income, and scale of fees, and therefore in these cases no rise of price has affected them. If, say, a barrister has made a larger income, and it may have occurred in individual and rare cases, it has been by exceptional personal effort. I have no corresponding datum line with that taken in the case of business. We come to the question of the Cabinet, and on this question there is a certain amount of prejudice. No Cabinet Minister would come under this Bill under the charge for this year because they have not enjoyed excess profits long enough. Again, what datum line am I to take. The Cabinet Minister may have given up his own personal business and he may have been earning £10,000 per year. How am I to calculate his excess profits? Am I to inquire what his other occupation was and to do, all this for the sake of getting nothing. I hope my hon. Friend will not push this point, which is really a matter of prejudice, any further, and that he will accept the assurance that in excluding these pro- fessions I have done so on no ground of favouritism to my Friends and colleagues, but simply and solely because I did not think it was just, since I could find no-datum line and since there was no revenue in it.
The right hon. Gentleman goes on saying that he can get no datum line in this case. I do not agree. It must be as easy to get a datum line in this case out of the Income Tax returns, a fair datum line, as it is in the other cases. He can ascertain what a man earned for two or three years previous to the War and what his earning has been during the period dealt with by this taxation. I cannot see where the position of the professional man is different from that of the merchant. Most merchants have no capital. Very few merchants employ any capital in their business whatever. They negotiate the transaction upon which they get the money from the banks and they have no money of their own in the business. I cannot see any real difficulty in including any of these other classes. I must tell the right hon. Gentleman quite frankly that his failure to include them, and especially barristers, has created a very bad feeling in the country, and scarcely anything caused more annoyance among the commercial classes than to find that the professional community are being exempted. It is true to say that that impression more than anything else is the cause of the great resentment which many feel against this tax.
The right hon. Gentleman has a curious idea about business. He seems to think that you make a huge profit in business without doing any work at all. You simply charge higher prices and so make excess profits. If the right hon. Gentleman had been conducting any business since the War broke out he would have a very different idea. But I can see what is in the right hon. Gentleman's mind. There is a difficulty there. There is a division between what I may call the interest on capital and the remuneration for management. These two amounts are very apt to become confused. The shareholder of a company who merely enjoys a higher revenue has no merit for the management. Therefore the right hon. Gentleman looks upon the remuneration for capital and the remuneration for the management of a business as two separate items. But where you have people who manage and also practically own a business they do not divide their income in that way. They do not make a clear-cut division between what they charge themselves for management and what they charge themselves for capital; therefore they cannot understand why other people who are utilising their brains no more than they themselves are should be exempt from the taxation now proposed. The right hon. Gentleman talks about higher prices. This tax is not confined to businesses which have charged higher prices. He is raising taxation on people who have made higher profits. But higher profits may arise from a greater volume of business at lower prices, and that greater volume of business takes greater energy, involves greater risks, and requires greater business capacity. The right hon. Gentleman seems to me to be still under the delusion that he is taxing war profits. He says that during the War doctors and barristers have not done well. But he is not taxing anybody for what has happened during the War.
Oh, yes. The right hon. Baronet is wrong there. It is the enjoyment of profit during the War; that is the basis of the tax.
Enjoyment of profit during the War, but it has not been made during the War. The right hon. Gentleman cannot have it both ways. He says that doctors and barristers have not made more money during the War. But they have made the money which he is taxing before the War, just like business men. Why a barrister who enjoyed a very large income during the year ending 4th August, 1914, should not have to pay any part of that, or where the difficulty as to a datum line comes in, like the hon. Member for Hexham, I cannot understand. In the case of a company you simply say, "What was your income during the previous three years?" and "What is it during the accounting period?"
On a point of Order. Is the speech of the right hon. Baronet in any way relevant to the Amendment before the Committee? The next Amendment deals with professions. I suggest that on this Amendment one can deal only with offices and employments, and that the remarks of the right hon. Baronet are relevant only to the next Amendment.
Not being a lawyer, I am not always able to follow the differ- ences between terms—between offices and professions. The Chancellor of the Exchequer, in his reply, brought in these illustrations, and I think the Debate would not be complete without them.
It is impossible to argue on paragraph ( b ) without including paragraph ( c ). Both my hon. Friend and I fell into the technical error of arguing upon ( c ) as well as upon ( b ); but it is unavoidable. The argument is precisely the same in the two cases.
Do I understand it to be the ruling of the Chair that it is open to Members to discuss either offices, employments, or professions on this Amendment? If so, we shall be repeating the discussion on the next Amendment.
You will not be allowed to do so.
I respectfully ask whether we are to be precluded from dealing with professions when we reach the Amendment which obviously deals with professions?
I confess that I cannot see why these words are in the Bill at all. It seems to me that these people would not be taxed if these words were not there. But I am not the draftsman; all I can do is to try and guide the Committee's consideration to the best effect. I do not see how I can draw a hard and fast line between "offices" and "professions" in the present discussion. I personally shall not rule out specifically dealing with paragraph ( c ), which follows on another Amendment.
I think it will be very much to the convenience of the Committee, and will save a great deal of time, if you allow the discussion to follow its present course. On the question of employments, can you refer to a man who has had his salary raised as making excess profits or increased profits at all? Is a man receiving a salary making a profit? That is one of the difficulties which has occurred to me. If this were really a tax on profits, and not merely a tax on people who get more money during the War than before the War, I do not see how you could logically exclude the clerk or manager whose salary has been raised during the accounting period; but if, as has so often been said from the Treasury Bench, it is merely a tax upon people who happen to have had the good fortune to have more money during the year of War than before, that argument does not apply.
The Budget Resolution on which these proposals are based said "profits and gains." Unfortunately the words "and gains" have been omitted from Clause 35.
That is quite true; but you would want an interpretation of the vague word "gains." We have not had a clear explanation of what the word "employment" really covers. As far as the argument as to Cabinet Ministers is concerned, it does not disturb me very much. I cannot see that it is very difficult for a Cabinet Minister to say what income he had before he accepted office. I dare say some of them are losing money, as the right hon. Gentleman pointed out. I do not know whether I shall be in order in referring to a question which is raised by words a little later on, but which is really relevant here. The words to which I refer are, "including the business of any person taking commissions in respect of any transactions or services rendered." That is rather obscure. I would like to ask whether managers or directors remunerated partly by a participation in profits in addition to salary are included under those words. They are not actually carrying on a business, but they are rendering services. That is a very common way of remunerating people, and it would be very hard that these should be taxed, while people who are remunerated by increased lump salaries escape.
There is an Amendment on the Paper raising that particular point. I suggest that it would be more in order to deal with the matter on that Amendment.
I quite agree. That is a specific point which can be separately dealt with.
8.0 P.M.
( indistinctly heard ): I want to emphasise what the hon. Member for Hexham said with regard to capital in business. I do not follow the Chancellor of the Exchequer when he says that the reason why he does not include professions is that there is no capital except brains employed. If that is what he has in mind, he will later on commit very great injustice, because a great many merchants' businesses are carried on without any capital. There was a laugh just now when that statement was made, but it is the fact. When you come to consider the basis of the capital on which you are to pay 6 per cent. to merchants you will find that great injustice may be done, because there is no capital in the business. The question of capital is very difficult, especially in cases where managers take commission because of the increased earnings owing to their exertions. A great wrong is being committed on the people of this country by the omission of anybody from this Clause. I have had many letters from those who are interested in the matter. I have had a letter from a lawyer who went to the Front. He was one of a certain number of lawyers in a certain locality. He gave up his business as clerk to the justices and many other employments. He was the only one out of ten or twelve men in that district to go, and he says, "Now I have come back a wounded man they have taken my business, and they have increased their businesses at my expense." I think it would be a gratification to him if he knew that they had to pay a proportion of that money to the funds of the country. I have been told the same thing by a doctor. Members of the medical profession have in a self-sacrificing manner given up their livelihood and gone to the front. Some have been men with big practices. They have gone out to be consultants, and while they were at the front the business of their rivals increased largely. The men I refer to have gone out and rushed into danger, and when, it may be, they have come back crippled in consequence of their work at the Front, they have found that the men who have stayed at home have taken their perquisites and their practice. Surely when you are passing a Bill which is meant to be just, so far as it can be so made, it should be just all around, and everybody should contribute. The bringing in of Cabinet Ministers was, I think, a matter for a little chaff, yet surely there is a basis for saying that the case of a lot of barristers who have had some of the big commercial cases that have been heard in consequence of the War might be considered. I have heard it from their fellows, who have said, "So-and-so has got numerous big cases in consequence of the War."
Solicitors are in the same category. They have had numerous cases of the sort in consequence of the War, yet here in this Bill you do not touch one of them. I do not think it is right. My own profession is exempted, but I for one, throughout all these discussions, have thought it a waste of time to do anything else than to express a readiness to pay up. The proposal which some of us are against has created an intense feeling of dissatisfaction in the country. It may be said that it is a small matter. It is not a small matter, but a big matter as regards sentiment and feeling. It is going to make this Bill unpopular with a great number of people who feel that we are specially dealing with shopkeepers, and that all sorts of people are brought in and specially dealt with, and that professional men, many of whom earn far more than these, are left out, and enjoy what is made by the War without contributing anything towards it.
May I point out that the hon. and learned Member's point is becoming clearer, but the desire of the Committee is to discuss paragraph ( c ). Cannot we dispose of the present Amendment, and get on to the exact point which the Committee wants to discuss?
My only object in moving the deletion of paragraph ( b ) was because I desire that everybody in the country should be taxed according to his ability to pay. That is not being done under Clause 35 as it stands. I hope the Chancellor of the Exchequer will consider the matter seriously and introduce some modification. By leave of the House I will withdraw my Amendment. [HON. MEMBERS: "No!"]
May I point out to the Chancellor of the Exchequer that obviously the reason for the introduction of these words into the present Section was to keep it in line with Section 30 of the old Act, but I do not see any reason why we should not put in the words in the existing Act, namely, "offices and employments of profit."
I will consider that later on.
If the Amendment is withdrawn, shall we have the same opportunity to speak on the same subject exactly on the Amendment to leave out paragraph ( c )? [HON. MEMBERS: "No!"] I thought not. On the original Resolution I told the right hon. Gentleman that this was the weak feature in his Budget. I can confirm what the hon. Members for Hexham and Liverpool have said that there is amongst the commercial classes of this country a very strong feeling about this matter. The commercial classes say that Parliament is composed of a large number of lawyers and members of the professional classes, and that they look after themselves. I do not suggest that there is any desire on the part of Ministers to relieve themselves from obligations which they ought to accept.
The hon. Member put a question to me just now as to whether his point would come up on paragraph ( c ). Clearly that is so, and more readily than on the present Amendment, so that I propose, if we can dispose of this paragraph ( b ) to ask the hon. Member for Liverpool formally to move his Amendment, and put it before the Committee—he has already given us his speech. Then the remarks of the hon. Baronet will be relevant.
With all respect, Mr. Whitley, I want to fight against this, and I do not know whether I can do it on paragraph ( c ). I will only detain the Committee a moment or two, but personally I should prefer to divide against the words here, if the matter is to be taken to a Division. I only wanted to confirm what the hon. Member for Liverpool and the hon. Member for Hexham said, that there are numerous merchants working businesses in this country without capital. That statement was received with laughter. The Chancellor of the Exchequer wants to catch people connected with the coal trade, but he knows there are a lot of coal owners and people connected with the coal trade who have practically no money at all invested in the business. The facts have been absolutely correctly stated by the two hon. Members to whom I have referred. I can give the right hon. Gentleman any number of cases within my own knowledge where a very small amount of capital is embarked in a concern where a very large business is carried on. Under these circumstances my right hon. Friend is asking the House of Commons to go too far when he asks the House to exempt altogether the professional classes. After all, it is example that the country looks at. It is the example that Ministers set to which the country looks. If the right hon. Gentleman asks what is the real value of a Cabinet Minister, I would suggest that the datum line would be about £1 a week.
Question put, "That the words proposed to be left out stand part of the Clause."
The Committee divided: Ayes, 107; Noes, 20.
Division No. 18.] AYES. [8.10 p.m. Adamson, William Gelder, Sir W. A. Pollock, Ernest Murray Adkins, Sir W. Ryland D. Goddard, Sir Daniel Ford Pryce-Jones, Colonel E. Agg-Gardner, James Tynte Goldstone, Frank Radford, George Heynes Agnew, Sir George William Hackett, John Raffan, Peter Wilson Anderson, W. C. Hancock, John George Randles, Sir John S. Baldwin, Stanley Hardy, Rt. Hon. Laurence Rea, Walter Russell (Scarborough) Balfour, Sir Robert (Lanark) Harris, Henry Percy (Paddington, S.) Redmond, John E. (Waterford) Barnes, George N. Hazleton, Richard Rees, Griffith Caradoc (Arfon) Barran, Rowland Hurst (Leeds, N.) Helme, Sir Norval Watson Rees, Sir J. D. (Nottingham, East) Beale, Sir William Phipson Henderson, Rt. Hon. Arthur (Durham) Robertson, Rt. Hon. John M. Beck, Arthur Cecil Henderson, Sir A. (St. Geo., Han. Sq.) Roch, Walter F. (Pembroke) Bowerman, Charles W. Henderson, John M. (Aberdeen, W.) Rowlands, James Brace, William Hope, Harry (Bute) Salter, Arthur Clavell Brady, Patrick Joseph Hope, John Deans (Haddington) Samuel, J. (Stockton-on-Tees) Bridgeman, William Clive Hope, James Fitzalan (Sheffield) Samuel, Samuel (Wandsworth) Bryce, J. Annan Jardine, Ernest (Somerset, East) Shortt, Edward Burns, Rt. Hon. John Jones, Edgar (Merthyr Tydvil) Smith, Harold (Warrington) Cator, John Jones, J. Towyn (Carmarthen, East) Spear, Sir John Ward Cecil, Evelyn (Aston Manor) Jowett, Frederick William Spicer, Rt. Hon. Sir Albert Chaloner, Colonel R. G. W. Keating, Matthew Steel-Maitland, A. D. Clough, William Levy, Sir Maurice Sutton, John E. Collins, Sir Stephen (Lambeth) Macleod, John Mackintosh Taylor, John W. (Durham) Cornwall, Sir Edwin A. M'Callum, Sir John M. Thorne, G. R. (Wolverhampton) Craik, Sir Henry McKenna, Rt. Hon. Reginald Tickler, T. G. Currie, George W. Middlebrook, William Toulmin, Sir George Dalrymple, Hon. H. H. Molteno, Percy Alport Turton, Edmund Russborough Davies, Ellis William (Eifion) Montagu, Rt. Hon. E. S. Walsh, Stephen (Lanes, Ince) Davies, Sir W. Howell (Bristol, S.) Mount, William Arthur White, J. Dundas (Glasgow, Tradeston) Denniss, E. R. B. Nolan, Joseph Williams, Llewelyn (Carmarthen) Doris, William Nugent, John Dillon (Dublin, Col. Gn.) Wilson, Rt. Hon. J. W. (Worcs., N.) Dougherty, Rt. Hon. Sir J. B. Nuttall, Harry Wilson, W. T. (Westhoughton) Du Cros, Arthur Philip O'Brien, Patrick (Kilkenny) Winfrey, Sir Richard Edwards, Sir Francis (Radnor) O'Connor, John (Kildare, N.) Wortley, Rt. Hon. C. B. Stuart- Essex, Sir Richard Walter O'Connor, T. P. (Liverpool) Yeo, Alfred William Fell, Arthur O'Dowd, John Fenwick, Rt. Hon. Charles Ogden, Fred TELLERS FOR THE AYES.—Mr. Field, William Parkes, Ebenezer Gulland and Lord E. Talbot. Galbraith, Samuel
NOES. Banner, Sir John S. Harmood- Holt, Richard Durning Newdegate, F. A Benn, Arthur Shirley (Plymouth) Houston, Robert Paterson Pennefather, De Fonblanque Bentham, George Jackson Jones, Henry Haydn (Merioneth) Williamson, Sir Archibald Byles, Sir William Pollard Jones, Leif (Notts, Rushcliffe) Younger, Sir George Chancellor, Henry George King, Joseph Cory, Sir Clifford John Lambert, Rt. Hon. G. (Devon, S. Molton) TELLERS FOR THE NOES.—Sir J. Dickinson, Rt. Hon. Willoughby H. Lough, Rt. Hon. Thomas Walton and Sir A. Markham. Hinds, John Mond, Rt. Hon. Sir Alfred
I beg to move to leave out paragraph ( c ).
We have had a discussion on this question, and I do not propose to start it again.
As a very humble representative of the much-abused profession of the Bar, I wish to say a few words in regard to those enormous profits which, by the imagination of hon. Members, it is supposed that profession will put into the hands of the Chancellor of the Exchequer. Where are those profits? I do not suppose that hon. Members who speak with such vehemence have any idea of the fact that the preponderating majority of members of this profession have lost money to a very great extent indeed since this War broke out.
Then they will not have to pay.
As a member of the Bar who unfortunately would not be touched by this proposal if carried out, I say that if you take the whole Bar which practices in London, I do not believe you would find three members of it who would be touched by it. [An HON. MEMBER dissented.] The hon. Gentleman has no information on which he bases his dissent from that; it is only an opinion
An HON. MEMBER made a remark which was inaudible in the Reporters' Gallery.
If the hon. Member can tell us, I ask him to say in reply where he got his information. Perhaps I may be permitted to know, at any rate, as much as the hon. Member of the makings and the profits of the profession to which I belong, and I say that I doubt very much whether in the whole of the London Bar, which obviously reflects the profession throughout the country, you can name certainly more members of the profession who would come in this proposal if carried. It is perfectly true that many members of the Bar have got into a class of practice which did not exist before the War broke out, but hon. Members entirely overlook the fact that those same members of the Bar have lost a class of case which did exist before the War broke out. What has really happened is that in very many cases the class of work has changed, but the profits have not increased, and I do really think, having regard to the fact that those who have made excess profits and would come within the ambit of the Bill can be counted on one hand, the vehemence and the language of hon. Members who expressed their regret that these professional men were not included were most unjustified. I speak with as little personal feeling on the matter as the hon. Baronet the Member for Mansfield.
I never spoke about lawyers at all.
I understood the hon. Baronet did, but certainly other hon. Members did. It affects me, I am sorry to say, not in the slightest. As regards doctors, with less knowledge, I respectfully disagree with hon. Members who think the Chancellor of the Exchequer would be justified in taking their excess profits. I believe the cases of doctors who have enjoyed excess profits since the War are very small. There, again, I believe the class of work has changed, and that before the War, especially since the passing of the National Insurance Act, a great many doctors were working as hard as it was physically possible for them to work, and, having regard to that fact, I think it would be impossible for those working in the civilian profession to increase their earnings owing to the fact that they cannot work longer hours than before. Without any feeling in the matter at all, I do really think the attack which has been made on the Chancellor of the Exchequer's determination to leave out these professional men is not in the least justified, because the amount of money which would come to the Exchequer if they were included would be trivial.
I do not agree with the hon. Member who has just spoken when he says that this proposal is directed against the legal profession. There are scores of men who might be making large incomes as sellers of coal, and large increases in their incomes as a result of the War, and it is that class of professional man who should be taxed, and not the lawyer. The whole point for the justification of this tax is not that it was due to the War, but to the fact that there is a class of man or a business which now during the War is making a larger income than during the pre-war period. I think that principle, with perfect propriety, might be applied all round. You could ask on the Income Tax paper, "What is your pre-war income?," and having arrived at that, without distinction of profession, business or employment, you should take 50 per cent. of it, and that can fairly be taken. I did not agree with the last Amendment upon which a Division was taken, and I think it was trivial and not to the point, but there may be a certain class of men who undoubtedly are making larger incomes now directly because of the War, and in these cases my suggestion would have effect; for this reason I think the Chancellor of the Exchequer might give this proposeal some consideration.
If the case stood exactly as the hon. Member for Pembrokeshire has put it—and I think he has spoken-very reasonably—I should have nothing to answer, for he would have made his case complete. I am not sure that I fully agree with the arguments of the hon. and learned Member for Warrington (Mr. Harold Smith).
I knew it would be unpopular.
I am defending the hon. Member's view, and standing the brunt of the unpopularity, but not for the reasons which he gave. If a substantial case had been made out—I certainly would not set up all this machinery for the sake of a sovereign or two—for taking the excess profits of professional men, I should do it, and the fact that they were enjoying those profits would justify the operation of this tax. But that is not the whole case, and it has not been fully stated by my hon. Friend who spoke last. If it were simply a case of saying that anybody who is enjoying more profit during the War than he did before the War, the argument would be unanswerable, but it is not that. We have allowed in the Bill alternatives in the case of all businesses. You have to determine what a person enjoyed before the War, and we have taken as our arbitrary line of what they enjoyed before the War, not what they actually enjoyed, but the best two out of three preceding years. If that does not give them a sufficiently favourable datum line, we may say, "You may take as a minimum 6 per cent. of the capital employed in the business"; and if that is not a sufficiently favourable line, and your business is of a special kind, you may go to a Board of Referees, who may give you a higher rate of interest. The hon. Member for Liverpool, who made such a stirring speech on this Amendment, has on the Paper an Amendment raising the minimum rate on capital from 6 per cent. to 8 per cent., so that he proposes to strike out all who are making more than 8 per cent. I think my hon. Friends will see how far we are getting away from the principle that they are enjoying more during the War than before the War. Before the War we take an arbitrary datum line. My difficulty when I get to the professional classes is that I cannot take any corresponding arbitrary datum line. The hon. Member for Liverpool spoke as if my difficulty had been merely one of capital. My difficulty in the case of the professional man is what arbitrary line am I to fix in his case as I have in the case of the business man. It is quite arbitrary in the case of the business man, and I allow him the best two out of three preceding years. If that is unsatisfactory, he can take 6 per cent. interest on the capital employed; and there are other exceptions, and they are allowed to bring certain items into the account to reduce the amount of the Excess Profits Tax. What corresponding allowance am I to give to the professional man?
Why does the right hon. Gentleman propose to treat professional men differently from a broker or an agent?
I only wish to deal with one case at a time, and I am now dealing with the allowance made for capital. The business man can take the best two years out of three. In the case of the business man I have also allowed another alternative, and that is a rate of interest on capital, and I allow him to come before a body of Referees, with unlimited power, to determine what that rate of interest ought to be. How am I to give the professional man a corresponding advantage. I cannot do it, and therefore I have no means of giving him the same datum line, or the same opportunity as I do in the case of the business man. How does the professional man make his excess profits, if he makes them? In no case can it be due to any increased charges, because his fees have not risen. It is simply overtime worked by himself, and that would be the general case for which I am making no allowance. I think I have said sufficient to show that you cannot draw an analogy between a business man working with capital and a professional man. The hon. Member for Hexham (Mr. Holt) asked me how I would deal with the agent or the broker who has no capital. My hon. Friend knows as well as I do that the agent or broker is paid by commission.
Not necessarily.
Is he not?
In many cases in South Wales there are agents why buy coal at a low price themselves, and sell it at a profit.
I should have thought that they would have been technically described, not as agents, but rather as merchants, but we will not quarrel about terms. Generally, when we talk of an agent we mean a commission agent, and a broker is paid by commission. We want to be fair in this tax, and if we are to be fair we have to consider how the agent or broker really makes his money. When he has made excess profits, what does it mean? It means that he has had either higher or more commissions. I put it that there is not the same element of personal work. [HON. MEMBERS: "Oh!"]
Quite right.
Is what I say absurd? There is not the same element of personal work in the agent who gets higher or more commissions owing to the high prices of commodities as there is in the case of a doctor who can only earn higher fees by the labour of his own brains. There is no comparison between the two cases. The mere fact of a rise in prices will give the agent or broker more profits.
They may not be the same transactions.
I am assuming the same transactions. Where there is a rise in prices, the scale of commissions will be higher, and the profits of the man will be higher. I venture to say that the agent or broker who works without capital is not under the same stress when he makes higher profits as the professional man. When we look at what has happened during the War, we find that the professional men who have made greater profits during this War—they can almost be counted on your fingers—have made those profits at the sacrifice of their health and vigour. We cannot give them the same compensation in the way of an arbitrary datum line as we can give to the business man, and, under these circumstances, and as there is very little revenue in it, I do not think that we should be justified in doing a grave injustice, as we should undoubtedly be doing in individual cases if we charged these men who are exhausting their capital—they have nothing else but their vigour and their health—and did not give them the same relief which we are giving to all businesses where the capital is being exhausted.
I should like to put what I think is the real point at issue to the Chancellor of the Exchequer quite sharply in the shape of a question. Will the right hon. Gentleman assure us, if the House in its wisdom, or its want of wisdom, insists upon taxing the professional man, that instead of bringing money into the Treasury it will, owing to the expense and trouble involved, be taking money out of the Treasury? If he assures me he has had the matter carefully calculated out and that to attempt to tax professional men would really be removing money from the Treasury, then I will vote with him; otherwise, as a professional man, I am quite determined that I do not wish to appear to shirk my share of taxation, and I shall vote against it. The question is, Is there a farthing of money in this proposal, or would it be a minus quantity once more? That is the question to which I want an answer.
If I knew how to devise, and I do not know how to devise, the same compensations and relief to professional men that we are giving to business men, then there would be no money in it at all, and I do not think, without some such compensation and relief and without some such discrimination as to the datum line, the tax would be just. If you are prepared to act unjustly, of course you can get money; but if you mean to be just to them and make a proper datum line, then I do not think that there would be one farthing of revenue in it.
The discussion has shown me, at any rate, that the Chancellor of the Exchequer has taken a disastrous line in regard to the whole of these proposals. It was clearly understood, at any rate outside this House, that we were going to take a proportion of those profits enjoyed during the War over and above the profits enjoyed before the War. That proposition was emphasised by the Financial Secretary to the Treasury a few days ago when we were discussing another Amendment. He pointed out that these were to be profits made by reason of the War, and he made a forcible appeal tons to refuse that Amendment on the ground that they were profits enjoyed during the War as compared with profits enjoyed before the War. We have abondoned that principle, and we are in reality limiting it to profits made by capital in certain businesses during the War.
I believe that these exemptions will take the whole heart out of the proposal. It is evidently the feeling of a great number of Members that we ought to have no exceptions at all. We have got the exceptions, and I cannot help feeling that this last exception will have a far more serious effect upon the whole of the proposals than the Chancellor of the Exchequer realises. I have tried to understand what is the meaning of the word. The whole of the discussion has proceeded upon the idea that the word "profession" means a professional man in the ordinary sense of the word, and some have thought that it was limited to barristers and doctors, and meant nobody else. I do not think that it is limited in any such way. The class which is to be exempted is "any profession." I believe that any Court would say that a profession was an occupation in which a person publicly engages himself. Then the Clause says "the profits of which are mainly dependent on the personal qualifications of the person by whom the profession is carried on." I submit when the question comes to be discussed in Courts of Law that the main argument will be devoted to show that it is a profession "the profits of which are mainly dependent upon the personal qualifications of the person engaged in it." If that is to be the explanation, a very wide vista opens up before us. It is not, only barristers or doctors, but it is solicitors, artists, architects, engineers, stockbrokers, managers, football players, bookmakers, and all that vast number of persons who live—I do not say it in an offensive way—by their wits and who earn their profits without any capital—a great number of respectable people. We are told that many merchants carry on their business without any capital. The last words are even more dangerous. Not only must he be engaged in a profession the profits of which are mainly dependent upon his personal qualifications, but a profession "in which no capital expenditure is required or only capital expenditure of a comparatively small amount." Therefore, you may have a person set up with a capital expenditure with which he buys a house or an office and then carries on business. He will argue, and will justly argue, that he is to be exempted. I remember very well the discussion last session when we were considering the question of coal. It was brought to my notice that under the system of dealing in coal there were some firms who carried on an enormous business by simply buying the coal at the pit's mouth and selling the contract which they had bought. They have nothing but a small office, yet they carry on a gigantic trade, and they do it entirely, I should say, by the exercise of personal qualifications. I ask the Chancellor of the Exchequer, is he really going to allow that class of man to escape?
My right hon. Friend is anticipating an Amendment of the hon. Member for Liverpool (Mr. Pennefather) which comes next on the Paper, and which proposes to insert after the word "profession" the words "or business." On this the speech of my right hon. Friend will be appropriate. However, I do not propose to accept that Amendment.
I do not propose the right hon. Gentleman does. If I thought he was going to accept any Amendment which would bring us nearer to including this large mass of people who are going to be exempt, I naturally would not say what I am saying. I am urging that these exemptions be done away with altogether, and that we should not embark on the dangerous course of saying that people are to be exempted simply because they are making their profits by the exercise of personal qualifications. I venture to submit that that is valid criticism.
I said I did not propose to accept a particular Amendment which would have the effect of excluding people whom my right hon. Friend said should not be excluded.
The right hon. Gentleman says he does not mean to accept any Amendment which would do away with these exclusions.
The hon. Member for Liverpool proposes to extend the exclusions, and I do not propose to accept his Amendment extending the exclusions.
I understood the right hon. Gentleman would not accept any Amendment which would do away with these exemptions I venture to suggest that between now and a later stage he should consider seriously the position in which he will find himself if he allows these exemptions to be retained in the Bill in their present form.
I will gladly do what my right hon. Friend suggests. I did intend to use the term "profession" in its ordinary technical sense. An accountant would be included. But there may be some difficulty, and I will between now and the Report stage re-examine these words with a view to limiting the exemptions as far as possible. But I do not wish to limit them beyond the scope of my own argument.
Would the exemption include anybody who buys or sells a commodity?
I do not propose to exempt such a person.
I understand that accountants are included. Will that include not only chartered accountants or incorporated accountants, but also firms of accountants?
As I have undertaken to reconsider the words, perhaps the hon. Gentleman will allow me to reply to his question on Report.
That is all I wanted to know. I support the retention of the Clause, and I think the right hon. Gentleman successfully defended it.
It has been said that a man who borrows capital from a bank has no capital in his business. I never heard such an absurd thing in my life. [An HON. MEMBER: "Who said it?"] It was said by one of the hon. Members for Liverpool.
That was in a previous discussion. When I took the Chair I understood there was a general discussion on the Amendment.
I am supporting the view of the Chancellor of the Exchequer. Let me take the case of a broker who sells 100 tons of iron at £2 per ton in the ordinary course of his business. This year, however, he sells it at £7 10s. per ton. The transaction involves no more brain work; it is simply the recording of a bargain, but the broker makes an additional profit. On the other hand, a doctor does not raise his fee from two guineas to four guineas. The broker gets a bigger commission, the greater the yield of his transaction. Then, again, take the case of the ship insurance broker. He charters a ship; the freight is the modicum of his commission; and this year he may earn £100 for a job which last year would only have brought him in £40. Ought he to be treated as a professional man under this provision?
I should like to ask the Chancellor of the Exchequer whether it is proposed to include in the ranks of professional men stockbrokers? I presume they would be so included.
indicated dissent.
Or the theatrical profession?
Question, "That the words 'any profession' stand part of the Clause," put, and agreed to.
In regard to the next Amendment on the Paper, in the name of the hon. Member for Liverpool, I would suggest that he should confine his observations to the more narrow point of a strict differentiation between profession and business, as we have already had a debate on the general question.
I beg to move, in paragraph ( c ), after the word "profession" ["any profession the profits of which"], to insert the words "or business."
I should like to say at the outset that I rise under some disadvantage, because the Chancellor of the Exchequer has already intimated that he does not intend to accept this Amendment. It is rather hard that he should make that pronouncement before he has heard anything in the nature of argument or discussion on the subject. Perhaps the Committee would like to hear the reasons for the Amendment. I am entirely unconvinced by the arguments that have been brought forward to the effect that there is a great difference between imposing this tax upon people concerned in professions and upon others who are concerned in businesses. There are many men of business, to my own knowledge, who rely entirely upon their skill in exactly the same way as professional men and others who are to be exempt. The words of the paragraph are:
9.0 P.M.
There are other people who are employed in all the big cities of this country who are called brokers or agents. Most of these men would come under that definition, and are men who have very little capital. If they had capital, they would probably be merchants. It is because they have no capital that they are acting as brokers or agents. They are employed simply on account of their skill and knowledge. They employ every bit as much skill as that which has been attained by many years of practice, like the skill of the doctor—skill of mind and brain in assimilating statistics and know- ledge from all over the world. They are in some ways just as intellectually employed as, for example, a solicitor. These men depend not upon capital, because they have not got it, but upon their own personal qualifications. My point is that if there are two men side by side, each of whom comes exactly under the definition of this Clause, each of whom depends upon his personal qualifications, without capital, or with capital of only a small amount, and each of these men earning his living, not by dependence upon market fluctuations, but by exercising skill of brain and acuteness of touch, sight, or smell, where is the moral difference that you should discriminate between these men and say that one should be taxed 50 per cent. of any excess profit he makes, while the other is not so taxed? I submit there is no moral difference. Even if there were, I should like to remind the Financial Secretary to the Treasury that when I spoke on this subject on the 30th September the Chancellor of the Exchequer in his reply very genially twitted me upon this point, and said I was trying to draw a moral distinction, and that you could not base taxation upon moral distinction. I say, in return to the right hon. Gentleman, that you cannot base taxation on moral distinctions. There is nothing but the faintest moral distinction between the business man earning his living as I have described, only by skill and without capital, and the professional man who earns his money by the exercise of his skill without capital. I would ask the right hon. Gentleman whether he will not see his way to expand this Clause and change the wording in such a manner that he puts upon a footing of equality in taxation all men, whatever their occupation may be, provided they are earning their money by their skill and industry, and not by the amount of capital employed.
Owing to the nature of this Amendment we are now discussing it is inevitable that the Debate should be to a large extent be a repetition of the Debate which preceded it. The very important point raised by the hon. Member was dealt with fully by the Chancellor of the Exchequer on the preceding Amendment in answer to the right hon. Gentleman the Member for North St. Pancras (Mr. Dickinson).
No!
The hon. Member cannot have been here.
Yes, I was.
My right hon. Friend in his speeches again and again explained that it was not intended to keep out of the purview of this tax the stockbroker and the broker in metals, businesses which have no capital, but which, if the Amendment were accepted, would come within the purview of the exemption. The hon. Member said the case was comparable to that of doctors, and then went on to say that the higher profits of these brokers and people of that kind who were trading without capital depended upon an increase in price.
I expressly said that the cases of the people to whom I was referring were those of people whose profits did not depend upon increased prices.
I thought the hon. Member dealt with both. He first dealt with the broker who sold metals, and then talked about arbitrators—I was carefully listening to him—who made their money in what I should have thought was a profession rather than a business. Not only did the Chancellor of the Exchequer make the speech which I have just been repeating, but he also promised that between now and the Report stage he would reconsider the wording of the Clause to see that it carried out his intention and did not include any of those whom he wished to exempt, or exclude anyone of those whom he wished to tax. It was upon that understanding that there was no Division, and I think the hon. Member will agree that the Government cannot go further than that on this Amendment, which has already been discussed more or less on the last Amendment.
I respectfully differ from almost every word which has fallen from the right hon. Gentleman. I heard, like himself, the speech of his right hon. colleague, and the Chancellor of the Exchequer never dealt with the Amendment of my hon. Friend in the very least. I go further than that and say that every remark which the right hon. Gentleman addressed to the Committee, in justification of the exclusion of professions, applies with equal force, and in some cases with greater force, to the cases examples of which my hon. Friend has given to the Committee. I am also within the recollection of the House when I say that the Chancellor of the Exchequer was, for want of a better word, attacked from behind by many of his hon. Friends, who asked him by what justification he excluded any person, whether a professional man or otherwise, whose profits, in the words of the Bill, are dependent mainly on the personal qualifications of the person. If it is right to exclude a professional man on the grounds put forward by the Chancellor of the Exchequer, those grounds being that you could not bring him within the ambit of this Bill, it is equally right to exclude the business man whose profits, as in the case of a professional man, are entirely dependent on his own personal qualifications. My hon. Friend mentioned a most striking case, the case of arbitrators. It is only one of several which occurred to me. It is one of very many which would occur to hon. Members if they gave the matter perhaps a little more thought than they have done. I do not care whether you go into the cotton market or the corn market, or whether you go down to Smithfield, or to any of our great centres of commerce, you will always find a large body of men of long commercial experience who, owing to special qualifications and special gifts, have spent the whole of their life and earned the whole of their income as arbitrators deciding disputes, and thus speedily and with as little cost as possible enable commercial men to settle their disputes. How in the name of common sense can you differentiate between those men and lawyers or doctors or accountants? I am convinced that no such differentiation is justified. I am not going to enlarge on the reasons which prompt one to support this, because I agree with the right hon. Gentleman that it has to some extent been thrashed out on previous Amendments. I will give him a case, and I beg, when he is considering the matter with the Chancellor of the Exchequer, that he will bear in mind the case I am going to give. I give him the case of a gentleman engaged in trade in London up till three months before the War—an employed person, earning £3,000 a year. Three months before the War he becomes a merchant on his own account, relying entirely upon his personal knowledge and his personal touch with a certain trade. He puts into his new business a capital of £2,000 and he makes £5,000 in the first year. On what basis are you going to tax him?
Lucky chap!
He may be. But let me place before the Committee the position of this lucky man if the Bill passes in its present form. That case will come within Part II. of Schedule 4, and I find to my horror that that gentleman's profits are to be taxed, but that his pre-war standard of income will be £120 per annum, and this entirely because he has great personal qualifications and knowledge. This case, I submit, requires the most careful attention. I further submit that it is impossible to differentiate the case of a business man of that sort from that of the professional man which the right hon. Gentleman has excluded from the ambit of this Bill.
Amendment negatived.
I beg to move, after paragraph ( c ), to insert,
"( d ) any trade or business the operations of which are wholly carried on in the British Dominions or Colonies or in India, the Legislature of which has imposed or may impose a tax on the excess profits of such trade or business."
This Amendment explains itself. I think it is desirable that very great consideration should be given to the proposal to tax a company whose operations, though registered in England, are entirely carried on in the Dominions where the Dominions come down upon that company for a similar tax. That company probably pays heavy Income Tax at home; it pays heavy Income Tax in the Colony in which it carries on its operations; it will in future give half of its excess profits to the British Treasury in addition to its Income Tax, and it will very likely also give a. large portion of its excess profits, if any remain, to the Dominion in which its operations are carried on. It seems to me that if it is possible for a company trading only in the Colony or Dominion to pay Income Tax in both countries, and to pay Excess Tax in both countries, the taxation of such a company is going to be very harassing and very unfair, and you are running a grave risk of making it impossible for it to continue to trade. I hope we shall be able to receive from the right hon. Gentleman some assurance that the Government will perhaps be able to help a company in that position.
I think the hon. and learned Member has shown great foresight in bringing forward this Amendment, because so far as I am informed no such case has arisen yet. He will correct me if I am wrong, but I do not think there is a single Dominion, certainly there is no instance in the Empire of India, in which there has been an Excess Profits Tax imposed. Supposing the case does arise, then I can assure the hon. and learned Member that if a company carrying on business in a Dominion or in India is subject to an Excess Profits Tax there, which may or may not be the same Excess Profits Tax as the tax in force here, the tax so paid in the Colony or in India will be deducted from the profits before they are assessed here, as an expense of the business, so that they will not have to pay twice over on the same sum. I will give an example. Let me take a company with a pre-war standard of profit of £1,000. Let us suppose that the profit this year is £2,000. The excess profit is therefore £1,000. Under the Bill as it stands the company will pay £400 tax, 50 per cent. of the excess profits minus £200. If there is a Colonial tax of 25 per cent., £250 will be charged there, and the profit for the purpose of our duty will be taken not at £2,000, but at £1,750, and the excess will be £750. So that the Excess Profits Tax to be paid in this country, instead of being £400, will be £275. So far as that is concerned, therefore, I think the Bill goes far enough to meet a hypothetical case.
This is an Amendment which I put down at the instance of the London Chamber of Commerce and the business men there, but I thought the matter well over, and came to the same conclusion as the right hon. Gentleman the Financial Secretary to the Treasury, that if in any of our Colonies or Dominions Excess Profit Taxes are paid they can be deducted or rebated from the tax that is levied here. Otherwise it is quite clear that you might tax a man 150 per cent. of his profit and take away his capital. I do not know whether the right hon. Gentleman appreciates the fact that Canada has recently promised to send us 250,000 men. Canada cannot do that without extra taxation. As extra taxation in a Colony very often follows on the same lines as in this country, in all probability there will be an Excess Profits Tax in our Colonies and perhaps in India. It is a fascinating source of income which can be taxed without hurting anyone at the moment, and, when causes of injustice are prevented and provided against, I think it is sure to be followed in our Colonies and Dominions. I am very glad to think that the right hon. Gentleman is following the same principle that is contained in the Death Duties, where the Death Duties in the Colonies and the Death Duties here are deducted one from the other. That is what I was going to ask the right hon. Gentleman to do, and I am very gratified to think that he intends to do it; but where is it in the Bill?
It is not in the Bill, but it follows—I cannot quote it from memory, because I have not got the reference—from a recent Finance Act, I think of 1912.
I thank the right hon. Gentleman. Will he consider what is the meaning of "persons ordinarily resident in the United Kingdom." A limited liability company registered here is a person, I suppose, within the meaning of these words in the Bill. It is a persona, an entity. Let us take the case of a company registered here which carries on the whole of its business in Canada with capital possibly subscribed to a certain extent in this country, perhaps to the greatest extent in Canada, with a board of directors in Canada and a small nominal board of directors in this country to carry on the ordinary statutory meetings which are required to comply with the Companies Acts. Here is a company, whose management is entirely abroad, whose shareholders are almost entirely in Canada, which may have a few shareholders resident in the United Kingdom, which may have a formal director or two, not a practical director, resident in the United Kingdom. Is that company to pay Excess Profits Tax as a company as a whole or will it be limited to those shareholders who are domiciled here, and not to the vast body of people who are Canadian shareholders in that company? We have no right to tax our Colonies any more than we have to tax the foreigner, and if under this Clause you intend to sweep into your net the taxpayers of Canada because they happen to be shareholders in a company which is registered here, with a nominal directorate here, I do not think it would be right. This matter has given me some misgiving, and I would like the right hon. Gentleman to explain to me what he means by "persons ordinarily resident in the United Kingdom."
We had this point up on an Amendment, which was moved by the hon. Member for Wiltshire on the words "or carried on." The Chancellor of the Exchequer then gave an assurance, which I think was accepted by the Committee, that where a business was not carried on in the United Kingdom, and only partly owned here, it would not come within the Bill.
The right hon. Gentleman has said that if an Excess Profits Tax were levied in another country, it would be a charge upon the business. Does not that conflict with the method by which I understood this tax was to be assessed as a Super-tax? This Excess Profits Tax is to be assessed in the same way as the Supertax. How, therefore, would such a tax in India or Canada be a charge upon the business?
If it is a charge upon the business levied in the same way in Canada or India as we propose to levy it here, the tax so paid there would be deducted here from the profits of the year, as an expense of the business.
In the same way as Income Tax?
In exactly the same way. I have got the Section now to which I referred. It is Section 5 of the Finance Act of 1914.
It seems to me that this discussion is really repeating "what was said on the Amendment to leave out the words "or carried on."
With due respect, I do not agree. I submit this is an entirely new Amendment.
I was not referring to the hon. and learned Member's remark.
I think the right hon. Gentleman (Mr. Montagu) has almost petulantly dismissed what is a matter of the greatest importance. I do not think he has yet realised that he lightly and almost sneeringly dismisses in a few words a proposal which will relieve the companies from paying both Income Tax and Excess Profits Tax here and in our Colonies or Dominions. The reasons he has given are two. One I agree with, and the other I disagree with. His first reason was that this was a hypothetical case, but if we are making proposals for the first time in the history of our country, are we to have no regard to a possible event because it has not yet happened? Is that the only reason which the right hon. Gentleman has to advance—that what some of us believe to be a misfortune has not yet happened? The right hon. Gentleman sneeringly dismisses it as a matter not worthy of attention. With that view I entirely disagree. There is one other point of view which the right hon. Gentleman put forward with which I beg to join issue. He said that this tax would not be paid twice over. By so saying he quite innocently deceived some hon. Members of the House. The tax will be paid twice. It will be paid in the Dominion which imposes the tax and it will be paid into the British Exchequer.
When the right hon. Gentleman says that the tax will not be paid twice he has not given attention either to the wording or to the merits of the Amendment. It is true that possibly the full amount will not be paid twice over, but even there the case of the right hon. Gentleman is not necessarily correct. We are told that if it has been paid in the Dominion on the full amount it will only be paid at home on the balance; but suppose that it has been paid at home first, what guarantee will the right hon. Gentleman give that the Dominion will only impose a tax on the balance? The right hon. Gentleman gave us figures, which he lightly dismissed— £250 and £350. It was arithmetic which would be a disgrace to a child in the third form of a public school. Even those figures should be multiplied by thousands. I am not speaking on behalf of companies whose income is reckoned by the thousand. I am speaking on behalf of vast interests in this country, who employ thousands of persons, whose annual turnover would be reckoned in millions. A company like that cannot be lightly dismissed by the right hon. Gentleman talking of hundreds of pounds. I invite him on this subject to think of millions, and to think of doing a grave injustice to companies, shareholders and businesses, and grave injustice to employés employed in these companies. I disagree with his decision. I regret it very much, and I regret equally the manner in which he has dealt with this most important Amendment.
The right hon. Gentleman has failed to say in what respect he could give any security that a Dominion tax imposed in a case like this would be allowed as a trade deduction. I ask for such security, because though we may be perfectly certain that while the right hon. Gentleman and his chief hold office a promise of that kind will be adhered to, yet we have some unfortunate recollection of promises given from that Bench with regard to the Finance Act of 1909, in reference to practice, which were not adhered to, the non-adherence to which was encouraged by those in high quarters, and with regard to which litigants were dragged into the highest Courts in the Realm and subjected to severe loss. In persuading the Committee that they have such security not only in the promise made by him, which we know will be kept, but in the words on the Statute Book, and in the necessary inferences which will be drawn from them in the interpretation of the present Bill, and previous Finance Acts, the right hon. Gentleman says that we can read Section 5 of the Finance Act of 1914. I have looked up that Section and find that it related to a totally different tax. The very fact that Parliament made that express enactment with regard to that tax in that year could be cited with some success to show that the intention of Parliament in reference to the present tax are totally different. It is a very good indication of what ought to be the policy of the present Government with regard to the present Bill, but it is something totally different from anything like evidence of a binding injunction as to what should be the action of the Courts in construing the present Clause of the present Bill, which is totally different in its terms from what Parliament did in 1914.
I have been assured by my legal advisers that the whole of this tax, being modelled upon the Income Tax, will follow the Income Tax law, and that deduction being possible with the Income Tax will also be possible with the Excess Profits Tax. It is purely a legal point, but that is our intention, and if the right hon. Gentleman prefers to have it in the Bill I have not the slightest objection to putting down words to carry out this intention, but, as I have said, our legal advisers said that it is not necessary.
I know that my right hon. Friend is anxious to do what is right in this case, but we have a great difficulty with regard to deduction. Suppose a man carrying on business in Australia makes £100 excess profits, there is a tax there of 50 per cent., and then he has got to pay 50 per cent. here on the £50 which is left. That is to say, he has got to pay £75 out of his £100. In addition to that he will have to pay the ordinary Income Tax here and the ordinary Income Tax out there. In South Africa, at all events, they are raising the Income Tax, and in Australia I have not the slightest doubt that it will be a very stiff tax, but when you have this tax of perhaps 3s. out there and 3s. 6d. in this country, and the Excess Profits Tax out there and here, the result will be very disastrous for any capital that would go into that Colony. Therefore I think that somehow or other this double tax ought to be avoided, or at all events to a great degree mitigated. It is a very burning question just now because the Colonies are very much up in arms about it. It was a great question of discussion at the last Imperial Conference, and if we are going to have a double Income Tax and double Excess Profits Tax it will do a very great deal to injure our commercial trade.
My hon. Friend and colleague in the representation of Aberdeen-shire seems to have forgotten that this is no new principle. It is undoubtedly a hardship that if an Excess Profits Tax is to be levied in this country and also in the Colonies a public company would pay the tax twice over. Both taxes would be levied by the Government in the name of the King, but it is a hardship which can not be taken away in this particular connection, because it is a hardship which has existed for many years and which is fully recognised. All of us who have investments in Colonial countries know perfectly well that we have to submit to deduction of, Income Tax in the Colonies and again, on the sum received here, to deduction of Income Tax in this country, and the larger the rate at which Income Tax is levied, either in this country or in the Colonies, the greater the hardship resulting. But we have all acquiesced in that. We have many of us, I dare say, attempted, I will not say to evade, but to discover a means of avoiding the payment of that double tax in the Empire, and we have not been able to do it. We know that we cannot do it. It is an established principle. Why, when that is so, should we take exception to it in this particular case simply because the tax is a larger one, a special one? Should we not rather reflect and remember that we are raising this tax for the special purpose of the War, and that it is perfectly legitimate for the Chancellor of the Exchequer to derive income from any possible conceivable source, that we are all suffering great hardships on account of the War, and the taxes which it necessitates, and that we must submit to all this taxation with the best grace we can?
So far as I know there is no British Dominion or Colony or India which has imposed any such tax, but I do not think that is any ground for rejecting my hon. and learned Friend's Amendment. At present it is by no means unlikely that the imposition of such a tax might be considered desirable by the Legislature of either of the British Possessions or of India. As regards India, some steps may have to be taken to raise additional revenue. I do not want to go into the details about the reasons for their doing so, but they will occur to any hon. Member. Take the case of cotton in the American War. There were enormous transactions and profits, just the very kind of profits brought under a tax of this description, and such things might happen again in war time. But the revenues of India are notoriously inelastic. It is difficult to invent a new tax in India. The invention which distinguishes the right hon. Gentleman on the Treasury Bench and his Chief, the Chancellor of the Exchequer, would be wasted in India, where they cannot think of a new tax. It is not exceedingly improbable that they would take a lead from what is done in the Legislature of the United Kingdom at a time like this.
I regard my hon. Friend's Amendment as very opportune and necessary. As a matter of fact, there exists an extreme feeling of injustice among those who are to pay Income Tax, and this is an opportunity to show that there is no intention of bleeding them twice over, which I think is quite right. The discontent with regard to the double Income Tax is, I think, very well known. Let us at least be certain that when this particular war tax is imposed in the United Kingdom that it is not also going to be duplicated to the destruction of the unfortunate people who are likely to pay it. I do not want to take up the time of the Committee, but I could show at much greater length how difficult it is to raise revenue in India, and how terrible it would be to have a precedent of this description, which might lead to another double tax, the existence of which, with regard to Income Tax, is so severely felt at present.
A man or a company carrying on business abroad in a Colony or Dominion, the taxes of the place in which he carries on that business are part of the conditions under which he conducts it, and he makes no profit until those are paid. I very seldom disagree with the Member for Aberdeenshire on a matter of business, but when he takes the case of a man making £100 profit out of which he is left with £25, I do not think that is an answer at all. It is necessary to bear in mind that the principle underlying the whole thing is that by whatever name you call the imposition, the business abroad must be carried on under the conditions which obtain in the place where the business is conducted, and the balance, after paying all the taxes, is what can be considered a profit.
Either the hon. Member for Aberdeenshire or I must have misunderstood the Financial Secretary, and perhaps the right hon. Gentleman will explain the matter.
This Bill as it at present stands follows the principle which now exists as regards Income Tax and double taxation. It is considered under the Income Tax law that the Colony, the Dominion, or this country has a right to levy Income Tax upon a company or business, and that has been the principle for many years. But under the Income Tax law, as my hon. and learned Friend behind me has just said, in estimating the profits on a business any such Colonial or Dominion impositions as Income Tax are allowed to be deducted from profits, and it will apply in exactly the same way if there is excess profits. Taxation levied in any Dominion or in India, in estimating the excess profits over here for our purposes, will be deducted from those excess profits.
If the Excess Profits Tax in any Colony or Dominion comes to the same amount as ours would do here, then none would be charged here. [HON. MEMBERS: "Oh, oh!"] Take an individual case: If a person has already paid any sum in a Colony or Dominion as Excess Profits Tax, do I understand my right hon. Friend to say that in respect of that particular charge, he would be taxed here on what remains of his excess profits, after paying the tax in the Colony? The right hon. Member for Sheffield was told that this was the intention, and if necessary it would be specifically set forth in the Bill. The probability is that it will be set forth and expounded by the Attorney-General, and that may have weight with the hon. Member for Warrington.
I would point out to the right hon. Gentleman that he is really, after taking the wool of the unfortunate company, going to take the skin as well. There is a considerable number of companies which are registered here, but which have got the larger part of their capital in Canada, or India, or Australia. It is a kind of taxation which is likely to drive the registration of those companies out of the country. The majority of the shareholders in the Dominions will say that it is no longer worth while to have their registered offices in England. I know the case of a very important company in India, the largest number of whose shareholders are living in India, who, because of the heavy Income Tax are taking away their registration in this country, and confining it to India. The result will be the loss of the Income Tax on that business. If you are going to shove this extra taxation on the top of the Income Tax the inducement to have the management of a business in India entirely will be very much greater, and the injustice of imposing this additional taxation on companies here, but which are largely owned abroad, will be very much felt.
If it is the case that the Colonies and India have not got such a tax, and do not put on such a tax, then the adoption of this Amendment will do no harm, because it deals with the case where taxes of this kind are imposed in the Colonies and British Dominions or in India. The Amendment has nothing to do with the Income Tax, but applies simply to the present emergency war taxes. The object is that these particularly oppressive and temporary taxes should not be imposed upon these undertakings twice. The main answer that has been given is that we are trying to provide for a case that has not arisen, and our response to that is there might be such a tax. The hon. Member who spoke last was under the impression that if there was such a tax imposed abroad it would be fully allowed in the taxation that was imposed here. The position is nothing of the sort. The tax will still be imposed on the whole of the balance left, after paying the excess tax abroad. I think the right hon. Gentleman might perfectly safely accept this Amendment. I can imagine that India, which is governed with a fair amount of reasonable intelligence and justice, and the British Dominions and Colonies, would not dream of imposing a tax of this kind at all. It is so outrageous, and involves so many hardships and anomalies, that I believe our experience in a short time will be quite sufficient to show them that if they must get money this idea, at all events is one which ought not to be followed.
An hon. Member who has just spoken said that the people were accustomed to pay the double Income Tax. May I point out that time after time I have proposed Amendments here trying to do away with that injustice, as I considered it? Take, for instance, the example of a man who carries on a wine farm at the Cape. He has to pay Income Tax there and he has to do so again here, because he has to live in England. He has altogether to pay four taxes. I submit, as it is not very likely that there will be Excess Profit Taxes in the countries mentioned, that it might be an act of grace to those owning property abroad and who have to live in England to accept this Amendment. Failing that, we are told that you would be entitled to deduct from the Excess Profits Tax in this country any sum which you paid by way of Excess Profit Tax in the Colony on a trade or business. I think that Section 5 of the Finance Act of 1914 does not apply to a trade or business such as that of a wine farm, but simply refers to a person who lives in England and who has securities, stocks, or shares payable in a Colony or foreign country. Upon those he would be entitled to deduct any Income Tax which he had to pay in the Colony. I doubt very strongly whether the argument of analogy would apply at all, and I endorse what was said by the right hon. Gentleman the Member for Sheffield, that if it required an Act of Parliament to allow a deduction to be made in the case of Income Tax, then it certainly requires a provision in an Act of Parliament to allow a deduction in the case of an Excess Profits Tax.
May I ask the Financial Secretary to the Treasury whether the hon. Member for West Derby (Mr. Rutherford) was right in the interpretation which he put upon the words of the right hon. Gentleman? I understood the right hon. Gentleman to say exactly what my hon. Friend says he did say. If that is all, and if the right hon. Gentleman is going merely to deduct the Excess Profits Tax, but charge on the balance, it does not meet the grievance in the smallest way whatever.
What I did mean was that any Excess Profits Tax paid in any Dominion, or in India, under a law not now in existence, would be deducted as an expense from the excess profit here assessable to tax. In answer to the hon. Member for Cambridge University (Mr. Rawlinson), he knows me too well to think that I would argue law with him, and if I am wrong in my law, we are agreed as to what we desire. I will see whether, between now and the Report stage, something cannot be done. Although there is much to be said on the subject of the double Income Tax, where there is in existence a tax both for the Colonies and this country, I cannot for the life of me see why we should exempt from taxation, in devising our Excess Profits Tax, profit which may hereafter be taxed by the Colony.
I do not wish to quarrel with the theory of double liability, but may I ask if what the right hon. Gentleman said to the hon. Member for Oldham (Mr. Denniss), is quite consistent with what he said just now as to Death Duties. Is the double liability to Death Duties not provided for in a much more ample spirit than the double liability in the other case?
I never said anything about the Death Duties, and I would not like to do so without refreshing my memory on the subject. I was talking about the Income Tax.
I thought the right hon. Gentleman nodded his head in assent to what I said, that is all.
Question put, "That those words be there inserted."
The Committee divided: Ayes, 13; Noes, 112.
Division No. 19.] AYES. [9.55 p.m. Banbury, Sir Frederick George Du Cros, Arthur Philip Salter, Arthur Clavell Banner, Sir John S. Harmood- Harris, Henry Percy (Paddington, S.) Younger, Sir George Benn, Arthur Shirley (Plymouth) Peto, Basil Edward Bryce, John Annan Pollock, Ernest Murray TELLERS FOR THE AYES.—Mr. H. Cecil, Evelyn (Aston Manor) Rutherford, Watson (L'pool, W. Derby) Smith and Sir J. D. Rees. Cory, Sir Clifford John
NOES. Adamson, William Hardy, Rt. Hon. Laurence Pearce, Robert (Staffs, Leek) Adkins, Sir W. Ryland D. Harvey, A. G. C. (Rochdale) Pollard, Sir George H. Agg-Gardner, James Tynte Haslam, Lewis Pryce-Jones, Colonel E. Anderson, W. C. Hazleton, Richard Radford, George Heynes Baldwin, Stanley Helme, Sir Norval Watson Randies, Sir John S. Barnes, George N. Henderson, Rt. Hon. Arthur (Durham) Rea, Walter Russel (Scarborough) Barran, Rowland Hurst (Leeds, N.) Henderson, Major H. (Berks, Abingdon) Rees, Griffith Caradoc (Arfon) Beale, Sir William Phipson Henderson, Sir A. (St. Geo., Han. Sq.) Roberts, Charles H. (Lincoln) Beck, Arthur Cecil Hinds, John Roberts, Sir J. H. (Denbighs) Bentham, George Jackson Holt, Richard Durning Roberts, S. (Sheffield, Ecclesall) Bowerman, Charles W. Hope, Harry (Bute) Robertson, Rt. Hon. John M. Brace, William Hope, James Fitzalan (Sheffield) Roch, Walter F. (Pembroke) Brady, Patrick Joseph Ingleby, Holcombe Rowlands, James Bridgeman, William Clive Jones, Edgar (Merthyr Tydvil) Rutherford, John (Lancs, Darwen) Burns, Rt. Hon. John Jones, Henry Haydn (Merioneth) Samuel, J. (Stockton-on-Tees) Byles, Sir William Pollard Jones, J. Towyn (Carmarthen, East) Samuel, Samuel (Wandsworth) Cator, John Jones, Leif (Notts, Rushcliffe) Shortt, Edward Chaloner, Colonel R. G. W. Jowett, Frederick William Spear, Sir John Ward Clough, William Keating, Matthew Spicer, Rt. Hon. Sir Albert Collins, Sir Stephen (Lambeth) King, Joseph Sutton, John E. Cooper, Sir Richard Ashmole Lambert, Rt. Hon. G. (Devon, S. Molton) Terrell, George (Wilts, N. W.) Cornwall, Sir Edwin A. Levy, Sir Maurice Thorne, G. R. (Wolverhampton) Cowan, W. H. Lewis, Rt. Hon. John Herbert Toulmin, Sir George Currie, George W. Lloyd, George Butler (Shrewsbury) Turton, Edmund Russborough Davies, Sir W. Howell (Bristol, S.) Macleod, John Mackintosh Walsh, Stephen (Lancs., Ince) Denman, Hon. Richard Douglas M'Callum, Sir John M. Walton, Sir Joseph Denniss, E. R. B. McKenna, Rt. Hon. Reginald Warner, Sir Thomas Courtenay T. Dickinson, Rt. Hon. Willoughby H. Markham, Sir Arthur Basil Wedgwood, Josiah C. Dougherty, Rt. Hon. Sir J. B. Mason, David M. (Coventry) White, J. Dundas (Glasgow, Tradeston) Duke, Rt. Hon. Henry Edward Mason, James F. (Windsor) Williams, Llewelyn (Carmarthen) Edwards, Sir Francis (Radnor) Middlebrook, William Williamson, Sir Archibald Fell, Arthur Molteno, Percy Alport Wilson, Rt. Hon. J. W. (Worcs., N.) Ferens, Rt. Hon. Thomas Robinson Mond, Rt. Hon. Sir Alfred Wilson, W. T. (Westhoughton) Field, William Montagu, Rt. Hon. E. S. Wortley, Rt. Hon. C. B. Stuart- Gelder, Sir W. A. Mount, William Arthur Yeo, Alfred William Goldstone, Frank Newdegate, F. A. Grant, James Augustus Nolan, Joseph TELLERS FOR THE NOES—Lord Griffith, Rt. Hon. Ellis Jones O'Brien, Patrick (Kilkenny) Edmund Talbot and Mr. Gulland. Hancock, John George O'Connor, T. P. (Liverpool)
I beg to move, after paragraph ( c ), to insert the words "( d ) universities, colleges, and public schools."
I think it is desirable that the position of these institutions should be made quite clear in respect of this tax. I do not know any case of a university where my proposed exemption is likely to apply, but I think there are cases of colleges and public schools where such an application would occur. As regards their general position there is an element of doubt as to whether public schools are in fact now assessable to Income Tax, and I do not think that this doubt will be settled until public schools have taken a case up to the House of Lords and got the decision of the House of Lords upon it. Meanwhile, however, there is no reason why a similar doubt should exist as regards the application of this to public schools, and that is the object of my Amendment. I want to make the position of public schools and similar bodies perfectly clear. If this Clause is passed there appears to me to be no doubt that private schools at any rate would come under Sub-section ( c ). I think the private schoolmaster would come under that Sub-section. But it may plausibly be argued that a private school is a trade or business as referred to in the first line of Clause 35, and that, therefore, it would be taxable as any other trade or business.
The Committee, perhaps, may ask me whether there is any such case in existence. My reply is that there is. I am informed—to give a specific instance—that Lancing College, Sussex, is a case in point. It appears that there the school is carried on under a Chapter which employs a headmaster to conduct the educational work of the society, and that profit was made in 1914 in excess of the average in two of the three years immediately preceding. I am informed that a similar case may be found in Mill Hill School. However that may be, I think it is quite clear that there are cases to which this Amendment would apply. I am sure the Committee will agree in the advantage of not causing a heavy tax of this kind to be imposed upon any educational institutions such as those as I have mentioned. After all, I am only asking for their exemption because there is no personal profit made by them. They are not in the same position as some other cases which have been considered this evening. There is no personal profit in connection with these colleges. I am sure the House does not want to hamper either universities, colleges, or public schools, especially at a time when so many of their members have joined the New Army, and have shown so much gallantry in the field.
Normally the class of institution to which my hon. Friend has referred would not be described as a trade or a business. Certainly they do not carry on trade or business for the purpose of making a profit, and they therefore would be exempt. I did not understand that he wished to exempt proprietary schools which are carried on for profit. His arguments were not addressed to schools of that kind. If he shares that view, he will see that his words are not necessary, because unless it is a proprietary school or college carried on for profit it would not come under the definition of a trade or business. I would, therefore, ask him not to press his Amendment.
There is the case of some other public schools which, as the right hon. Gentleman may be aware, have been very unfortunate owing to the War. Some of them have lost a large number of boys. It is quite clear that they are dependent upon the boys for their continuance.
There may be some cases in which schools are carried on in that sense as a business for profit, and in that case they will be subject to Income Tax.
I quite agree with my right hon. Friend, but I think that some of the cases to which the hon. Baronet the Member for Mansfield referred deserve some attention. There are a number of cases in which certain schools have been hit by the War, and the boys have been sent to cheaper schools. These latter, equally with more expensive schools, are entirely bound by the trust deeds that no money earned is spent for the personal profit of anyone. These schools will suffer very much in the future, though matters in time may right themselves. The right hon. Gentleman has assured us that these do not come under the Bill as it is drawn. His assurance is absolutely satisfactory to us as Members of this House. But all these Finance Bills are interpreted elsewhere. They are interpreted by quite sincere and very able officials of the Inland Revenue, and they are also interpreted by the Courts. Is the right hon. Gentleman equally sure that the specific words of the Bill do cover these cases? That is the doubt that is in the minds of some of us. We fully accept his statement that he does not wish to include these schools, and we are sure they are not included in the spirit of the Bill, which he has so lucidly explained to us. But we are not equally certain that they might not be brought in by authorities who have only the words of the Bill to go upon, and who are not allowed to refer to the expressed intentions and opinions of Ministers of this House, or another place. I am not sure whether the actual words of the Bill carry out the intentions of my right hon. Friend. Possibly between now and the Report stage, if the hon. Member does not press this Amendment—as I suppose he will not do—my right hon. Friend would be willing to consider whether the words do undoubtedly carry out his intention. If not, perhaps he will consider what other words suggest themselves.
Surely this matter must be plain. Suggestions have been made as to exempting the professions. The words of the Clause are "trades or businesses." If a concern is a trade or business prima facie it is within the Clause, and the cases which my hon. Friend has suggested prima facie are certainly neither trades nor businesses.
I do not know whether I am raising a point which has been discussed before, because a good number of these points have been dealt with while I was out. Although this might not apply to a corporation, how will it apply to a housemaster whose income might be affected by the War? Would that come under the head of a business or a profession?
That does not arise here. We have passed the point on which that did arise.
If the Chancellor of the Exchequer is quite sure that such cases as I mentioned are not affected by the tax, and that the Courts will so interpret it, I shall be very glad to withdraw the Amendment, but I wish to be quite sure the Courts will do that, because many cases have occurred as regards Income Tax where promises which have been made on the Treasury Bench have been useless in the Courts.
Of course, I cannot answer for the Courts, but I will see to it, so long as it is in my power to do so, that if a case arises we shall not claim.
If you do not wish to tax the people referred to, is there any harm in putting in these words?
I do intend to tax some of the people included in the hon. Member's words, but I do not intend to tax people included in his speech. The people mentioned in his speech I do not intend to tax are already excluded, but if I put in these words I shall exclude the people I do intend to tax.
I do hope the right hon. Gentleman will put something in to protect such cases as my hon. Friend mentioned.
Will my right hon. Friend accept the words of the hon. Gentleman opposite if these words are added, "not conducted for profit"? I admit the word "college" is used very vaguely, and does cover a certain number of private institutions which enjoy using the word, although other people are slow to give it. If such words as I have suggested were added that might meet the point.
Does my hon. Friend really suggest that a school not conducted for profit could come under the word "trade" or the word "business"?
Surely my right hon. Friend is quite wrong. Private schools surely come under the heading "any profession," the profits of which are dependent mainly on the personal qualifications of the person by whom the profession is carried on"?
I will give the Chancellor of the Exchequer a case in point, namely, a proprietary boys' school which is limited, managed by an association which has the word "limited" omitted from its title because it is not carried on for the purpose of profit for shareholders, but, as a matter of fact, is carried on at a considerable profit, which is applied under the special Act of Parliament for the improvement and benefit of the school. I suggest that is a case which requires consideration, and perhaps on Report the Chancellor of the Exchequer will see his way to cover that in the exemptions.
Amendment, by leave, withdrawn.
The Amendment standing in the name of the hon. Member for the Kirkdale Division of Liverpool (Mr. Pennefather) deals with two different subjects, and the first part does not read clearly in this part of the Clause. The second part, I think, should be brought up in the form of a new Clause, as it is quite apart from anything with which we are dealing in this Clause.
I beg to move, to insert as a new paragraph,
"( d ) any railway, tramway, gas, electric light or other company working under any special Act of Parliament."
I think it will be felt that these companies do require some consideration. Of course, I am not particularly interested in them, which is a common thing for anyone to say, but I do think a particular case arises here for consideration by the Committee. Such a concession is very often given for a limited period of years, and towards the end of that time there is often a provision that they may be taken over by the public authority without any compensation. There will be a considerable number of those enterprises coming to fruition during the period with which this Bill deals. All those special corporations have an Act of Parliament, and their position has been specially considered by this House. They have their franchise, and expenditure of money has been invited under provisions set up by the authority of this House. Therefore I do not think that we ought to lightly seize 50 per cent. of their profits even under such an emergency as that which exists at the present time. I can hardly believe that this grave case has been considered by the Chancellor of the Exchequer. I do not think my point requires any further elaboration, and I move this Amendment in order that my right hon. Friend may state whether he has provided for it or not.
I should like to impress upon the right hon. Gentleman the necessity of doing something with regard to these companies. Railway companies do not interest me so much, because I do not suppose there will be any profit for them, and they are not subject to being purchased by local authorities. I do not think it applies so much to gas companies either, but tramway and electric light companies are almost all subject to purchase by the local authorities. All the electric light companies of London are subject to purchase by the county council in 1930 or 1931, and consequently they have fifteen or sixteen years to run. They were limited to a certain time because it was thought that that was a sufficient period for them to elaborate their system, create a goodwill, and receive a good return for their money. They would then be able without loss to hand their undertaking over to the local authorities at the then value, although nobody knows exactly what that means. It is generally looked upon that that value will be a little more than its scrap value. Taking the history of some of these companies, many of them were some time before they paid any dividend at all. Then some of them paid 2 per cent. or 3 per cent., and some of them have never reached 6 per cent. Yet they will be taken over by the county councils in 1931, and a great deal of capital may be lost. The Legislature no doubt meant that during their life they should be able to put aside a sufficient sum from their good dividends to make up for any loss of capital that might be sustained. That has not been done. One of them has reduced its capital from £5 to £4 shares.
What is going on at the present time? Some of them who have large districts are gradually extending and laying down their mains, creating a goodwill for the county council when they step in in 1931 without the Council paying one single penny piece for that goodwill. Of course, a very serious question may arise unless something is done, but that is a question for discussion at another time. It is, however, a particular subject for consideration whether they should be charged the Excess Profits Tax or, if so, whether it should only be after providing for such a return by way of interest as to enable them to put by a good and sufficient fund to meet the almost certain loss at the time when the local authority exercises its option to purchase. I cannot conceive that there can be any real objection to this. If the right hon. Gentleman will ask someone connected with the Board of Trade who knows something of these tramway and electrical companies, he will find that they are limited very much as to what they can do with their accounts. An auditor comes in for the Board of Trade and another auditor for the company, so that they are very limited under the Act under which they carry on their business as to the provisions they can make. I would appeal to my right hon. Friend to give special consideration to these companies. Some of them by the additional capital which they are putting up are gradually increasing, and some of them in the last three years will show a gradual increase of income, probably one or two or three thousand pounds. It will be very hard lines if they have their increased income taken away from them, seeing that it is the sum which in the purview of the House of Commons was intended as their reserve to replace the capital which they have expended and sunk in the creation of goodwill, and which will not be made up to them when the time comes for the local authority to take them over.
I think that I can clear up the point. If hon. Members will turn to Clause 38, Sub-section (1), they will see the words,
"Where a primâ facie case is made out for an increase of the percentage standard, as respects any class of trade or business."
We are going to add to that words which will include sub-classes of a class of trade or business. I have had before an opportunity of stating to the Committee, and I am glad to have the opportunity of repeating it now, that we should regard it as a primâ facie case for an increase of the standard rate of interest where a company had only a limited life. I am afraid that I have used rather strong language. I said it would be absurd to allow only 6 per cent. in the case of a company like a rubber company, which had to lie up its capital for five years before getting any return. I can say that it would be equally absurd or foolish to allow only the minimum rate of 6 per cent. to a company of this kind, which had to make good during a limited number of years the whole of its capital. We have provided expressly for that object, and I hope my hon. Friend will be satisfied to leave the question to the Board of Inland Revenue.
I hope the provision which the right hon. Gentleman points to will be sufficient. These companies are very much in the same position as rubber companies. An electric light company does not enter into its full revenue at once. It has to develop, and every addition of a consumer necessitates the expenditure of capital. I hope the right hon. Gentleman will allow discussion on the words he adds.
I do not think it will be necessary to add words. The words as they stand in the Bill are sufficient. I take it the words, "where a primâ facie case is made out," would cover the case cited by the right hon. Gentleman. I certainly should regard that as a primâ facie case.
I think this would be a very dangerous Amendment if it were put into the Bill. I rather agree with what was stated by my hon. Friend here that a tramway or other company which is making extra profits this year or next year ought to be put on the same terms as other companies. There are many companies which are doing good business, and are making extra profits this year, and they ought to pay like any other companies. The same remarks apply to electric lighting companies. There are great developments in some districts, especially with regard to munition factories, involving a largely increased consumption of electric light. I do not agree with what has been said with regard to the purchase of these companies by municipal authorities. My experience has been—and I think it is the experience of all who have any acquaintance with municipal work— that when companies are purchased by the municipal authorities those authorities have to pay very much larger sums than the undertakings are really worth. I have known some cases where the amount paid has been three times the actual value. Moreover, electric light companies and tramway companies possess running powers, and the municipality can only buy at the end of seven, fourteen, or twenty-one years; therefore there is ample time for a company to develop, and at the end of the period if a corporation thinks of taking it over as a going concern, I am pretty certain that the corporation will have to pay the full value. I therefore think the tramway company and the electric light company should be put on the same basis as other companies.
I think this is a bogus Amendment which is being moved purely for destructive purposes. My hon. Friend the Member for Aberdeen referred to companies paying 2 or 3 per cent., but I think he will find that the companies referred to in this Amendment will be entitled to be treated on the standard' basis of 6 per cent. or more, and therefore the question of 2 or 3 per cent. does; not apply at all.
I know that.
Then why did you say what you did?
My hon. Friend never listens to half what a speaker says. I spoke of companies which at the beginning of their existence were only earning 2 or 3 per cent. That has nothing to do with the present time. I was speaking of a period some years ago.
That has nothing to do with the question. The point I want to make to the Chancellor of the Exchequer—
You moved my Amendment and took a Division upon it.
I should like to take a Division on the right hon. Gentleman's Amendment, because it would be defeated by the Committee. I say it is a bogus Amendment
I do not think that is desirable language to use. The hon. Member must not attribute motives to another Member.
I withdraw the word and will use the words used by the late Mr. Chamberlain upon one occasion, and say it is "not an honest Amendment."
The hon. Member would not like these phrases applied to himself, and he has no right to apply them to other Members.
Is it not in order to describe an Amendment as not being an honest Amendment? It was ruled by Mr. Speaker that a Member was entitled to describe an Amendment as not being an honest Amendment because it was a destructive one. I say this is an Amendment which is destructive of the Bill. I do not wish to use an offensive term, therefore I will withdraw the word "bogus," because you, Sir, say it is not a proper word to use. The whole of the five paragraphs which the right hon. Gentleman (Mr. Lough) has put down are destructive of the whole principle of the Bill. I only wanted to say in half a dozen words that I hope the Chancellor of the Exchequer is not going to widen the net and let any more fishes escape than he has done already.
I am much obliged to you, Sir, for the protection you have given me against the rather crude attack of the hon. Member foe the Mansfield Division (Sir A. Markham). At the same time, perhaps I might be allowed to say that I can defend myself very well in this case. I was absent from the Committee for two hours, and I find that in my absence an Amendment which I had put down as a reasonable Amendment for discussion was moved by the hon. Member for Mansfield, and that he actually took a Division upon it. I have had scarcely an idea with regard to the Bill that he has not unconsciously adopted. However, I forgive him for his outlandish remarks. I want to ask the Chancellor of the Exchequer one question with regard to Clause 38. As the Clause is drawn, it obviously applies to a class of trade or business quite different from the corporations to which I referred. Perhaps the right hon. Gentleman could see his way to consider whether words ought not to be introduced indicating these special corporations. That would not widen Clause 38 in any way. The Clause simply gives power to the Commissioners of Inland Revenue to increase the percentage standard in respect of any class of trade or business. It might say, "and corporations."
We mean them to be included.
The right hon. Gentleman is bursting with good intentions with regard to Amendments, but they are not made in the Bill.
Let us wait until we get to Clause 38.
If the right hon. Gentleman says that on Clause 38 he will consider whether some words are necessary to include these corporations, I will withdraw my Amendment.
My right hon. Friend is not correct in saying I moved his Amendment.
You told for it.
I told for it and I would have told for every Amendment to increase the powers of taxation—not to restrict them.
Amendment negatived.
I beg to move, at end of paragraph ( c ), to insert as a new paragraph,
"( d ) any enterprise in the nature of a trade or business carried on by municipal authorities."
I hope I am now moving something which will please the right hon. Gentleman. With all respect to the grasping tendencies of the Treasury in these times, I think they might draw the line at municipal authorities. [HON. MEMBERS: "Why?"] For many reasons. One is that these authorities at present are spending a great deal of money. They are working at considerable expense, and if you deprive them of any profit it will only compel them to throw a heavier rate upon the people. I think we ought not to interfere with the property of municipal authorities. In many cases they carry on most useful enterprises at a loss, but there may be one enterprise which develops suddenly into a slight profit, and it may develop just during this accounting period. The Treasury will give them no assistance in any of their enterprises which are working at a loss, and if an electric lighting undertaking which has been working at a loss shows a profit of 10 per cent. or 15 per cent. it would be a great hardship to take from a small or a large municipality a few thousand pounds on this pretext.
I should like to support the Amendment. I think in connection with municipalities it is a misnomer to talk about profits at all. A municipality does not make profits in the ordinary sense that a private trading company makes a profit,, and in many there is a question of surplus that is not going to be used for anyone's personal advantage or gain any more than in the case of a public school or university. It is not a question of individuals being enriched or enjoying a larger revenue as the result of the War. The question of municipal surplus is in an altogether different category from that of the private profits made either by individuals or by private trading companies, and I am quite sure from that standpoint it ought to appeal to the sense of the House that there is no analogy between the two cases, and that from that standpoint there is a very strong case that the Chancellor of the Exchequer ought to take into account. I believe strongly that exemption ought to be made, because this is not profit in the ordinary meaning of the term at all.
My hon. Friend has addressed a very powerful argument to the House, and I greatly deplore that for the reasons I shall give, I do not feel myself able to accept it. The first reason is this, that his argument is just as relevant to the ordinary Income Tax as it is to the Excess Profits Tax. It seems to me that the argument is as relevant to the Income Tax as to the Excess Profits Tax. Parliament has already decided, rightly or wrongly, that the profits of municipal undertakings shall be subject to Income Tax. If my memory serves me—I will not be quite sure—one of the grounds of Parliament's decision was the ground I am going to allege as the second reason why I shall have a difficulty in accepting my hon. Friend's arguments. One of the grounds formerly alleged, and alleged now, is that these municipal undertakings are in many cases directly competing with other concerns, in which private individuals have invested their money, and from which they might reasonably look for a fair return. This battle has been fought before and Parliament has decided in favour of putting the two classes of concerns on exactly the same footing. I do not feel that I should be justified now in reopening that battle and asking Parliament to come to a different decision. I feel less justified in doing so, inasmuch as I think there is extremely little money in the whole thing. We shall therefore be only affirming a new principle in direct conflict with an old-established Parliamentary principle for the sake of little or no revenue. Under these circumstances I think we had better let the matter stand in the position in which it has stood for many years.
I beg to move, as an Amendment to the proposed Amendment, to leave out the word "municipal," and to insert instead thereof the word "public." I have an Amendment on the Paper to add, as a new paragraph, "any undertaking in the nature of a trade or business owned or carried on by a public authority." There is a certain difference between a municipal and a public authority. The term "public authority" includes such authorities as the Port of London Authority, the Clyde Trustees, the Mersey Docks and Harbour Board, the Metropolitan Water Board, and other institutions which are acting as public bodies, working solely in the interests of the public, and which are not technically municipal institutions, although on the same footing.
The Chancellor of the Exchequer seems to be acting inconsistently beyond limits. He tells us now that all these people have got to pay Excess Profits Tax because they are liable to Income Tax. A short time ago he told us that persons who enjoyed offices or employment—persons who are engaged in professions dependent upon the personal qualifications of such persons are not to pay the Excess Profits Tax, but all the time they have to pay Income Tax. Really, the right hon. Gentleman's inconsistency is unlimited.
I did not say what the hon. Member says I did.
Yes, you did.
The hon. Member is doing injustice to my argument. What I said was that this was an old contest which arose at the time of the imposing of Income Tax, that when the Income Tax was imposed upon these companies the issue as between the public company and the private company was settled, and that I did not intend to ask Parliament to go back upon that.
The right hon. Gentleman has not improved the position in the least. Surely, when the Income Tax was imposed the issue as between the professional man and the business man was settled. Surely, when the Income Tax was imposed it was imposed upon everybody alike. My right hon. Friend now comes forward and makes exceptions of certain favoured classes. Having done that, he says because the Income Tax does not discriminate between the other classes he will not discriminate, despite the fact that although the Income Tax is uniform he has already made discriminations. I think it must be obvious to anyone who reads the Bill carefully that neither a municipal authority nor a public authority are the least liable to pay, because they will come under the six per cent. provision. The effect of excluding them by name will, however, save the bother and worry of corresponding with the tax collector. The whole point will then be settled by the words of the Act of Parliament. A great deal of trouble will be saved. It seems most unreasonable that because by some possible chance one of these authorities may show a profit during the year 1914, as compared with the average of the three previous years, that profit, which in any case would go into the pockets of the public, should be taxed in the way proposed.
Sir J. HARMOOD-BANNER rose—
The hon. Member has moved no Amendment. Of course the discussion must be confined to the Amendment which is proposed.
I will accept the Amendment.
Amendment to proposed Amendment put, and agreed to.
Question proposed, "That the words, as amended, be there inserted."
I am sure that the Committee will be astonished if I say a word on behalf of the municipal authorities, but I happen to be associated with municipal work, and I would like to point out that the effect of not accepting the Amendment will be to transfer a certain amount of the rates which municipalities now enjoy into the public exchequer, and seeing that they are now deprived of so many of the exchequer contributions which they formerly received, it would be extremely hard if they were to suffer this extra loss. Municipalities have got to face a great excess in expenditure consequent on their contributions to war funds, and also their heavier wages which they have to pay, and none of these profits which they used to receive will now come into the municipal exchequer: they will go into the Government exchequer. No doubt the enormous increase in wages which working people have received have added enormously to the amount of the tramway receipts of various municipalities in the country. There has never been such prosperity among the inhabitants of the various cities of the country. They have spent their money, it may not be economically, in various ways, but instead of there being any relief now from the Exchequer for the municipal authorities the Exchequer are saying, "Whatever you have got extra we are going to take from you." I do not think that that is fair, and I shall certainly vote against it.
My hon. Friend behind me has given the very best of reasons for this tax. He says that the people of these various towns in which working-class families derive great advantage are so rich that they are spending a very large amount of money. That is the very reason why they ought to be taxed. I am surprised at my hon. Friend taking the line he does, because apparently he is rather socialistically inclined. Apparently he believes in collective trading, and thinks, therefore, like the hon. Gentleman opposite, that this is a very fair subject of exemption. I totally disagree, and hope that the right hon. Gentleman will stand to the tax.
I only want to protest against the theory which underlies the argument of the hon. Member who draws a fine distinction between companies which are honestly called companies, and have a vast number of very small investors, such as provincial water companies, which are authorised to carry on undertakings by Act of Parliament, and those undertakings which are not companies, which happen to be undertakings of public bodies. That distinction is a distinction without a difference. I was very glad to hear that the Chancellor of the Exchequer has enunciated such a sound principle on the proposal, and I hope that no argument of that kind will induce him to alter it for a moment. I happen to represent, in a way, as the chairman of the Provincial Water Companies' Association, these companies. They do not ask to be exempt from this Excess Profits Tax at all. They only ask for some small Amendments which come later on in the Bill. It would be a monstrous injustice if undertakings for water and other public purposes which happen to be conducted by municipal and public bodies were exempted and statutory companies were subject to this tax. Therefore, I hope the Chancellor of the Exchequer will not weaken his decision.
The only effect of this tax on these alleged profits, which are not profits at all in the ordinary sense of the word, would be that the municipality would cease to make profits. The effort of a municipality is, or ought to be, and generally is, to administer these various enterprises at cost price to those who are to enjoy them. They charge their burgesses nothing for cleaning the streets, nothing for taking away their ashes and dust, and so forth. They endeavour to charge them nothing for riding on a tramway, and I think it would be far better if they carried all their passengers for nothing. [HON. MEMBERS: "Oh, oh!"] It is all very well for the Committee to laugh, but if they thought it out they would find that it was a perfectly just and equitable thing to do.
The hon. Gentleman is entering upon the question of municipal trading, which does not arise here.
The effect of the tax on the alleged profits which accidentally arise will be that all enterprises will be carried on as near cost price as possible, so that no alleged profits can occur.
11.0 P.M.
I think the right hon. Gentleman will have to give a little further consideration to the Amendment of my right hon. Friend. There is no uniformity of practice among the public authorities, either in England, Scotland, or Ireland, with regard to these municipal enterprises. You will find in some communities that the gas and electric light undertakings are in charge of the public authority, and, under their private Acts, they are bound to balance their accounts from year to year. If they show a surplus profit in one year they have to reduce their charge in the ensuing year. In other instances the municipalities, in managing their tramway systems, gas lighting or electric lighting undertakings are entitled to make profits out of these undertakings and apply those profits to the reduction of the rates. Both those instances which I have given are absolutely correct, and, therefore, I think the right hon. Gentleman has made out a case for some special consideration for those so-called municipal trading enterprises. The right hon. Gentleman says there are cases where municipalities are in competition with other corporate bodies, but those must be very exceptional cases, and I certainly think that this matter ought to have fuller consideration before the Amendment is absolutely rejected. Let me cite an instance which has come under my notice during the past few weeks. The Corporation of Aberdeen promoted a Bill for a new and extended water supply. They have no debt at present; they have wiped it all out; but the corporation have decided to assess a water rate for the ensuing year, in order to provide the money necessary for the new works, and to equalise in some way the burden as between the existing ratepayers and others. If out of that rate they collect £10,000 or £15,000 or it may be £20,000, that may be said to be excess, and the corporation, instead of being able to apply it for the purposes of the water undertaking, will have to pay 50 per cent. excess profits. Let me cite another case, the question of electric lighting. All along the East Coast and in London we are kept practically in darkness. The revenue of the electric lighting department of Aberdeen will shrink very much, and the result will be that the corporation will have to largely increase the electric lighting rates for the current year. Take another case, a munitions district like the Glasgow district, where they are in a blaze of light. They have got a large number of splendid factories for the manufacture of munitions. That means that the Corporation of Glasgow is making a very largely increased revenue out of the electric lighting undertaking, both for lighting purposes and munitions. [HON. MEMBERS: "They ought to pay!"] In that case, of course I think they ought to pay. That does not get rid of the difficulty with regard to Aberdeen water supply, and I would ask the right hon. Gentleman to give that some consideration.
I can assure my hon. Friend he has made the most complete speech in defence of the provision made in the course of the Debate. He has recognised that there are cases in which the tax should be imposed—that is to say, he is opposed to this Amendment, which excludes them all absolutely. When you get to the individual cases they can be dealt with under Clause 38, and the Court of Referees are entitled to fix a higher amount than 6 per cent. in certain cases.
Question, "That the words, as amended, be there inserted," put, and negatived.
The Amendment of the hon. Member for Plymouth (Mr. Shirley Benn), dealing with subsidiary companies, should come on The Schedule where the Government has put down an Amendment.
I understood you to say that the question of mining royalties, on which the hon. Member for St. Pancras had given notice of an Amendment, could be brought up towards the end of this Clause. The hon. Member is not now present.
The hon. baronet is mistaken. I have my note here stating that it is out of order, because it involves a charge beyond the Resolution of "Ways and Means. That is already proved by the fact that the Government gave notice of a Resolution to enable them to deal by a new Clause with the question of taxing royalties.
I beg to move, after the word "person" ["but Including the business of any person taking commissions"], to insert the words "not being a director of a company or an employé."
As the Committee are aware, directors' fees are frequently paid partly by a fixed amount and partly by a commission upon profits. In the case of managers of companies also the payment is often by a fixed amount plus a commission upon profits. It seems to me that if the words stand as they are in the Bill it might be held that such a director or manager was included in the category of persons "taking commissions in respect of and transactions or services rendered." The insertion of my Amendment would make the position much clearer. It may be held that a director or employé would come under paragraph ( b )—"offices or employments," but there seems a little doubt on the point, and if these words were inserted no kind of question could hereafter arise as to the real interpretation of the Clause.
So far as the object stated by my hon. Friend is concerned, I think the words in the Bill are sufficient. The case of a director paid partly by salary and partly by commission would be covered, I think, by paragraph ( b ). The commission would be a form of pay, and would undoubtedly be part of his salary, so that under the Bill he would get the relief which I agree ought to be given. But if we accepted the Amendment it would go a great deal further. Many directors are not only paid by salary and commission in the ordinary sense, but they also act as agents, and as agents receive commission. These, being directors as well, would be exempt as agents because they were directors. I think the Bill as it stands is quite sufficient to do what my hon. Friend wishes, whereas his words would do what neither he nor I wish to do
Perhaps the hon. Member would be willing to leave out the words "or an employé." I have had a letter on that very point. Take the case of the chairman of a company whose remuneration is partly by commission. Very often the position is that the company is in a bad state, and the chairman agrees to take no salary until a certain return is made. That return is proportionate to the dividend. His remuneration, his salary, depends entirely upon that Commission. Therefore, there is a strong case made out so far as these directors are concerned.
They would be exempt.
I do not think that is quite clear under paragraph ( b ). The right hon. Gentleman might, I think, consider the point in the same spirit in which he has accepted some suggestions put forward.
After the explanation of the Chancellor of the Exchequer, I do not wish to press my Amendment. He has, I think, made it abundantly clear what practically is the intention of these words.
Amendment, by leave, withdrawn.
I beg to move, after the word "commissions" ["any person taking commissions in respect of"], to insert the words, ["other than commissions on any class of insurance]." There are a great many professional men, such as solicitors, accountants, estate agents and others, who receive commissions on account of certain work, and I should like the right hon. Gentleman to deal with that aspect of the case, but I shall not press the Amendment unnecessarily.
( was understood to say ): So far as this relates to those who take commissions for fire and life insurance I do not see that there is any cause for exemption. I do not think I can recommend the Committee to accept this Amendment.
I see the point of the right hon. Gentleman, but if you are going to exempt a professional man in one aspect of his business, I do not see how you are going to get him in another.
The hon. Member asked leave to withdraw.
I did not go to that length: I said I was not prepared to press my Amendment.
In respect to commissions, I do not know whether the same practice obtains in England, but in Scotland it is perfectly competent for solicitors to introduce their clients to a stockbroker in London, and to receive for their services a Stock Exchange commission. I presume the Chancellor of the Exchequer does not hold that the receipt by a practising solicitor of a commission of that kind takes him out of the category of professional men?
Supposing a person, as the hon. Member for West Aberdeen has described, has a small subsidiary business in respect of which he takes a commission, does he then become liable to pay this tax on the whole of his income, although the main part of it is that derived from the exercise of another calling? The wording of the Clause is not perfectly clear on this point. If a man in respect of such a business derives a commission, it may be of only 10 or 20 per cent., under the terms of this Clause he will have to pay tax on the whole of his business.
I do not think there is any possibility of any increased commissions being earned on life or fire insurance this year. The indications are, I think, that there is a reduction in the premium income of most companies. But there is a new phase of insurance where there will be an enormous increase in premiums, and that is air-raid insurance, which will bring in a largely increased income to the agents. In that case the tax, I think, ought to be paid, but with regard to life and fire insurance, I am quite certain there will be a decrease rather than an increase in the income of the year.
Before I withdraw I should like to have made clear the point raised by the hon. Member for Hexham.
( indistinctly heard ): A separate agency business would be a separate business.
Even if the agency business would be taxed separately, I would like to put to the right hon. Gentleman that in Scotland at all events commissions of that kind have not been regarded in the least sense as a separate business, but as part of the substance of a professional man's business.
By the words "including the business of any person taking: commissions in respect of any transactions or services rendered," we mean the business to be limited to that business of taking commissions in respect of any transactions or services rendered. If they do not cover the purpose we will see before Report that they do so.
Question, "That the words proposed be there inserted," put, and negatived.
I beg to move, after the word "commissions" ["any person taking commissions"], to insert the words "other than literary royalties."
These royalties, in forty-nine cases out of fifty, take the form of payment down, and in fact it is a fee just as a lawyer's, fee. The form the transaction takes is. that of selling the copyright or a licence retaining the copyright. I fear that such royalties might possibly be included in the words in the Clause, and I have put the Amendment down to make sure.
Authorship is not a business but a profession, and is certainly not "the business of any person taking commissions in respect of any transactions or services rendered," and by no possible construction of the words of the Clause could such a person be so described, so that, I think, the words proposed by the hon. Member are quite unnecessary.
Take the case of an author writing a play. His commission might amount to many thousands of pounds. Surely that must be a case of a person taking a commission in respect of a service rendered. The manager of a theatre would approach him to write a play and give him a royalty upon it. I do not see why he should not pay, but I am striving after uniformity, and if the Government want to exempt him it ought to be put in.
In regard to book writing it is exceedingly unlikely that the two classes, novel writing and school books, which are generally the most remunerative are producing anything which will give you excess profits. In regard to writers on the War, they are journalists and would come in the same category as lawyers. I want it made quite clear that the literary man is not included. He may write two or three books every three or four years and he has no pre-war standard at all. He may make an agreement ostensibly to write for royalties and for a sum down on account of royalties, and that is really a fee and nothing else. Because he has done that in this year he has to lose half the profits, not of a year, but probably of a lifetime of thought. I am not convinced by what has been said that literary royalties would not be included.
Take the case of Mr. Belloc and others who are writing articles week by week and obtaining very large sums of money holding meetings in towns throughout the country. [An HON. MEMBER: "There are one or two others."] Be that as it may, these gentlemen make large and substantial profits by reason of the fact that these meetings at which they explain their views upon the War have brought them very large incomes.
Does the hon. Baronet suggest that they are included in the words "literary royalties" now before the Committee?
Yes.
I wish to raise another point which I think is a much more practical one. Take the case of an author who may have sold for so much cash down his right to certain royalties. The royalties will then be in possession of a business man who would certainly be liable to this duty. Supposing somebody bought a royalty surely he would be taxed upon royalties which he would be receiving.
I cannot see how that arises under this Amendment, which applies to an author receiving royalties. The hon. Member proposes to insert, after "commissions," the words "other than literary royalties." I do not think the case which the hon. Member puts to me is covered by those words. So far as I am advised, literary royalties could not be under the head of "commission," and an author who earned literary royalties would be included under the head of "profession." Therefore, on both heads the Amendment is unnecessary. That is the reading of the words by the Inland Revenue and by myself, and in view of the reading of the words we should not propose to enforce the tax.
In view of the statement of the Chancellor of the Exchequer, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
The Amendment in the name of the hon. Member for Liverpool (Mr. Pennefather)—to leave out the words "or an agent whose remuneration consists wholly of a fixed and definite sum not depending on the amount of business done or any other contingency)"—would no doubt raise a discussion which we have had in anticipation. The next Amendment in the name of the hon. Member for Aberdeen (Mr. J. M. Henderson)—after the word "agent," to insert the words "for any insurance company or"—deals with a matter already settled. The second Amendment in the name of the same hon. Member—at the end of the Clause to add the words. "In the case of any trade or business which, by reason of its being unable to pay its debenture holders and creditors, is being caried on by a liquidator, receiver or trustee under the court, no excess profit duty shall be levied or paid until provision is made for payment of such unpaid debenture holders or creditors "—is in the wrong place. I think that it ought to come in as a new Clause. The Amendment of the hon. Member for Carlisle (Mr. Denman)—at the end of the Clause to add the words, "and of any person reciving such payments as render him liable to Mineral Rights Duty"—involves a charge, and is therefore out of order.
The Amendment of the hon. Member for Newry (Mr. Mooney)—at the end of the Clause to add the words, "Where any trade or business to which this part of this Act applies is carried on by a company (hereinafter called the 'subsidiary company') all or substantially all the shares in which are owned by another company (hereinafter called 'the parent company') such trade or business and the profits arising therefrom shall, for the purposes of this part of this Act, be deemed to be the trade or business and profits of the parent company, and the subsidiary company shall not be separately charged with Excess Profits Duty, but the profits of the subsidiary company shall be accounted for by the parent company as part of its profits"—should come in the schedule where the Government have put down an Amendment to deal with the point. The Amendments—in the names of the hon. Members for Oldham (Mr. Denniss), and Islington (Mr. Lough)—at the end of the Clause to add the words, "and of the business of foreign firms represented in and transacted on their behalf in the United Kingdom by an agent or servant in respect of that part of their excess profits which are so earned"—is also a matter which has been already dealt with.
Do I understand you to say that my Amendment has been already dealt with? I do not know where.
I thought that it had been dealt with on the Amendment of the hon. Member for Warrington (Mr. Harold Smith), but, of course, if it is a new point the hon. Member is entitled to move.
It has nothing to do with the Amendment of the hon. Member for Warrington. A foreign company has an agent over here. The agent pays Excess Profits Tax, but the foreign firm do not pay any tax on the profits they make here.
I do not know whether the hon. Member was in the House at the beginning of the Sitting, when a Resolution was moved in order to make agents in this country liable to Income Tax. If a Clause founded upon that Resolution is passed, they will then automatically come under the Excess Profits Tax, but if the House rejects the preliminary step they cannot come under this tax. We must take the case by steps. There is no need to move that Amendment now.
It is involved in the Ways and Means Resolution?
Yes.
And practically this Amendment will be accepted?
It will follow.
Question proposed, "That the Clause stand part of the Bill."
I have an Amendment to omit the Clause.
The hon. Member will understand that it is my duty to put the question when we reach the end of the Clause "That the Clause stand part of the Bill." He may, of course, speak in opposition to the Motion.
In speaking in opposition to the Motion that the Clause stand part of the Bill, I do so because I feel that the Clause is absolutely unfair and discriminatory. I sympathise with the principle of taxing excess profits; I should not have objected if the tax had been considerably heavier. It is intolerable that at a time when the country is almost bleeding to death any body of persons or any individual should be allowed to make a profit out of the necessities of the nation, or even while the nation is suffering loss. The main objection to this Clause is that it puts the main burden of the tax on excess profits on one class while it exempts another class altogether. I cannot understand why the commercial community should be expected to pay it while the professional classes are placed in a position of privilege and exempted altogether. I regard lawyers, doctors, Cabinet Ministers, architects, and all persons, in fact, who are making larger incomes than in the pre-War period as proper subjects for the attention of the Chancellor of the Exchequer on this particular occasion. I think it a monstrous thing that merely because they are not engaged in commerce they should be placed in a position of privilege and exempted from bearing their fair share of the nation's burdens for the purposes of this great War. I submit that no case was made out by the Chancellor of the Exchequer in his opening statement or has been made out in the course of these Debates for this exemption.
It can be said, of course, that it is difficult to assess Cabinet Ministers because there is no datum line that can be relied upon. But I would suggest that in the case of a Cabinet Minister who has risen from the ranks, and who in the past has been receiving £400 a year, the datum line might well be fixed at £400. Similarly, if he he has been receiving £2,000 a year, and the arrangement of pooling salaries has resulted in his getting £4,000 a year, the datum line might well be fixed at £2,000, and the Minister should be called upon to pass a tax on an excess profit of £2,000. I do not believe there is any argument in existence which can logically justify this preferential treatment, and I think it is almost an insult to the commercial community that it should be put in a position of disadvantage in a matter like this. It is either an insult or a compliment. I prefer to regard it as an honor, and indeed, I rather thank the Chancellor of the Exchequer for giving me an opportunity, should I make any excess profits of handing over 50 per cent. for the benefit of my country in a crisis like the present. But I do resent the failure to pay a similar compliment to members of the professional classes, many of whom are in a position owing to the War of securing quite exceptional and in a sense excessive profits. Many lawyers are doing remarkably well; many doctors and surgeons are making larger profits than in the past. Architects are engaged in Government work. We are spending an enormous amount of money in building national factories for the production of munitions. It is quite an open question whether those factories are needed. Still they are costing an immense amount of money, and the architects engaged on that work will reap a rich harvest. I hold that the State is entitled at a time like this to take a fair share of these excess profits in the same way as it is taking a proportion of the excess profits made by the commercial classes. I hope the Committee will refuse to accept this Clause unless the Chancellor of the Exchequer can see his way to redraft and modify it between now and the Report stage.
I have never opposed the incorporation of a Clause in an Act of Parliament with a greater consciousness that I was doing right than I am in opposing the inclusion of this Clause in the Bill. The discussions we have had upon every one of the proposed exemptions, both those that are proposed by the Government in the Bill itself and also those which have been proposed by various members in different quarters of the Committee, have all gone to show that the method in which this tax is proposed to-be imposed is full of inequalities and iniquities. The Clause is curiously inconsistent in itself. It begins by imposing a duty upon trades and businesses. To my mind that does not in itself include husbandry, but whether or not a trade or a business does include husbandry it is perfectly certain that a trade or business does not include an office, and it certainly does not include an employment or a profession. Nobody ever dreamed until we saw this Clause in the Bill that a trade or business could by any stretch of the imagination include an office or an employment or a profession. In fact, the very words "trade or business" are not exclusive of its being a profession or an office or an employment. In that case why does the Bill go out of its way in a Clause like this to say that a trade or business is not to include an office or an employment, or a profession? I cannot help thinking that when this Clause was drawn up the Bill was in a different condition, that it applied to various other kinds of profits and that it was not intended merely to be applied to a trade or business. The fact is that the whole of the exceptions are obviously a mistake. Those of us who oppose the principles of this Tax altogether would, of course, be out of order in repeating any argument to that effect now, but what we are entitled to do at each stage of the Tax and when we have completed the discussion on the Clause as we have at present, is to pause and ask, is this Tax: being imposed in a manner which is equitable all round and does it create individual cases of comparative hardship and injustice?
I take it that in a new tax like this, whether or not it is objectionable in principle—it evidently is, because everybody affected by it desires to get out of it—there is one principle which we ought as a Committee of the House of Commons to insist upon, and that is that it should fall with equal justice and impartiality upon the whole of the community. Personally, I say this, that if we are to have an Excess Profits Tax of 50 per cent., let us impose it upon the whole community. If we are to have this tax, as I understand we are to have it, having got so-far in the Committee that we have decided to have it, let us implore the Chancellor of the Exchequer to make no exceptions, to wipe this Clause clean out, and impose the tax upon everybody, whether he is in an employment, whether he is in an office, whether it is commissions, whether it is literary royalties, whether it is a municipality carrying on business, or whether it is a private company, or a public company or a statutory body.
If the State has made up its mind that, taking certain periods and comparing one with another, 50 per cent. of the excess ought to be handed over to the State in any individual cases whatever in the United Kingdom or people who were carrying on business abroad, the principle I contend for is that there should be no exceptions, that this Clause is unnecessary, that we should refuse to incorporate it in the Bill, and by going into the Division Lobby and voting against the incorporation of the Clause we should be inviting the Chancellor of the Exchequer, between now and the time when he has finally to make up his mind in regard to these matters, to levy this tax upon the just and upon the unjust alike, upon everybody who has got an excess income in the accounting period over the period before, so that all these complaints, all these appeals, all these so-called concessions which are being made and with which he will be worried to death if he does not take the advice now being tendered to him can all be wiped out and he can say, Wherever I have excess receipts by anybody I intend to have a half of it. Then nobody would be entitled to complain that he was being especially picked out and hard hit in this matter. But if we have to pay an astonishing, an exorbitant and, in many cases, a terrible tax like this is to be, for Heaven's sake let us make an effort and see that it is made fair, equitable and reasonable all round.
I hope it will not be considered necessary to protract the discussion on the Clause. The hon. Member has described it in a way which its language will not bear. He starts by saying, if the House has accepted the principle of the tax, let us make it completely uniform and leave out this Clause.
All the exceptions.
If you leave out this Clause you leave out the tax. The House has agreed to accept the tax and it is hardly consistent with the conclusions to which the House has come to leave out the Clause. I should be almost tempted to make a bargain with the hon. Member, and to say if he would stick to what he has said I should be prepared to agree with him—
I have a number of Amendments in my name. If the right hon. Gentleman will say he is prepared to impose this tax upon everybody, irrespective of whether he is in office or in employment or whatever it is, and that if it is to be half of the profits made in the accounting period in excess of the average of two of the three pre-War years, I will make him a present of the whole of the Amendments I have put down, and I will not raise any word upon this Bill while it is pasing through this House. That is all I have got to offer, and I make the right hon. Gentleman a free offer of it.
Does the hon. Member mean to exclude all cases of allowances on interest and capital?
Yes, the whole lot.
Does he mean to exclude all cases of rubber companies: for instance a company which has made no profits because they have not been developed? Does he mean to exclude the case of companies which have got a dying asset, dwindling capital?
My point is this. If a rubber company to-day which has been steadily successful for the last five years is not going to pay anything of this Excess Profits Tax because of the way the right hon. Gentleman has drawn it up, and another rubber company which has not made profits during the years, of development, but is now making a profit in one year has to pay this tax, then I say it is unfair. What I say is that everybody ought to pay, and there ought to be no exceptions such as the right hon. Gentleman has mentioned.
The hon. Member's point was that if we would take the best two out of the last three pre-war years as our datum line, and make everybody pay 50 per cent. on the excess profits, he would accept that datum line, and would be willing to withdraw all opposition to the Bill.
So far as I am concerned.
Does he mean that to apply to rubber companies?
To everything.
Does he mean to apply it to one rubber company which is fully developed, which has got a datum line so high that it has made no excess profits, whereas another rubber company, which is developing, has got a datum line of nothing, because it was not developed in the pre-war years, and therefore all the profits it makes are excess profits? Does he really mean to treat these two companies alike? Of course he does not.
It is for you to deal with it, not him.
I did not say so; not in that way.
That was the offer.
No.
He said he was prepared to withdraw his opposition on certain conditions.
I did not mean that the right hon. Gentleman should set up fresh cases of injustice. I did not mean that you should make the thing even more difficult by allowing nothing at all for un-remunerative capital. My point was that all companies and individuals, whether in offices or not, all people who are employed or in any office, or any company, whether it is a statutory company or a public company, whether their money is received from royalties, or whatever their source of income, if they are going to receive excess profits over and above the amount of the pre-war period they ought to pay one-half of those excess profits to the State. There ought to be no exceptions, and this Clause ought to be struck out.
It often happens that in conducting a Debate of this kind some point is raised several times over. The hon. Members who happen to be present at one time when a point is raised are not the same hon. Members who are present when it is next raised.
I have been here all day.
If the hon. Member has been here all day he must have heard the answer given.
I have heard the answer.
The hon. Member may not think it a good answer, but it is an answer which cannot be withdrawn. According to the datum line we have taken, excess profits are reckoned not upon the actual amount recived in 1914 over previous years, but they are reckoned upon the excess over the datum line. That datum line may have no remote application to what precedes it. In the case of the professional man there is no such alternative datum line as in the case of the business man. That constitutes the whole difficulty. In the case of a business there are wasting assets; the capital of the business is wasting. Then you make exceptional allowances. You do not take the mere difference between the profits actually earned after the beginning of the War and the profits earned before the War. You take a fictitious datum line; you make allowances for the wasting capital, for the using up of the machinery, and for the capital not having been remunerative before the War. In the case of the professional man you have no means of making similar allowances. His capital is his knowledge and his health, and you cannot make allowances for the using up of his machinery, his energy, or of his capital, his knowledge, which may have been un-remunerative before the War. Having regard to the fact that in the case of professional men there are no great excess profits, there is no case for the tax. It would be absurd to bring them under the operation of a rule where you cannot apply the same principles of equity which you apply in the case of businesses. I quite agree that if this tax were simply and solely a tax of 50 per cent. upon the difference actually received after the outbreak of war as compared with the amount received in the year or the average of two or three years before the War, the case for the inclusion of professional men would be complete. But that is not the tax.
It ought to be.
But my hon. Friend himself said it should not be. He said that it would make it more unjust if we left out the provisions for interest on capital and so on. We have put in all these provisions; we have made provision for an arbitrary datum line, and for wasting assets, and you must allow that you should make similar provisions for professional men. But it passes the wit of man to know how you could make them. The extra profits made are so rare and so small, there would be nothing left. I could not be a party to proposing a tax which would be at once unjust and unremunerative. My hon. Friend thinks this tax unjust. At any rate it is remunerative. The other tax would be neither just nor remunerative, and that being the case, I do not think it would be worth proposing.
I really cannot follow the reasoning of my right hon. Friend. I think that if a difference is made as between the business man and the professional man the difference should be in favour of the business man. I will tell the Committee why. The business man runs two risks; the professional man runs one risk. The business man not only has his health and his brain which he might forfeit by over exertion, but he has also the possibility of forfeiting the whole of his capital. If he loses his capital he is practically done for the whole of his business career in life. Why the professional man should be exempted it is impossible to understand. If he had not made any excess profits he would not pay the tax. If he had, I cannot understand why he should not pay the same as the business man. Many playwrights are making large incomes now. Why they should not be brought in it is difficult to understand. I protest with all my mind against any discrimination of this sort.
I quite agree with the Chancellor of the Exchequer that this is not the time to repeat the arguments we have put forward, but I must say that my right hon. Friend never makes a speech about this tax which does not increase my difficulty in doing anything but opposing it to the utmost. Take the speech made in reply to the hon. Member for Liverpool: He professes that he is creating a greater anomaly in the datum time than under any other aspect of the tax. As to the 6 per cent. on companies that have made 50 per cent.—
The right hon. Gentleman is going back to Clause 34 and the whole group of Clauses. He must keep strictly to Clause 35. We had a long discussion on Clause 34, and that matter was disposed of and settled by the Committee.
May I point out that during the time Mr. Maclean was in the Chair the Chancellor of the Exchequer dwelt at very considerable length on the question of the datum line; it formed the whole burden of his speech. If the right hon. Gentleman the Member for Islington is not entitled to reply to that, perhaps the Chancellor of the Exchequer will get up and make another speech.
I was in the House listening to what was said, and I do not think that the hon. Gentleman has given quite a fair representation of what took place. The Chancellor of the Exchequer was dealing with the arguments which had been advanced on Clause 35, but the right hon. Gentleman (Mr. Lough) is going back to Clause 34, and dealing with the merits of the whole tax.
I was tempted away by what was said by the Chancellor of the Exchequer, but I shall have plenty of opportunities later to raise the question of the 6 per cent.
The Chancellor of the Exchequer says the tax is founded on a very simple principle, that the men best able to pay have to pay. But how does that apply to his description of the datum line, which is not strictly in accordance with the principle that the man best able to pay will have to pay—the principle on which the Chancellor of the Exchequer declares this tax is founded?
12.0 M.
We must all recognise that the Chancellor of the Exchequer is equally anxious with other Members of the Committee that this Excess Profits Tax shall be levied in a fair and equitable fashion. I know that he is hampered by the fact that the Budget Resolution on which the provision in regard to the Excess Profits Tax in the Finance Bill is based was not sufficiently wide to enable him to bring into the net everybody in the country who is enjoying this increased income during the War period, and who, equitably, ought to be called upon to pay the Excess Profits Tax. But there is the question that Clause 35 is not as wide in its scope as the Budget Resolution should enable it to be made, and that is a disappointment. So far as it does apply and taxes the large body of taxpayers on the excess profits which they make during the War, I give it my heartiest support; but I deeply regret that it so far departs from the true principle of taxation, that every man should be taxed according to his ability to pay. That makes it, I am afraid, a cause of great disappointment to the general community and to the commercial community of this country. I hope the Chancellor will even now consider whether he cannot extend the scope of this Clause.
May I ask if paragraph ( c ) brings in those gentlemen and firms who have been making very high profits in the erection of military huts and other work for the War Office and the Admiralty, and also gentlemen who buy timber on commission?
Yes, both of them.
Not architects?
I mean the gentlemen superintending the erection of huts and other buildings, paid by commission?
Not the architect. He means the builder.
I did not say the architect.
I think the Chancellor's speech about the datum line was pure special pleading. He said it would be unjust in the case of professional classes to take the average of the preceding two years, but why then should it be fair to do so in the case of the business man? His argument is that he is giving an allowance in the latter case of 6 per cent. on capital, but if there is a difficulty as to the other case it is perfectly easy to insert a special Clause to deal with the point, and there would be no difficulty in doing justice. What the country thinks is that the Government have introduced the tax for the purpose of taxing not only com-
Division No. 20.] AYES. [125 a.m. Adkins, Sir W. Ryland D. Henderson, Sir A. (St. Geo., Han. Sq.) Rea, Walter Russell (Scarborough) Agg-Gardner, James Tynte Hope, James Fitzalan (Sheffield) Roberts, Charles H. (Lincoln) Ainsworth, John Stirling Jones, H. Haydn (Merioneth) Samuel, J. (Stockton-on-Tees) Beck, Arthur Cecil Jones, J. Towyn (Carmarthen, East) Samuel, Samuel (Wandsworth) Bowerman, Charles W. Jones, Leif (Notts, Rushcliffe) Shortt, Edward Bridgeman, William Clive King, Joseph Simon, Rt. Hon. Sir John Allsebrock Chaloner, Colonel R. G. W. Lewis, Rt. Hon. John Herbert Thorne, G. R. (Wolverhampton) Clough, William Maclean, Donald Walton, Sir Joseph Collins, Sir Stephen (Lambeth) McKenna, Rt. Hon. Reginald Williams, Llewelyn (Carmarthen) Currie, George W. Montagu. Rt. Hon. E. S. Williamson, Sir Archibald Davies, Sir W. Howell (Bristol, S.) Munro, Rt. Hon. Robert Wilson, W. T. (Westhoughton) Du Cros, Arthur Philip Pearce, Robert (Staffs, Leek) Wortley, Rt. Hon. C. B. Stuart- Edwards, Sir Francis (Radnor) Peto, Basil Edward Yeo, Alfred William Ferens, Rt. Hon. Thomas Robinson Pryce-Jones, Colonel E. Hazleton, Richard Radford, George Heynes TELLERS FOR THE AYES.—Mr. Healy, Timothy Michael (Cork, N.E.) Randles, Sir John S. Gulland and Lord Edmund Talbot Helme, Sir Norval Watson
NOES. Barlow, Montague (Salford, South) Holt, Richard Durning Bryce, J. Annan Lough, Rt. Hon. Thomas TELLERS FOR THE NOES.—Mr. Byles, Sir William Pollard Rutherford, Watson (L'pool, W. Derby) Cowan and Sir A. Markham Cory, Sir Clifford John
Committee report Progress; to sit again this day (Thursday).
The remaining Orders were read, and postponed.
panies, but professional people as well. The feeling among commercial people is that they are not being properly treated by the House of Commons when there are so many lawyers about, and that the business man is being taxed while the professional classes escape. What datum line can you take for a Member of Parliament? I suggest that in these times of scarcity of labour £1 a week would be a fair value for the datum line for Cabinet Ministers. I am referring to the true value at which to assess their services. But leaving Cabinet Ministers out of consideration, because even if they were assessed on the basis of what they are worth the amount of the tax would not be very much, at the same time it would give some satisfaction in the country. We are going to a Division on this question. I only want to say to the Chancellor, in conclusion, that I have supported this Bill from the commencement, not with limitations, like my hon. Friend opposite. I am for increasing the tax and getting all we can, as we want the money at the present time. It is a great disappointment that this Bill is going to leave out all the lawyers and professional classes. For that reason I must vote against the Clause as it stands.
Question put, "That the Clause stand part of the Bill."
The Committee divided: Ayes, 46; Noes, 7.
It being after half-past Eleven of the clock upon Wednesday evening, Mr. DEPUTY-SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
Adjourned at a quarter after Twelve o'clock (Midnight), Thursday, 4th November.