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Commons Chamber

Volume 75: debated on Wednesday 17 November 1915

House of Commons

Wednesday, November 17, 1915

DESTRUCTIVE INSECTS AND PESTS ACTS, 1877 and 1907

Copies presented of Orders numbered D.I.P. 281 to 199, inclusive, declaring the areas described in the Schedules thereto to be infected with Wart Disease and infected areas for the purposes of the Wart Disease of Potatoes (Infected Areas) Order of 1914 [by Act]; to lie upon the Table.

Trade Reports (Annual Series)

Copies presented of Diplomatic and Consular Reports, Annual Series, Nos. 5519 to 5523 [by Command]; to lie upon the Table.

ENEMY MERCHANT VESSELS (ITALIAN DECREES AND PRIZE REGULATIONS) (MISCELLANEOUS, No. 18, 1915)

Copy presented of Italian Decrees relative to Enemy Merchant Vessels, together with the Italian Naval Prize Regulations [by Command]; to lie upon the Table.

Lighthouses, Etc. (Local Inspections)

Copies presented of Reports to the Board of Trade by the Trinity House of Deptford Strond, the Commissioners of Northern Lighthouses, and the Commissioners of Irish Lights, of their Inspection of Local Lighthouses, Buoys, and Beacons in 1914 [by Act]; to lie upon the Table.

National Insurance Act

Copy presented of Provisional Regulations, dated 15th November, 1915, made by the National Health Insurance Joint Committee, acting jointly with the Insurance Commissioners, entitled the National Health Insurance (Medical Benefit) Regulations (No. 2), 1915 [by Act]; to lie upon the Table, and to be printed. [No. 382.]

Copy presented of Regulations, dated 15th November, 1915, made by the National Health Insurance Joint Committee, acting jointly with the Insurance Commissioners, entitled the National Health Insurance (Medical Benefit) Regulations, 1915 [by Act]; to lie upon the Table, and to be printed. [No. 383.]

Copy presented of Regulations, dated 15th November, 1915, made by the Insurance Commissioners, entitled the National Health Insurance (Compensation Agreements) Regulations, 1915 [by Act]; to lie upon the Table, and to be printed [No. 384.]

Oral Answers to Questions

War

British Prisoners of War

asked the Secretary of State for Foreign Affairs whether he has any information showing that at least sixty British prisoners of war are employed on menial and degrading work at the Berlin garbage farm at Spreenhagen; can he state that these men accepted this work voluntarily; and, if he has no information on the subject, will he have inquiries made through the American Ambassador at Berlin?

I have received no information on the subject, but I will make immediate inquiries in regard to the matter through the United States Ambassador.

Flax Imports (Ireland)

asked the Secretary of State for Foreign Affairs if he has any information as to what quantities of flax seed will be available for export from Russia and Holland during the coming months, and as to the steps which have been taken to secure adequate supplies for Irish growers of flax for the next sowing season?

His Majesty's Ambassador in Petrograd has been requested to furnish a report on the quantities of flax seed likely to be available for export from Russia, but his report has not yet been received. The flax crop in Russia is, I understand, on the whole better than last year's crop. The chief difficulty, of course, lies in the lack of sufficient means of transport, but in this respect His Majesty's Government have been and are doing everything in their power to assist British importers. As regards Holland, the Netherland Government have, as the hon. Member is doubtless aware, prohibited the export of flax seed, but it is probable that they will grant licences for the export of quantities beyond Dutch home requirements. It is impossible to estimate the exact amount which will be available for the United Kingdom, but His Majesty's Government have not lost sight of the importance of this question, and will continue to use their best endeavours in the interests of British flax growers.

British Nurses (Serbia)

asked the Secretary of State for Foreign Affairs if he will make a special request to President Wilson to give instructions to the American Ambassador at Berlin to make every effort to save the lives and honour of British ladies now tending the sick and wounded in Serbia?

I have already made inquiries through the United States Ambassador in London and Sir Charles des Graz as to—

British Concession (China)

asked the Secretary of State for Foreign Affairs if he can now publish the representations made by the British residents of the British concession at Canton, in China, regarding the re- moval of Germans from that concession and the correspondence relating thereto?

I do not consider it desirable in the public interest to publish the whole of the correspondence on this subject, whilst the publication of only a part of it would be misleading.

East Africa

asked the Secretary of State for the Colonies if he has any information to give to the House as to recent military events in East Africa; and whether enemy forces there have been rearmed and furnished with ammunition?

I do not think it desirable to make any statement at present about the position in East Africa.

Malay States Guides

asked the Secretary of State for the Colonies whether the Malay States Guides are now being employed on active service; whether he can state what number of native troops drawn from the Crown Colonies are now being utilised in connection with the War; and whether there exists in that direction further scope for recruiting?

The answer to the first part of this question is in the affirmative. A very considerable number of troops drawn from the Crown Colonies and Protectorates are serving in the various theatres of war, but it would not, I think, be desirable to give the figures.

Dentistry for Troops

asked the Under-Secretary of State for War whether he will say what grades in the British Army are entitled to free dentistry; and whether assistance could be given to officers of limited means who are obliged to incur heavy expenses in the supply of defects caused by service in the trenches?

All grades below officers are now receiving free dental treatment, and officers at the front are treated, when necessary, by the dentists appointed to the Forces. Officers who suffer loss or injury to teeth through wounds are also granted necessary expenses of treatment.

If they suffer loss or injury through wounds they are now granted any expenditure necessary for their teeth.

asked the Undersecretary of State for War whether he is aware of the extent of assistance given to officers and men of the Colonial contingents in respect of assistance in dentistry operations, and how it compares with that given to the British troops?

So far as I am aware, the assistance given by the Colonial and British Governments to their respective officers and men are practically on the same lines.

asked what provision is made for dentistry for the troops at the Front; whether it includes not merely operations for the relief of pain but such operations as are necessary to supply defects; and whether, owing to the lack of opportunity for the latter class of operations, many officers and soldiers have had to give up much of their short period of leave to the supplying of such defects?

I am not aware that the facts are as stated in the latter part of the question. It would be surprising if it were so, as dental surgeons and dental mechanics are supplied to the troops at the Front as demanded by the authorities. The treatment includes all that is necessary for the relief of pain, and also operations. It further includes the provision of artificial dentures to the noncommissioned ranks.

asked whether any commissions in the Royal Army Medical Corps are open to properly qualified dentists?

Dental surgeons are given commissions on the unattached list and not in the Royal Army Medical Corps.

Canteens (Employment of Men Eligible for Military Service)

asked the Under-Secretary of State for War whether those who are responsible for engaging men to be employed either in the canteens abroad or in this country have received instructions not to engage men without previously satisfying themselves that they are not eligible for military service?

In the canteens abroad the personnel consists of enlisted men. At home very few canteen employés are eligible for enlistment.

Commissions (Colonial Recruits)

asked the Under-Secretary of State for War whether a Colonial gentleman enlisting as a private is unable to obtain a commission by reason of his having enlisted in the Colonies; and, if so, will he ascertain if the technical difficulty can be surmounted which prevents the War Office utilising the services of a gentleman in every respect qualified for a commission?

No, Sir, no obstacle is imposed by the War Office to a Colonial gentleman who has enlisted as a private obtaining a commission. The same conditions, so far as the War Office is concerned, apply to those serving in the ranks of a Colonial contingent as to those serving in other units of His Majesty's Forces.

Defence of the Realm Act (Removal Order, Chatham)

asked the Under - Secretary of State for War (1) whether Mr. A. W. Mantle, a British subject, of Bayford, Up-church, near Sittingbourne, was ordered by the police under the instruction of the military authorities from Chatham to leave his home at Bayford and to reside outside the area at the end of June, 1915; whether Mr. Mantle has been charged with any offence against the realm: whether any opportunity has been given to Mr. Mantle to know on what charges or on what evidence he has been compelled to leave his home; and (2) whether the conduct of Mr. Mantle, of Bayford, Upchurch, in his monetary affairs has caused the police or military authorities to be at all suspicious; if, so, whether any opportunity has been given to Mr. Mantle to produce evidence to allay these suspicions; and, if not, whether he will grant Mr. Mantle an opportunity to do so?

The action taken in this case was under the Defence of the Realm Regulation No. 14, under which, as I have on previous occasions explained, no charge is necessary. Mr. Mantle was suspected of acting, or of having acted, or of being about to act, in a manner prejudicial to the public safety. It would not be in the public interest to go further into the details of this case.

Was this gentleman given no chance of making an explanation and taken from his home, so that he could not make an explanation which would clear away the greatest doubts?

The rule is that no explanation is considered necessary in such cases. If the hon. Gentleman wishes in a special case to bring an explanation to my notice, I should be glad to examine it.

If I can bring forward a case, will the right hon. Gentleman give it his consideration?

Mediterranean Expeditionary Force

Illness Among Troops

asked the total number of cases that have occurred in Gallipoli, up to the latest date for which the figures are known, diagnosed respectively as dysentery, cholera, trench-fever, pyrexia, typhoid, and paratyphoid?

I would refer my hon. Friend to the answer I gave on 9th November to the hon. Member for South-West Ham.

asked the Under-Secretary of State for War whether he will consider the advisability of not sending back to the Dardanelles men who have been invalided home for dysentery and enteric, but to employ them in some other theatre of the War where there would be less danger of suffering a relapse from want of suitable food?

asked the Under-Secretary of State for War whether he is aware that a considerable number of officers and men are being sent home from the Dardanelles suffering from dysentery and enteric; that these officers and men are being fed with ordinary rations while on their homeward voyage, and that these rations often consist of tinned food, quite unsuitable for invalids; that there is little or no provision of medical necessaries on board for cases of this kind, and that owing to these facts many deaths have occurred that might have been avoided; and if he can see his way to remedy this-state of affairs?

The answer to the first part of the question is in the affirmative. I should prefer to postpone my answer to the other parts until I have had time to make proper inquiry, but, as at present advised, I do not think the generalisation the hon. Member makes is well founded.

Recruiting

Vaccination (Territorial Force)

asked the Under-Secretary of State for War whether he is aware that men who have volunteered to join Territorial units under Lord Derby's scheme and been passed as fit are being rejected by recruiting officers solely for refusing consent to vaccination; whether this is done under instructions from or with the knowledge or consent of the War Office or Lord Derby; and whether he will prevent this loss of men who are badly needed by instructing recruiting officers to tell recruits that vaccination is voluntary in the Territorial Force: and in inoculation in all?

Liability to vaccination is not a condition of enlistment in the Territorial Force. No alteration has so far been introduced under Lord Derby's scheme in the conditions of enlistment into the Territorial Force. I cannot undertake to inform the Departments under my control that there is no alteration in the instructions under which they are acting.

Members of Fire Brigades

asked the Undersecretary of State for War if he can yet say whether the arrangement between Lord Derby and the London County Council relating to the enlistment of firemen extends to members of fire brigades outside the jurisdiction of the London County Council who are working in cooperation with the London Fire Brigade under the scheme devised by the Commissioner of Police at the Home Office on the 25th of May with a view to dealing with fires caused by hostile aircraft?

Special Constabulary

asked the Under-Secretary of State for War whether, in view of the announcement that single men of military age are expected to enlist before 30th November, he can state whether single men under forty in the Special Constabulary are exempt from the obligation to respond?

Home Service Units

asked the Under-Secretary of State for War if he will state whether the announcement that single men of military age are expected to enlist for active service before 30th November affects the position of single men of military age who have enlisted in the Territorial Army for Home service only; and whether in future the distinction will he maintained?

It is hoped that many of the Territorial soldiers who have not accepted the general service obligation will reconsider their position and offer themselves for general service. Subject to this anticipation, I may say their position remains unaffected.

Baking Trade

asked the Prime Minister if he is aware of the difficulties under which the baking trade is at present being conducted consequent upon the depletion of the staffs of those engaged in it, due to enlistment, thus endangering an adequate supply of bread for the needs of the public; and will the Government safeguard the baking trade by treating it as a starred industry?

Bakers engaged in making bread have been put on the list of reserved occupations. The other classes of workpeople in this trade which have been similarly reserved are mechanics and electricians engaged in the maintenance and repair of tools and machinery, enginemen (engine-tenters), and stokers (boiler firemen). Instructions to the recruiting officers will be issued by the War Office accordingly.

Valuation Department (Officials)

asked the Chancellor of the Exchequer whether temporary and permanent officials in the Valuation Department of the Civil Service who, not being starred, feel that it is their duty to express willingness to be called up in their proper classes under Lord Derby's scheme for military service require permission from the Commissioners of Inland Revenue before doing so in order to bring themselves within the scope of the Treasury Minute as regards salary and reinstatement; whether such permission will be granted to all unstarred men who enlist for future service; whether such men who so enlist without permission will be dismissed or subjected to any penalty; and whether it is proposed to issue any armlet or badge of Civil servants who, although anxious to enlist, refrain from doing so without permission.

Members of the temporary staff of the Inland Revenue Valuation Office are at liberty to relinquish their temporary employment at any time, and if they do so in order to join His Majesty's Forces, the month's notice, which under their contract they are strictly bound to give, is waived. With regard to members of the permanent staff, the Commissioners of Inland Revenue have issued a notice to the effect that they are prepared to consider further applications to join His Majesty's Forces, and, where permission is given, the usual terms authorised by the Treasury will apply. Badges are issued, under certain conditions, to Civil servants who have made a bonâ fide application to be allowed to enlist, but have been refused permission on the ground that they cannot be spared without disorganising the work of their Departments respectively.

The right hon. Gentleman has not answered one part of the question, namely, as to what will happen to members of the permanent staff who, without permission, enlist in response to pressure that is being put on them by the recruiting authorities?

The last part of the reply does, I think, partly reply by inference to the question, "Badges are issued under certain conditions to Civil servants who have made bonâ fide application to be allowed to enlist." If they do not take the badge and insist upon enlisting; against the wishes of the head of their Department they are, of course, at liberty to do so, but they would not be enlisting under the ordinary accepted terms.

Does the right hon. Gentleman not think that it is unfair for two different Government Departments to be pressing contradictory duties on these men, and that either they should be relieved, once and for all, from pressure by the recruiting authorities, or it should be treated as a matter of duty to respond to that pressure?

When they receive a badge I think they would be relieved from the pressure of any other Government Department. I will be very glad to look further into any case.

Mercantile Marine (Certificated Officers)

asked the President of the Board of Trade whether his attention has been drawn to the recruiting efforts now being made among the certificated officers of the mercantile marine; and, in view of the depletion which has already been brought about by the War, whether he will confer with the recruiting committee with a view to discouraging any further attempts to withdraw officers who are essential to the safe navigation of British merchant ships?

I have already been in communication with the War Office and Lord Derby on this matter, and am taking steps with a view to securing the exemption from recruiting of officers and certain other necessary ratings of the merchant service.

Time-Expired Men

asked the Under-Secretary of State for War if there is a rule that all non-commissioned officers who returned off the Reserve after mobilisation will have to leave their regiments at the termination of the War; and whether the War Minister can see his way, in special cases and in accordance with regimental requirements, to permit the re-engagement of such non-commissioned officers to complete twenty-one years with the Colours?

asked the Under-Secretary of State for War whether a number of twelve years' men are being discharged from the Army who would join up to complete their twenty-one years' service for pension if allowed to do so; whether the Government will not accept their services to do their full time for pension, but state that they will retain these men until the end of the War; whether he is aware that from Hilsea Barracks, Portsmouth, 199 men were discharged the week ended 30th October and 72 men were discharged the week ended 6th November; and whether a number are to be discharged this week?

No time-expired twelve years' man is discharged from the Army if he is willing to continue serving till the end of the War. Consideration of the conditions under which these men may be allowed to re-engage and qualify for pension is being held over until the close of the War, as it is not known what the situation may then be in regard to the number of long-service soldiers for whom places can be found in the Army.

Is the right hon. Gentleman aware that a large number of useful non-commissioned officers are leaving their units at the expiration of their twelve years' service, when they would be perfectly willing to remain on if they were allowed to re-engage for a total of twenty-one years' service?

I would be only too delighted if they could be prevailed on to re-engage. I can only say that an appeal will be made to them to do so.

Royal Engineers (Commissions)

asked the Under-Secretary of State for War if he will explain how it is that, whilst doctors, drainage experts, mining experts, surveyors appointed to the staff for the Royal Engineers, and others whose expert professional knowledge is required by the Army get the rank of full lieutenant on joining, members of the profession of architects, surveyors, and engineers gazetted to the Royal Engineers have to join as second lieutenants unless they receive a nomination from a Colonial Government?

The hon. Gentleman is, I think, comparing two things not entirely comparable. Candidates applying for Commissions in Royal Engineer units or units of other arms must begin in the lowest rank. Those appointed as drainage experts, mining experts, or in other similar capacities, are differently situated, and the lowest rank recognised is in their case that of lieutenant (honorary). I do not follow the allusion contained in the last line of the question.

Munitions

Skilled Mechanics Recalled from Military Service

asked the Under-Secretary of State for War whether the skilled mechanics who are recalled from military service for munitions work continue to receive military pay and allowances and to be provided with uniforms in addition to the wages of their civil employment; and, if so, whether, having regard to the high wages being earned by munitions workers, he will take steps, in the interest of national economy, to suspend the military pay and allowances of soldiers while in such civil employment?

No, Sir; the position is as I explained on the 26th July last in reply to a question put to me by my hon. Friend the Member for Aston Manor. The soldier receives neither pay nor allowances unless in any week his civilian earnings fall short of the sum to which he is entitled as a soldier, in which case the deficiency is made up.

Rifle Grenades and Trench Mortars

asked the Minister of Munitions whether he is aware that the regiments in the trenches in France are specially in want of more rifle grenades and trench mortars;. and whether Government factories are being made or machinery collected to meet this need?

Increased supplies of the two munitions referred to have been asked for, and the production of both has been greatly increased and is being pressed forward. Special arrangements for their manufacture have been made and are now in working. I may say that the weekly output of grenades of all kinds is now more than four times what it was three months ago.

Rifle grenades have not increased quite in the same proportion, but there has been a great increase in their production.

My hon. Friend will realise that rifle grenades just now are more important.

Brass Prices

asked the Minister of Munitions whether his attention has been drawn to allegations that, during the last few weeks, a firm offered to supply the Government according to specification with brass strip used for making cartridges at 29 cents a pound f.o.b. New York, which at the present rate of exchange is about ¾d. a pound higher than the Government's fixed price; that the offer was for deliveries to start promptly of 70 to 120 tons per week; that no attempt was made to enter into negotiation with this firm, and that they were not even asked to lower their prices although there was a lack of brass for making cartridges; and whether he will have inquiry made into the circumstances?

I am obliged to my hon. Friend for calling attention to these allegations. No such offer as that referred to in the question can be traced. I may say that it has been found possible to meet requirements from sources in this country at a lower price than that named, which, moreover, does not include freight, and that arrangements have been made which will, it is hoped, lead to a still further reduction.

Controlled Establishments

asked the Minister of Munitions whether he intends to ask further powers from Parliament to enable him to take over as controlled establishments undertakings like electric-power stations and other businesses essential to munition works but in which munition work itself is not actually carried on?

My right hon. Friend hopes to deal with this question in a Bill which will shortly be laid before Parliament.

Gretna Factory

asked the Minister of Munitions who are the contractors for the construction of the new factory at Gretna, and on what basis they are to be paid?

My right hon. Friend has nothing to add to the answer given on November 9th to the hon. Member for Chippenham.

Gramophone Company's Works, Hayes (Women's Wages)

asked the Minister of Munitions whether the provisions of Memorandum L 2, issued by his Department, are applicable to the Hayes Gramophone Company; if so, is he aware that the wages paid by this firm to women employed on men's work are, in fact, considerably lower than those prescribed; whether application for arbitration, under Part I. of the Munitions Act, was made on behalf of the workers so long ago as 24th September; and what steps have been taken to settle the differences which have arisen and to secure the adoption of L2?

I am making full inquiries into this matter, and will communicate the result to my hon. Friend. I would point out, however, that the memorandum referred to relates only to the employment of women over eighteen years of age. I can assure my hon. Friend that my right hon. Friend intends to use every endeavour to promote the adoption of the recommendations contained in. the memorandum in the cases to which it applies.

Labour Officers

asked the number of labour officers appointed under the Munitions Act; what their duties are; what their occupations were previous to appointment; and what are their qualifications for the position?

The number of labour officers is nine. Of these two were officers of the Board of Trade, six were engineers, and one was connected with business. These officers have eighteen assistants, of whom five were officers of the Board of Trade, ten were engineers, and three were connected with business. The duty of the labour officer is to make, personally or by his assistants, inquiries and reports upon such points in connection with the supply and use of labour for munitions purposes as may be referred to him from the Ministry; and to co-operate on behalf of the Ministry with local munitions committees and labour Advisory committees in matters relating to the local supply and use of labour for munitions work.

Questions

3rd Lincolnshire Regiment

asked the Undersecretary of State for War if he is aware that the 3rd Lincolns have been in camp under canvas at a place known to the hon. Gentleman since last May, and that last Friday night over one-third of their tents were blown down and the camp made untenable by being flooded; if he can explain why no huts have yet been erected for their use; and if he is aware that huts have been at a railway station three weeks pending a dispute between the contractor and the railway company owing to the latter company refusing to deliver the huts to the camp because it is outside their delivery area?

I am obtaining information on this matter, but have not as yet received it.

Killed and Wounded Soldiers (Return of Property)

asked the Under-Secretary of State for War whether he is aware that many complaints are made by relatives of soldiers reported as killed or missing or imprisoned by the enemy respecting the return of property, kits, and clothing; and whether he will inquire into this complaint and endeavour to provide a remedy?

I am aware that there have been some complaints. I am afraid that some losses are inevitable. No absolute guarantee can be provided, owing to the nature of the campaign, but I can assure my hon. Friend that all possible steps are taken.

Coal Mines Regulations Act

asked the Undersecretary of State for War whether he is aware that, under the Coal Mines Regulations Act, no person can be in charge of a mine or do surveying unless he is the holder of a certificate granted by the Home Office; that at the present time owners of mines find it difficult to get men properly qualified to enable them to carry out the Act of Parliament; whether these men are being canvassed and recruited at the present time; and will he, therefore, ask Lord Derby's committee not to canvass any colliery manager or mines surveyor or chief sales agent of any colliery whose services are necessary for carrying on the mine?

Colliery managers and surveyors are engaged in essential work below ground, and it is recognised that they are indispensable to the working of the mine. In view of the arrangements already announced they should not be canvassed and instructions are being given to this effect. As regards sales agents, each case must be considered on its merits, and it will be open to the employer to offer evidence before the local tribunal that his agent cannot be spared.

Bomb Accidents, France

asked the Undersecretary of State for War whether, seeing an accident took place on 16th October in the Fleur Baix bombing school in France, an officer having accidentally detonated a bomb which killed him and wounded three officers and a sergeant, who had won the V.C., he is aware the War Office refused to allow the names of any of these officers to appear on the roll of honour; whether this ruling excludes these officers' names from the public rolls of honour at their public schools and universities; why an officer or man who loses his life through no fault of his own is treated in this manner; whether he is aware that many badly designed and defective bombs have been sent to France by the Ordnance Department; and whether all persons who have lost their lives owing to these defective bombs are under the War Office ruling precluded from having their names placed on the roll of honour?

My hon. Friend is incorrectly informed. The names of all officers and men accidentally killed with the Expeditionary Force are announced, but the names of those wounded and not killed are not announced, because if accidental injuries of one kind are announced it is impossible to exclude accidental injuries of all kinds, which would include the trivial. I cannot accept the accuracy of the statement contained in the penultimate part of the question, although I admit that accidents have occurred, such incidents are unavoidable. The proceedings of the Court of Inquiry on the accident in question have not yet been received at the War Office, and it is therefore impossible to say whether it was due to a defective bomb or not.

May I say that I have a letter from the War Office definitely stating in writing the names of those accidentally wounded? Why are the wounded not included in the roll of honour?

If you included cases where no deaths occurred you could not eliminate very trivial injuries, sprains or something of that nature.

National Economy

asked the Prime Minister whether there are any other committees in addition to the Retrenchment Committee appointed by the Government to examine into public expenditure with a view to securing economy in every possible direction?

The Prime Minister has asked me to answer. The wider questions of financial policy are, as my right hon. Friend the Prime Minister has stated, being considered by a Committee of the Cabinet. The Retrenchment Committee and the public Departments are dealing with the details of retrenchments that can be effected in the Civil Service.

asked the Chancellor of the Exchequer whether there is adequate machinery at the Treasury to supervise and control the increased national expenditure of the country?

Any detailed supervision or control by the Treasury over naval and military and munitions expenditure for carrying on the War would clearly be impracticable. Subject to this qualification, I am satisfied that the machinery of the Treasury is adequate to discharge the functions referred to in the question.

Railway Dining Cars

asked the Prime Minister if, in order to avoid the waste of coal consequent upon increased tonnage, of male labour employed in un-remunerative service, and possibly of unconsumed food, the Government will discontinue the running of dining and other refreshment cars upon all British railways now under Government control?

This question is receiving the attention of the Railway Executive Committee. Refreshment cars are only run on business trains, and while the use of them saves business men a good deal of time, I am advised that the economy in coal and labour that would result if they were discontinued would not be so great as seems to be generally supposed.

French Chamber of Deputies

asked the Prime Minister whether the French Chamber of Deputies and the British House of Commons could be brought into closer relations for the purpose of promoting the interests of both countries in connection with the War and matters arising out of the War?

I am sure that the Prime Minister will very gladly consider any suggestions that the hon. Member may wish to make in this connection.

Imported Luxuries

asked the Prime Minister if he will have prepared, printed, and hung up in post offices, church porches, and other public places for the guidance of the public a list of the chief imported luxuries, as well as of ordinary commodities, the imports of which from abroad have, during the last twelve months, exceeded in value a certain datum, say, £5,000,000, and thus enable home consumers by a process of restriction of user and of selection to reduce the increasing export of gold for the purchase of goods other than munitions of war?

I would refer my hon. Friend to the answer given to a similar question by the President of the Board of Trade on 2nd November, in which my right hon. Friend expressed the opinion that it would be impracticable to prepare a list of the kind contemplated.

Men Unfit for Service

asked the Undersecretary of State for War whether he has arranged for the discharge of those men who have remained, since the date of their active service; whether, in some regiments, because they were found to be unfit for active service; whether, in some regiments, there is a considerable number of such men who ought never to have been accepted as recruits; and whether any steps are now being taken to secure a more efficient medical examination?

A soldier who is unfit for active service abroad is not necessarily discharged. If he is fit for garrison duty abroad or for service at home he is retained accordingly. If unfit for any of these forms of service he is discharged. A certain number of men have been accepted in the past as recruits who have been found after enlistment not to be in all respects fit for service. These men, if unfit for any form of service, have been discharged. Every endeavour is made to secure efficient medical examination of recruits, and we are not aware that there is now any ground for complaint in this respect.

Is it not the fact that examining doctors are paid by results, with the consequence that they have a direct inducement to pass as many men as possible?

Is the right hon. Gentleman aware that some of the persons discharged from sanatoria as partially cured are passed by the doctors?

Public School Battalions

asked the Undersecretary of State for War whether his attention has been called to the action of the officer commanding a Public School Battalion in refusing to grant discharges to those men under his command who have the offer of commissions in other regiments for which otherwise they would be well qualified; and whether, in view of the paucity of officers in many regiments, the Secretary of State will see that when a private would be able to obtain a commission under such circumstances his commanding officer shall not withhold his leave without good reasons being shown?

The position of the Public School Battalions in the New Armies is that no further commissions can be granted until the battalions go abroad.

If the battalion goes abroad, can commissions be offered in cases properly recommended?

No; he will not have the same authority as he has now. I will see that the matter is made public.

Territorial Regiments (Re-Inforcements)

asked the Undersecretary of State for War whether he will consider the position of Territorial regiments which require reinforcements but are at present unable to obtain them owing to the fact that recruits are sent to newly-formed units; whether he is aware that this causes unnecessary waste of money by the fact that the officers of the older regiments are left with insufficient men while still receiving full pay; and whether he will provide that new units shall not be formed until the older units have been adequately replenished?

I dealt with this matter in debate last night. Perhaps my hon. Friend will be good enough to refer to what I then said. Within the necessarily brief limits of an answer, I could not make the matter as clear as I hope I was successful in doing yesterday.

Defence of the Realm Act

Compensation Claims

asked the Financial Secretary to the War Office whether the salary paid to surveyors appointed to deal with claims for compensation for disturbance of property for military requirements under the Defence of the Realm Act, and other claims of a like nature, is £150 a year; whether in such a salary is included travelling and other expenses; whether it has been possible to secure the services of capable men, to be trusted in the handling of the sums of money involved; and whether the delays in the payment of claims often due to men of small financial means have been caused by shortage and incapacity of staff owing to the small salary offered?

The sum of £150 a year is the normal salary in peace time of an assistant agent under a chief agent on War Department local estates. At the outbreak of war a number of experienced valuers made public spirited offers to assist the Department at this salary as a temporary arrangements. These terms have recently been revised, and the temporary assistant agents will now receive £200 or £250 a year according to their experience, chief agents receive salaries of from £300 to £600. The work of all these agents is supervised by valuers of great experience at the War Office, who are assisted by agricultural experts of the highest standing from other Departments and private estates and by partners in some of the best known firms of surveyors. The salary is exclusive of travelling expenses and allowances for journeys undertaken on the public service. The answer to the third portion of my hon. and gallant Friend's question is in the affirmative and to the concluding portion in the negative.

Questions

War Loan Conversion

asked the Chancellor of the Exchequer the amounts of 3½ per cent. War Loan, 1925–28, 2½ per cent. Consols, 2¾ per cent. annuities, and 2½ per cent. annuities that have been converted into 4½ per cent. War Loan, 1925–45, in accordance with the terms of the prospectus of the 21st June?

Wool Prices

asked the Chancellor of the Exchequer whether he is aware that well-washed English fleeces of the description known as Lincoln hogs of 36's quality advanced in price from 12½d. to 18d.–18½d. between 6th August, 1914, and 5th August, 1915; and if he proposes to tax the extra profits which farmers have made on their wool in consequence of this increase in prices due to the War?

If my hon. Friend will refer to Clause 21 of the Bill now before the House, he will see that a very substantial increase is proposed in the taxation of profits made by farmers.

Agricultural Engines

asked the Parliamentary Secretary to the Board of Agriculture whether his attention has been called to the question of enforcing the law as to three men being required to attend agricultural engines on the high road; and whether, in view of the shortage of labour in the country, he will take steps to get the law altered in this respect?

No, Sir; no representations have reached the Department as to any practical difficulty having arisen in complying with the statutory requirements which the hon. Member has in mind. Any question of altering the law in the matter would be, of course, for the Local Government Board to consider.

Agricultural Model Farm, Ballyhaise, County Cavan

asked the Vice-President of the Department of Agriculture (Ireland) what amount was expended in the purchase, fitting, and stocking of the agricultural model farm at Ballyhaise, county Cavan; what amount has been realised by the sale which took place on the 3rd instant, also the reasons which have led the Department to close this model farm; and why, if it is a measure of economy, the Department have recently taken another farm between the Santry and Malahide Roads, near Dublin?

The amount expended since it was bought in 1904 in the purchase, fitting, and stocking of the Ballyhaise Agricultural Station was approximately £30,000. The recent sale of portion of the stock and implements is expected to realise £1,300, and some outlying portions of the farm suitable for small holdings are now being sold by public auction. As intimated in my reply to the hon. Member for East Limerick on the 4th instant, the Department have been compelled by financial stringency to suspend for the present the educational work at Ballyhaise, but it must not be assumed that that work may not be resumed should circumstances permit. The Department have not taken any farm in County Dublin as stated in the question, but acquired twelve months ago under the Development Act a small portion of land in the district referred to for the purposes of a veterinary research laboratory.

Can the right hon. Gentleman say what it is proposed to do with the unsold portions at Ballyhaise?

They are selling what they are likely to find a market for, and holding the rest over.

School Attendance (Pewsey)

asked the President of the Board of Education whether his attention has been called to a summons at Pewsey in the case of Emily Stone, whose husband is serving in the Army abroad, and who was summoned for not sending her boy of twelve years regularly to school instead of employing him to assist her with milking, etc., and to the decision of the bench that this boy must be sent regularly to school; and whether, in view of the representations made to the local authorities by his Department as to employment of children in agriculture during the War, he proposes to take any action in the matter?

My right hon. Friend's attention has not been called to the case. He is bound to assume that both the local education authority and the magistrates have full knowledge of the local circumstances and have given due weight to them. The facts, as stated in the question, do not appear to warrant any action on the part of the Board.

Special Constables

asked the Secretary of State for the Home Department if he is aware that information was given to the police authorities at Scotland Yard some ten days ago regarding suspicious circumstances relating to a person who claimed to be a special constable; if so, will he state if the police made inquiries; and, if so, when those inquiries were made; if the result of those inquiries suggested that the person in question was desirable as a special constable or otherwise; if otherwise, will he state why the person in question is not desirable as a member of the Special Constabulary; and what steps have been taken in regard to him, and when?

I am obliged to the hon. Member, who when he previously called attention to this case gave no details, for the trouble he has since taken to place further information before the police. Inquiries were at once made, and as it was found that this person was not possessed of the necessary qualifications for being a special constable, the Commissioner of Police directed, on the 9th instant, that he be asked to resign his office.

Emigration Regulations

asked the Home Secretary what measures have been taken to regulate the emigration of British subjects of military age?

The Government has decided that during the continuance of the War British subjects of military age who have occasion to desire to leave the United Kingdom must first provide themselves with special permission to do so, and this permission will not be given without good cause. An Order in Council is being obtained and other machinery devised to carry this policy into effect.

It would be difficult for persons in distant parts to apply to London, but that matter has been thought of and provided for, and it is intended that there should be applications in localities in cases where it is called for.

Zeppelin Raid (Arrested Suspects)

asked the Home Secretary whether, in the case of the two men arrested on suspicion in connection with the recent Zeppelin raid, one of them was still in custody on 22nd October; has this person since been released; if so, upon what date; and was he an alien enemy or a naturalised British subject?

The answer to the first and second points are in the affirmative; to the third point, 29th October; and to the last point, a registered alien of Swiss birth.

Aliens

asked the Home Secretary whether he is aware that the manager of a hotel in Northumberland Avenue, a large part of which is occupied by the Ministry of Munitions, is a man called Flukinger, who passes by the name of Fredericks and professes to be of Swiss nationality; whether he is aware that persons acquainted with Flukinger regard his loyalty as open to grave suspicion; and if he will take measures to ascertain what is Flukinger's real nationality and whether the suspicion referred to is justified?

I have made inquiries in this matter, and am informed by the Commissioner of Police that the Swiss nationality of the person in question is vouched for by the Swiss Legation, and that there is no justification for the suspicion referred to.

asked the Home Secretary why Frederick Moss, an unnaturalised German Jew, is permitted to remain at liberty at Braintree; and will he have him interned or sent home, seeing that he recently beat a British schoolboy of fifteen years of age with a thick hedge stake, inflicting a wound over the boy's right eye which will mark him for life, his defence being that some schoolboys had called out, "We will kill the German spy"?

Moss, who is sixty-three years of age, was exempted from repatriation on the recommendation of the Advisory Committee, as he had resided in this country for forty years, was married to a British wife, and had six British-born children. In view of the incident to which my hon. Friend refers, I have thought it right for the case to be reconsidered.

asked if alien enemies resident in neutral countries are permitted to run steamship services to United Kingdom ports; and, if so, is it intended to continue this privilege?

Speaking generally, the answer to the hon. Member's question is in the negative. It is, however, possible that persons of enemy origin domiciled in neutral countries may in some cases have an interest in neutral steamers trading to this country.

Change of Name (a. Markham)

84. The following question stood in the name of Sir A. MARKHAM: To ask the Secretary of State for the Home Depart- ment whether he is aware that a Jew of German origin by deed poll, some weeks after the commencement of the War, changed his name from Adolf Schultz to A. Markham, and has for some months continued to export coal to Holland under the name of A. Markham and Company, from offices situated at 165, Fenchurch Street, E. C.; whether he is aware that when applications for licences to export coal to Holland were made by this firm to the Exports Committee a member of the Committee was of the opinion that these licences were for the account of A. Markham, colliery owner, of 60, Fenchurch Street, E.C., where an export business in coal is carried on; will he say whether ho has any powers to prohibit naturalised Germans taking British names during the War; and, if not, will he obtain powers from the House to enable him to do so and to make these powers retrospective?

On behalf of my hon. Friend, and on account of his modesty, I beg to ask question No. 84.

I am informed on inquiry that Adolph Schultz, who changed his name to "A. Markham," is a natural-born British subject, and that the Exports Committee as a whole were under no misapprehension as to the identity of A. Markham and Company. It is singularly unfortunate, to say the least of it, that the firm should have adopted the name of a well-known colliery proprietor. I have to-day received a letter of explanation from the firm which I shall be glad to show my hon. Friend, if he cares to see it. In the meantime, he must remember that his name is a famous one. For example, a well-known children's book called "Little Arthur's History" was written by a lady who assumed the name of "Markham" for the purpose.

Does my right hon. Friend seriously think that any person ought to have the right to change his name any month he thinks fit to do so? Will he recommend that this firm take the name of John Simon?

I am afraid that that name would not command the same authority in the coal world. I would remind my hon. Friend that if the name were assumed in order to mislead, the law provides a remedy. It must be remembered that this firm is not an alien firm; the man in question is a natural-born British subject. During the War we have already a regu- lation that aliens cannot assume other names save under certain conditions.

I should have to have notice of that. I am assured that he is a natural-born British subject.

If the right hon. Gentleman finds that he is of hostile origin or association, will he have him interned under his own Order?

Foreign Manufactured Goods

asked the President of the Board of Trade if he will consider the desirability of publishing a list of the actual articles the public are buying at the present time which are of foreign manufacture, with a view that the people should refrain from buying them, and thus further diminish the amount of gold going abroad?

I can only refer the hon. Member to the reply which I gave to a similar question asked by the hon. Member for Wigan on 2nd November.

Cotton Exports to Turkey

asked the President of the Board of Trade if he will state if the official figures indicate that 260,500 yards of cotton goods were exported from this country to Turkey during the month of October last; and, if so, will he explain why such exports were permitted and say if such exports are to be allowed to continue?

The cotton piece goods and other commodities shown in the Monthly Accounts as exported to Turkey were in fact consigned to ports in territories formerly Turkish but now in the occupation of other Powers. Pending a final adjustment of the new boundaries of the Turkish Empire consequent upon the Balkan wars, it was decided that for statistical purposes exports to ports and places in the territory formerly Turkish but now occupied by other Powers should continue to be recorded as exports to Turkey. An explanatory note to this effect will be inserted in the Monthly Accounts in future.

London Emery Works Company

asked the President of the Board of Trade whether he is aware that the London Emery Works Company, Limited, is controlled by a German named Seligmann, who holds all the shares except one, who since the War changed his name by deed poll to E. Selwyn; whether he is aware that this firm is an off-shoot of the German firm Vereignite Schmirgel Fabrik, at Hainholz, near Hanover, of which E. Selwyn, late Seligmann, is the sole director and controller; whether, seeing the London Emery Works Company, Limited, was registered as a British company after the War, and that they have received numerous Government orders while purely British companies in Sheffield doing a similar business have been short of Government orders, he has communicated to the Government Departments the fact that this a German firm, the accumulated profits of which will at the end of the War go to the German parent company?

The London Emery Works Company, Limited, is controlled by a naturalised British subject of German origin, in whose name all the shares except two are registered, and who has changed his name of E. Seligmann to E. Selwyn since the War. The shares are held in trust for an enemy, and the business is a branch of the German company referred to in my hon. Friend's question. I have no definite knowledge as to the constitution of the German company, but my information is to the effect that it does not belong to Mr. Selwyn. I have appointed a supervisor of the business carried on here and any profits which in the ordinary course would have been sent to Germany will now be payable to the Public Trustee as custodian.

Will not all these profits go to Germany after the War? Is my right hon. Friend aware that there is a very strong feeling in Sheffield at British firms not having fair play?

I cannot say what will happen after the War, but that will certainly be one of the points to be considered in fixing the terms of peace.

Did not the Home Secretary say just now that names could not be changed since the War started?

I understand that the Regulation with regard to change of names was not in operation at the beginning of the War, and I am informed that Mr. Seligmann changed his name before the Regulation came into force.

British Abrasive Wheel Company (Erich Gerbel)

asked the President of the Board of Trade if he will say whether Erich Gerbel is still the manager of the British Abrasive Wheel Company, Limited; whether this gentleman, who was a director of this company prior to the War, is an unnaturalised German; and will he say whether he informed the Munitions Department before this firm was taken over as a controlled establishment that the management was carried on by an unnaturalised German?

The returns filed by the British Abrasive Wheel Company, Limited, show that before the War there were seven directors of the company, of whom Mr. Erich Gerbel Strover was one, but that he has now ceased to be a director. I have no information as to the nationality of this gentleman, or whether he is acting as the manager of the company, but I will have inquiries made. No information was given by me to the Ministry of Munitions with regard to the management of the company.

Iron Ore Trade

asked the President of the Board of Trade whether a considerable part of the foreign iron ore trade of this country is still in the hands of German firms; whether the firms of F. Dupré and Company, 27, St. Mary Axe, E.G., F. Haeberlin, 5, Whittington Avenue, E.C., and K. Ettlinger and Company, Finsbury Court, Finsbury Pavement, E.C., are carrying on their usual business from London, and, if so, why is this permitted; and whether he is aware that K. Ettlinger and Company is an offshoot of Messrs. Beer, Sondheimer, and Company, of Frankfort-on-Main, who were concerned in the recent case of Merton and Company, heard by the President of the Admiralty Division, relating to a cargo of zinc ore intended for Germany?

I understand that the firms mentioned by the hon. Baronet are engaged in the iron-ore trade. Firms established in this country are not prohibited from trading whatever the nationality of the members may be or whatever their relations may have been with enemy firms before the War. They are, of course, not permitted to have commercial intercourse with firms in enemy countries.

Regimental Drafts

asked the Under-Secretary of State for War whether he is aware of the dissatisfaction caused in the New Armies in France by sending out to them officers and drafts belonging to other counties than that of the regiment receiving the draft when officers and men of their own regiment are trained and available at home and anxious to join their friends; and will he take steps to remove this grievance?

I quite sympathise with the point raised by my hon. and galiant Friend. When drafts are available of the regiments requiring them they would naturally be sent, but it is frequently the case that drafts of the regiments are not available, and in that case recourse has to be had to the drafts available in other regiments. This arises from the unequal incidence of casualties as between different units. I would refer my hon and gallant Friend also to the answer I gave to the hon. Member for Devonport on the 28th October.

Will the right hon. Gentleman make inquiries as to why drafts belonging to the 8th North Staffordshires were not sent to them, and whether they were available in this country?

Army Service Corps

asked whether, with a view to the more harmonious co-operation between the regiments in the trenches and the Army Service Corps, any steps can be taken to pass into the commissioned and non-commissioned ranks of the Army Service Corps officers and non-commissioned officers who have served, but who are no longer perfectly fit to serve, in the trenches, and at the same time to pass fit officers from the Army Service Corps into the Line?

My information is that the relations between the Army Service Corps and the rest of the Army are excellent, and I should be sorry to know that my hon. and gallant Friend has any information to the contrary. Under certain circumstances exchanges are already permissible, and any individual case submitted will be judged on its merits; but if my hon. and gallant Friend is rightly taken as suggesting any wholesale arrangements of this nature, I can only say that I fear this would be impracticable. It would undoubtedly still further complicate the already difficult question of promotion in regard to which various Members of the House make representations to me from time to time.

Pom-Poms for Trench Fire

asked whether there is any sufficient reason why pom-poms should not be used in the trenches, particularly with a view to batter down enemy's loopholes and machine-gun emplacements?

If my hon. and gallant Friend raises the technical point whether pom-poms cannot be used in the trenches, my answer is that I am advised that this is possible. I should be obliged if he would not press this question further in public.

Ammunition (United States)

asked whether-ammunition manufactured in the United States and recently supplied to the troops at the front has been found defective as a result of tests?

I assume my hon. Friend is referring to small-arm ammunition, and on that assumption I would refer him to the answer given by my hon. Friend the Financial Secretary on the 19th October to the hon. Member for the Mansfield Division.

But since that answer was given is it not the fact that defective American ammunition has been supplied to the field guns?

Soldiers' Leave

asked the Undersecretary of State for War whether soldiers returning to the West of Ireland after fifteen months' service at the front have only the same time leave allotted to them as those returning to their homes in London; and, if so, whether, seeing that the leave time of the former will in many cases be almost exhausted when they reach their homes, owing to the length of the journey, delays of trains and boats, and from other causes, he will have this grievance redressed by having additional days of leave granted to Irish soldiers returning from the War?

In view of the numerous representations on this subject from hon. Gentleman who sit for Scottish as well as Irish constituencies, I have caused inquiries to be made of the Field-Marshal Commanding-in-Chief as to whether leave cannot with advantage be extended in some cases, if this is not already being done, for soldiers who have a long distance to travel.

Territorial Regiments (India)

asked the Under-Secretary of State for War whether he can inform the House if the men serving in Territorial regiments in India whose time expires on the 1st April next are to be permitted to return?

The case of men serving in Territorial regiments in India, whose time may expire before the conclusion of the War, is in no sense peculiar. They will be dealt with on the same conditions as other Territorial soldiers. In an answer I gave on the 9th November to the hon. Member for the New Forest Division I stated what these conditions were. I will send the Noble Lord a copy of the Army Orders which govern the matter.

Troops at Home (Winter Quarters)

asked the Under-Secretary of State for War whether any troops are still under canvas in this country; and, if so, can he say when the War Office propose to move them into winter quarters?

Yes, Sir; but where this is the case it is with the concurrence of the medical authorities, and the transfer to quarters or billets will be made shortly.

Land Valuation Department

asked the Secretary to the Treasury whether the Board of Inland Revenue are offering posts as surveyors of taxes, with salaries running up to £500 a year, to the discharged officials of their Valuation Department, while the surveyors appointed by the War Office to deal with compensation for disturbance of property for military requirements and claims under the Defence of the Realm Act all over the United Kingdom, involving the handling of large sums of money, are being paid at the rate of £150 a year; and whether this difference in salary represents the comparative importance of the work required to be done?

Applications are being received from members of various Departments of the public service (including the Valuation Branch of the Inland Revenue) in connection with future vacancies which may arise in the Tax Surveying Branch if the House of Commons sanctions the increased taxation contemplated by the Finance Bill. The figure of £500 mentioned by my hon. Friend is the maximum of the scale allotted to second-class surveyors of taxes, namely, £350 to £500, and it is not anticipated that posts of this character can be filled (save possibly in a few very exceptional cases) otherwise than by the promotion of trained tax surveyors of the third class.

asked the Secretary to the Treasury the number of non-military age men recently dismissed from the Land Valuation Department who have been engaged for other Government work; and what further steps are being taken to utilise the services of the remainder of these men for any necessary Government situations suitable for them that offers?

I may refer my hon. Friend to the reply given by my right hon. Friend the Chancellor of the Exchequer on the 2nd instant to a question by my hon. Friend the Member for Hertford. I am causing a copy of that reply to be sent to him.

National Insurance Act

asked the Comptroller of the Household, as representing the National Health Insurance Commissioners, whether, having regard to the official circular of the Insurance Commissioners (201 I. C), issued in September, 1914, to the effect that, owing to the War and to the additional duties now undertaken by the doctors, no substantial revision of the Regulations would be made, and having regard, further, to Sir Robert Morant's letter of 17th March, 1915, addressed to the secretary of the British Medical Association, confirming the above-mentioned statement, and adding that no changes of any kind have been under consideration for adoption during the present year, he can offer any explanation of the action of the Commissioners in having drafted new Regulations, to come into operation on 1st January, 1916, which materially modify the agreement entered into by medical practitioners, who are now required to accept the new conditions or to withdraw from the panel?

The reference in the documents cited by the hon. Member to modifications in the agreements between medical practitioners or chemists and insurance committees related only to the question of modifications during the course of the year 1915, under special powers taken for the purpose by Regulations introduced at the end of 1914. Those special powers have not, in fact, been used. A revision under the ordinary powers of the Regulations as from 1st January, 1916, was necessitated by the new terms of service for chemists. The consequential changes affecting doctors were, in view of the special circumstances of the War, carefully devised so as to secure that the doctors' financial position should be left untouched in all respects, and were fully discussed beforehand with representatives of the medical profession, and recommended by them to the profession for acceptance.

Were these the only alterations introduced into the Regulations in 1916?

There were two minor Regulations in reference to rubber stamps, and one other point, which can be exactly connected with the financial terms of the doctors, but they also were not objected to. They were discussed beforehand with the medical profession.

Does the reference to the alterations to the doctor's terms confine them to England and Wales; does it include Scotland?

Emigration (Press Messages)

asked the Postmaster General why a telegraphic Press message relative to scenes in Londonderry City on the arrival of intending emigrants from county Donegal, on Thursday, the 4th of November, handed in at the Belfast General Post Office about 8 o'clock p.m. on that day, addressed to several English and Scottish newspapers, was not delivered until the following day, although similar messages sent direct from Londonderry were dispatched on the evening of the 4th in time for publication in Dublin newspapers on the morning of the 5th?

My attention had not previously been drawn to this matter, but I am making inquiry, and will communicate with the hon. Member.

Sale of Coal (Dublin)

asked the Chief Secretary for Ireland whether he is aware that 10,000 bags of coal were sold to the poor of Dublin last winter at a cost of 1s. per bag of 16 stone delivered to the users, the deliveries being limited to families with incomes of 20s. weekly and under, the cost of the difference in price being paid from the National Relief Fund; whether the result of the experiment was justified by experience; and, if so, whether, having regard to the increased cost of coal and the other necessaries of life, it is proposed to provide similar facilities during the present season?

The statements in the first part of the question are generally correct, except that the bags were 10 stone and not 16. The distribution was of undoubted benefit to the poor of Dublin, but certain objections were raised to the principle of it, which will require very careful consideration before it can be repeated.

British Ships (Chartering)

asked the Secretary of State for Foreign Affairs whether, seeing by a recent Order in Council a vessel under a neutral flag in which an enemy has any interest is liable to seizure in this country, he will say whether a German domiciled in a neutral country can become the chartered owner of British vessels, receive the privileges and protection of the British flag, trade with the United Kingdom ports, and escape the Excess Profits Tax; and will he say what is the position of a German resident in neutral countries under the Proclamations that have been issued touching this matter?

I have been asked to reply to this question. It would be possible for an enemy subject domiciled in a neutral country to charter a British ship. The ship would remain subject to British law and British control. The Government have full information as to the British ships which are under charter to foreigners, and the whole matter is being carefully watched.

Soldiers in Hospital (Deductions from Pay)

asked the Undersecretary of State for War whether he is aware that men on active service at Aden who have been compelled to go to hospital from the effects of the sun have 4¼d. per day deducted from pay while in hospital; and whether, in view of the fact that many of these men are Territorials who gave up good employment to volunteer for foreign service and that they have to keep up their contribution at a reduced rate to national insurance, he will provide that hospital stoppage of pay shall not be enforced under the circumstances mentioned?

I have no special information as to the conditions at present prevailing at Aden, but have made inquiry of the Government of India and will consider the matter further on receipt of their reply.

Loss of Hospital Ship "Anglia."

Can the right hon. Gentleman inform the House as to the news of the total loss of the hospital ship "Anglia," with 400 of our wounded on board, in the English Channel?

I am sorry I have received no information about this that I can communicate to the House. Perhaps later in the day, if I have any definite information, I will communicate it.

Bombay Presidency (Sale of Intoxicating Liquor)

asked the Secretary of State for India whether he will cause inquiry to be made as to the reasons for not appointing Excise advisory committees in the Kaira district of the Bombay Presidency; and whether, before deciding to open twenty-five additional shops for the sale of intoxicating liquor in this district, steps were taken to consult local opinion, as recommended in paragraph 6 of the dispatch of the Secretary of State for India, dated 29th May, 1914?

Income Tax (Bankrupt Estates)

asked the Chancellor of the Exchequer whether the Accountant of Court in Scotland has repeatedly held in dealing with trustees on bankrupt estates, and particularly in a letter dated 23rd February, 1912, to the solicitor of Inland Revenue in Edinburgh, that Income Tax on deposit receipts held on behalf of bankrupt estates was not properly exigible from these estates; whether he is aware that this conflict of opinion between his Department and the Accountant of Court gives rise to uncertainty on the part of trustees in bankruptcy apart from the question of surcharging them; and will he say whether Income Tax is in future to be exacted from deposit receipts on these estates, so that trustees in bankruptcy may know exactly how they stand with his Department on this point?

I am informed that the letter referred to by my hon. Friend is the only communication on this subject which the Inland Revenue have received from the Accountant of Court. In a reply to that letter the liability to Income Tax was explained and has not since been questioned.

Land Purchase (Ireland)

asked the Chief Secretary for Ireland whether he is aware that, out of 10,985 bonâ-fide claimants for reinstatement under the Evicted Tenants' Clauses of the Act of 1903, 7,253 are. still unprovided for, together with 2,236 whose-applications were not lodged before the 1st May, 1907, as specified by the Act; and, seeing that the Congested Districts Board, the Estates Commissioners, and the Department hold 64,000 acres of arable land, mostly under cattle, whether for the benefit of the country he will take steps to have these lands taken over for immediate cultivation, and so give employment to these applicants, who are skilled agriculturists, and increase our food production as well as keep at home some of the farming classes?

The Estates Commissioners inform me that they have received 13,387 applications from persons seeking reinstatement as evicted tenants or the representatives of evicted tenants. In the exercise of the discretion vested in the Commissioners, 7,362 of these applications-have been refused for one or other of the various reasons detailed in the Commissioners' Special Report on Evicted Tenants on the 11th June, 1907 (Command Paper 3570). Of the remaining 6,025 cases, 3,451 evicted tenants or their representatives have been reinstated or provided with new holdings by the Commissioners; 230 cases are provisionally noted for consideration in the distribution of such intended land as the Commissioners may acquire; and 2,344 cases which were lodged subsequent to the date (1st May, 1907) specified in the Evicted Tenants Act have not been inquired into. The Commissioners consider that the 230 cases which have been provisionally noted; for consideration, and where new holdings have not yet been provided, includes all evicted tenants whose claims deserve consideration in the allotment of holdings. As regards the latter part of the question, I would refer the hon. Member to the concluding portion of my reply to the hon. Member for West Wicklow on the 29th September.

Is the right hon. Gentleman aware that the Committee appointed by this House to inquire into the nation's food supply have recommended that more land should be cultivated, and does he think that it is in the best interests of the nation that a Government Department in Ireland should hold 64,000 acres of the best land—

Foot-and-Mouth Disease (Somerset)

asked the Parliamentary Secretary to the Board of Agriculture if he has any further information to give bearing on the outbreak of foot-and-mouth disease in Somerset, and the result of the treatment being applied?

Since my reply to the hon. Member of the 9th instant, there have been five additional outbreaks confirmed, bringing the total up to thirty-nine. Until yesterday the further spread of disease had been confined to the district immediately to the east of the city of Bath along the banks of the Avon. The latest outbreak is, however, I regret to say, in an entirely new district of Somersetshire, some four miles south-east of Glastonbury, and its occurrence has necessitated the imposition of restrictions over a wider area. Apart from this outbreak, the position in and around Bath is becoming more satisfactory, and the outbreak is being got under; and there is no reason at present to anticipate any very serious spread of the disease in the neighbourhood of Bristol.

National Insurance Act

Tuberculosis Cases (Kilmarnock)

asked the Comptroller of the Household, as representing the National Health Insurance Commissioners, whether his attention has been drawn to a complaint by the insurance committee at Kilmarnock, stating that the cost to that committee of certain tuberculosis cases had averaged over £63 each; whether the agreements in terms of which payments on this scale have been made in various parts of the country resulted from arrangements arrived at without the consent of insurance committees; whether the payment of £63 per case referred to represents the figures for the year 1913, and thus exemplifies the working of the Act prior to the outbreak of war; whether the corresponding figure for Kilmarnock in respect of the year 1914 is now available; whether payments on this scale are to be regarded as of common occurrence throughout the country or as due to altogether exceptional circumstances prevailing in Kilmarnock and district; and, if so, whether the ordinary vital statistics applicable to the district afford any explanation of these circumstances?

Perhaps the hon. Member will repeat this question tomorrow. May I add that where detailed questions of this character dealing with local circumstances in Scotland, Ireland, or Wales are asked at one or two days' notice, it is impossible to afford hon. Members the desired information without incurring the expense of telegraphing the question verbatim to the Scottish, Irish, or Welsh Commissioners, and receiving a reply from them either by telegram or express letter. I am sure, therefore, that hon. Members would prefer to save expense by giving somewhat longer notice of their questions.

Is it not the case that I gave notice of this question fully a week ago, for the express purpose of meeting that difficulty? I shall be delighted to ask the question to-morrow, or any other day the hon. Gentleman desires.

New Member Sworn

The Right Honourable George Cave, K.C., His Majesty's Solicitor-General, for the County of Surrey (Kingston Division).

Orders of the Day

CONSOLIDATED FUND (APPROPRIATION—No. 2) BILL

Considered in Committee, and reported without Amendment; to be read the third time To-morrow.

Finance (No. 3) Bill,

Considered in Committee.—[PROGRESS, 9th November.]

[Mr. WHITLEY in the Chair.]

NEW CLAUSE.—(Income Tax on Securities Representing a Bank's Subscription to War Loan.)

Any bank carrying on a bonâ fide banking business in the United Kingdom shall be relieved, by repayment or otherwise, from Income Tax under Schedule C in respect of the interest on any securities which the bank prove to the satisfaction of the Special Commissioners to represent subscriptions by the bank to any Government loan issued for the purposes of the present War either before or after the passing of this Act, and the bank shall include the amount of any such interest in the computation of the balance of its profits and gains for the purpose of assessment under the first case of Schedule D.

Clause brought up, and read the first time.

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

This Clause deals with the Income Tax payable by banks. There was, as the Committee will remember, a Clause added to the Bill to which considerable objection was taken, and I then undertook to bring up a new Clause as an agreed Clause in order to meet the objection which had been raised. The point of difficulty was the following: in consequence of the banks subscribing very largely to the War Loan, the interest which they receive from their investments, increased as they have been so largely by the purchase of this War Loan, exceeds the net profits. Income Tax on interest on the War Loan is deducted at the source. The consequence is that the banks will be called upon to pay by deduction at the source Income Tax on a larger amount than their actual realised profits. This difficulty was raised at the time when the banks were about to make very large applications for the War Loan, and I undertook to consider the question in order to relieve the banks from any charge that might be unfair. The present Clause carries out the obligation which I undertook.

As I raised this question first of all in the House, I am very much indebted to the right hon. Gentleman for putting the matter right but, to tell the honest truth, unless he had informed the Committee what the Clause meant, I am perfectly certain the Committee could not have understood it. Why a Clause of this sort with a perfectly simple intention should be put in such an obscure manner I cannot see. What does it mean? It means that where interest on investments in banking business which is charged at the source is larger than the profits of the bank the repayment of the excess sum for Income Tax shall be made. It says by "repayment or otherwise," this shall happen, and then it goes on to say that "the bank shall include the amount of any such interest in the computation of the balance of its profits and gains for the purpose of assessment under the first case of Schedule D." What does that mean? Can the right hon. Gentleman tell me what it means? It is an astounding Clause, and I intended to ask for an explanation in order that the House should clearly understand it. I know the Chancellor of the Exchequer has given an explanation, but I still protest against the astounding way this Clause is drafted.

I was also astounded to see this Clause. I listened to the explanation given by the Chancellor of the Exchequer, which failed to enlighten me, and I confess that I was no more enlightened by the remarks made by the hon. Baronet opposite. I understand the Clause as meaning that owing to the 4arge subscription by the banks in War Loan, it is intended to give those banks a preference under which they will get relief of the Income Tax if that tax is assessed on securities held by the bank. I am not yet convinced of the justice of that proposal. Perhaps the right hon. Gentleman is prepared to develop his argument. I was quite unable to exactly understand the interpretation which he placed on this. Clause. I fail to see why there should be any special terms given to the banks. Why should this concession be given simply because the proceeds of the interest on securities have been used for further subscriptions to the new War Loan. I fail to see why we should offer special terms to banks any more than to any other individuals. If other people are in the same position as to their securities with regard to the War Loan, is it argued that they should not get this concession? I quite fail to understand why this concession should be made to bankers. It is a concession equal to 1 per cent., and the interest on the loan is 4½ per cent., and so the banks would get 5½ per cent., whereas the ordinary individual is only getting 4½ per cent. I appeal to the right hon. Gentleman to explain to the House exactly what his proposal means.

I do not see what justification there is for this proposal. The right hon. Gentleman says it is made because the banks are large subscribers to the War Loan, but I think we are entitled to know if there is any other justification for making such a concession.

I will give the hon. Gentleman an example. Assume that the bank has subscribed £5,000,000 to the War Loan. The interest after the Income Tax has been deducted would be £225,000; therefore the net profit to the bank would be £200,000. That would be paying Income Tax on £25,000 more than they have earned. The bank has to pay current account interest on the £5,000,000, and it would be a monstrous thing if this House did not make this concession. We passed last year a relief to insurance companies, and allowed them to charge their working expenses as against the interest on their investments. I am sure my hon. Friend does not wish that bankers should be mulcted by reason of the largeness of their subscription. They subscribe at 4½ per cent. money on which they have to pay interest The whole difficulty arises because the banks have to pay current and deposit interest on the money entrusted to them, which they lend to the Government, and if you deduct the whole of the Income Tax from that income, and what they have to pay, it would bring the figure down to a less amount than that for which they are being mulcted under the Income Tax. I know a special Act was passed covering the case of the Yorkshire Penny Bank.

I do not think the speech of the hon. Member for West Aberdeen-shire has commended this Clause to the Committee. He is usually a very clear advocate, but the question put by my hon. Friend the Member for Coventry (Mr. D. Mason) was why bankers should be specially treated, and the hon. Gentleman did not take the least trouble to answer that argument. The hon. Gentleman mentioned insurance companies, but I wish to ask the Chancellor of the Exchequer whether he has a good reason for not putting this Clause into more general terms. Probably this year, so far as this particular Finance Bill is concerned, there are no insurance companies that really come within the four corners of this Clause; but there may be in future years, and surely any institution which is in a similar position to the banks should have this proposal applied to them as well.

My hon. Friend agrees with my argument. What we desire is that this proposal should not be quoted against us as a precedent in the future.

I would like the Chancellor of the Exchequer to state clearly if other institutions similarly placed to banks will be similarly treated?

This Clause is proposed in order to meet the special case of the banks which have made specially large applications for War Loan, and it has nothing to do with the general question affecting insurance companies and other companies, with which, like my hon. Friend, I am familiar. This will certainly not be taken as evidence against them.

4.0 P.M.

May I point out that the Committee apparently has not realised that the banks are in a very peculiar position, quite different from insurance companies? The banks are not investing their own money; if they were, there would be no-reason for this Clause. They are investing their deposits, and they have to pay interest on those deposits. Without this Clause, the result, therefore, would be either that they would not invest in the War Loan or that they would be charged Income Tax on a sum much larger than the profits they make. If the insurance companies had money with them on deposit and invested that money in War Loan, then they would be in the same position as the banks, but until they are in that position they have no claim. If they should ever be in that position, then no doubt they would have a similar claim. I hope that I have made the matter clear.

The hon. Member for West Aberdeenshire (Mr. J. M. Henderson) explained that this is money which is on deposit with the banks, and that, therefore, they have to pay the depositors a certain rate of interest. I would point out that the rate of interest they pay to their depositors is far short of the rate of interest which they receive on War Loan, and I fail to see why they should not pay Income Tax on the difference.

It has never been stated so yet, and I do not think that the Clause states it. It seems to me from this Clause that they are exempt—

No. Income Tax on their investments is deducted at the source. If the income from their investments is greater than their profits, it follows that they pay Income Tax on an amount greater than their profits. We propose that they should not do so where the amount in excess of their profits is due to the War Loan.

I can quite understand the case for this Clause from the point of view of money, but I should like to ask whether the banks have not converted a large amount of Consols into War Loan, whether that money is not their own money, and whether some distinction should not be made between the depositors' money and their own money?

So far as the War Loan belongs to the bank, then the income which they get from the War Loan will not be in excess of their profits, because the interest which they get on the War Loan will be part of their total revenue; but so far as the War Loan which they hold is not bought out of their own money, but is bought out of borrowed money on which they have to pay interest, then it may well happen that the gross income they receive from the War Loan is greater than their profits.

Question put, and agreed to.

Clause read a second time, and added to the Bill.

NEW CLAUSE.—(Allowance and Repayment of Duty in Respect of Motor Spirit Used by Veterinary Surgeons.)

For the purpose of giving veterinary surgeons an allowance or repayment of half the amount of Motor Spirit Duty, whether payable under Section eighty-four of the Finance (1909–10) Act, 1910, or this Act, Part I. of the Fifth Schedule to the Finance (1909–10) Act, 1910, shall be read as if the following paragraph were added thereto, namely:—

"(5) to a motor car kept by a registered veterinary surgeon whilst it is being used by him for the purposes of his profession."

Clause brought up, and read the first time.

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

This Clause relates to the allowance which it was promised in Committee should be given to veterinary surgeons in. respect of motor spirit used by them. We propose to extend to them the same allowance as is given the doctors.

Question put, and agreed to.

Clause read a second time, and added to the Bill.

NEW CLAUSE.—(Provisions with Respect to the Charge of Income Tax on Non-Residents.)

(1) Section forty-one of the Income Tax Act, 1842 (which relates to the charge of' Income Tax in special cases), shall, so far as it relates to the taxation of non-residents, be extended—

( a ) 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

( b ) so as to make non-resident persons so chargeable, although the branch, factor, agent, receiver, or manager may not have the receipt of the profits or gains of the non-resident.

(2) A non-resident person shall be chargeable in respect of any profits or gains arising, whether directly or indirectly, through or from any branch, factorship, agency, receivership, or man- agement, and shall be so chargeable under Section forty-one of the Income Tax Act, 1842, as amended by this Section, in the name of the branch, factor, agent, receiver, or manager.

(3) Where a non-resident person carries on business with a resident person, and it appears to the Commissioners by whom the assessment is made that, owing to the close connection between the resident 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 nonresident produces to the resident either no profits or less than the ordinary profits which might be expected to arise from that business, the non-resident person shall 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.

(4) Where it appears to the Commissioners by whom the assessment is made or, on any objection or appeal to the General or Special Commissioners that the true amount of the profits or gains of any non-resident person chargeable in the name of a resident person with income tax cannot in any case be readily ascertained the Commissioners may, if they think fit, assess the non-resident person on a percentage of the turnover of the business done by the non-resident person through or with the resident person in whose name he is chargeable, and in such case Section fifty-three of the Income Tax Act, 1842, shall extend so as to require returns to be given of the business so done by the non-resident through or with the resident in the same manner as returns are to be given under that Section of the profits or gains to be charged.

(5) The amount of percentage shall in each case be determined, having regard to the nature of the business, by the Commissioners by whom the assessment on the percentage basis is made, subject, in the case of an assessment made by the additional Commissioners, to objection or appeal to the General or Special Commissioners.

If either the resident or non-resident person is dissatisfied with the percentage determined either in the first instance or on objection or appeal by the General or Special Commissioners he may, within twenty-one days of that determination, require the Commissioners to refer the question of the percentage to a Referee or Board of Referees to be appointed for the purpose by the Treasury, and the decision of the Referee or Board shall be final and conclusive.

Clause brought up, and read the first time.

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

This is a much more formidable Clause, and it is introduced with the object of charging Income Tax in certain cases in which we conceive that by an arrangement between residents and non-residents Income Tax is not paid in respect of income which we think may, in the true sense of the word, be said to be earned in this country. I have had a number of objections raised to the Clause, and I am prepared to meet the main objections which have been mentioned by including in the Clause certain Amendments when we get to the Committee stage of it. As originally introduced, our purpose was to charge Income Tax in cases of this kind. A foreign firm manufactures a certain article in this country and sells that same article to the consumer in this country. Nevertheless, by an ingenious arrangement of a parent company and subsidiary companies, all, in fact, owned by a foreign firm, no Income Tax is paid in respect of any of the profits made in regard to the manufacture or sale to the consumer of the article in question. That means that a whole trade can be absorbed in this country from start to finish by a foreign firm without one penny of the profits made in the trade being charged with Income Tax. I am sure that the Committee will agree that a case of that kind ought to be dealt with.

That is the case where A sells to B, who is non-resident, certain goods at cost price, and B then sells them back to this country, and the goods never leave the country.

That is the case where the goods are manufactured in this country and are sold in this country and never leave this country; but there is in respect of the whole process of the conversion of the raw material into the finished article and the sale of it to the consumer not one pennyworth of profit shown from start to finish for the purpose of the Income Tax returns, although the profits of the trade are enormous. That is one of the cases with which it is proposed to deal, and I am sure that I shall have the sympathy of the Committee. I am sure that the hon. Baronet opposite would desire to deal with that case. That is the type of case with which we want to deal. I will give a type of the case with which we do not want to deal. An Australian wool grower sends his wool to London, where it is sold in open market on the Wool Exchange to a French purchaser. We do not want to charge Income Tax in respect of any transaction in connection with that wool from start to finish, except upon the profits of the auctioneer or broker who sells it. Is it clear what we do not want to do? I have given the two types, and I think in the language which we have used and in the Amendments which we are going to introduce—

I will give them in a moment. I believe in the Clause as it stands, with the Amendments which we propose to introduce, that we have limited ourselves to excluding all cases of the type of the Australian wool grower.

If the wool is sold to a resident here, then the resident here, in dealing with the wool, will make profits, and he will come under the ordinary Income Tax laws. This Clause will not touch him. Does the hon. Gentleman mean, "If the resident here is really the Australian wool grower, that it is not sold to a resident here in a complete and bonâ-fide sale, and that he is really an agent "?

No, he will not be taxed, and there is no reason why he should be. I think, when I read the Clause with the Amendments, that it will be quite clear. We propose, in Sub-section (3), after the word "person" ["Where a non-resident person"], to insert the words "not being a British subject or a British Dominion or Colonial firm or company or branch thereof." And we propose at the end of the Clause to insert a new Sub-section as follows: "The fact that a non-resident person executes sales or carries out transactions with other nonresidents, in circumstances which would make him chargeable in pursuance of this Section in the name of a resident person, shall not of itself make him chargeable in respect of profits arising from those sales or transactions." Those words exclude the case of the agent or auctioneer who is simply acting in this country as the middleman between the Australian seller on the one hand and the French purchaser on the other. We exclude all those cases.

Agents or auctioneers, except agents' or auctioneers' profits. Where the transaction is not really one in which the profits in the true sense of the word are earned in this country, we do not propose to tax.

Might I ask the right hon. Gentleman if he has any copies of these rather long Amendments which he can furnish to members of the Committee?

This is only the Committee stage of the Bill, and it will come up again on the Report stage. It is not easy to hand round copies of the Amendments, but when we get to the Committee stage I will see what can be done. We are not even yet on the Committee stage of the Clause.

Is it not true that the moment the Second Reading is carried we proceed with the Committee stage, and we shall be asked to discuss Amendments of which we have now heard for the first time?

But can we not move to postpone the Committee stage until the end of the new Clauses?

When a Clause is brought up and read a second time it is usual to proceed at once with the discussion in Committee.

Would it be in order if the Chancellor of the Exchequer were to move, with regard to the Committee stage on this new Clause, that you report Progress, and ask leave to sit again? Then we could take the Committee at the end of the new Clauses.

I think it would be more convenient to take the Second Reading now, and I will move the Amendments when we come to them. We shall have plenty of time to consider and discuss them. I have now for the convenience of the Committee announced the nature of the Amendments which I intend to move, but I hope that those Amendments will not be made the subject of a Second Reading Debate. The purpose of the Clause is quite clear.

I think we ought to protest against the way in which we are being treated in regard to this Clause. [HON. MEMBERS: "No, no!"] I will try to make good my point. Here is perhaps one of the broadest Clauses which this House has ever been asked to consider. It extends the Income Tax laws which have been in operation so many years, and I do not hesitate to say it is the widest extension ever attempted to be given to any branch of legislation. How has it been brought before the House of Commons? In the first place, when the Resolutions on which the Clause is founded were moved, they were put down without a word from the Government, and it was only when the hon. Member for Dumfriesshire got up and gave expression to the astonishment that had entered the minds of many of us that an explanation, and, as I will try to show, a very insufficient explanation, was given by the Chancellor of the Exchequer.

I intended it to be. I will try to prove it; I do not think that my right hon. Friend should say it is not true when I am doing my best to state what is the truth. The speech of the right hon. Gentleman was based on two cases. He first gave us the case which he has again referred to to-day regarding the firms A and B, and then he gave us another case of firms in this country. I would point out to the Committee that that is not the right way to approach an important question of this kind. The principle which is at the root of it ought to be first grappled with. Here there is a clear principle at stake— the principle of taxing all foreign businesses in this country, and of giving powers of taxation in the widest sense. That principle ought to have been debated in this House in a broad way before the Clause was introduced. I do not want to take a narrow or technical objection. When my right hon. Friend stood up today and proposed the Clause, he used words which indicated that it was a very serious, and possibly contentious, Clause. But he has not said a word about the principle; he has simply given us once more the two illustrations to which I have referred. It is for the House to examine this vast change of procedure, and we can hardly be expected to do so merely on the basis of the two illustrations given.

The right hon. Gentleman made no attempt to defend the principle; neither did he refer to the wide and possibly destructive application which this Clause may have as regards the commerce of this country. What were the two illustrations my right hon. Friend gave? The first was that of the firm A, a German firm which, as he told us on a previous occasion, has, with German money, built a factory in this country, and is manufacturing certain articles from start to finish; then, by some ingenious plan, the articles are invoiced to the same house in Germany, and subsequently sold back to firm B in this country and distributed all over the land. Undoubtedly there does appear to be here an attempt to avoid the Income Tax, and that particular case in some fair and careful way might be dealt with. If the Clause before us were a direct businesslike attempt to deal with that particular case I should not think it necessary to oppose it. But even so, I think I shall be able to show to the House in a moment that we ought to proceed very cautiously in dealing with it. Look at what takes place under the, circumstances which the Chancellor of the Exchequer has described. In the first place, German money is invested over here; in the second place, land is bought, a factory is built, labour is employed, all sorts of people are engaged, and their salaries are subject to Income Tax, and subject to all the taxation which this country thinks it right to impose. Rates, too, are paid, and thus great benefit is done to this country even in the extreme case which the Chancellor of the Exchequer has cited. We may some day, when we have destroyed the facilities with this country offers to enterprises of this sort—we may be sorry some day for the hasty step we are taking this afternoon. Therefore I say in regard to the case of the firm A, even if the Clause were restricted to deal only with that particular case, I would not oppose it, although at the same time I hold we are bound to consider most carefully the steps we are taking, lest by too wide an application of it we may do more harm than good.

I will ask the Committee to believe that this Clause is not the simple thing that it is represented to be by the Chancellor of the Exchequer. It is a Clause of which we have had a very restricted explanation, but it is also a Clause of the widest possible import. What does it do? The Clause proposes in the widest way to tax the foreigner. Its principle is summed up in the words "the taxation of the foreigner." I admit that that is a fascinating subject. There may be those in this House who will say, "Why not tax the foreigner?" I always thought the Chancellor of the Exchequer was a stalwart opponent of crude experiments. I admit there is a great deal of fascination about the question of taxing the foreigner. Our whole revenue in times of peace was only £200,000,000 a year. Yet we are fortunate to have a vast trade amounting to ten or eleven hundred millions a year, and it does appear to people who do not think we ought, by taxing the import and export trade, to make the foreigner pay a little of the burden which presses so heavily upon us. Hence this crude idea of taxing the foreigner.

But anyone who thinks about it will see the importance of preserving this great stream of commerce, which is the most valuable asset the people of this country have. This country is a great open market to which everybody can bring commodities, out of which everyone in this country can make money. It is also a free market to which all foreigners can come and take away whatever they require, and the result is that we have built up industries like the cotton trade, industries founded on something we do not produce in this country. Owing to the freedom with which commodities can be brought here and sold here, we have built up this huge trade.

I really must interpose. This is not an occasion for a general discussion on taxation. The Clause has nothing to do with the taxation of imports. This Clause is limited to extending the present Income Tax to certain non-residents who carry on business in this country. There is no question of taxing imports.

If I have put the questions too widely I will try now to keep well within your ruling. I was possibly led astray because I feel rather strongly on this question. But I would venture to point out, with all respect, that there are no restrictions in the words used in the Clause as to its application. The object is to make non-resident persons chargeable to Income Tax in respect of any branch or manager or agent they may have in this country. The non-resident person means, of course, the foreigner, and the object of the Clause is to enable us, through his agent, to tax that non-resident person to any extent we like. Of course I admit the Clause is confined to Income Tax, and perhaps I put the case too widely. But as one of my hon. Friends near me mentions, it really is a tax on imports—it may work out as an Income Tax upon imports, because the Clause goes on to provide that it will make the nonresident person so chargeable, although the branch factor, agent, receiver or manager may not have the receipt of the profits or gains of the non-resident. I submit that we get no commodities brought into this country except through an agent. The Clause is not definite, and I would like to know what there is to prevent even a commercial traveller—an occasional visitor to this country—from being taxed.

There is no restriction in the Clause at all. If the right hon. Gentleman will turn to the subsequent proposals on the Paper he will see a proposal made by my hon. Friend the Member for East Islington, (Mr. Radford) which will enable him to-deal with the case to which he particularly referred. It is a Clause of only a few lines, but it would enable my right hon. Friend to do everything that is properly required. I hope I may have the attention of the right hon. Gentleman; it is very difficult to argue a matter like this while a conversation is being carried on between the only two Cabinet Ministers present. I am suggesting that the Clause to be proposed by the hon. Member for East Islington will give the Chancellor of the Exchequer all the powers he requires, and at the same time it is not drawn up in the sweeping way that the Clause now under discussion is. Under the Clause proposed by the right hon. Gentleman we can tax an agent to any extent we please by means of Income Tax; in other words, we can thus tax non-resident persons. Look at the structure of it. According to Subsection (3), if it is suspected there is a profit, the Income Tax Commissioners can fix any percentage they please, and under Sub-section (4) we do not impose the tax; it is left to the Income Tax Commissioners to fix the amount of the tax. Therefore we are asked in this Clause to allow a tax to be imposed on suspicion, and the amount of the tax so imposed is to be fixed by the Income Tax Commissioners. It follows from Sub-section (5) that no one buying goods in London or selling goods there will know exactly what impost may be put on. At the present time there are plenty of firms that come here to get goods in London which they can no longer obtain in Germany, and a very useful development of trade is taking place. I know of cases, however, in which even the threat of this legislation is causing such firms to think of going to some other country where they will be more fairly treated than under the proposals made in this Bill.

Take the business which has been referred to in connection with Australian wool. There is nothing to prevent the growers of Australian wool being taxed to any extent. They all have agents here; they are themselves non-resident, but as producers they may be taxed to any extent. Then again, take a Colonial business, such as that with which I am connected—the business in tea, coffee, or cocoa. This is a business in articles produced in a foreign country, although they are handled here. Foreigners have to come here to buy them and that is an actual advantage to us in this country. In the same way foreigners have to go to Bradford to buy their wool. If these foreigners find that the Income Tax Commissioners will have power to assume their profits and to tax them, it will put an end to that great commercial prosperity which this country has so long enjoyed. The Committee might think, especially having regard to your suggestion, Sir, that I was widening the matter too much, that I am exaggerating the evils and the dangers of the Clause. I would respectfully ask the Committee to look at the Clause on page 28. That would enable the Chancellor of the Exchequer to do everything he wants to do in the cases of his two illustrations. But this huge Clause, which enables him to tax, to any extent the Income Tax Commissioners please, any profit that is made out of the goods in this country, must have the most pernicious effect upon our trade. The Clause certainly ought to be very carefully examined by the Committee, and I would earnestly ask those who have just as much experience of these business matters as I have, whether the effects that will be produced by this taxation may not be most prejudicial to our commerce and do a great deal more harm than any amount of revenue that may be produced by the Clause.

The Chancellor of the Exchequer has very kindly told us what alterations he proposes to make in this Clause. I will not discuss those alterations now. I quite agree with him that the first instance he gave, which was practically an evasion of the Income Tax, ought to be met, and I should be prepared to support any Clause which would prevent English subjects evading the tax. But the Clause as it stands goes very much farther than that, and the Amendments suggested by the right hon. Gentleman do not touch what is, to my mind, the main point of the Bill. I will put my case as shortly as possible, and endeavour to state it by giving a few concrete examples. The Bill provides that where a man or a firm are agents for the sale of any foreign produce in England, acting as agents and receiving a commission, although they may prove to the Income Tax Commissioners that their commission is, we will say, £500 a year and they are prepared to pay Income Tax on that £500 a year, the Commissioners may put it on the turnover for the year, which may possibly amount to £100,000 a year. The Commissioners might say, "In our opinion, the ordinary profit on that turnover would be 10 per cent., and therefore your profits should not be £500 a year, but £10,000 a year. Now we are going to charge you 3s. 6d. per cent., or any larger sum, upon that £10,000. You are not injured, because you can get it back from your agent residing in some foreign country." That is undoubtedly a tax upon imports. What will the people residing abroad do? They will either say, "We are not going to have this indefinite Income Tax; it is at present 3s. 6d., it may be 4s. next year, or even 5s. It is an indefinite tax; we are not going to pay it. We have to pay in our own country taxes for carrying on our business, and we are not going to pay taxes in another country, which is a so-called Free Trade country; therefore we shall not send goods to England at all." That is one thing that might result. I have a letter, which I will read later on, illustrating that.

The next alternative is that they might say, "Very well, the Income Tax is 3s. 6d.; add that to the price of the goods." Then the consumer here will have to pay. The third course open to them is. to say, "Very well, we shall not have an agent resident in England any longer. What we shall do is to send over a reliable clerk, or junior partner, to stop at a hotel in London." He will stop here for a fortnight and go round and see everybody here, and make all arrangements, and then return to his own country. How are you going to tax him? The only result of the Clause will be either to make the consumer pay more or to drive business away, so that the business which is in existence here and in the hands of agents, just at a time when you want to encourage the profits for every Englishman in this country, will disappear. I think that is perfectly clear. With the permission of the Committee, I will read this letter, which is dated the 12th of this month. I am perfectly prepared to give the letter to the Chancellor of the Exchequer, or the name of the writer to any hon. Member who desires it. The writer says he is a Colonial broker, and a partner in such-and-such a firm. He also says that he is a member of the City Carlton Club, but that has nothing to do with the matter. He says:— eigners were competing with them and were not paying taxes. No doubt that is so, but this is not the way to remedy it. You must not remedy one grievance by imposing a remedy which is worse than the grievance. The way to remedy the grievance is to impose an Import Duty. This is quite the wrong thing to do, and the only result of it will be to drive trade out of this country. It will be very serious with the Income Tax at the present high rate, and it will give to the Government the power to say afterwards, "We claim the right to extend it, and we are now going: to extend it, and we claim the right in every case, although a man may say his profits are so much, and produce his books to prove that the profits are so much." It will form a precedent for the Inland Revenue saying, "We do not care about that, we are going to tax you at a larger rate, because we think the profits are larger than you say." That is a very dangerous precedent. It will do no good to anybody. I hope that in the Amendments the right hon. Gentleman is going to move he will include Amendments to meet the particular points I have endeavoured to put before the Committee.

I rise to express my entire agreement with the remarks which have fallen from the hon. Baronet (Sir F. Banbury). It is not frequently the case that I am able to endorse everything he has said, but on this occasion I can do so. A great many cases will arise which will occur to hon. Members who are engaged in commerce across the seas. There is great difficulty in defining exactly what an agent is. That will arise in cases such as those I am going to instance. Take a firm of nitrate manufacturers in Chile, who are not British subjects at all, but nitrate being a commodity largely used in Europe, and London-being the financial centre and a convenient place from which to do business on the Continent, as well as with Great Britain, they have established a branch firm here, having a small office, with only one or two individuals who are acting as agents for this manufacturing concern in Chile. Of course, a tax such as is suggested in this Clause will immediately cause them to close the office here. There is no difficulty at all in removing that office, either to Holland or New York.

Because the tax which is suggested in this Clause will fall on that office.

It will not. Will the hon. Baronet quote the words which will make it fall upon that office?

If that is not the proposal, then the Clause does not embrace what the Chancellor of the Exchequer says he wishes to do. The Clause seems to me to be an attempt to tax a non-resident person. It is quite true that the Chancellor of the Exchequer says that he does not intend to tax the manufacturing profit on the nitrate, but only wants to tax the merchant's profits; but the foreigner equally objects to paying Income Tax on what you call merchant's profits as on manufacturing profits. How you are going to separate the two profits is quite inconceivable. I can tell the Chancellor of the Exchequer that on many articles—some of the largest articles— there is no merchant's profit at all. If you bought wheat in America or Buenos Ayres to-day, and chartered a ship and sell it, you would lose money on the transaction. The only way in which you can make money on the transaction is to anticipate the course of the market, buy in anticipation of a rise, or sell in anticipation of a fall. That is common knowledge. If the Chancellor of the Exchequer and the Treasury do not know it, I can assure them that it is my experience, and I am sure that it will be confirmed by others. If this firm which manufactures nitrates wants to put up machinery and has a small agency here in London, but removes it in consequence of the apprehension of taxation under this Clause, to Holland or New York, what will happen? If they have an office in London, they would naturally consider the prices of the manufacturers of nitrate machinery in this country, and, having their own people here, they would place the orders for that machinery here. But if the agency of this firm is in New York or on the Continent, it stands to reason that the engineers, manufacturers and others who are in touch with them there, and whom they can see in their office every day, are much more likely to get the order for the machinery than would be the people here if they had an office here.

The same thing applies to the chartering of ships, to all financial arrangements, and to insurance. Where the agency is, there a great deal of business follows. It is a great mistake for this House to impose any legislation which will have the effect of driving away these agencies. These agencies are not insignificant; they very often lead to further business, and a very great deal more business than the agency sets out to do at the commencement. You are going to try to tax this man as an agent, and to get at the business through this so-called agency. Suppose for a moment that the man establishes his agency in New York. What is to prevent him cabling over here to a nitrate broker in London, or a nitrate broker in Glasgow, or another in Liverpool, and offering the nitrate to them direct, without establishing an agency here at all? If he does that we have lost the benefit of his agency and have not succeeded in taxing him. That is the whole point, and that has happened now with wheat. American wheat is largely sold by dealers in Chicago. They do not need to open an office here. They telegraph to a broker in Liverpool and to another in London, and make an offer of so many loads of wheat at a certain price, in which is included a very small brokerage of a ¼ per cent., or even an ⅛ per cent. The Chancellor of the Exchequer will say the ⅛ per cent. is not the profit which might be expected to arise from the business. Consequently that unfortunate broker will be told that he has got, not only to pay on the ⅛ per cent. which he has received, but upon some fancy profit that the merchant or dealer in Chicago is making. To my mind the whole Clause is going backwards. We ought not, as British merchants and commercial men, to do anything that stops business. We ought to inspire the Government to encourage business and not to stop it, and surely the whole of this Clause is directed and will, in fact, stop business. This is not a time when we ought to do that. In my judgment it is a great mistake. I think even our whole Income Tax conception is probably wrong about taxing foreigners. I am not sure it would not be better for us, even with our companies, to say to every foreigner who shares in our undertakings that we will deduct Income Tax. It would be a good thing to encourage the foreigner to come here and establish himself. There are many reasons why the more business we allow to be established here, the more we get out of it. We get our financial profits out of it, our insurance profits out of it, the letting of our offices to these people, the banking, any quantity of things which arise from business, even if the profits on the business belong to a man who may live in Russia or South America. Consequently, I must join with the hon. Baronet in uttering my strenuous protest against the trend of legislation of which this Clause is an example.

The Chancellor of the Exchequer has really not taken this Clause quite so seriously as its terms would lead us to expect he would do. I am not suns that he quite understands it himself. I feel that if he had a thorough knowledge of the way in which the business of this country is conducted he would hardly have drawn the Clause in the terms in which it now stands. He has given us no estimate whatever of what he expects to get out of it. It is rather remarkable that we have had no mention whatever of that, either in his Budget speech or to-day. I do not know whether it is again a sort of gamble, but we are not given any indication whether it means £500,000 or £500, or £5,000,000. We have no idea whatever, and can form no judgment of what it means from the point of view of finance. It would not be very serious if the whole Clause was dropped. The right hon. Gentleman has not met some point I put when this matter was discussed before. In the first place, he has not dealt with the question that he is endeavouring to tax persons out of the jurisdiction, that is to say, he is violating the principle of no taxation without representation. That is very serious. The South African War was supported on the ground that you had a great body of British subjects being taxed without any representation. The right hon. Gentleman is proposing to apply not only to South Africa, but to all our Colonies and Dominions, and to foreign countries as well, this obnoxious principle which we held to be a very great justification for us in the South African War. That is the first point he has not deal with, though it was brought to his notice on the last occasion.

Again, I pointed out that it would be absolutely impossible to have agencies in this country on the part of non-residents if this Clause is carried out. See the unfairness which will happen. One foreign or Colonial merchant would have an agent, and therefore his business would be subject to taxation, but another would have no agent. If that non-resident firm sold his goods to an individual, there would be no tax upon him whatever. How unjust that would be. One man who sells through an agent pays the tax, and another, because he does not sell through an agent, does not pay. That is an illustration of the inequality of the tax. But the right hon. Gentleman has not dealt with the serious point that he is certainly going to drive out all commercial agencies from the country. Let me read a letter from a firm of Colonial merchants. They say:—

"owing to the close connection between the resident and the non-resident person, or otherwise."

What does "or otherwise" mean? No one can tell. It is indefinite and uncertain. Again—

"No profits, or less than the ordinary profits."

What are the ordinary profits? Very often there are no profits in a transaction of that kind. As it is a non-resident that the goods are sent to, the agency draws upon him, and if the market has gone down he will very often make no profit but an actual loss. That occurs constantly. If the right hon. Gentleman is to investigate the profit made by the non-resident, the non-resident ought to be able to come and show that he has made no profit whatever, which is frequently the case. See the difficulty of causing the non-resident to have to produce his accounts here. In the fourth Sub-section we have this—

"If the true amount of the profits or gains of any non-resident person chargeable in the name of a resident person with Income Tax cannot in any case be readily ascertained."

What do you mean by that? Again it is quite indefinite. Go to the next line —

"The Commissioners may, if they think fit, assess the non-resident person on a percentage of the turnover of the business done by the non-resident person."

What percentage? There is no definite-ness. The Commissioners may put any percentage they please. It is quite unheard of in our law that officials shall have the right of putting any percentage they please as an assessment for Income Tax. It seems to me intolerable to have a thing of this kind proposed at this time, when legislation is made so precise and exact on principles which are so well established. The next indefiniteness is in Sub-section (5):—

"The amount of percentage shall in each case be determined having regard to the nature of the business by the Commissioners."

Here are two variants! The first is the business, and the second is that it is to be determined by the Commissioners. It is utterly and entirely indefinite. I have said enough to show how indefinite it is. Again, you are supposed to have an appeal. To whom is the appeal? It is from one set of officials to another. What chance has the non-resident on an appeal of that sort? In regard to definiteness, I want to recall one of the principles laid down by Adam Smith, which has been acted upon and regarded as axiomatic in all taxation in civilised countries. It is this:— thing this copying of our enemies, because what is the difficulty in Turkey that the taxpayer has to meet? The tax gatherer says, "Your taxation is so much." There is nothing by which the taxpayer can ascertain whether it is that or any other amount, and the result always is that the tax is levied according to what the tax collector thinks he can get out of the unfortunate taxpayer. That is the principle here. It is indefinite, arbitrary, and uncertain, and no one can tell what it is to be. I ask the right hon. Gentleman to consider whether this is a fit time to introduce uncertainty of this kind into a serious matter of this nature.

5.0 P.M.

I want to show how the unfortunate nonresident is treated. We are violating the principle of taxation with representation. If he is not satisfied with the decision of these Commissioners, he is allowed to appeal within twenty-one days. The right hon. Gentleman is applying this to places all over the world. To reach Sydney takes thirty-one days, and you may not have a post going at once, but may have to wait a week, so you might have to wait thirty-eight days before the assessment would reach the unfortunate man, and within twenty-one days he must give a decision as to whether he will appeal or not. It shows how this Clause has been drafted without a knowledge of the business conditions of this country or of its trade. It is wholly foreign to any accurate knowledge of how that trade is carried on. The hon. Baronet (Sir F. Banbury) has quoted an opinion of the Prime Minister when he was Chancellor of the Exchequer. I wish to refer to it to illustrate an extreme case, of which I do not believe there are ten in the United Kingdom. The Prime Minister, when Chancellor of the Exchequer, pointed out that a case of that kind could be dealt with perfectly well in an administrative manner, and that there was no need for fresh legislation whatever. Why, then, should we have this machinery, which will go far beyond that case? The right hon. Gentleman has run away from the case he originally put to us. He pointed out that there was no desire to lose Income Tax coming out of business profits, and he wished to bring these nonresident persons into the purview of the Income Tax. Now he bases, his whole argument upon this extreme case, which, the Prime Minister pointed out, could be dealt with perfectly well administratively. I ask the right hon. Gentleman whether he will not reconsider the matter. He really is going on the wrong track. If he will examine these cases, he will find there is not these big profits which he thinks arise. Take the case of a non-resident person conducting his business here, without having an agent, but consigning to a merchant. In that case the non-resident person would not pay any Income Tax, but if he has an agent here he has to pay it. The right hon. Gentleman has forgotten that the agency fee is there, and is probably subject to our Income Tax. The profit which the non-resident person makes by the sale of his goods, if he does make profit, and that is not certain—he is not in this country; it is outside the purview of this country, and, therefore, is not a fit and proper subject for taxation. I would remind the Chancellor of the Exchequer of the detrimental effect this new tax must have on persons amongst our Allies who find themselves charged with a new tax at a time like this, when they have to meet enormous taxation on account of the War, and when they find that this new charge is being put upon them by one of their Allies.

I am not very friendly to this Clause, but at the same time I do not think it is open to some of the objections which have been urged against it. If my hon. Friends who have spoken had refreshed their memory as to the meaning of Clause 41 of the Income Tax Act of 1842, they would not have made some of the statements which they have made. The scope of this Clause is not as large as they suppose it to be. My hon. Friend who has just spoken (Mr. Molteno) appeals to the time-honoured maxim that there should be no taxation without representation. If he applies that maxim to the case of a nonresident foreigner who establishes a business here, and makes large profits on it, then I must respectfully dissent from that maxim.

If he establishes a large business here, and makes large profits here, he pays Income Tax.

May I call attention to the purport of Clause 41 of the Income Tax Act of 1842? The purport of the Clause is that whereas there were certain persons through whose hands passed the profits of a business not for their own advantage, but for the advantage of some other persons, and who in such cases were trustees for married women and infants or committees for lunatics, the Chancellor of the Exchequer said to the trustee or the committee that they should be chargeable with the tax in respect of those persons who were beneficiaries. I suppose the right hon. Gentleman now proposes to apply that same principle to the branch of a business here whose headquarters is abroad, and make the branch or agent carrying on the business chargeable in the name of the non-resident. That seems to me to be a simple thing, and I regard it as a laudable purpose. I believe that will be the opinion of the House, and I do not think that the Clause will have the far-reaching effect that some of my hon. Friends fear.

Having said that, I have said all that I can in favour of the Clause. It is open to other objections, and very grave objections. In some respects it goes much further than it ought to go, and I do not think that it has been very carefully considered. It is open to this objection, that it is an instance of the application of the principle of legislation by reference, and I think it is the worst example of that odious practice that I have ever come across. There are three ways in which this subject might be dealt with. The Clause purports to be an amendment of Clause 41 of the Income Tax Act of 1842. The obvious way to deal with that is to. amend Clause 41 of the Income Tax Act, 1842, and I would suggest that that be done. If that were done, it would be the best course to take. Another course would be to amend Clause 41 of the Income Tax Act of 1842 in the way desired to embody it in present legislation, then to repeal the existing Clause 41, and to enact the new Clause in place of it. That would probably be clearer and better. There is a third-proposal which is very much worse, and the Chancellor of the Exchequer has chosen that one, and that is to leave Section 41 of the Act of 1842 standing. I may here say that the Act of 1842 is one of the most difficult, prolix, verbose, and uncomfortable Acts on the Statute Book. That being the case, the Chancellor of the Exchequer tries to outdo the original Act. He introduces a new Clause to add to the heap already existing, and he puts side by side the original Clause and this amending Clause, and leaves the legal profession and the community to fight it out, and ascertain what it means. I protest against that method of dealing with the question, and I am sorry that the right hon. Gentleman has thought fit to deal with it in that way. He really knows better than to deal with the subject in that manner. He is a man of varied exploits and accomplishments and knows the law as well as other things, and it is not for him to degrade the Statute Book by putting on it such a Clause as we have now before us. Therefore, I suggest to the right hon. Gentleman that he would do well to withdraw this Clause, and to embody briefly, clearly, and intelligibly, an Amendment to carry out the object in view, framing it, if necessary, in such a way as to make it perfectly clear that no more is done than I have said has to be done. By those means he would prevent the Clause having too wide an application, which I feel sure the Chancellor of the Exchequer does not intend, and he would relieve my hon. Friends of the anxiety which they feel that the Clause is much more terrible than it appears to be.

The hon. Member who has just spoken (Mr. Radford) praised and blamed this Clause, and I would like to do the same thing. In the first place, there are many cases where as Chancellor of the Exchequer I would like to get Income Tax from persons abroad who have agents here and who in their greed to obtain all the profits, are not satisfied to sell as merchant to merchant, but so arrange the agency as to obtain the final retail price. I do not like to mention names, but take the Standard Oil Company. They are not satisfied with selling their goods to merchants in the United Kingdom, but they establish the Anglo-American Oil Company in Liverpool and other places, and they take their goods finally through to the smallest shopkeeper who buys 5 gallons, thereby getting the retail and distributive profits as well as the manufacturing profit. In that case the Chancellor of the Exchequer is perfectly justified, if possible, in trying to estimate the whole of the profits in the United Kingdom, and assessing those profits to the original refiner or producer of the article, and levying Income Tax on those profits. But it is. almost impossible to draw the line between such a man and another man sending mahogany from St. Domingo to Liverpool and instructing his agent there to sell it at the best price possible. It is absolutely impossible for any Commissioners to estimate the profit that the grower of the mahogany in St. Domingo obtains.

While it may be advisable to try to get some estimate of the profit, I think that the Clause, as I understand it, is not workable. The hon. Baronet the Member for the City of London (Sir F. Banbury) proposed a way out of the difficulty which is not a good way, so far as the immediate incidence of the tax goes, but it does mean for the Chancellor of the Exchequer revenue, which is what he is trying to obtain, and that is to put an Import Duty on these articles. Where it is a transit business great difficulty arises. It is on. behalf of merchants in London, Liverpool, and other places who are doing a transit business that I am mostly speaking. So far as we can follow this Clause, it would injure the transit business. A great deal of the world's commerce is conducted in this way. A person in some part of the world grows a certain article, and he consigns what he has grown or made to a market. It is a matter of indifference to him whether the market is Havre, Amsterdam, Hamburg, New York, or Liverpool. He consigns his goods to a market, and he has a broker or agent in that market who will offer the goods at public auction or by other means to buyers from all parts of the world. We in England obtain an enormous mass of business of that nature by offering facilities to the consigned goods in the great ports of this Kingdom. We open credits for these people. We say, "Up to 75 per cent. or 80 per cent. of the value of your consignments we are willing to put credits at your disposal before you ship, on signing the bill of lading." By these means we attract transit business to this country. If I understand this Clause, it is going to cut a great deal of that transit business away.

The right hon. Gentleman shakes his head. Perhaps some of us, while we have read the Clause, do not understand it. It may be that the proposed Amendment of the Clause is not very clear. The right hon. Gentleman proposes, in Sub-section (3), after the word "person" ["Where a non-resident person"], to insert the words

"not being a British subject or a British Dominion or Colonial firm or company or branch thereof."

Perhaps that means that all those who are in the neutral countries or in foreign countries will be included. By excluding those persons or firms or companies mentioned in the Amendment, I take it that it is quite clear the right hon. Gentleman means to include a great many of the other people who are now shipping their goods to this country as a good transit market. I think, under the circumstances, and in view of the misunderstanding of this Clause, that while it would be a loss to the Exchequer in Income Tax between now and May next, it would be well to move the rejection of this Clause, and leave it over to the next Bill, which will be introduced, I understand, in May next year, so that we can really consider the matter. I am reminded by my hon. Friend (Sir F. Banbury) that this was not in the Finance Bill when first introduced, and therefore many of us have not had time to consult with our constituents as to the effect of this Clause. I have, however, had representations made to me from Liverpool that it will have a most adverse effect on a great deal of business, although they have not had time to fully consider it. While I do not like to move the rejection of the Clause, I sincerely trust that the Chancellor of the Exchequer will withdraw it.

I think that the hon. Member has taken upon himself a very serious responsibility. We know that a course of business exists in this country and is extending, whereby profits made in this country in particular trades pay no Income Tax. We know that that practice is extending.

Large. I think that the hon. Member takes upon himself a very serious responsibility when he says that he desires to have this omitted.

It has been suggested that the remedy should be by imposing an Import Duty. The Import Duty would not touch the cases, which I have chiefly in mind, of goods made in this country which never leave the country. We should have to impose the duties on the imported article whether it was sold in a way which we should regard for tax purposes as legitimate or illegimate. The Inland Revenue are only servants of the State collecting revenue for the benefit of the State. They know only too well the methods by which the law is evaded, some legitimate, and some I venture to say illegitimate; but all methods of evasion which they cannot stop. You may have a British firm with foreign branches where the profits of the British firm are charged to the benefit of the foreign branch and are brought away and escape the Income Tax. We cannot help that; we have to submit to it. But when you have a foreign firm with a British branch, and the British branch is the mere creature of the foreign firm and is allowed to make no profits, so that the whole profits of the purely British trade inure to the benefit of the foreign firm, which escapes taxes on the profits made in this country, then, I think, that the hon. Gentleman takes upon himself a very grave responsibility if he says he will not assist the revenue to collect that tax. That is all we ask. [HON. MEMBERS: "NO!"] When we come to the Committee stage on this Clause show me the words in which we ask for more and I will cut them out. But I say here and now that that is all we ask. If, after having heard me, the Committee wish me not to go on with the Clause, I will withdraw it. The responsibility is not mine, and I do not believe after what I have said the Committee will ask me to withdraw this Clause.

I hope that the Committee will pay great attention to what the right hon. Gentleman has just said. I have listened to what has been said by my hon. Friend the Member for the City and other Gentlemen with great experience in business. I would remind the Committee of a matter which does not seem to me to have been very prominent in our minds, and which has not been referred to except in the very practical as well as humorous speech of the right hon. Member for Islington a few minutes ago. The principle of the Act of 1842 with regard to the taxation of profits, as I understand it, is this: that people resident in this country shall be taxed on their profits wherever they make them, and the profits earned in this country shall be taxed if you can get at the profit earner. That, as I understand, is the fundamental principle of the original Income Tax Act. The right hon. Gentleman has put his finger upon the class of profit earners in this country who contrive not to be here for the purpose of taxation, and I think that the Committee would agree with the Board of Inland Revenue and the Chancellor of the Exchequer in insisting on the principle that if profits are earned in this country, by business carried on in this country, those profits are a subject of fair taxation here. The people of this country at large bear the burden by which those profits are earned. The difficulty has arisen, as I think, by the presence in this Clause of language which by itself suggests that an agency existing in this country without a business established in this country, shall render a foreign principal, who has not a business here but merely employs an agent, liable to be taxed in this country, though he is a foreign principal and is not doing anything more than employing an agent. I listened to what the right hon. Gentleman said the last time, when he laid such emphasis upon the action of businesses existing here, but having no one here who was subject to taxation under the Income Tax. That was the difficulty with which he was proposing to deal; but if I understood him properly, he was not, by these words of precaution and definition in Section 1 (a) of his new Clause, aiming at the large class of most valuable and delicate businesses which it is the object of the speeches which we have heard this afternoon to safeguard.

Suppose the Clause goes through in that form, and my hon. and learned Friend was called upon to interpret it in a court of law, would he not give the interpretation which he has himself just put upon them?

I must confess when I read this Clause that it seems to me that it would be exceedingly likely that the officers of Inland Revenue would propose to tax agency business, business which may be done through an agent. But I do not gather that that is the object in view.

And if the House is in a position to tax a mass of business which at present is evading taxation to the common detriment of all of us, it would be a great misfortune if we called upon the Chancellor of the Exchequer to withdraw a Clause of this kind, which he says is intended to tax that class of business, and which he assures us he is ready to amend, so as not to foe open to the very formidable objection which has been advanced in various parts of the House. On those grounds, without any pretence of business knowledge upon these matters or of business dealings, I appeal to hon. Members to consider more than once before calling upon the right hon. Gentleman to withdraw a Clause the result of which is very beneficial.

I have listened to the whole of the argument with regard to this Clause, and I must confess I find myself in agreement with the argument of those who have argued against it, but while I agree with their arguments I think that they have put up arguments against an entirely different proposal from that which is contained in this Clause. Everyone will agree with the argument that a bonâ-fide agency for a foreign principal should not come under this Clause. As I understand the Clause, and as I understand the intention of the Chancellor of the Exchequer, it only means to get at cases where a bonâ-fide agency does not exist; in other words, it is the case where there is a colourable pretence and not a genuine agency that he means to get within the scope of this Clause. That, as I understand—it may be doubtful—is the actual meaning of the Clause as it stands. [HON. MEMBERS: "No."] I will give way to the right hon. and learned Gentleman (Mr. Duke). If that is not the meaning, then the Chancellor of the Exchequer has indicated clearly that that is the meaning which he wishes the Clause to bear, and that if the Clause is read a second time effect would be given to this intention. Everyone naturally dislikes the somewhat vague powers which are given under this Clause to the Inland Revenue to find the actual person. There are grave practical difficulties, I do not doubt, in meeting that. We all know that the cases which this proposal is meant to meet—cases of people who are anxious to avoid proper obligations. That is a very difficult case to meet, and I would ask the Chancellor of the Exchequer to give further consideration to see whether he cannot make it quite definite what people are being taxed. If he meets those two points—and I think that he has indicated that he will —we might read the Clause a second time, and then thrash out the actual words when we have an opportunity of moving Amendments.

If I intervene for a few moments, I hope that I shall be accorded the indulgence of the Committee, because though my right hon. Friend said just now that his knowledge of business matters was small, my knowledge of those matters is smaller still. But I listened to the whole of this discussion with all possible attention which I could give, and two points emerged from it. I think that it is not denied the Chancellor of the Exchequer said what was perfectly true when he pointed out that there are profits and large profits being made by non-residents in this country out of businesses belonging to this country and out of articles made in this country which are purely English, and that they escape all liability for Income Tax. I have heard no answer to that objection, which appears to be altogether satisfactory to me. Certain words in the Clause have been pointed out as extremely objectionable, but I have heard the Chancellor of the Exchequer say just now that when we come to discuss the Clause in Committee those words shall be considered, and unless he can defend them he is quite ready to withdraw them. That seems a fair offer on the part of the Chancellor of the Exchequer. He stated that if the Committee really desired it, after hearing what he had to say on the subject, he was ready to withdraw the Clause, but at the same time he pointed out that this Committee would be taking upon itself an exceedingly heavy responsibility which he would not share. I think that we ought to consider most carefully what has been told to us by the Chancellor of the Exchequer before the Committee takes advantage of the power which undoubtedly it does possess at this moment, because he has said that if we insist upon it he will withdraw it. The Committee should consider most carefully whether it is justified in taking that action.

I must confess that this argument has put me in somewhat of a difficulty. When this Resolution was before the House a week or two ago I thought that this proposal aimed at getting Income Tax out of agents who were here representing manufacturers abroad, who sent their products to this country for distribution. One knows perfectly well that there is a great number of those cases. We see advertisements in all the papers of a great many of those articles, which come in partly as the result of those advertisements and partly as the result of travelling in the ordinary way. They are delivered at the selling prices, and the agent simply has either a salary or commission. I do not wish to say anything that will assist evasion of the Income Tax, with which I am in sincere sympathy, but, as I read this Clause, I ask myself, Where does it lead? I take, for instance, the agents who represent actual raw materials on which a manufacturing process has been placed, and I do not quite see how you are going to get at many of those agents at the present time if you impose this tax. It seems to me that a great deal of the importation of raw material could be done without agents, and the goods would come straight away to the manufacturer here, and I do not see how you are to get the Income Tax from him or anybody. Then you come to the articles that are raw material for some other manufacturer. Such articles are manufactured and they come here, not to be used in the condition in which they arrive, but they go through manufacturing processes that are used here in order to produce something else from them. I quite understand that the manufacturer of smaller articles will be quite prepared for this, because it would really be an Import Duty as against those articles. That I think should be faced in some other way; and if this proposal were applied simply to the articles that come over and are distributed exactly in the same form in which they come over, I think there would be something to be said for it. In the form in which the Clause comes before us now I see very grave danger, and I trust it will be reconsidered.

I have read this Clause very carefully indeed, and I find, according to its wording, that an agent is to be liable, if he cannot get the declaration of profits from his principal, to be assessed to Income Tax in respect of the profit which his principal is supposed to have made. I can sympathise with what the right hon. Gentleman says, that his intention is to make those people pay Income Tax who are actually trading in this country. I want, however, to call attention to the wording of this Clause, and I think the right hon. Gentleman will admit that if it were to become law as it stands now it would simply destroy that enormous business in this country which the merchants of this country have taken generations to establish. If you take the vast business which is done in the Baltic and in Mincing Lane, you find that it deals with hundreds of articles. Take an article like wool, in which my own firm is interested. We get consignments of wool from the Persian Gulf and from other countries at certain seasons of the year when there are monthly sales of wool, and at other seasons bi-monthly sales, the buyers coming from all parts of the world to London to cover their requirements for the season. Under this Clause we should have to go to the principals abroad and ask them to make a return of their profits upon the wool, and, following that, I see from the wording of the first part of the Clause, the agents are liable to be assessed to Income Tax if the principals do not give returns of the profits they have made on their consignments. This applies not only to wool but to other articles which are sent here on consignment to be sold by public auction in this country, which has become the market to which people come from all parts of the world.

I can assure the right hon. Gentleman that the wording of this Clause is quite sufficient, if it is adopted, to stop that trade. If it is asserted that you are going to tax people who are sending their goods to this market, they will immediately stop sending them. We have had to struggle for years against foreign competition. The Germans have established centres in all parts of the world, and they have tried as much as they can to induce local merchants to send their goods to Hamburg. They have, in addition, established lines of steamers by which those goods could be carried in order to induce the merchants to send them to Hamburg. We in this country have succeeded—because we have had this business for generations—in maintaining the supremacy of the British market, and if anything is done to jeopardise it we shall lose in five minutes what it has taken generations to establish. I do not want to labour the question, but I can assure the right hon. Gentleman that if he persists in the present wording of the Clause it will have the result I have stated. But I believe he is inclined to meet us in some way, but, if he does not, he is certainly going to affect our commercial supremacy, which, in turn, must affect, to a great extent, our carrying trade. The steamers, in many cases that go from this country to the Persian Gulf and other places with British goods, bring back wool and other articles in return. If they cannot get the return cargoes for London we shall be compelled, when the War is over, to take many of those steamers off, and the result will be that our foreign competitors would take advantage of the opportunity and get a great deal of this export trade into their hands.

There is another question, though I do not know whether it is covered by this Clause, because it is so ambiguous. Take the position of the shipping market. The whole of the shipping world is centred in London. If persons in America want to charter a steamer, they telegraph to their agents in London, and the charter takes place on the Baltic. All parts of the world do the whole of this shipping business in London. Are the agents—because they are agents—to ask their principals what has been the result of the voyage of a steamer, and are those agents to be assessed for Income Tax in respect of that voyage; or are we to tell people, say, at Java or the Philippines, that if they want to charter a Norwegian or a Danish steamer they can have a charter in London, but they will have to pay Income Tax. I ask the Chancellor of the Exchequer to consider seriously this Clause. I am not a lawyer, and I do not say that I understand it, but, were I to put it in plain English, it appears to me to make it impossible for an agent in this country to accept this liability to be assessed in respect of any profits that might be made by his principal in any part of the world.

I ask my right hon. Friend to pause before he passes this Clause— which if adopted will have a far-reaching effect—until he has become acquainted with the views of the Members of this House. I have no doubt my right hon. Friend has the best intentions when he says that he does not intend to include agents, but according to the wording of the Clause it does include agents. In my experience of business all over the world I do not know of any country where they charge Income Tax on the profits of business done through agencies. I feel perfectly sure that if this proposal is carried it will have a most disastrous effect on the trade of the country. If you say that certain foreign businesses must be taxed, you had better deal with the matter as they do in France with regard to importations from countries abroad. They do not charge Income Tax on the profits of business done through agents, but if the firm or company registers an office in France they have to allocate a certain amount of capital in proportion to the trade they do, and pay the tax on that capital. By that taxation the trader knows exactly what he has to pay upon. But under this Clause he does not know what he will be charged, and it entirely rests with the Income Tax people to assess the amount. That seems a most unfair and disastrous proposal, and I trust my right hon. Friend will not press the Clause in its present form.

I think all the objections to the Clause have been stated, and that it may now be read a second time on the distinct understanding that the right hon. Gentleman will be able to deal with this question of agency. If, however, the Clause is to be left as it is, I submit that it is so objectionable that it should be dropped. It is intended to prevent persons who should really be brought under the Income Tax from getting out of the liability by a mere technicality as to the place where they do their trade, and, that being the object, I think that the right hon. Gentleman ought at least to be allowed an opportunity of amending the Clause. I think he will find it very difficult, but I appeal to the House to now pass the Second Reading of the Clause on the condition I have stated.

What my hon. Friend has just said applies to one aspect of the Clause, but we are also endeavouring to deal with the other case, where goods are manufactured and sold in this country, and yet by an arrangement the whole profits of the business escape taxation. I listened to the whole of this Debate, and I think one of the difficulties under which we labour is that we are not all equally well acquainted with the existing Income Tax law. Agents, in one sense of the word, are now liable to all the taxes which some hon. Members who spoke think so objectionable. [HON. MEMBERS: "NO, no!"] Yes, that is so. A great deal of the confusion arises from the fact that the word "agent" is used in two different senses. Some hon. Members understand it as the ordinary business relation, but the word has another and technical tax meaning. Resident agents are already liable in respect of profits of their non-resident principals when the contract to sell the principal's goods is made in the United Kingdom, or under other conditions.

The first condition is trading within this country, and the second condition is that the profits pass through the hands of the agent. In the application of the existing law various methods of evasion have been adopted. Some of those methods of evasion I personally do not attempt, and do not mean to attempt, to catch, because I think, in the circumstances of trade, the existing law is too wide, and those methods of evasion which have been adopted, though they are methods of evasion, still are methods of evasion which appear to be legitimate, and I do not want to attempt to catch them. There are other methods of evasion which we think are wholly illegitimate, and those are the methods of evasion which we want to deal with. For instance, there is the case of what is nominally an independent company here, though that company is really the mere creature of a foreign company or agent. That is the case of goods manufactured in this country. That is the kind of case I mean to catch, and that is the kind of evasion which I believe everybody in this Committee thinks we ought to attempt to catch, and I do not mean to attempt to catch those methods of evasion which a great many hon. Members who spoke to-day think are legitimate. With that explanation, I hope now I shall be allowed to take the Second Reading of the Clause, and then we can discuss in Committee the various Amendments which hon. Members wish brought forward.

Question put, and agreed to.

I beg to move as an Amendment to the proposed new Clause, in Sub-section (1) ( a ), after the word "person" ["non-resident persons"], to insert the words "not residing in any Dominion, Colony or Dependency of the Crown, or within the territory of any of our present Allies."

The object of this Amendment is to exclude persons resident in our Dominions or Colonies from the operation of this Clause.

I propose to move later on an Amendment to insert after the words "non-resident persons" the words "not being a British subject, or a British Dominion, or Colonial firm, or company, or branch thereof." I think that will meet the hon. Member's point.

Amendment, by leave, withdrawn.

I beg to move, in Subsection (1) ( a ), to leave out the words "or manager, as well as in the name of any factor, agent, or receiver."

The Committee will see that the adoption of this Amendment will still give the right hon. Gentleman the opportunity of fulfilling the promise he has made to us. He says he is willing to omit agents, and that he does not want to bring in the ordinary business agent within the scope of the tax he is proposing. He confines his case to a branch of a business in this country. The words referring to any branch would cover that case. The object of the Amendment is to leave out the word "agent" in paragraph ( a ). If "agent" remains in, many profitable businesses will be closed up. If this Amendment is adopted, I propose to move another Amendment.

I am afraid if this Amendment were accepted it would make a real muddle of the existing law. By Section 41 of the Act of 1842, a factor, agent, or receiver is already liable, under certain conditions, in respect of non-resident's profits. We propose to add to the factor, agent, or receiver, the words "branch or manager." My right hon. Friend proposes to give us "branch" but to strike out "manager," but we do not think that that will quite do. I think ray right hon. Friend has put down his Amendment in a hurry, and I do not think he had the Act of 1842 before him when he was doing so.

Perhaps the right hon. Gentleman will take the opportunity of explaining how he does propose to exclude those agencies which he promised to exclude.

I beg to move, in Subsection (2), after the word "arising" ["gains arising"], to insert the words, "from the sale or distribution of commodities within the United Kingdom."

6.0 P.M.

This deals with the point which I think is included in the promises made by the Chancellor this afternoon, and which are not at all fulfilled by the terms of the Clause. The Chancellor asked us to give him the Second Reading of this Clause, and told us that then he would try and bring the Clause into harmony with our desires. The Committee will see that these are the very cases in regard to which the discussion has been raging this afternoon. We have been told of the case of a factory set up here by a German house, of goods purchased and distributed through the United Kingdom at retail prices which showed no profit on the manufacture or production of the goods. We were also told of the Standard Oil Company and other great companies which distribute their goods through the United Kingdom at retail prices. I propose to limit the Clause to such businesses as that. It may be asked what I have in view. My fear about the Clause is that it will result in the destruction of the United Kingdom as the emporium of foreign commerce. I do not want the export trade of this country destroyed. I do not want the freedom of importing which we now enjoy hurt or limited in any way. That has been the burden of all the criticism which we have heard. But we have nothing from the Chancellor of the Exchequer beyond an assurance that he will not do anything to restrict this free import into and export from this country, and that he solely aims at checking the distribution of commodities in the United Kingdom by foreigners who make a large profit and cheat the revenue authorities of the Income Tax which they ought properly to pay. Complaint has been made that the Clause is much wider than the speeches of my right hon. Friend. I propose this Amendment in order to bring the Clause into relation to those speeches.

I quite see the force of the case put forward by my right hon. Friend. I recognise the claim of the Committee to see that the Clause does what is intended in as precise language as possible. But I would ask hon. Members to look at the question from another point of view. The Income Tax payer is always endeavouring to evade the Income Tax collector, and any definite terms put into the Clause will be instantly found to provide a fresh means of evasion. If you put in the words now proposed and leave out the words "directly or indirectly," as the right hon. Gentleman intends to suggest presently, the effect in practice would be the discovery of a new means of evasion. I am now dealing not with a general change in the law of liability, but with an effort to get rid of the evasion of the liability. I propose to meet the general question of good or bad faith in the agent's transactions by leaving out, in paragraph (3), the words "or otherwise," which I think are open to some objection as being too vague, and inserting in their place the words "and to the substantial control exercised by the non-resident over the resident."

If you can find a better word I should be glad to hear it. We all know what it really means. In practice it means a subsidiary company in which a great majority of the shares are owned by the parent company, so that the subsidiary company makes no profit, but buys the goods from the parent company at a price at which all the profits go to the parent company abroad. It is difficult to find what other language you are to use to get rid of the system of evasion. I should have thought that these words would have been sufficient to cover the case of the agent as well as that of the parent company. We carefully considered the matter before I came to the House. I would put it to the Committee that we should amend the Clause in the way I suggest, and then reconsider it as amended on Report. I submit that the particular Amendments now proposed—I have no complaint against them; they are quite legitimate in ordinary circumstances—become, in fact, new methods of escaping the imposition of the tax.

I do not think that the Clause will be sufficiently guarded even with the suggested words added in the next paragraph. It appears to me that the words "a non-resident person shall be chargeable in respect of any profits or gains arising" surely cover the case of a foreigner consigning goods to one of the big commercial banking houses in London with a Bill of Lading attached, and the banking firm selling the cargo to Dunkirk.

That transaction is dealt with by another Amendment which I have promised to make at the end of the Clause. There are two Amendments. The first I have just read; the second, at the end of the Clause, is as follows:—

"The fact that a non-resident person executes, sells, or carries out a transaction with other non-residents in circumstances which would make him chargeable in pursuance of this Section in the name of a resident person shall not of itself make him chargeable in respect of profits arising from this sale or transaction."

That meets the case, I think. The language of the Income Tax law is extraordinary difficult. It is the fault of the Act of 1842 upon which my hon. Friend so justly casts his strictures. This Amendment secures that where one foreign firm sells to another foreign firm through London or elsewhere no Income Tax will be chargeable in respect of the transaction, except in respect of such profit as the agent, auctioneer, broker, or banker may make here.

In the case of the vast quantity of merchandise, material of all kinds, which is sold by public auction in Mincing Lane, will the agent be liable for the Income Tax of the principal abroad who sends such goods as wool, cotton, rubber, indigo, and so on? I have had forty years' experience, and, so far as I know, he never has been so liable.

I hope the Chancellor of the Exchequer will not accept the Amendment of the right hon. Member for West Islington if it bears the construction which I take it to bear. It appears to me that while a resident person who carries on business here and exports goods on which he makes a profit is certainly liable for Income Tax, it would make it doubtful whether a non-resident person who carries on business in this country is liable.

It is really a point with which my right hon. Friend is trying to deal. We want to prevent the principals of the agent who reside in a foreign country being made liable for Income Tax to the extent of all the supposed profits made here. That would surely be destructive of the export trade. As my hon. Friend said, the agent would not be liable in respect of the supposed profits; but I submit that according to the Clause as drawn he would be made liable. Words must be introduced to exclude the export business. My words do it only indirectly. They leave the non-resident person liable for profits made in the United Kingdom. The reason I put it in that form was that it would cover the only cases which have been given by the Chancellor of the Exchequer as a justification for the Clause.

If the words of the right hon. Gentleman were adopted they would do the very thing he is wishful to prevent. The hon. Gentleman who spoke from the other side of the House asked the Chancellor of the Exchequer whether it was his intention to tax goods imported here and sold and distributed here? He replied, "No."

That was the question put to me by an hon. Member on the opposite side of the House. I would not like to be misunderstood on that point. He was speaking of the wool sales that take place once a week in the City of London.

There is no Income Tax chargeable on these sales. I submit that if the right hon. Gentleman's words are put in they will have the effect of making Income Tax chargeable upon the profits of these sales. That is contrary to what has ever been done before, and it is contrary to what I have ever known done in other countries. It will stop the import trade into this country. The right hon. Gentleman's words ask that the Clause shall read that a non-resident person shall be chargeable in respect of any profits or gains arising from the sale or distribution of commodities within the United Kingdom. In other words, we are to pass an Act that any cargo consigned to this country, and sold through an agent here for distribution here would be then chargeable to Income Tax. I understand the Chancellor of the Exchequer does not mean that, and therefore I shall not detain the House.

The real difficulty is that we are discussing, not the Clause as it stands on the Paper, but a Clause subject to two very important Amendments. It is difficult to discuss the exact effect of the Amendments proposed to be introduced by the Chancellor of the Exchequer when they are not before us. If I understand rightly the Amendment of the Chancellor on this point it will have the effect that any transaction which takes place between two non-residents, through the mediation of a resident, will not be liable to Income Tax; but if the non-resident sells goods here which, when they are put up for auction in this country, be bought, he may be chargeable?

If the Amendment does not have that effect it makes very difficult an appreciation of this policy. Take the illustration of wool. A transaction takes place in London between an Australian wool-seller and somebody who lives in France or Germany, and who buys that wool at auction through an agent in London That transaction apparently is not to be subject to Income Tax; but when that wool, having been put up for auction in London, is sent to Australia, if it happens to be bought by somebody in this country, it does become subject to Income Tax.

That is really not the case. The profit on that transaction might or might not be subject to Income Tax in this country. If that wool sold at the Wool Exchange goes out of the country we have done with it. We have nothing more to do with it. If it is sold at the Wool Exchange to the agent of a foreign seller, sold to a broker as an apparently open transaction, that is another matter. We have to deal with people who try to evade us. Wool is sent in the ordinary way to the Wool Exchange and sold in the open market, but the purchaser is really the vendor in another form. If my hon. Friend knew the devices adopted to escape Income Tax he would be surprised. This is a new law. If my hon. Friend were as familiar as I am with the various devices for escaping Income Tax he would know everything was possible in this matter. There might be a case of this kind where a transaction would become subject to Income Tax. If wool is bonâ fide sold in this country to a manufacturer, merchant or dealer, there is an end of it so far as this tax is concerned, because the profit of that transaction will be brought into account in this country. But if the wool is really only sold for the purpose of evading Income Tax, and the wool thus sold will be handled in this country, and a profit on the resale in this country made for a bonâ-fide non-resident, we shall endeavour to get the tax. We are all familiar with the transaction referred to by the hon. Member for Wandsworth: it has taken place for so many years in this country. This Clause would not touch goods bonâ fide, sold here by auction to a bonâ-fide purchaser.

We are back again from where we originally started. We are desirous of doing something to prevent something else that we are all agreed upon. Why on earth, then, cannot we have a Clause whose sole object is the prevention we seek? We are in this—shall I say?—muddle because the Clause, as it was originally drafted, was intended to do two things. One was to put on certain people fresh taxation of which, I venture to say, everybody in this House disapproves; the other was to prevent people evading taxation, a measure of which everybody in this House approves. Under these circumstances, I would ask the right hon. Gentleman whether he would not do this: it would not hurt him in the least; on the contrary, it will expedite business. To-morrow is the Third Reading of the Appropriation Bill. It is quite impossible that we can do more than get through the whole of the new Clauses to-night, and we shall not then discuss this Bill again till next Tuesday. Why cannot the right hon. Gentleman withdraw this Clause and bring it up next Tuesday as a new Clause, which shall deal with the object which he says he is desirous of achieving? Then the Committee will know what they are doing. Such a new Clause will be brought up after the right hon. Gentleman has gained experience from this discussion in relation to the drafting of it. We shall then have a new Clause before us with a prospect of the discussion taking much less time. I appeal to the right hon. Gentleman not to press us to go on with something we do not understand, and which I do not believe he himself understands. We shall sit here till ten or eleven o'clock and make no progress. I would put to him the desirability of adopting my suggestion, which, I think, is a sensible one.

I hope the right hon. Gentleman will accept the appeal of the hon. Baronet the Member for the City of London. We have now spent a very long time on this Clause, and we have heard admirable speeches from the great merchants who represent the views of the various interests on the effect of this proposed Clause. There would be no loss of prestige if the right hon. Gentleman followed the suggestion to withdraw the entire Clause, which I believe it is impossible to amend. The hon. Baronet has ably pointed out that the right hon. Gentleman intends to do something entirely different to what we are now discussing. The right hon. Gentleman shakes his head. Will he not, out of sympathy for humble Members of the House of Commons, give us a Clause which we can more readily understand? We are surely entitled to have a Clause which means what it says? The Chancellor of the Exchequer has ably conducted this Bill to its present stage. He has never moved the Closure. He has shown courtesy, urbanity, and patience; and I suggest to him that he surely should have regard to what now has been said, and withdraw this Clause. I looked at it with the object of finding out some method of amending it which does not fall in the category of the Amendment of the hon. Gentleman the Member for Dumfries (Mr. Molteno), who made an admirable speech.

I would remind the hon. Member that we are not now discussing the whole Clause. We are dealing with Amendments to the Clause.

I appreciate that point. I was only going to refer to one remark made by the hon. Member for Dumfries which I think applicable to these two Amendments. He quoted Adam Smith as saying that these taxes should come within on" of the four canons of taxation.

The hon. Member is now repeating what he said before, and that is really making the discussion general on the Clause.

With all respect, Mr. Whitley, I have no intention of acting contrary to your ruling, and I will not pursue that phase any further. I shall conclude my remarks by most heartily supporting the appeal of the hon. Baronet, and shall ask the Chancellor of the Exchequer, in view of all he has done, to reconsider his decision, withdraw the Clause, and give us a Clause which will probably commend itself to the whole Committee, and one that carries out his intention.

The Committee does not quite, I think, appreciate the position of the Clause. The Clause has been read a second time. We are now discussing it in detail. Therefore the Clause cannot be withdrawn at this stage.

Nor can it be postponed. The only thing to do is that when I put the Question, "That the Clause be added to the Bill," hon. Members can negative it, and another Clause can be brought up at the end of the new Clauses to take its place. That would have to be an entirely different Clause to the one under consideration, or else we should be discussing the same thing after the Committee had negatived it.

It is very clear that the Amendment of the right hon. Gentleman the Member for Islington would have exactly the opposite effect he intends. If we had a sale at Mincing Lane of a cargo of foreign produce which is going to be bought by a foreigner, and sent abroad to a foreign country, it is quite clear that there would be a sale within the United Kingdom. The Chancellor of the Exchequer says that he intends to exclude from the Bill transactions between foreigners. A sale by a broker in the City of London would be included in this Bill, instead of being excluded. That is perfectly clear, so that I hope my right hon. Friend will withdraw this in order that we may get on with the discussion.

I hope the word "non-resident" will apply to a man described by the right hon. Baronet as a man who does not even have a house, but lives at a hotel.

After what has been said already, it is evident that the difference here is so great that we seem to be getting into deeper and deeper mire, and I really appeal to the Chancellor of the Exchequer to accept the suggestion of the hon. Baronet the Member for the City of London; otherwise we shall continue to debate this Clause for a long time, moving Amendments that may not have due regard to the rest of the Clause, which is long, and has many ramifications.

There is a real difficulty about this. I think I have made a very fair offer to the Committee to put into the Clause three Amendments which appear to me to cover the objections that have been made. Then when those Amendments are in the Clause added to the Bill, we can reconsider the Clause on Report I think that is a very fair offer, and I will endeavour to frame the Clause strictly in accordance with the opinions I have heard in Committee. I may be wrong in that; if so, I will reconsider it on Report, but I cannot negative the Clause now, because I should have to recommit the Bill. [HON. MEMBERS: "No!"] Yes, because I cannot bring it up afresh on Report. We want safeguards in this Clause, but a substantially different Clause will not effect the purpose I have in view. Therefore, I think the only possible way of meeting it, if these Amendments will not cover the point, is to reconsider it again on Report. I would ask the Committee to accept the Clause with the Amendments I am about to move.

I do think a great deal of time would be saved if my right hon. Friend would accept the suggestion made by the hon. Baronet the Member for the City of London. The Chancellor of the Exchequer sees it is extremely difficult for us to consider these three Amendments, and if, therefore, he would indicate that he will allow this question to be postponed with the understanding that we give the thing most careful attention, he would save an infinite waste of time this afternoon. I would really most respectfully appeal to the right hon. Gentleman. Nobody wishes to obstruct him. I have been myself in the greatest difficulty. I have been told that my words would defeat the object I have in view. I do not want to go on with these words; I only want to define it as the Chancellor of the Exchequer says he is going to define it. But the right hon. Gentleman is asking us to accept that in words which we hear for the first time. That is rather hard on us.

I am asking nothing of the sort. Under the forms and procedure of this House we are in certain difficulties. I offered to put in three Amendments which, I think, meet the case. When these Amendments are incorporated in the Clause my right hon. Friend will have an opportunity of seeing them before we come to the Report stage. I offer to my right hon. Friend and others who are deeply concerned in this Clause that between now and the Report I will gladly see and discuss with them, if possible, any necessary Amendments to carry out my publicly declared object. I cannot make a fairer offer than that.

We have now two offers before us—the offer of the right hon. Gentleman, which, personally, I should hope to see accepted, and the offer of the right hon. Gentleman (Mr. Lough) to withdraw the words of the Amendment he has moved. Perhaps as a beginning we had better take that, and then, perhaps, it would be possible to proceed.

I accept the proposal of the right hon. Gentleman on this understanding. It must not be forgotten that if we pass these Amendments it may be said afterwards the Committee agreed to them. It must be clearly understood that the Committee do not agree to these Amendments, but only pass them because the right hon. Gentleman is in a difficulty, and we are desirous of helping him out; that on Report stage we shall have full liberty to discuss the whole matter, and that we are not committed in any way to the Amendments of the right hon. Gentleman. On that understanding I think the sooner we put the Amendments of the right hon. Gentleman and pass to something else the better.

I want to understand exactly where we are. Do I understand the right hon. Gentleman is going to move another Amendment which will deal with the case of sales by brokers in Mincing Lane?

I think so; but, if I am wrong, between now and Report I shall be quite willing to see the hon. Member.

I have been asked by the Port of London for an assurance from the right hon. Gentleman that the transhipment trade will be cut out of the Section!

What I suggest is this: If we go to the Report stage we will not be able to discuss the thing at all as we do in Committee; we shall only be able to speak once.

Amendment, by leave, withdrawn.

I understand that hon. Members are not at this stage proposing to move their Amendments.

On a point of Order. Would it not be possible to have the next Amendment—to leave out "whether directly or indirectly"—discussed] It seems a point of great substance. Are we not to have a chance of saying a word upon it?

I beg to move, in Subsection (2), to leave out the words "whether directly or indirectly."

I suggest, with great respect, that those words are much too wide. Practically any amount of charge might be made against agents who bought anything in this country if those words stand in the Bill. If the words are left out the Bill would read, as it seems to me, just as strongly as now for every practical purpose. It appears to me the words are irrelevant and unnecessary.

I really do not think my right hon. Friend is meeting me. I have done my best to meet him. I put the responsibility entirely on my right hon. Friend. These words are put in not to oppress the taxpayer, but in order to prevent evasions. He may be right. I cannot say that the words are essential to the Clause; they are words put in to avoid evasions, and if the right hon. Gentleman takes the responsibility of moving the Amendment, after all that has passed, I will accept it. [HON. MEMBERS: "No!."]

Question, "That those words stand part of the Clause," put, and agreed to.

I beg to move, in Subsection (3), after the word "person" ["where a non-resident person carries on business"], to insert the words "not being a British subject, or a British Dominion or Colonial firm, or company or branch thereof."

I only rise to point out that if we insert the words "or company," the effect will be that, in principle, foreigners who are non-residents have only got under the company law to incorporate themselves as a company in this country and then the whole of the proviso of this Subsection with regard to non-resident persons will not be effective in respect of such company, although it may be composed of the very people whom the right hon. Gentleman wishes to bring within the purview of his taxation. Furthermore, these words follow the word "person." It is difficult to imagine a person being a firm, but I imagine that a person cannot be a company. I understand that a company by being incorporated becomes a person. If the right hon. Gentleman brings in a company as being exempt, I feel pretty sure he is weakening the Section, and opening a loophole to evasion of the proper taxation chargeable upon profits earned in this country.

I rather think if the Chancellor of the Exchequer refers to the Interpretation Act in general use he will find that "person" includes "corporation." I wish to know whether the words used in the Amendment, "British Dominion or Colonial firm," is of necessity sufficiently comprehensive. My impression is that they are new words. The definition of a firm as a Dominion firm is a new expression, and I do not remember it anywhere. I am not sure that "British Dominion or Colonial" will include the whole of the British Empire, and perhaps the right hon. Gentleman will refer that point to his draftsman.

Yes, I will. I am much obliged to the right hon. Gentleman, and I will refer it to the draftsman. The use of the term is new, and I will agree to consider that point.

Question, "That those words be there inserted," put, and agreed to.

I beg to move, in Sub-section (3), to leave out the words "or otherwise," and to insert instead thereof the words "and to the substantial control exercised by the non-resident over the resident."

The Chancellor of the Exchequer has told me that those words will meet the difficulty, but I would be very glad if we could have some further explanation. As the Clause stands, it says that the non-resident person shall be chargeable "owing to the close connection between the resident and the nonresident person." I think that opens a very wide door, and I am much obliged to the right hon. Gentleman for proposing to omit the words "or otherwise." The words which the right hon. Gentleman suggests should be put in are very difficult to discuss here without having them on the Paper, but if he will assure us that they cover my point I will not persist in my Amendment on the Paper.

I think the words "substantial control exercised by the non-resident over the resident" bring up many cases which are familiar to us all. The non-resident holder in a British company, or the non-resident, may be the principal partner in a firm which carries on business here and substantially controls the firm. We are putting in the word "substantial" in order to avoid one rather obvious means of escape. Whether we shall achieve our object or not I cannot say, but I think the words are very clear.

Will this Amendment leave out the word "or" and put in the word "and," so that there will be two commissions?

Yes, there are two commissions, and in practice we always intended that.

Amendment agreed to.

I beg to move, to leave out Sub-section (4).

I think the Committee will agree with me that this is a serious Amendment. The point which is covered in this Sub-section has not been mentioned by the Chancellor of the Exchequer. It enables the Income Tax Commissioners, if there is any difficulty in obtaining the amount of the profits, to imagine those profits and charge a percentage on the supposed amount of business.

Perhaps they do, but it seems to me that you are proposing a novel principle, for it allows the Income Tax Commissioners to levy what tax they please, and I thought the levying of taxation was one of the great functions of this House. If the Commissioners are to settle the percentage of profits and the amount of business, it is really going a very long way, and I move this Amendment with the object of allowing the Chancellor of the Exchequer to give some explanation.

Owing to the course of business between the principal and the subsidiary firm, let us suppose the latter, which is liable to the tax, shows no profit. When it shows no profit on the ordinary basis of estimating profit, then some new basis must be adopted, if it is to show any profit at all. We suggest that a percentage on the turnover should be the basis, and I think that is a fair proposal. We are not proposing to tax people on an outrageous percentage basis, therefore I think the right hon. Gentleman's argument is quite unintelligible. If we are to tax, and it is admitted that the ordinary method of estimating profits will not apply, then we must adopt some other method.

Why not adopt the method which is used in France and elsewhere, under which a foreign firm could allocate a certain amount to the branch in England, and you may insist that they should so allocate?

That would turn out to have precisely the same result. I put it to the Committee that what we are proposing is a fair method of estimating the profits, and some method has to be adopted.

I would like to ask how you can assess a non-resident person. I am sure this Section will lead to difficulties with Colonial manufacturers who send their products to this country, and it will probably lead to retaliation on the part of America, who wall try to tax our manufacturers who send their products to America. I will sure you will have great difficulty in putting this proposal into practice. How can you find out what is a fair profit—

Really there is nothing of the kind proposed in this Clause, and consequently all these speculations are pure idleness.

The Chancellor of the Exchequer is quite right, because this is done in Colonial banks who carry on a separate business here, and in the case of foreign banks. I admit that it is done in a more or less happy-go-lucky fashion, but it seems to satisfy both parties, and the same process will go on.

I think this is about the fairest proposal in the Bill. It is thoroughly fair and right, and based on experience. All the corn merchants doing business in this country, who have been buying and selling in the Argentine, have to pay a tax on the same principle as this; so that in addition to the Income Tax they also have to pay a tax in Argentina on every quarter of wheat they sell. It is a fair and easy proposal, and I commend the Chancellor of the Exchequer for having taken it in hand and inserted it.

Question, "That the words proposed to be left out stand part of the Clause," put, and agreed to.

I beg to move, at the end of Sub-section (4), to insert the words,

"Provided that for the purposes of this Section of the Act the term business shall not be held to apply to the sale or purchase of goods which are imported into this country and subsequently re-exported within the space of one year."

7.0 P.M.

I would like to point out to the Chancellor of the Exchequer that there are two classes of goods which are re-exported. One class comes here sold already. It is then retranshipped and sent away. There is no actual sale in this country at all, and the goods simply pass through the country by being imported, and they are exported afterwards, the broker here having arranged by letter with the foreigners in the two countries concerned. You can easily deal with that class, but it is not quite so easy to deal with the second class where people send their goods here to be warehoused and sold. They may be warehoused and sold for export, but they have to be warehoused because the sales are only quarterly in some cases. They have to be warehoused sometimes for longer than a quarter and as long as twelve months, waiting a favourable market, but they are always exported. Will the right hon. Gentleman try and cover that case as well?

I beg to move, in Subsection (5), to leave out the words "twenty-one days," and to insert instead thereof the words "four months."

The object of this Amendment is to give more time. A non-resident may be in a place where it is quite impossible for him to be communicated with in anything like twenty-one days. I do not know whether this will still have application to our Colonies, but if it will the post out alone is thirty-eight days, and you may not happen to catch the post.

That is barely enough. Twice thirty-eight is seventy-six days, and three months would only just cover it.

There are many cases where the postage is fully six weeks with only a fortnightly mail. You must have time to look over the mail, and consequently four months is the shortest possible time.

Very well, I will accept four months.

Question, "That the words 'twenty-one days' stand part of the Clause," put, and negatived.

Words "four months" there inserted.

I beg to move, at the end of the Clause, to insert the following new Sub-section:—

"(6) The fact that a non-resident person executes sales or carries out transactions with other non-residents in circumstances which would make him chargeable in pursuance of this Section in the name of a resident person shall not of itself make him chargeable in respect of profits arising from those sales or transactions."

I am speaking for others as well as myself, and I am trying to meet my right hon. Friend. I have an Amendment on the Paper which I think, to some extent, covers the same ground. At any rate, I think the difficulty which I try to meet by my Amendment, which of course is not drawn in terms of art, may be covered by the Government Amendment. The Chancellor of the Exchequer told us that words would be introduced to exclude from the charge proposed in the Bill the legitimate agent who is over here buying, who is staying a short time, who is not permanently resident, and who has no business in this country, and I think he indicated that his words would effect the object I have in view in my Amendment, which is to make it clear that a casual person just coming here to buy goods shall not be subject to all the provisions of the Clause.

These words mean that the non-resident who sells his commodities through this country to another nonresident is in no circumstances liable.

If he sells through his agent here to another non-resident, then the first non-resident is in no circumstances liable. The agent, of course, pays upon the agency.

I should like to ask whether that includes the case of a nonresident who sells through an agent here to an English firm. Does the agent have to pay merely upon his commission or upon the so-called profits of the non-resident?

If the sale by the agent to the English firm is what we will call— and we shall all understand—a bonâ-fide sale, then the agent will only pay on his agent's commission. If it is not a bonâ-fide sale, and he sells to the English firm not at the true price, then he will be called upon to account for the profit which he makes.

The right hon. Gentleman will put words in on the Report stage to carry that out?

I am not sure that they are not in now. That is my intention, and the Clause shall be made to meet that point.

Will the Clause enable the right hon. Gentleman to tax the man who is non-resident, who has not even a house or an office in London, and who stays at an hotel? We may all expect, when the War is over, that this country will be deluged with foreigners of every kind coming over here to sell their goods. They will have neither a house nor an office, and while they are here they will live at an hotel. I sincerely hope that the Clause will enable the Income Tax authorities to charge persons of that kind. These people come here because of our import and export facilities; they get paid for whatever business they do, and they are able to get gold the next day. Why should they be able to carry on business in the City of London without being called upon to pay Income Tax? I hope that the Chancellor of the Exchequer will be able to tell us that this Clause will enable the Income Tax authorities to tax persons of this kind.

Question, "That those words be there inserted," put, and agreed to.

Clause, as amended, added to the Bill.

I want to mention a point which has not been covered in the Debate, and to remind my right hon. Friend that the business which comes to the City of London does not always consist of commodities which can be sold by auction. A great deal of insurance business comes in the form of reinsurance contracts, and we are particularly anxious that there should be no difficulties put in the way. The right hon. Gentleman said that he was prepared to meet anybody who would come and see him, and all I rise to ask now is that if the insurance companies would like to put their case before him will he see them?

It is important for this reason: The great bulk of the reinsurance business in the past has been done in Germany. That tremendous company, the Munich, is an entirely reinsurance company, and they got the bulk of the Russian reinsurance business as against the companies of London. We have every reason to think that we shall not have competitors from Germany again, and we are hoping that the great Russian companies will come to the London market. If the receiving companies here are to be involved in large payments for Income Tax it may keep some of that business away. Very often they are friendly companies who exchange business one with another. The agreement may be that each company shall cede to the other a certain proportion of its surplus. I feel quite sure that the right hon. Gentleman does not want to place any difficulties in the way of those who are connected with the insurance business of London and who are anxious to make London again the centre of the reinsurance market. If the right hon. Gentleman will say that he will see us, if we want to make representations to him, I shall be perfectly content with that assurance.

I want to draw attention to the use of the word "branch" in this Section. What does the right hon. Gentleman mean by the word "branch"? It is not to be found in the Act of 1899 or any previous Act, and it seems to me that the use of the word in this Section ought either to be defined or a more expressive word used. The word "branch" was used primarily to indicate a vegetable substance, and it is used in theology, where it means a lineal descendant. What does it mean? Is it a man who has an agent acting for him in another country? Is that agent a branch? Is a firm capable of having a branch? Is a company capable of having a branch? What does it mean? I do not quite know, and I do not want to speculate, but I implore the right hon. Gentleman between now and the Report stage to consider whether the word "branch" is a welcome novelty, and, if so, whether it should not be defined, or whether it is an aggravation of the already deplorable language of the Income Tax Acts.

Question put, and agreed to.

Clause, as amended, added to the Bill.

NEW CLAUSE.—(Excess Mineral Rights Duty.)

(1) Where the amount payable to any person as rent in respect of the right to work minerals or of any mineral wayleaves (in cases where the right to work the minerals and the mineral wayleaves are not part of the assets of any trade or business) 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 (in this Section referred to as the accounting year) exceeds the pre-war standard of that rent, there shall be paid as an addition to any Mineral Rights Duty payable or paid, either directly or by deduction, by reference to the amount of the rent paid in that working year, by that person (in this Section referred to as the person liable) an amount equal to fifty per cent. of that excess.

(2) The pre-war standard of rent shall, for the purposes of this Section, be taken to be the average of any two of the three last pre-war rent values to be selected by the taxpayer, and in cases where the minerals have not been worked or the wayleave have not been let throughout the three years by reference to which the three last pre-war rent values are to be calculated, or for any other other reason there are no proper data for ascertaining the pre-war rent values, shall be taken to be such amount as may be fixed by the Commissioners of Inland Revenue, having regard to the data afforded by the working and price of minerals in like circumstances, subject nevertheless to the same appeal as that to which the assessment of duty by the Commissioners is subject under Part I. of the Finance (1909–10) Act, 1910.

The pre-war rent value shall, as respects each of the three years immediately preceding the first accounting year, be taken to be the sum to which the rent for the accounting year would have amounted in each of those years if the rent, so far as variable according to price, were based on the average prices governing the payment of the rent in that year.

(3) Any amount payable in any accounting year by the lessee of minerals or wayleaves to a superior lesson as rent in respect of the minerals or wayleaves shall be treated as a deduction from the amount payable to the lessee as rent for that year, and in computing the pre-war rent values a corresponding deduction shall be made on account of any such rent.

(4) Any Increment Value Duty payable annually under Section twenty-two of the Finance (1909–10) Act, 1910, shall, when paid, be treated as a deduction from the rent payable to any person in the year in which the duty is paid, and a corresponding deduction shall be made in computing the pre-war standard with which the rent for that year is to be compared.

(5) Any duty payable under this Section shall be assessed by the Commissioners of Inland Revenue on the person liable, subject to the same appeal as that to which an assessment of duty by the Commissioners under Part I. of the Finance (1909–10) Act, 1910, is subject, and shall be recoverable as a debt due to His Majesty from that person.

(6) Sub-section (3) of Section twenty of the Finance (1909–10) Act, 1910, shall extend so as to authorise particulars to be required of any lease of minerals or way-leaves, and as to the sums paid or payable thereunder, and of such other particulars as to the minerals or wayleaves as the Commissioners may require for the purpose of this Section.

(7) Expressions to which a special meaning is attached by Part I. of the Finance (1909–10) Act, 1910, shall have the same meaning in this Section.

Clause brought up, and read the first time.

I beg to move, "That the Clause be read a second time." I do not think it necessary to say anything in regard to it. It runs on the same lines as the old Mineral Eights Duty of 1909–10.

Question put, and agreed to.

Clause read a second time.

I beg to move, in sub-section (1), to leave out the word "amount" ["amount so payable in respect"], and to insert instead thereof the words "total sum of money."

I do not know whether it is the intention of the Government, but the effect of this Clause, as drawn, will be that the receiver of a royalty may be charged for excess profits, when, in fact, he has had no excess at all, but has suffered a decrease. Where the royalty is based on the price and rates per ton, which is a varying quantity, it follows that the amount received as rent depends upon two factors, one the rate per ton, and the other the quantity of minerals worked. It may well occur that the lesser may have an actual decrease in the total amount received as compared with the year in which the prices and rates per ton were lower, and this would be brought about by the operation of the other factor—namely, the quantity of minerals got. We will suppose that in 1913 the quantity got was 100,000 tons, and in 1915 75,000 tons. The royalty in the first case was 7d., and in the second year 8d. The actual rent received in the earlier year, the pre-war year, was £2,906, and in the later year, the accounting year, it was only £2,500. There would consequently be a deficiency instead of an excess.

How does that come about? It comes about through the old draftsmanship habit of imagining things to have happened which have not happened. If hon. Members will refer to the second paragraph of Sub-section (2) of this new Clause, if they can understand it at all, they will see the root of the mischief which this Clause, perhaps unintentionally, contains. What is there there? You there have a method proposed of imagining the receipt in the pre-war year instead of getting the actual receipt. You are asked to imagine it was something which it was not. You are asked to imagine that the receipt in 1913 was the amount received in 1915, measured as it would have been if the royalty at the lower rate of 1913 had been at the higher rate of 1915. That entirely omits and ignores the possible operation of the other of the two factors which necessarily determine the rent received.

The effect of the Sub-section would be this. Imagine that in 1915 the output was 100,000 tons and the royalty 8d. The resulting rent would be £3,333. The Clause then says you are to go to the earlier year which is your datum line and measure the extra profit. You are not to look upon what was actually taken in rent in 1913 or 1914, but you are to look upon as rent what would have been received in 1915 if the rate per ton in 1915 had been in fact the rate per ton in 1913 or 1914. That is entirely fictitious. It supposes that an equal amount was actually received in all three years. I have supposed that in 1915 you get £3,333. Assume that 100,000 tons were raised in 1913 and in 1914, and that in 1913 the royalty was 6d. and in 1914 it was 7d. You then get the actual rent received, £2,500 in 1913 and £2,916 in 1914. Under the Sub-section that will give you an average of £2,708. The excess profits in 1915 would, therefore, amount to £625, which is the difference between £2,708 and £3,333, and would be chargeable under this Clause. The Committee will observe I have assumed for the purpose of this calculation that there have been an equal amount of minerals worked in all three years. But take a case which this Clause entirely ignores. Suppose the output in 1914, instead of being 100,000 tons, had been 150,000 tons. The effect would be instead of having an excess profit chargeable of £625, there would actually be a decrease of £730, and the consequence of this wording would be to make the receiver of the rent chargeable with an excess profit, although he had had to submit to a decrease. I do not know whether that is the intention of the Clause. I may be told it is not the effect. It will take a good deal to persuade me it is not. But if I am told it is the effect, and the intention as well, then I think the House will be curious to hear why, in this particular case, receivers of rent or profits are subjected to this extraordinary and entirely abnormal treatment.

The right hon. Gentleman has brought before the Committee a very complicated and intricate matter. I would like to deal with it by comparing the principle of the Clause as framed with the principle on which the right hon. Gentleman would have us go. The Clause proposed by the Government charges an excess Mineral Rights Duty on royalties which vary with the price of minerals. The Clause pays no regard to the relative amount of the aggregate sum payable in the liable year in comparison with the previous year. It takes no account of that, simply because the royalties depend not only on the price of minerals, but also on the amount of minerals got out in any given period, and that is a quantity which fluctuates from time to time and is in accordance with the amount of minerals which the lessee finds it convenient or desirable to work. It may happen in one year a comparatively small amount of minerals is obtained; but even so, although there is a diminution in the amount of minerals worked, the rent received, owing to the increase in prices, may be bigger than, or nearly as big as the rent received in the previous year. But the fact that so small a quantity of minerals has been worked provides the lessor with the certainty of a greater amount of royalties in the future, because he still preserves the rights over minerals at his disposal. There is therefore, I think, in the excess price of minerals which he has worked, and the royalties which are increased to those minerals, a proper subject for taxation.

But if you frame your tax upon the consideration that you have no right to take into account the increase or decrease in the amount of minerals worked, simply because the increase or decrease exists in capital value, you cannot take into account the average. We might have proceeded on another principle. We might have taken the gross receipts, and if we had done that we should have gone not on the principle of the Mineral Rights Duty as it now exists, but on the principle of the Excess Profits Duty, and if we had done that we should have had to give back or make deductions in respect of the amount of minerals worked, because it would have involved a depreciation of capital comparable with that for which we made allowance in the Excess Profits Duty. The real principle of the Clause as it stands is exactly the same, so far as the aggregate income is concerned, as in the case of the Excess Profits Duty. We do not look for Excess Profits Duty to the income enjoyed by the individual, but we look to the profits made by the business. It may be that the individual may have received increased dividends from one company and decreased dividends from other companies, so that he is worse off in that year in which part of his income has paid Excess Profits Duty than in the other years. The whole principle of the Excess Profits Tax pays no regard to the individual. The money may have been distributed among a large number of people in different conditions and circumstances, and I submit if you allow, in the case of the Excess Mineral Rights Duty, the individual to set the profits against the losses you will increase the anomaly.

Suppose we accept the right hon. Gentleman's Amendment. He made out one particular case. I will deal with smaller figures. We are considering aggregates now. Let us suppose that under the prewar standard the owner of the mineral rights received a royalty of 1s. on 10,000 tons. That would represent £500. If in the War period 1,000 tons only was worked and he received 10s. per ton, that also would give £500. Under the right hon. Gentleman's proposal he would pay no Excess Mineral Rights Duty at all, because the total revenue was the same as before, although, as I have pointed out, he would have 9,000 tons more minerals to work at some future time. Take another case which is almost identical. Take a case where 10,000 tons were worked during the pre-war period at 1s. a ton. Let us suppose that during the War period this same man received 10s. on 1,001 tons, that is £500 10s. He is practically in the same position as the other man who has no excess profits at all. But under this proposal in the case of the 1,001 tons the excess profit would be calculated at 9s. per ton, and the difference between the prewar price and the War price would be £450 9s. Therefore, although the man only received 10s. more income, he would have to pay a duty of £225 4s. 6d. I think that my figures and calculations are accurate. I suggest to the right hon. Gentleman that his scheme is not better than ours, and that because of the difficulty of making the proper allowance for depreciation or appreciation of the capital value of the mines we had better not look to individuals but to the transactions, to whomsoever the profit goes, just as we have done in the case of the Excess Profits Tax.

In this Clause there is a certain amount of unfairness which one may trace to all sorts of conditions and all sorts of instances in this Bill, but a certain amount of unfairness which must need occur in any new taxation of this sort. I thought there was one principle in this Bill, and that the Chancellor of the Exchequer founded his arguments upon it—it was that the people who got more money this year were to pay extra taxation. This Clause does not seem to be founded upon that principle. It is very regrettable that the Government have not taken the increased profits whether they come from quantity or price, instead of taking only those profits which come from price. It would have been a very much more satisfactory method. It would have brought in a considerable sum of money, and I hope, even if it is too late to revise the principle of this Clause this year so as to bring it into accordance with the Bill, that when the Government have had an opportunity of seeing what they have missed by the increased quantity tax, there will be legislation to put the increased quantities that will occur in many cases of royalties under this special taxation, as well as the increased prices that are received.

I hold no brief for the mineral landlords. I am in the unhappy position of having to pay royalties, but I must say I do not think it is a just principle to charge on the excess royalty and not on the excess profits of the aggregate royalties received as compared with the pre-war standard year. My right hon. Friend has said that you have to take into consideration the fact that during the accounting year a certain colliery or mine might have worked a lesser quantity, and therefore that that quantity is available to be worked in future years. That is perfectly true, but it may be worked at so much less royalty than was paid in the pre-war standard year. Therefore that is not a very good argument. It seems to me very hard to have to pay on the excess royalty when the aggregate of royalties received is considerably less than was received during the pre-war standard year. The right hon. Gentleman tried to make out a case of a 10s. royalty. That was a very exaggerated case so far as coal is concerned. The Duchy of Lancaster is one of the biggest sinners in the matter of royalties. Their royalties are very high, but they never charge 10s. a ton; they run to 1s. 6d., which is pretty high, but there are a good many which are only 4d.

I was not posing as an expert in the coal trade or upon royalties, but if you divide my figures by any sum, or multiply them by any sum, you come to the same result.

The case put before the Committee was that of a 10s. royalty, which is a very extravagant case. In the interests of justice I would appeal to the right hon. Gentleman to consider whether he cannot meet this Amendment, which is a very fair one.

As the Financial Secretary tripped once in his argument but recovered himself, he will not be surprised if I say that I find some difficulty in following the details of the Clause and the Amendment. I should like to know from him quite clearly whether he takes all the principles applied to the case of other excess profits and applies them here, and that no more severe draft is made upon the owners of mineral rights? I ask this question because it has been my fate in this House to hear the owners of mineral rights condemned as enemies of the human race, and treated as if they were hardly God's creatures at all. My right hon. Friend just now rather unfortunately used the figure of 10s., whereas if he had used the figure of 1s. that would have been the top figure which applies to the case. I know it was only used for the purposes of illustration, but that fact induces me to ask him, Is the effect of this Clause to impose upon mineral rights owners any more severe burden in respect of this tax than is imposed elsewhere upon other owners?

The difference between my two right hon. Friends is this, that the right hon. Gentleman the Member for the Hallam Division of Sheffield (Mr. Stuart-Wortley) wants to charge on quantity, and, as I understand it, the Government propose to charge on the increase of the rate of the price.

The right hon. Gentleman asks why should not other people do that. They do, because increased stock may be treated as part of the profit, and Excess Profits Tax may have to be paid on it. I have had something to do with mining royalties. As a rule there is a fixed period for which they run, and a fixed quantity to be taken until the mine is exhausted. You might have during a series of years to come 25,000 tons more to win, and that being so, you have a less actual royalty to pay this year. The Government's idea is that whereas you got 6d. last year for whatever was won from the mine, you are getting 8d. this year, and I take it they want to charge excess profits on the difference in the rates that are received.

The right hon. Gentleman's answer was practically a confession of his fell intention. He substantiated his case by trying to imagine a royalty of 10s. I might claim that as one argument against him. He says he is going on. He says, further, that if I am a mineral royalty receiver, I have a certainty of a future profit. This tax is supposed to be applied to increased profit made during the War. If I do not get it during the War, shall I get it after the War? The probability is I shall not get it until a long time after the War, because not until long after the War will the case occur which has produced both an increased output and an increased royalty. The right hon. Gentleman asks me to pay an Excess Profits Tax upon a profit which has really diminished in quantity.

I cannot see the justice of charging on the increased royalty any more than I can see why you should charge on the increased freights of steamers, or of any commodity the price of which has risen. They are not charged on the increased rate; they are charged on the increased profits. In selling coal they do not charge on the increased price, but on the increased profits, even if the tonnage had been the same or more.

Question, "That the word 'amount' stand part of the Clause," put, and agreed to.

My next Amendment is consequential, and my third Amendment is a window-dressing Amendment, which makes plain my intention. As the right hon. Gentleman says that his intention is in direct opposition to mine, I shall not move it.

Clause added to the Bill.

NEW CLAUSE.—(Power of Treasury to Issue Securities Free of Taxation.)

The Treasury may, if they think fit, during the continuance of the present War and a period of twelve months thereafter, issue any securities which they have power to issue for the purpose of raising any money or any loan with a condition that neither the capital nor the interest thereof shall be liable to any taxation, present or future, so long as it is shown in manner directed by the Treasury that the securities are in the beneficial ownership of persons who are neither domiciled nor ordinarily resident in the United Kingdom, and securities issued with such a condition shall be exempt accordingly.

Clause brought up, and rend the first time.

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

This Clause deals with Income Tax chargeable upon securities issued by the Government during the War. When the Anglo-French Loan was being negotiated it was found that, in order to make it attractive to the Americans, it would have to be free of Income Tax. We desire by this Clause to empower the Treasury during the War to grant a similar exemption to foreign holders of future issues, whether they are issued abroad or here. In the present position of trade and the adverse balance which now exists, and in the existence of a large number of attractive investments to foreigners in their own country, it is not only highly desirable that we should get foreigners to consent to lend their money, but it is highly desirable that we should offer them attractive terms in order to make them do it. I most seriously commend to the attention of the Committee that the charge of Income Tax upon these securities has, in the loans we have already raised, been a serious bar to obtaining subscriptions from abroad. We have received representations upon all sides that if we can allow a foreigner not to pay an Income Tax to maintain this country we shall receive in the future large and much-needed subscriptions.

I believe that what the Financial Secretary to the Treasury has said is entirely correct. Take the case of the last Loan at 4½ per cent., issued in this country. If that could have been issued so that it could have been held by American and other subscribers in neutral countries, and had been free from Income Tax, I believe a larger amount of that Loan would have been purchased. The fact that the Tax is one which is on an ascending scale pro tanto makes it more difficult for a foreigner to have anything to do with a Loan issued in this country. If it were on a fixed scale of 6d., it would be a very easy matter to sell the Loan. We shall only be following the practice of America. If any American loan is held by a non-resident holder, and a certificate is attached showing that the loan belongs to a non-resident holder, no American Income Tax is charged. I put a question, some time ago, to the Chancellor of the Exchequer on this very point and was told that the law was that Income Tax must be charged on an English Government security, even if the holder were nonresident in England. I am quite certain the country will be all the better for the Clause which has just been moved, and I hope the Committee will support it.

Question, "That the Clause be read a second time," put, and agreed to.

Clause added to the Bill.

NEW CLAUSE.—(Provision as to Income Tax to be Charged on Pay of Sailors and Soldiers.)

Income Tax shall be charged only at the rate mentioned in Section three of the Finance Act, 1914, upon the pay of sailors and soldiers serving in the armed forces of the Crown, and none of the provisions of this Act or of the Finance Act, 1915, with regard to Income Tax shall apply to deductions from the pay of such soldiers and sailors unless they are possessed of income independent of their pay amounting to one thousand pounds per annum or more, in which case the exemption from liability to be charged Income Tax upon their pay at the increased rates provided in this Act and the Finance Act, 1915, shall not apply.

Clause brought up, and read the first time.

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

I rise to move the first of the private Members' Clauses. I am glad to have that position on the Paper, because I am quite sure there is no Clause, of the very considerable number which private Members desire to move, which will have more complete support from the whole of the civilian population throughout the country. I do not believe there is a man who is unable to take his part in the actual fighting in the War who does not feel that it is a monstrous injustice that we should charge, on a very large proportion of the actual pay we are giving to our soldiers and sailors, Income Tax at the special rates which have to be imposed for war purposes. The Clause, as I have put it down, is a very simple one, although I admit I have introduced into it one element which was not introduced in the still simpler one I moved on the last Finance Bill. I have endeavoured to meet the point which has been made from the Treasury Bench on more than one occasion, and which, I think, was clearly indicated by my right hon. Friend (Mr. Chaplin) on a recent occasion, when he said he was not sure that officers would appreciate any differentiation between them and the civil population in the matter of Income Tax. I feel sure that he was thinking of that very small minority of officers who happen to be in the possession of considerable independent means. That point was made when the matter was first discussed this year, I think in February, by the Chancellor of the Exchequer, and therefore I have put in words expressly to exclude from the remission of the additional war Income Tax all officers who are possessed of incomes independent of their pay amounting to £1,000 per annum or more. I recognise that that would introduce administrative difficulties which the more simple form of simply remitting the Income Tax in all cases from officers' pay would not be liable to. I need not say that if that is the only objection that the Treasury have to my Clause, I shall be delighted to omit all words after the words "soldiers and sailors." Therefore, in effect, we should leave them to pay the Income Tax they were paying at what I may term the pre-war rate of Income Tax. which provided an integral part of the revenue of the country for all purposes as a peace basis which, I think, is fairly and properly chargeable to every subject, whether in the Army or Navy or in the civil class of life, because they all reap to some extent a corresponding benefit from the expenditure.

Let me deal with two lines of argument which have been put forward by the Financial Secretary to the Treasury on a previous occasion. We have had it pointed out to us several times by him and by the Chancellor of the Exchequer that they cannot agree to this proposal, or anything like it, because it would cost too much, and on the last occasion when I raised this question, the right hon. Gentleman said that, far from it being a question of great financial importance:— tributing it over the civil population it would add about one-fifth of a penny to the Income Tax. I have not the very slightest doubt, if the question could be referred to the civil population of the country, to the Income Tax paying classes, whether they would rather see very heavy deductions made from the pay of soldiers and sailors—and deductions would be made from warrant officers in the Navy under the lower exemption limit for the first time while we are at war—or whether they would pay one-fifth of a penny more Income Tax, as to what their decision would be.

On that question of the warrant officers in the Navy, I have got a list of the pay and allowances of some junior ranks of naval officers and warrant officers. I will give the Committee one or two. Take the case of sub-lieutenants. Their pay is from £63 17s. 6d. to £130, and the additions are from £36 10s. to £45 12s. The pay of a mate is £146 a year. The pay of commissioned warrant officers varies from £182 to £200. All these men are either brought in as Income Tax payers by this Finance Bill for the first time, or else, owing to the lowering of the exemption limit, a very large additional claim is made upon them for Income Tax quite apart from the increased rate of Income Tax which is imposed by this Bill. It seems to me quite clear that the argument that has been used that this is a question of raising the pay of officers and warrant officers if we are to give them any relief from this Income Tax, is really an absolutely untenable argument, and I hope it will not be put forward to-day. Here I have given concrete cases of non-commissioned officers and officers of junior rank in the Navy who, owing to the operation of this Bill— the lowering of the exemption limit— would be brought in as Income Tax payers for the first time. I ask the Chancellor of the Exchequer if he is going to tell me in answer to that that if he accepts my Clause he will be raising the pay of these men. It is not possible that he could make any such contention.

I would next point out that with regard to married officers, particularly the officers of junior ranks, they have in every case got to pay the cost of an establishment ashore and they do not get any adequate allowance for that purpose, and the general increase in the cost of living, of which we have heard a great deal in connection with the claims of labour, falls excessively hardly upon them, and at that very time when their home establishment ashore is costing them more you are going for the first time to make this huge reduction from their pay. The case of officers in the New Army is even harder. Many of these men have given up quite lucrative posts-professions, businesses, and the like—and they have had to consider, before they accepted a commission, whether the small pay they would get would actually, so to speak, keep the wolf from the door and provide sufficient sustenance for their families to enable them to do without the whole of their earnings, which are in many cases sacrificed owing to their taking on military duties. Then the Chancellor of the Exchequer, while raising the Income Tax all round to pay for the War, says to these men, "Although you made your calculation fifteen months ago when you joined the Army, we are now going to take another 1s. 6d., or whatever it may be, in every £l of your pay for Income Tax." Of course, that upsets the whole calculation and they find themselves, or rather their families do, in even more straitened circumstances than they would be if it were not for the imposition of this additional taxation. It has been pointed out that the case of officers killed in the War, so far as Death Duties are concerned, has been met. I remember the Chancellor of the Exchequer now the Minister of Munitions saying, when that question was raised last year, that the Government had no desire to make a profit out of the sacrifice of life which is entailed in this War, and to some extent it is met. I do not want the Chancellor of the Exchequer to tell us that it is entirely met, because it is not, because the Death Duties are only limited in respect of the anticipation of life of each individual man who is killed calculated upon the 3 per cent. tables. I pointed out at the time, when money was cheaper than it is now, that the calculation on the 3 per cent. tables was really absurd. There was no possibility of money being worth only 3 per cent. during the currency of the War or for many years after, so the Government is still making a profit on everything over and above the 3 per cent. tables on which they remit those. Death Duties. So that makes one argument the more for not making this excessive claim on the pay of those who survive, or while they survive, on their very modest incomes in the form of pay.

Only one other argument has been put forward that I want to deal with. It was said that it was not fair to make a remission of taxation in respect only of those soldiers and sailors whose pay was above the Income Tax level. There is really nothing in that argument whatever. Take the case of any private who is serving abroad. His wife has a separation allowance in many cases quite equal to the pay that he was receiving in civil life. The family have not got the great expense— and it is a very large part of any working-class family's expenditure—of keeping the man at all. He is provided in full. I am not grumbling at it. I am merely pointing out what is the actual fact. He is provided with clothes, and if he is abroad he does not pay any Tobacco Duty, which is a very large part of his indirect taxation, and most of his smoking is actually provided free by a grateful nation. When it is all reduced to its last residuum, we find that a little additional taxation on the tea consumed by his wife at home is the only real additional contribution in the form of War taxation that he has to pay at all. The case is not analogous to the case of officers in any kind of way.

8.0 P.M.

One word more with regard to the main argument on which the Chancellor of the Exchequer has always relied—namely, that we must not raise this question because we ought to raise it, or some analogous question, upon the Army Estimates, whenever we have the Army Estimates before us again. We ought, then, to ask for an increase of pay to all ranks so that the extra Income Tax may be met. I do not think that is so. I say we are not asking for any increase of pay at all. We are simply asking that the pay shall not be diminished, and violently diminished, in the course of the War. I believe that this is the proper time to raise the question, and the proper way to do it is by exempting from the special war taxation the pay of officers. Compare the expenditure of the War Office and the Admiralty. A statement regarding naval expenditure was made within the last few days in this House by the late head of the Admiralty (Mr. Churchill). He said that they were able to make immense provisions, which, without Treasury control, he was happily able to finance. I am delighted to think that they should be able to provide everything in the way of ships and guns that is necessary, but we all know, both in regard to the Army and the Navy—I do not say that to some extent it is not inevitable—that there is enormous expenditure in many directions, upon a lavish scale, for which the country gets no adequate return. When you consider that, it really is monstrous that after all this extravagant expenditure the officers themselves should be asked to make a large contribution out of their pay, when infinitely more money could be saved every month, and I believe every week, by a little application of reasonable economy, than the small amount of £625,000 with which my Clause deals. There is only one further point. I noticed yesterday that the Secretary of State for the Colonies (Mr. Bonar Law), in speaking about the Army and the Navy, said this—and when I heard him say it I thought of the Amendment I am now putting before the Committee:—

I most earnestly hope that the Chancellor of the Exchequer will consent to have this Clause added to the Bill. He has been First Lord of the Admiralty, and he knows perfectly well the work that the Navy does, and he is bound to be sympathetic towards them whatever arguments he may use against us. Can we overrate and can we ever repay the officers of the Army and the Navy for the way they have carried out this War? I maintain that we cannot, and it does seem to me both illogical and unjust that they should be compelled to contribute to the cost of the Services to which they belong. The Clause does not touch the Income Tax as a whole; it only suggests that the extra Income Tax should not apply to the officers of the two Services, and, of course, should not apply to the officers of the Mercantile Marine, to whom the Navy and the country owes so much in connection with this great War. If we examine the case in regard to this extra taxation, officers in both Services are very underpaid. Notwithstanding, you are now going to deduct from their pay this extra Income Tax. I have often tried to induce the Government to agree to the Income Tax being done away with altogether in regard to officers, except those who can afford to pay. Those who have extra income could pay. In the present case, will the Chancellor of the Exchequer remember that the price of food has gone up? In regard to the Navy there are two establishments to keep, there are the children to educate, there is extra outfit for officers in the Army, and there is a great deal of extra expenditure connected with the War. And this is the time when we are going to put extra taxation on the officers of these Services.

I hope that there will be no argument raised to the effect that by and by on the Estimates we should move that the pay should be increased. The point is one for immediate consideration. There are many officers of both Services and in the Mercantile Marine who have given up high and comfortable pay to serve the State, and at this moment their families are reduced, more or less, to want, owing to the extra taxation and the extra price of food. Under these circumstances I hope the Chancellor of the Exchequer will be sympathetic, and will, at any rate, take off the extra taxation that has been imposed in connection with the War. In regard to the Navy, for some reason or other they are not to be given their prize money. But that is not a point with which I can deal now. The point at issue is the extra taxation, and we should remember not only the Army and the Navy, but the auxiliary forces. All the auxiliary forces now fighting for the Crown are also included in my hon. Friend's Motion. There is another point which I mention casually, and that is the education of the children. In many cases that I know of myself, and others that have been brought to my notice, this extra taxation will prevent the parents from giving the same education to their children as they did before. That has been brought to my notice by letters. I hope the Chancellor of the Exchequer will recognise the force of our case. A very small sum is involved in this Clause. It is a sum which I am perfectly certain the country would only be too glad not to take from the officers of the Services, more particularly having regard to the splendid and brilliant way in which they have taken up their duties during the War.

The Clause, as moved by my hon. Friend, is somewhat complicated, and I should prefer it in the modified form which he suggested in the course of his speech; that is to say, to leave the pay chargeable with pre-war Income Tax and not charge it with any of the increased Income Tax which has been imposed since the commencement of the War.

I had better have it made quite clear. I understood the hon. Member to move the Clause in the form in which it is placed on the Paper.

I moved it in that form, but I said that I would be very glad if any objection was raised by the Treasury to its being complicated to agree to certain words being omitted.

The Clause goes on to exclude from that exemption any officers who have incomes independent of their pay amounting to £1,000 a year. I think that that would involve very invidious distinctions between different officers in the same regiment. When the question arose in this House as to the payment of £400 a year to Members of Parliament, it was suggested that there are many Members who did not want it, who had ample independent incomes, and that therefore the pay should only be given to those Members who really required it. The objection raised by the Government then was that that would be making an invidious distinction between men who in this House are all equal. To make a distinction of that kind between officers of the same regiment and officers in the same Service would be even more invidious and more harmful than to make such a distinction between Members of this House. There is also this further difficulty in introducing that exception. How would you in practice carry it out? The pay of the officer is paid to him every month through his bankers, and the Income Tax is deducted at the source. How would you know when you are carrying to the officer's account his pay whether he has an independent income amounting to £1,000 a year? The difficulty would be enormous. Wherever there is that difficulty in the collection of a tax it always involves expense, and the expense which would be incurred in getting over the particular difficulty in this case would probably be more than the amount that we should save.

I have put down a Clause to exempt the pay of officers, warrant officers, and noncommissioned officers from Income Tax, and it seems to me that that would be a fairer way and a more just method of dealing with the matter. I would be prepared to say that you should impose upon them no Income Tax beyond the pre-war tax. I ask the Committee to give this matter their most serious consideration, because I know that it is a matter of most serious importance. I know many men in the Service who have accepted commissions and have given up business, profession, employment, or other source of income; men who are married, with families, who have given up everything from which they derived an income and have accepted the very small pay which is given to them as officers of the Army. I know many cases of men who have accepted commissions as lieutenants in the Army, married men with families, who have now an income of £186 a year. They have, in the first instance, since the War broke out, had their cost of living enormously in-creased, and increased in a manner which nobody foresaw. They have to live and maintain their families upon their small pay, and meet these increased charges, I know of men who to my own knowledge are unable to do that. I know of more than one case—since I mentioned the matter in the House I have had correspondence about it—of men who had made provision for their families in the event of their death by means of a policy, and who have had to abandon the policy because they could not maintain it out of their pay. I have had cases brought before my notice of officers who have had to take their children away from the schools which they went to before the War, because they could not maintain them at those schools. I have had cases brought to my notice where officers have had to place their families upon the lowest possible scale of living, because they could not afford to give them anything like the scale of living which they enjoyed before. These men have made these sacrifices willingly, and when they made these sacrifices they calculated that they would have, at any rate, their small pay of £186 a year clear with which to meet their obligations. It is now proposed to reduce it.

The Chancellor of the Exchequer said that what we are asking is an increase of pay. With great respect to the Chancellor of the Exchequer, it is nothing of the kind. But if it is an increase of pay to say that those men shall not have increased Income Tax imposed upon them, then to impose that tax is to reduce their pay. You cannot have it both ways. And if you have got these men to come in on the terms that they are to have certain pay, you have got no right to reduce it. You may say that they took it subject to risk. Did the Chancellor of the Exchequer or anybody imagine this time last year that we should be to-day faced with an Income Tax such as we are faced with? No one dreamed it, and least of all the men who have come out and given their services. Just consider the position this time last year. Fifteen months ago we had an Army of, in round figures, 300,000; to day we have got an Army, in round figures, of 3,000,000. That extra Army of 2,700,000 had to have officers. You had to go to the civil population to find these officers; you had to go and ask men, not merely boys, but men of mature age, men who were accustomed to command men, men of education and position, to give up civil life and come out for certain pay; and they have done it, and done it in a manner which has excited admiration throughout the world. No class of men in the world has done better than those men who have given up their businesses and come out to serve as officers in this War.

It is on that class of men that you must to-day depend to lead your men to victory. If you had not your officers, your troops are useless. If you expose those officers to a sense of gross injustice and give them the idea that they are being unfairly treated by their country, when they have done everything for their country, are you going to get the best out of those men when one of these men at the front leading troops feels, "If I am killed my wife and children will be penniless." Such a man has given up everything. He is willing to give up everything, but for Heaven's sake treat him fairly and justly! He asks no more than simple justice. Simple justice means that a man who has made those sacrifices ought to be asked to bear no more taxation. He has to bear more than his share of indirect taxation as it is. He has no means of passing on the indirect taxation to anybody else. Working men are able to pass it on by increase in their wages, and in hundreds of instances wages have been increased, because of the increased cost of living. Those increased wages are passed on by the manufacturer, and again by the retailer to the officer, who is the ultimate consumer. He has not only to pay his own share of the indirect taxation, but he has to bear the share of that other person who has passed it on to him. He cannot strike: he would not, if he could. He would die rather than strike for higher pay. [An HON. MEMBER: "And the Tommies too!"] Surely that ought to be taken into consideration when we are considering this question of the officer. He is already heavily taxed by indirect taxation, and he cannot pass any of it on to anyone else.

The whole consideration of the officer's pay is governed by this fact, that if the pay can be reduced by this increased Income Tax now, next year it may be further reduced, and it may be still further reduced later on. How is such a man to make provision for those depending on him, when he has only got a little pay, and does not know, and never can know, how much of that pay will be taken from him? I do ask the Chancellor of the Exchequer to deal with this matter in a generous spirit. I have put it to the Committee that the strictest justice entitles these men to be relieved from the burden of Income Tax. The Income Tax is a method by which you apportion the national burden among the people of the country, and you apportion it by placing it in varying amounts upon the different people, according to their capacity to bear the burden. Surely those men are bearing their full share of the national burden already. They ought not to be asked to bear any more. They have sacrificed everything. They are sacrificing their lives in thousands, and when you consider the incidence of Income Tax, surely the burden ought to be placed on the shoulders of those men who are staying at home and making money out of the War, and not on the shoulders of those men who give everything and are prepared to sacrifice everything, and their lives as well. I put it on the ground of simple justice. If the Committee really thinks that the strictest justice does not entitle them to what I have asked, then I do ask the Committee to deal generously with those men, who have been more than generous in the sacrifice which they have made.

This is a case which obviously appeals to the sympathies of everyone. Those who support the proposal of the hon. Member who has just spoken, take advantage of the argument which he has used, that in the case of officers who have given their services to the country, and have given everything, it appears to be an undue hardship to submit them to the ordinary charges, which all other citizens have had to bear. I admit the full force of that argument, but I do not think that it really meets the case, and I will explain why. The hon. Gentleman relies, and all of us rely upon the case of hardship to the man whose income is so low, and who is so unaccustomed to this low standard, and who yet has to maintain a wife and family on a comparatively small sum. That hardship, which exists for officers, exists for a vast class of citizens in civilian life. In no case has this House considered hardship as a ground for relief from taxation. If £186 a year is not properly the subject of Income Tax when received by officers, equally it is not properly the subject of Income Tax when it is received by civilians, whose income in consequence of the rise in prices is also diminished.

At present I am dealing with the one point of hardship, and the case of hardship is not greater for the officer than for the civilian. The wives and families of officers suffer no more materially on reduced income than the wives and families of civilians whose income is equally reduced. An income of £180 a year goes no further in the case of a civilian than in the case of an officer.

May I interrupt the right hon. Gentleman? The officer has to pay a much higher rate of insurance than the civilian on account of risking his life, and he cannot insure at all in some offices now.

The man who pays insurance does not pay Income Tax on that portion of his income which he applies to the premium. It is quite true that it leaves him with a less balance of income, but he has less Income Tax to pay.

Surely the distinction is this, that the officer has voluntarily taken upon himself that hardship in the interests of his country.

That is another point. I want to deal with the question of actual hardship, which I submit is no greater in the case of an officer than in that of a civilian. The same amount of money affords no more comforts to one than to the other. When you talk of the special case of hardship arising from insurance it must not be overlooked that the officer's wife gets a pension or a gratuity; the civilian's wife does not. The hon. and learned Gentleman's second point is that the officer has voluntarily submitted to this lower income.

I think that was the second point raised by the hon. and learned Member, that the officer has voluntarily subjected himself to this less income. In many cases I readily admit that it has been a serious loss to officers, but in many cases it is not so. In no case in civil life has that ever been recognised as a ground for the reduction of the tax. Many people in civil life appear to have large incomes and are doing work on behalf of the State gratuitously. Many gentlemen in the hon. Member's own profession have sacrificed very large incomes in order to have their time free. There are very well-known counsel here who are devoting their services to the State. They have not advanced that as a ground for the reduction of the Income Tax. It is submitted that because the officer risks his life he has a right to a reduction of the Income Tax. I do not see it. I do not see how you can measure the risk of life against money. On his entering the Service his pay is not regulated upon the risk that he may lose his life. There is no relation between the two. The Noble Lord may say that inasmuch as a man risks his life he ought to receive much higher pay, but I cannot see how that is an argument in favour of not charging Income Tax. If the pay of the officer is brought unduly low by the payment of Income Tax, the proper remedy is to increase his pay.

I rather deprecate these interruptions. It would be very much better to allow the right hon. Gentleman to make his speech and then answer him afterwards.

A Bill would have to be introduced by the War Office; but I submit most clearly that it is not proper to exempt classes of the taxpayers from the ordinary Income Tax. If the result of the Income Tax is to reduce the pay of an officer below the proper level of income which he ought to receive, then it is the duty of the War Office to propose to increase his pay. The effect of this Amendment would be to make up to the officer the payment of the Income Tax of the amount of 1s. 3d. in the £ on his income over £120. If that charge makes the income unduly low, the War Office ought to propose to increase the pay of the officers by that amount. Let us see where such a proposal would lead us to. We have heard this evening, on the case of the officers, a very moving speech by the hon. and learned Gentleman who has just spoken. He said, with truth, that if we had no officers our troops would be useless. That is perfectly true. Let us look at the other side. If we had no troops, our officers would be useless.

How does this question affect the troops? Skilled workmen, hundreds of thousands of them in our Army, had been earning wages of £2, £3, and £4 a week before they enlisted. The workman who enlists risks his life; he is valuable to the service of the country; he performs every duty just as described in the case of the officer, and he leaves his wife and family, say two children, behind, with an income of 21s. a week. His wife and family have to submit to all these evils of higher prices. They have to submit to more than that—they have to submit to the increased cost of living due to this very Finance Bill. You wish to take the officer out of the charge of Income Tax. How are you going to take the soldier out of the charge of the increased taxes, since the War, on sugar, tea, and other commodities which his wife and family consume?

The officer has a larger income from which to pay, but the charges under the Finance Bill fall very heavily upon the families of skilled mechanics receiving 21s. a week. I have never heard a word suggested to me that special relief should be given in the increase of the separation allowance in order to make up for the additional charge of the new taxes upon the wives and families of soldiers. I only give that as an illustration of where it leads to. The moment you are going to treat your officer as something different from the ordinary citizen you cannot stop there. Soldiers and sailors of every rank ought to be paid an adequate rate of pay for their services, but the rate of pay must be settled by the naval and military authorities. I most strongly deprecate any action by the Committee on the Finance Bill, which would distinguish between and separate different classes of citizens enjoying the same income, and differentiate between them for the purposes of taxation. I regret very sincerely that I feel it to be my duty to recommend the Committee not to support this proposed new Clause.

We all recognise after hearing the speech of the right hon. Gentleman that this is a question of very great difficulty in point of principle. I confess that the sympathy I feel towards this Amendment has not been removed by the arguments of the right hon. Gentleman. After all, we have to look at this proposal broadly, and not from a meticulous consideration of fiscal proprieties, and not with regard to possible distinctions of class and class. The wish of the House of Commons, and of the country at large is, I am quite sure, that we should deal with those who are fighting our battles in such a manner that we cannot be reproached for any want of consideration of their difficulties. I know, from having frequently listened to speeches of my hon. and learned Friend (Mr. H. Terrell), and from having discussed this matter with him and with other officers, of the grievous effect among certain classes of officers of the present system of exacting from them the common contribution when they are making an unmeasured contribution to the public service. I know what a grievance that mode of dealing with them is felt to be. One gets letters from the front, and one hears of it in the discussions of young officers who have made great sacrifices and faced the supreme sacrifice of all. I confess that argument addressed to this subject does not move me from the position that we are doing something we ought not to do when we take the pay, the most meagre pay, of the young officer at the front, and subject it to the same deduction because of the task in which he is engaged, to that which is made on every one of us here at home who is doing nothing of the kind that he is doing. That is the inequality which is not removed from my mind by any observations with regard to fiscal propriety.

Take a captain's pay, which will not in any circumstances be more than £400 per year, and upon which the man who has given up civil life, given up everything, has to live, and upon which his dependants have to subsist, while he is away. You take your taxation from that £400 a year, and the result on the man at the front is that you accept his services and you do not care about the position in which you put him, and those dependent upon him. That is the effect, and that effect is not going to be removed by some more sympathetic treatment of that class of officers by the War Office. I do not see any indication of any action of that kind by the War Office. Under those circumstances I think this Committee of the House of Commons is entitled to have that case in view, and to say that when you are taxing us here at home, who live in comparative security with regard to our lives, that we do not expect that you are going to tax the man who has given up everything and gone to lay down life, if need be, on the footing on which you are going to tax the man at home, who is reaping such advantages as are left in civil life, and who is not in a position to make those other sacrifices. There are larger and broader considerations than those which the right hon. Gentleman has applied to this question. At present they have not emerged in any official consideration of the subject. The right hon. Gentleman will understand that I am not using that expression in any spirit of disparagemet, because I have observed that, no matter who is at the Treasury, the Treasury has taken the view that in point of principle this is impossible. After all, the country has a human heart, and the Treasury has an official heart, and the question is whether the human heart or the official heart is going to prevail. My strong feeling is that there are here things which appeal to the human heart, and which are not touched by any of the arguments addressed to us, and on which the House has to act.

So far as the arguments of the right hon. Gentleman have gone, let us see where we stand. It is said that the rank and file will not be proportionately dealt with, and that the rank and file will bear their burdens of the War in their families by the increased cost of living. But so will the man of £400 per year, or £250 per year, who happens to receive a commission. That man down to last year, in the case of probably four-fifths of the junior ranks in the Army who are now earning those meagre sums, was able to command a large income, and has given it up. The wives and children of those men are here at home. They are bearing all the burden of the increased cost of living, and they are bearing it under greater difficulties, because, however we may think that the distinctions of class and class might be obliterated, and ought to be in times like these, they are not obliterated. The woman who is an officer's wife has not the facilities for earning any supplement to her income which the woman who is the wife of the private soldier or noncommissioned officer has, and which in many cases she does. It would be an immense advantage if we all had such a sense of the fitness of things that the officer's wife did not suffer any detriment in her sense of personal propriety at being able to undertake those tasks; but she cannot do so, and therefore to compare the position of the officer whose family are staying with difficulty at home while he is on public service with that of the non-commissioned officer or private soldier, because their families have also to bear the increased cost of living, and so forth, is to compare what is not literally true and what is not true in spirit. The cost of living falls far harder on the person in the higher social life and on the person who has greater difficulty in supplementing the income. The right hon. Gentleman says that it is the reverse. I see hon. Members opposite whose knowledge of these matters is in recent times more intimate than mine, but I assure them I do not speak with absolute want of acquaintance with the difficulty of living on a small income. I had practical experience, if I may say so, and all my life, I am happy to say, I had a great number of friends who had practical experience of living on a small income. I venture to say, with some confidence, that the burden of increased prices falls more heavily upon people in receipt of the lower classes of income which are subject to Income Tax than it does upon people just below that level. In my judgment, therefore, that is not an answer.

As to the general principle upon which it is said that you cannot distinguish between the military income and the civilian income, I venture to say that it is presented in total disregard of the relative situations of the soldier at the front and of the civilian at home. What is asked for by my hon. Friend, and that in which he is supported by a great body of opinion in the House and in the country, is a recognition that the case of the soldier is totally different from the case of the civilian. If we are wrong about that, there is no foundation for my hon. Friend's appeal. If we are right about it—that the case of the soldier calls for the generous consideration of the House of Commons, and that it differs fundamentally from the case of the civilian—then the soldier is entitled to be heard in this House when he says, "I am doing for you what you are not doing and what in many cases you are not capable of doing for yourselves. Do consider whether the measure applied to me is not a different measure from that which you are applying to yourselves, and in a time when the stress of war increases from day to day and the risks of service increase as they continue— do consider whether it is fair to extend an additional burden to that stress and to those risks to the man who is your deputy at the front and who is doing for you what it is impossible that you should do." On these grounds, if it is necessary for my hon. Friend to proceed to a Division, although up to this time I have not divided against any proposal from the Front Bench, I feel so strongly about this matter that I shall be bound to vote with him.

Everybody must sympathise with the object which various speakers on the other side have in view. But I think that all the arguments used in support of this proposition can be equally used in support of a proposal for increased pay for the private soldier. You cannot assist the private soldier by dealing with the matter in the Finance Bill on the question of Income Tax, and if the private soldier has to wait until his pay is increased I think the same argument applies to the officer. I much prefer the proposal of the hon. Member for Gloucester to that moved by the hon. Member for Devizes, but I cannot see my way to support either, although I sympathise with the object they have in view. Let us see how it operates. It is well known that hundreds of thousands of men have joined the ranks as private soldiers whose incomes as civilians was higher than the income of men who were officers. These men have sacrificed their income as civilians in order to accept 1s. or 1s. 2d. a day as private soldiers. On the other hand, thousands and thousands of second lieutenants are receiving in the Army a higher rate of pay than they were receiving in civil life. [HON. MEMBERS: "No!"] Oh, yes, thousands are. That being so, we could not logically support putting into the Finance Bill a Clause of this description. That is really the only point that I want to make. When the hon. Member for Gloucester was speaking with regard to the £196 a year paid to a lieutenant, he spoke as if the lieutenant would have to pay on £120 a year and at the same time pay for the education of his family. If he has three or four in family and an income of £196 a year, he pays no Income Tax whatever. The reason I cannot support this proposal is that I know men in the ranks who have sacrificed much more income than officers have done, and that with this reduced income their families have to pay the increased cost of living and also the indirect taxation. Officers as compared with private soldiers are better off in the Army than private soldiers. Therefore, as far as I am concerned, I cannot support the proposed new Clause.

I also have a new Clause on the Paper dealing with this matter. I should much have preferred that the Clause had been confined to the Income Tax connected with the War expenditure. I should like to regard this matter as a war question. This is a War Budget to meet the expenses of the War. There you have a clear line of division. Soldiers are doing the fighting, civilians have got to pay for it. That is the line on which I should like to see the matter discussed. The argument of the. Chancellor of the Exchequer and of the last speaker failed to convince me that they were speaking entirely of the sacrifices made, whether of the soldier on enlistment or of the civilian who gave up income in order that he might do work for the War. What we are speaking of is the amount that the State is taking from him now after having made a bargain with him in connection with the money he was to receive during the War. The private soldier has not had any deduction made. The private soldier may be still receiving inadequate pay, but, at all events, he is not having anything of this sort deducted from it. The officer has already had one deduction, is going to have another, and there may be other deductions following. I think the argument failed, because the Chancellor of the Exchequer has not given any case in which any other person has suffered deductions from the amount which was agreed to be paid him in connection with the War. The case we have heard comes home to the hearts, not only of Members of the House, but of people outside. We know that the Departments have been told that they must be very careful of economy in these days, and we also are undoubtedly the guardians of the purse; but I believe that in making this demand we have behind us the sentiment of the country, and that on this occasion we may safely go outside the ordinary allegiance that we desire to extend and urge the Government in the strongest way we can—that is, by our votes—that they shall not consider this as a matter of economy, I will not put it as a matter of generosity, but merely as a matter of justice. I think it is only a just act that we should see that our soldiers are not subjected to this deduction. This being a War matter, we should take the burden upon ourselves. I believe there is not a single man outside this House but, if he has really thought the matter out, will agree with our attitude on the subject.

The point which has been urged on the other side has been an officer's point alone. [HON. MEMBERS: "No."] I take it that the argument of the right hon. and learned Gentleman was directed, in part at least, to that very question. He went into detail to show that while an officer should receive this special exemption there was not the same reason for giving special treatment to the common soldier. The right hon. and learned Gentleman the Member for Exeter does not disclaim responsibility for my paraphrase of what he said.

I do not disclaim responsibility, because there is nothing I dislike so much as to interrupt a Member of the House speaking. My observations were in the hearing of the Committee, and my hon. Friend does not quite represent my point of view. What I said I meant to say, and I am quite willing to sit and listen to the criticism of my hon. Friend.

I thank the hon. and learned Gentleman for his intervention. As I said, the hon. and learned Gentleman made a strong plea for special consideration for the officer. He went on to show why that should be awarded, and that there was not the same strong leason for giving special treatment to the soldier. I thought that that, at least, was part of what he tried to represent to the House. He went on to say, as I understand him, that the officers' wives could not supplement the income of the family in the same way as could the wives of the non-commissioned officers and soldiers. Let me take these two points. I want to urge upon the notice of the House this fact: that so far as the working-class familes are concerned the articles which are the subject of additional taxation, owing to the Budget, enter more fully and in a greater proportion into these family budgets of working-class people than they do into the budgets of the well-to-do. Bread, sugar, coffee, dried fruit, and cocoa, in bulk represent a larger proportion of the family outgoings in working-class homes than they do in the homes of those who receive larger incomes. I would have the Committee remember that since separation allowances were awarded on the new scale the cost of living has gone up very considerably, and has gone up directly as the result of Budget taxation. If my argument is sound it means that the familes of soldiers in receipt of separation allowances are the subjects of deductions in view of increased prices, directly due to the legislation of this House, in a greater measure than are the families of officers, who have margins beyond the ordinary essentials of food and of family upkeep. The argument would be unanswerable that if this Amendment be assented to by the Committee you are pledged thereby, in my view, to an increase in the separation allowances of the non-commissioned officers and men.

That makes a difference to my view of the Amendment. As I heard hon. Members on the Opposition side of the House explain this new Clause I heard nothing to the effect that they were prepared to make a recommendation of increased separation allowances in keeping with the argument which they advanced for the exemption from Income Tax for the officers. The other point which the hon. and learned Gentleman made was the wives of officers supplementing the family income. I have been sitting on the Clerical Occupations Committee at the Home Office. The evidence advanced to us there by bank managers and the like was that the relatives of their employés, many of whom had taken positions in the Army, and who are in receipt of this £186 per annum that has been spoken about, were doing the work which their male relatives had done. That serves to show that there are a large number of openings for well-educated women, the wives of officers and other dependants, sisters, and so on, who can take up that work, and thus supplement, each in her own particular way, and in a way she is well equipped to do, the family income, just as the wives and sisters of the non-commissioned officers and men supplement their family incomes by working in munition factories and the like. Unless the Government, therefore, are prepared to say to-night that they propose, if this new Clause be accepted, to give an equivalent increase which will make a similar concession to the noncommissioned officers and the men to that proposed to officers, I am not prepared to give any support to the new Clause. If we have an assurance in support of what I now understand is the position of the hon. and learned Gentleman opposite (Mr. Duke) that he is prepared to give similar treatment as that accorded to the officers, to the non-commissioned officers and men, if we have such undertaking from the Front Bench, then my attitude on the new Clause will be different. I am bound to say that the appeal made by the hon. and learned Gentleman the Member for Exeter made a deep impression upon me. I believe there are difficulties in the homes of some of our junior officers that have gone. At the same time I cannot forget that many young fellows who are members of the Officers' Training Corps, and who enjoyed no income previous to this War, were a charge on their families—that thousands of students who have gone from Oxford and Cambridge whose outgoings are reduced and the expenses of whose families are reduced by their going to the War—that they are now drawing an income. This probably covers a large proportion of young officers in receipt of this £186 per annum. I feel that the hon. and learned Gentleman has made a most powerful appeal to the sentiments of this House, and if the country is prepared to pay the expense, well and good. I would like also that the source from which the money will come should be represented from the Front Bench. There must be no more taxation of food, which in the main will heighten the cost to the working people. If, however, it is proposed to raise the necessary amount—because by this exemption there must be a corresponding in- crease in the amount of taxation—if the suggestion be that the Super-tax shall be increased—then, again, my opposition to the Clause would vanish. But I would like a lead from someone on the Treasury Bench, and a reply to some of the arguments which have been recently advanced in debate.

I suppose we must take it for granted that when Treasury officials, from the Chancellor of the Exchequer downwards, deal with a question of this sort, they must deal with it from the very narrow point of view of Treasury rules or Treasury procedure. I do not expect, and I very greatly regret, that the right hon. Gentleman the Chancellor of the Exchequer should turn round in regard to this question on to a topic which has been echoed in every one of his speeches since, namely, that this was a class question— a question between rich and poor, between the officer class and the private soldier. In the speech of the hon. Member who has just sat down—the fairness of which I fully recognise—I noticed something of the echo of that question. Much as I admired the tone of the hon. and learned Gentleman the Member for Exeter, I beg that he will allow me to regret that he allowed himself to be drawn by the words of the Chancellor of the Exchequer into considering this a class question. That appears to me to be totally irrelevant and out of place. I do not set up for any class a special privilege, or say that the wives and dependants of one class should have more than those of another class. I say it is a question concerning private soldiers just as much as officers, and I am perfectly certain that if we took the opinion of the ordinary private in a regiment he would see the justice of it. The Chancellor of the Exchequer tells us the proper way to deal with this is not in a small concession of this sort. Small it may be in money; £625,000 is the cost of what would be a gracious gift to those to whom it is brought, and a gracious gift in the mind of a nation who gave it. It is not a very-large sum, but he says the proper time is when we are considering the pay of the Army generally. That may be put off indefinitely.

Do hon. Members remember that the pay of the officer in the British Army, except for a small increase that was made a year or two ago, remains exactly as it was in the days of Charles the Second, and that there has been no material increase of pay since then? We know it is quite fair that the claims of the private soldier should be considered. The claims of the private soldier have been considered, and he is paid a considerably larger rate than he was a few years ago; but we know perfectly well that the British officer is not paid a market wage for his work. The Chancellor of the Exchequer said he made his bargain, and he must stick by it. I cannot conceive any Minister on that bench standing up and saying that that represents the position of the British officer. We know quite well that a hundred considerations enter into the mind of the officer before he joins, of which the money side is the very last to affect his choice. He is attracted by duty, by self-sacrifice, by emulation, by nobility of the calling, by the spirit and the courage embedded in his heart. We know that he does not seek to obtain the market price. You say we may consider hereafter the question of dealing with this by increased pay. You never do it when the time comes, and at present we contend that, instead of increasing pay while he is in the trenches, you so increase the sum payable by him that he finds that the pittance paid to his credit at his bankers is considerably smaller than what it was last year.

If the hon. Member who spoke last will allow me, I will call his attention to one aspect of this question which shows it is very considerably a private soldier's question. What is more desirable, if we can do it, than to promote from the ranks an eligible and efficient man? Do we not all desire it? What is the difficulty? It is that over and over again he has to refuse it because he is unable to take the burdens, combined with the light pay which is attached to the officer's position. The hon. Member, I am sure, will not contradict that, and he must be able to quote from his experience, as I could from mine, many cases where the private soldier has been obliged to refuse the position of an officer because he cannot meet the expenses. I am perfectly certain the hon. Member will agree with me that this would be a way of making easier the promotion of the fit and suitable private soldier from the ranks. It is, therefore, I contend, largely a question for the private soldier as well as the officer. Let us consider what it would really mean. Let us imagine the case of an officer who has died in the trenches. Do not let the hon. Member suppose that all the officers in the British Army belong to the wealthy class. In the case I am imagining there is paid to the widow, amongst all the sadness of her mourning and of her bereavement, the small pittance that remains to be paid. Is it a nice thing to think that the little sum that had been calculated upon is reduced by a tax—to sweep away which it would cost this nation something like £600,000—that that little sum which she and her orphan children have reckoned upon, is to be reduced because, forsooth, according to the dictum of the Chancellor of the Exchequer, all men must be dealt with alike? Those officers have made their bargain and they must keep to it, and, if other people are to be reduced, men who are giving their time and trouble, not to speak of their lives and homes, are to be reduced because fair play demands that a reduction should be made in the pittance to be left to the widow and children for their subsistence. No, it may be all very well to adduce narrow and pedantic Treasury precedents, but I say the nation and the greater part of this House would welcome an act of generosity like this.

Let me refer to one extraordinary contrast which struck me in debate since I have been present. When I came into the House the right hon. Gentleman opposite was arguing in favour of a new Clause dealing with the power of the Treasury to issue securities free of taxation. What was the motive that the right hon. Gentleman put forward for supporting that Clause? Because it might be in our interests to free these lenders from taxation. You can break your Treasury precedents and free from taxation the man who lends money to you, and invests in these securities, although it is against all your Treasury precedents, because it would pay you, and because you see your self-interest in it; but if you have laid new and unexpected burdens upon the pittances of officers, soldiers and sailors, you are not then to break any Treasury precedents, but you are to bring forward as an argument the sacredness of these precedents, and the necessity of imposing an absolutely equal burden of taxation upon all men, whether they are those who have easy and comfortable homes or those who may be sacrificing their lives in the trenches.

I would remind the hon. Member who has just sat down that sentiment never won a war. It is easy enough to paint terrible cases of hardship and injustice caused by this War. Anyone can paint equally harrowing cases, but I know this, that the officers in the Army want to win this War more than they want to save their pockets. I know that they are as willing as anybody in this nation to sacrifice everything they possess to bear their share of the burdens like anybody else in order to win this War, and I am confident that—

I would, in deference to the Committee, suggest that interruptions should be as few as possible. The hon. Member has had a full opportunity of stating his case, and unless he has a really important interruption, I hope he will refrain.

One of the greatest difficulties in the way of our winning this War is finance, and we do not mind if the last penny has to come out of our pockets in order to win it. I am opposed to placing any restrictions upon the Treasury as to the sources from which they can draw, and I hope the Government will stick to their guns. I hope they will treat all alike, and if they find it necessary even to increase the burdens all round and pay no attention whatever to the undoubted hardship and injustice which must necessarily fall upon individuals

It appears to me that what we are dealing with is not a question of increased pay to officers or men. The point is whether the Chancellor of the Exchequer is justified in decreasing the pay of those officers who entered the Service at a fixed rate of pay. What we have to consider is, are we justified in treating that pay in this way. It is not a question of the officers alone, because it concerns the men as well. I raised the other day a case of a non commissioned officer whose pay in conjunction with the pay of his wife under a separation allowance comes within the limit of the Income Tax; and I asked whether ho was to be mulcted in Income Tax because his wife gets a separation allowance, although she is not living with him but is obliged to live apart by military law. The Chancellor of the Exchequer has no right to deduct from the pay guaranteed to an officer when he entered the Service.

The appeals which have been made from the other side of the House with regard to the position of officers, calls to mind an incident that happened here a few days ago. I was asking the Colonial Secretary to state the rate of pay of the various Overseas Contingents, and he gave the figures as 4s. per day for Canada, 5s, for New Zealand, and 6s. for Australia, for privates. I asked him with a view to giving better opportunities for enlisting if he would raise the pay of British soldiers, and he replied that he would do nothing of the kind, and loud cheers met that observation from the opposite side. I think if there is any proposal to raise the rate of pay, the man getting 1s. a day would not meet with any sympathy from hon. Members opposite. [An HON. MEMBER: "It is wholly untrue."] If hon. Members opposite are in favour of increased pay for the soldiers, I am quite certain that they will find a sufficient number of hon. Members on this side to join with them in order to get their rate of pay increased. If you lay down the principle of exempting any citizens from taxation, you do not know where it will ultimately lead us, and this Amendment is a wrong way of dealing with the matter. The injustice arises from the fact that when you have taken, by this increased taxation, so much from the officer's pay, you leave him with a sum which is less than his just due as an officer.

There can be no other ground for this demand, and the right principle to adopt is to raise the officer's pay in those ranks in which they are ill-paid. There is nothing more pitiful and more sad or derogatory to the honour of the nation than to see appeals in the advertisement column of the "Times" from officers asking for small loans to rid them of debt, so that they may take up a commission. I believe that every man in the community should be reduced, if necessary, to the level of the private or officer by taxation, and we should get as near equality of sacrifice as we can. The man who does not fight cannot possibly make the same sacrifice as the man who goes to the trenches. You make a class question of this by the proposal which is before us, and you leave the private on one side. This taxation affects the private in another direction which is very often forgotten. The Income Tax under Schedule A falling upon cottage property is the main cause of increase in rents at the present time, and this is inflicting a tremendous hardship on the family of the private. The right way to remedy this question of rent is to raise the pay of the ill paid officer, and also the ill-paid private. I hope this injustice will not be done simply because the matter has been brought up from the opposite side of the House. The whole question ought to be dealt with in a proper way.

I make a most earnest appeal to the Chancellor of the Exchequer to give this very moderate proposal, as I conceive it to be, a favourable hearing. I think he might have met it in a somewhat larger spirit than he has done. We put it forward as an act of justice, and the demand cannot be met by a string of cold-blooded Treasury excuses. The main reason for which I support this Amendment is that in substance it is the case of the fighting man whose position is entirely and fundamentally different in time of war from the case of the civilian. In time of war the fighting forces of the Crown have to bear burdens entirely different from those which civilians bear. You cannot possibly by any means equalise that burden, and you cannot secure equality of sacrifice between the civilian and the fighting man. The State can, however, to some extent adjust the financial burden, and can, at any rate, relieve the fighting forces from some of the additional taxation which the War has entailed. I do not desire to minimise the services rendered by this civilian population of the country, because I know that the War casts heavy burdens upon us all. Hundreds of thousands of civilians in this country, yes, and of both sexes, are rendering great and splendid service to the country at this moment, whether in munition works, or in hospital work, or in work essential to the carrying on of the business of the country, and let us not forget that much of it is done freely and voluntarily. But when you have said all that, you cannot be blind to the fact that the fighting men are engaged in work which, by reason of their duties as soldiers, is not only different in degree but in many respects is different in kind from that in which the civilian is engaged.

Daily and hourly the fighting man experiences hardship, suffering, and danger. He is prepared to surrender his health, his limbs, and his life if necessary for the country, and let us bear in mind in this connection that he is surrendering his health and his life in many cases for the safety of those who remain at home. I say that it is impossible for civilians adequately to repay the debt which they owe to our fighting forces, and it is impossible for the State to adjust the burdens arising out of this War equally as between our fighting forces and civilians. But there is one small concession you can make. You can say that amongst the burdens caused by this War are those of heavy additional taxation, and the State can at any rate relieve the fighting forces of some part of that additional burden. There are many-other special reasons, which have been touched upon, why this Clause should be carried. The officers and men, especially in this great New Army which has been created, do not belong to a very wealthy class, and they can ill-afford this additional taxation. No concession is asked in favour of the richer class among the officers, and their case is already met by the Amendment, but the additional Income Tax presses upon the vast majority of the officers with extreme hardship, and it presses not only upon them, but upon their families whom they leave behind.

The Noble Lord the Member for Portsmouth (Lord C. Beresford) referred to the question of insurance. The man who enlists in the Army since the beginning of the War finds the greatest possible difficulty in effecting insurance at all. In many cases he cannot effect it, and even when he can effect it he has to do so at an enormously increased rate of insurance. That is one of those things from which the civilian does not suffer, and I do urge upon the Chancellor of the Exchequer that it is a factor which he should take into account in adjusting the financial burdens which fall upon the civilian and the officer respectively. I will give a few instances to show the sort of taxation which officers will be called upon to pay under the scheme of additional Income Tax. A commander in the Navy is responsible for the entire routine of a battleship, and has 700 or 800 officers and men under him. Assuming that his pay is his only source of income, he would be called upon to contribute £30, or almost double the amount under ordinary circumstances. An officer with £600 a year would be required to pay £52 10s. If you go to the higher ranks, a rear-admiral with £700 a year would be called upon to pay over £66. I give these figures for the purpose of showing how very heavily this new taxation will press upon the officers of the Army. We do not desire, as the Committee is aware, to relieve them from all taxation, but only from that particular proportion of the new taxation which is consequent upon the War which now exists. Let me say one word about the suggestion of the Chancellor of the Exchequer as to the proper mode of meeting this case being by giving to the officers additional pay. I ventured to make an interruption, and to ask the Chancellor of the Exchequer whether he would bring in a Bill for the purpose of increasing the officers' pay. He did not give me quite a direct answer. He said that it was for the War Office. I should very much like to know from him, and perhaps he can tell me, whether, if the War Office proposes to him to bring in a Bill for increasing the officers' pay during the period of the War, he will find the money out of the Exchequer for financing it? If he will answer me that question, I shall be very much obliged.

That is a hypothetical question which I really could not be called upon to answer. I should have to see what the proposals of the War Office were, and how far they reached. I do not think that I should be fulfilling my duty as Chancellor of the Exchequer if I gave rash promises like that.

I should be very sorry to ask the Chancellor of the Exchequer to give a rash promise. If the War Office proposes to increase the pay of officers by a sum equal to this very moderate amount of £625,000, will he support it? If he will, then he has gone a good long way to meet our case; but if he will not, then I say that this reference to increased pay is purely delusive, and is intended to throw us off the line, and to get the opinion of the Committee diverted to some perfectly irrelevant consideration. The truth of the matter is that this is not a question which can be properly met by giving increased pay. We are proposing to provide temporary relief for Army officers and men for the period of the War. I quite agree that the question of officers' pay is one which might very properly be brought up when we have finished the War. It ought to have been brought up long ago, and the question of pay ought to have been settled long ago, but the right hon. Gentleman knows, just as well as I do, or as well as anybody else in this House does, that it is quite impossible to remedy this undoubted inequality and injustice by means of increasing the pay during the War. It is a pure delusion, and we ask him to meet the matter in the way in which it can be met by relieving the officers during the period of the War from this additional taxation. That is the remedy which we have in hand, and I ask him to apply it. It is a very simple one. The amount involved, as we know, is relatively small, something like £600,000, the cost, I suppose, of about one-seventh of one day of the War.

About three hours of the War! The right hon. Gentleman does not tell us that it would not be an act of justice to grant it, but, for reasons which we have heard, inadequate reasons as I think, and as I am sure the country will think, he refuses this act of justice because he says it will cost as much as three hours of the War May I suggest to him a means by which he can get a great part, if not the whole of the cost? Let him cut off, say, one half, or, if he likes, the whole of the salaries of Members of Parliament, and I might also suggest a reasonable proportion of the salaries of Ministers as well. That would go a long way to meet this small cost.

That interruption is quite irrelevant. The salaries of archbishops are not voted by this House, while as to the payments to judges, should they come up they will have to be considered in a proper way. I am dealing with our own salaries, and if the course I suggest could be adopted, I am quite certain the country would not complain of our action, and I doubt if this House would have any legitimate right to complain. I therefore ask the Chancellor of the Exchequer, seeing how very small the sum involved is, and seeing that a reason why this concession should be granted is in order to make-some small attempt not to equalise the self-sacrifice—that would be impossible— but to readjust the burden of additional taxation consequent on this War. I ask the right hon. Gentleman to reconsider this question if it is not too late, and to grant a concession which would not only be satisfactory to the vast majority of the Members of this House, but would be approved throughout the country, and not least by the ordinary soldier, who has learnt to admire and love his officers during this campaign. It would be looked upon by him as an act of justice to those who have led him and will lead him to victory.

May I point out to my hon. and learned Friend that it is hardly fair to ask the Treasury whether it will sanction expenditure in the future when its proper function is to prevent it? The hon. Member for Sunderland made an eloquent speech about officers and privates. May I ask him if he has read this Clause 1 It provides that the Income Tax shall be charged at a certain rate on the pay of soldiers and sailors. I can find nothing in it about officers. All that is proposed is that Income Tax shall be levied not at 3s. or 3s. 6d. in the £, but at 1s. 2d. on the pay of all soldiers and sailors, irrespective of their rank, who are liable owing to the amount of their pay, provided that they have not private means of £1,000 or beyond. There is no distinction here between officers and privates, and the hon. Member, if I may say so, introduced a subject which had nothing whatever to do with the matter before the Committee. He suggested that the private soldier would be disadvantaged by this new Clause. He never attempted to prove it, and if he had done so he would not have succeeded, because it is impossible of proof.

But having introduced that subject we may be met with a claim that this act of justice should be given to people who are not concerned in any way with this particular new Clause. I myself rather doubt whether there ought to be exemptions. I should very much prefer that there were none at all. Everybody subject to Income Tax should pay it with no exemption at all. That, I believe, is a proper course to pursue; but, unfortunately, like many other ideas which I have held, it is not followed and exemptions have been introduced. Under these circumstances I am rather inclined to vote for the Amendment of my hon. and learned Friend. But I can only vote for it on this condition, that it is not to be used as a weapon to obtain further concessions for other people. It must be remembered that the cost of living presses just as hardly on the young officer as it does on the young private; in fact in many cases now young officers, being poor people, and having to maintain a certain position which the private has not, the increased cost of living, leaving out the Income Tax question, presses much more hardly on him than on the private soldier. Further, as I have been reminded, the young officer has no separation allowance. Really the hon. Member for Sunderland has drawn a red herring across our path. It was a dangerous red herring, because it might lead to other people not concerned with this new Clause being benefited by it. We cannot afford that. Nobody is more anxious than I am to do everything possible for our soldiers in the field. But we cannot afford to pay more money. It is very difficult for us to pay what we do. I therefore want to utter this warning note. If we go to a Division I can only support my hon. and learned Friend on the clear understanding that there is to be no increased allowance made to anybody else. [A laugh.] I do not see what there is to laugh at in that.

I have not heard any argument brought forward to show that there is any merit in any other exemption. This exemption applies to everybody in the service of the Crown, either as a soldier or sailor, who has to pay Income Tax; it does not matter whether he is an officer or a private; it make no difference at all. All are treated alike. I say this concession ought to be confined to these particular people, and it must not be used as a weapon to get something for somebody" who is already benefited, and to allow him to get something out of this new Clause. I hope I have made my point quite clear, and, on that understanding, I shall support my hon. and learned Friend if he presses the matter to a Division.

I should have enjoyed this discussion if it had not been for the speech delivered by the hon. Member for Hanley (Mr. Outhwaite).

It was a speech calculated to introduce class prejudices. It recommended an addition of 4s. a day to the pay of the British soldier, and a the Army now numbers 3,000,000 men it would involve an aggregate cost of about £210,000,000 sterling. The idea is to bring them up to the same pay as is received by the Canadian soldiers. The hon. Member could not have taken the trouble before he made his speech to have worked out the cost, and consequently the speech could only have been made in the interests of class prejudice.

I do not think the hon. Baronet has any right to make an attack of that kind. In my opening remarks I stated why I raised this question. I will not go into the figures mentioned by the hon. Baronet because they are simply preposterous. He has not taken into account the allowances.

If the hon. Member takes 365 days in the year and multiplies that by 4s. he will arrive at the figure of £70. If he multiplies that 3,000,000 he arrives at the sum of £210,000,000, which would be the extra cost involved to the Exchequer. Therefore to bring up the question in that form was most ill-advised. For many years in this House, living as I have done near a military camp, I have advocated that officers should be paid a wage enabling them to live in the Army irrespective of their private means. I do not think it can be said that the pay officers are receiving has been or is such as would enable them in peace time to live upon their pay. What is the position to-day? I ask the Committee to regard this Clause from the point of view of the great majority of the officers in the Line regiments and, it may be, a few officers in the British Cavalry regiments. I should say that the average private income of officers in the Line regiments is certainly not more than £150 to £200 a year. Why this Clause should apply to those with incomes of £1,000 a year I do not understand, because it will only apply to a very limited number of officers. The cases I have in mind, which the right hon. Gentleman should endeavour to meet, are those of a number of men who have gone from civil life, who were salaried men earning £200, £300, £400, or £500 a year. They have given up their work and gone out to fight for their country. Some employers have continued their salaries. Those employers who could afford to do so have done so, but many of these men have lost all their salaries because the employers could not continue to pay them. What is the position of these men? They leave behind them a wife, sometimes a family of five or six children, with the income they were receiving gone, and they then have a small pittance in the form of pay from which is deducted a sum far too great in my opinion, having regard to the special circumstances of the case. If this Clause were altered so as to bring the sum down to a more reasonable figure, I feel sure the justice of the case is such that it would receive a larger measure of support than it will as it is at present framed.

May I ask the hon. Baronet to suggest what form of altered Clause would receive his support?

That is for the hon. Member himself to suggest. While I am on my feet I cannot say what the amount should be. The average income of the old officers of the Army, with very few exceptions, was nothing like £1,000 a year from private means. We ought to provide for those who have gone abroad during the War and given up all they had—men who have no incomes from private sources, but who have lost their salaries and have left their wives and children more or less dependent upon charity. I expect there are numbers of members of the Committee who have had calls made upon them and appeals made to them to help cases of this kind. We have all had these appeals from men who have written to say they were receiving a certain salary, and that that salary has gone. The Chancellor of the Exchequer ought to remedy cases of this kind. I have never asked him during the progress of the Budget to make a single deduction, and I have always voted for increasing rather than decreasing the revenue. If he could do something in this matter he would meet a legitimate grievance, having regard to the special circumstances of these men who have given up everything, men who are not in receipt of anything from capital, but whose whole income is derived from their personal exertions.

I desire to make a few observations setting forth the grounds upon which I support the new Clause moved by my hon. Friend. This is the third Debate we have had upon this question since the War began. This is the third Finance Bill in regard to which this Clause, or something like it, has been moved, and at last one comes to know the sort of historical answers that will be given against it. The Chancellor of the Exchequer the first time made the answer that it was an improper Amendment and unfair, because it really involved an increase in the officers' pay. He told us that the right thing to do was to apply to the War Office to get the officers' pay increased. That is an argument which is all very well on the first occasion, but when you have heard it the second time and the third time and no effort is made by the War Office in the Army Estimates to deal with the matter, one begins to wonder whether it is not really passing off a difficulty of the moment to another Department, who will equally throw back the difficulty upon the Treasury when the proposal is seriously brought forward. The other argument suggested originally was that it would cost so much. Now that we realise that the cost of the War is approximately £5,000,000 a day, it cannot be suggested, indeed the right hon. Gentleman did not suggest, that the cost of this Clause would be so much, that it was one the country could not afford, because relatively it is a very small matter.

I now come to the arguments which, I think, are a little unfortunate—namely, that you are dealing with a matter which concerns one class only. I hope the hon. Member for Sunderland (Mr. Goldstone) will believe me when I say that if he brings forward any case in which any of the men who are now so gallantly serving in the Forces of the Crown are treated hardly he will certainly have my support, and, I am sure, the support of a great number of Members who at present are in favour of this Clause. That is not the point we are discussing. It is not a question of officers as against the men, or of the men as against the officers. When we come to discuss it as having arisen owing to the increased cost of living, the Committee are running off on lines which are not germane to the Clause. Let us see what it really is. We are dealing with the question whether or not we should by this Finance Bill impose a heavier burden upon the soldiers of the Crown—that is to say, whether a larger number of persons shall suffer deductions from their pay. If we agree, and I take it every member of the Committee will agree, that there must be a different scale of pay between officers and men—I do not think in any quarter of the House or the Committee it would be suggested that there should be no increase pay given to officers—if you once accept that basis of differentiation between officers and men, you get to this point. I agree with the hon. Baronet the Member for the City of London (Sir F. Banbury) that it is far better to deal with this from the point of view of sailors and soldiers, without any class consideration as to whom it should apply. That is the Clause, and it would be out of order to deal with it in any other way. If that is the Clause, the question before us is: Shall we by this Finance (No. 3) Bill enforce a greater deduction from the pay of certain classes of soldiers and sailors than we did before? I agree with the hon. Member for New- castle-under-Lyme (Lieut.-Commander Wedgwood) that it is not a matter which is called for very largely from any particular class of soldiers or sailors. It is called for by the civilians; it is called by the citizens, who, as the Chancellor of the Exchequer said, have to bear severe deductions in civil life. Yes, they do; but it is from the citizens who sit at home and who are quite content to bear whatever burdens are put upon them in civil life that the call comes that we should not impose by our action to-night greater burdens on those who are contributing to our security and safety at home. And it is when we come to consider what right we have to ask for further sacrifices on the part of these men that conscience says to us all, "we have no right at all," and so this Clause is very properly drawn, because we all feel that while those who can and ought to bear it—the citizens—are properly taxed in having a largely increased Income Tax, when they are imposing in this House this heavier burden on civil life we feel that there is one just exception that ought to be made to it, and we ought not to impose similar burdens on those who are entitled to every possible consideration from us.

One more word. A great number of the soldiers and sailors who are dealt with under this Clause have a right to certain exemptions. Some of them would be entitled, although the exemption limit is reduced, to claim a repayment, or rebate, of Income Tax. I remember pointing out when this Clause was first before the House that it was really an unwise thing, indeed an unfair thing, to impose a tax and deduct Income Tax from the officer's pay, and leave the officer who is at the front to require the rebate in respect of that sum to be, repaid to him. It is asking a man to undertake a civil duty which is quite impossible in the strenuous activities of life at the front. I believe the Chancellor of the Exchequer has got over that difficulty, without any statutory power behind him, by some Treasury Minute which I saw announced in the papers some few months ago, and although I agree that not all that one sees in the papers is perfectly accurate or fully to be relied upon, I hope that statement was true, and whether he had right behind him or not I hope he endeavoured to give some rebate to the officers who were entitled to it. But it is very foolish on our part, and it is not fair on our part, to impose an increase of taxation and to rely on a certain number of officers being able, either by means of the Treasury Minute or in other ways, to secure their exemption. What one ought to do is to say that the citizens who have to bear their burden in civil life are prepared to bear their full share of this increased tax—the whole of it—and not to impose it at all upon soldiers or sailors.

10.0 P.M.

Some of us are very loth, indeed, to disregard the appeal of the right hon. Gentleman, and vote against the Government upon this. I confess it weighs very heavily with me, but there is a class of these officers as to whom I cannot reconcile it with my sense of propriety to support the Government in refusing an exemption. I make an appeal now to the right hon. Gentleman if he cannot see his way to go further and to say, with regard to these officers who are in the lowest class, who are really poor men, that he is willing to exempt them from this additional taxation—some of these officers, second-lieutenants, lieutenants and captains, with mere captain's pay and nothing else to live upon, and men promoted from the ranks, who are worse off than any of them, as to whom really it is a bitter hardship to press this taxation upon them. Bearing in mind that they are poor men, and that there is nothing to distinguish them from other poor men, except that they hold commissions, I appeal to the right hon. Gentleman as to whether he cannot see his way to meet this demand, which touches the sympathy of everyone in the House, by saying he will make a concession. So far as I am concerned, if the right hon. Gentleman met that class of case, I should not be ready to vote against the Government; but if he does not meet that class of case, we must let the country know that we think there is a hardship on these poor officers and their families which ought to be redressed.

I am sure I am impressed with the universal opinion of the House, and the appeal from the right hon. Gentleman (Mr. Duke) is made with greater force than from almost any other Member of the House on either side. On principle I remain where I stood, but I cannot help recognising that there is a very strong body of feeling in the Committee, not universal by any means and not shared by me, but a strong body of feeling with regard to special cases of hardship. I should be willing to propose to make this proposal on Report, if it meets with general acceptance, that soldiers and sailors whose incomes from all sources does not exceed £300 shall be relieved of all increase over and above the pre-war rates of Income Tax on their pay. This I admit infringes my principle, but I offer this proposal in order to meet what have been pointed out as very special cases of hardship. I do not think I ought to be pressed to go beyond that. I do not think I ought to be asked to meet the case of a man who, however reduced his income may be, has still more than sufficient to meet the necessities of life, at any rate upon the standard which millions of the civilian population regard as beyond their reach. I hope this will meet with general acceptance.

It is very satisfactory that the Chancellor of the Exchequer has met to this extent the general wish of the House, but one remark that he made I think was regrettable. The soldier in the trenches and the sailor in the ship knows what his officer is worth, and the officers know what the men are worth; they are good comrades all through, and they will die together. We do not want that mentioned at all. I will suggest to the right hon. Gentleman that £300 is rather too little. I think if he said £400 it would really meet the case. The officers who are the hardest hit are those who rise from the ranks. The labour leaders must know that, and they must have personal friends of their own who are well qualified for officers, who have got the art of leading and commanding men, and leading them into action with skill in moments of danger, who cannot afford to be officers. Every little charge such as this extra Income Tax means a great deal. After all, it is only the War we are speaking about. The Chancellor of the Exchequer speaks of extra pay by and by, but that may be a long job. We are only dealing with the present conditions of taxation and the present rates of pay. This is a war tax, and every little extra tax that is put upon the income of these officers militates agains our getting more men promoted from the ranks. It is on behalf of these men particularly, as well as other men, that I would ask the Chancellor of the Exchequer if he will try to meet our views a little further. He has been generous in his idea, because I know it is against his principle to do this. His principle is perfectly right. His principle as Chancellor of the Exchequer is not to spend money, but to be as stingy as ever he can with money. I would, however, ask him to think the matter over, and if possible grant the exemption up to £400 a year instead of £300. That means a minute sum to the taxpayer. If he did that, I think the Committee would accept the suggestion.

While I must recognise with gratitude any concession on this question from the Chancellor of the Exchequer, I am bound to point out that he has fixed on a figure—I do not know how he arrived at it—which does not seem to me to meet the case of the really poor man. With regard to the suggestion made by the Table and gallant Lord (Lord C. Beresford) that the amount should be £400 a year, I would point out to the Chancellor of the Exchequer that he is dealing with "very small total incomes, such as £400 a year, and when he says "total income from all sources," and he is dealing with officers, many of whom are on active service, I would ask him to consider whether really in effect his concession will be operative? It will mean that deductions are made in all cases, and that the individual officer, in the trenches in many cases, has got to make out elaborate forms to show that his income from all sources is so much, and set forth the precise dividends and so forth which constitute the additional income which, in addition to his pay, does not exceed £300. I do not think that in practice any appreciable number of officers will be able to do that. Therefore I hope the Chancellor of the Exchequer will make his concession simple and say that if the pay is less than £400 a year he will not deduct the additional Income Tax.

I appreciate with gratitude the Chancellor of the Exchequer's concession, but I would suggest that the carrying out of this suggestion would involve an enormous amount of expense and difficulty. The only way it could be done would be by each officer making out claims for the return of his Income Tax, because the Income Tax is deducted from his pay before he gets it. He might be in Serbia, the Dardanelles, or elsewhere, and the matter would be very difficult. It would mean that every man must go through the form of making a formal application for the return of his Income Tax. Take the case of a lieutenant with £186 a year pay. He would have to pay Income Tax on £56 of that, and he would pay Income Tax at the rate of 1s. 3d. in the £.

If he had not a child he would pay on that amount. The man with a family would have to pay something.

An HON. MEMBER: It depends on the number of children. He might be exempt.

He would not get more than £20 per child. If he had one child he would pay on £36, and he would have to make a claim for return of Income Tax on the £36. How is he to do that? The man is on service, and he does not understand the intricacies of the Income Tax. He may be serving anywhere abroad, and I maintain that in practice he could not do what would be required of him. It really means that you are offering with one hand what in practice you do not do, because, in the first instance, you take away the Income Tax, and then you say: "You can get it back." The cost of his getting it back again might be almost as much as the amount of the Income Tax. I would suggest that the simpler and better way would be to adopt the plan we have adopted in this House in regard to the pay of Members. We do not pay Income Tax on £100 of our income. Why not say to the officer, "You shall not pay Income Tax on the first £300 of your pay, on anything beyond that, any private means, you pay increased Income Tax, just as if you were not an officer. You shall not pay the increased War Income Tax on the first £300. On anything beyond that income you pay Income Tax just an any ordinary individual." The result would be that when they came to deduct the Income Tax at the source they would not deduct Income Tax on the first £300. That would cost very little. The relief to the really deserving men, the men to whom relief is a vital nacessity, would be given at the source; it would be given chiefly and without trouble, and it would not matter whether they were in the Dardanelles, in Serbia, in France or in England, they would get that relief without any trouble or expense. I appeal to the Chancellor of the Exchequer to consider that matter and make his concession simple. If he adopted the plan which is in operation regarding the deduction of Income Tax from the pay of Members of Parliament it would meet, to a certain extent, the case we have put forward.

After the many difficulties referred to by the two last speakers, I hope the Chancellor of the Exchequer will reconsider his offer, and that instead of pressing it he will leave the matter open and let us divide upon it. It is quite clear that there is going to be more trouble and work for the officers to get the exemption than the exemption will be worth. I am sorry that the right hon. Gentleman has allowed the hon. Members on the other side to get on the blind side of him in this matter.

I made a genuine offer. This Amendment, I would remind the Committee, is down on the Paper in the names of eight hon. Members. Six of these hon. Members propose precisely what I propose, while two of them, it is true, adopted the idea of the hon. Member who has just spoken. With regard to the difficulty that has been suggested, I would point out that, as a matter of fact, an officer now, if he has got children, if he has less than £300, or if he has any other income, almost in every case has got to make an application for abatement. The hon. Member (Mr. Terrell) claims that his proposal would be far more simple. It is true that it might be far more simple in some cases, but at the expense of every argument on which he has supported the introduction of this tax. He is going to give the relief in full to an officer, no matter how rich he may be. I think it is far better to accept the offer made, which is a genuine offer, as a fair settlement of the question, and one which, I think, might be accepted.

I think my right hon. and hon. Friends must realise that they will not get any more from the Exchequer, and they had better take what they can get. So far as I am concerned, I made a definite pledge to the right hon. Gentleman. He has tried to meet me. I will not say that he has done what I have wished, but, at any rate, he has made a real effort to meet me, and in those circumstances I could not vote against the Government.

If the right hon. Gentleman's offer is assented to, I think that any opposition which we expressed from here would vanish in general assent. I do not agree with what the hon. and learned Gentleman opposite has proposed —to relieve people in receipt of large incomes merely to secure a certain amount of simplicity. I suggest that we should now, with general assent, agree to the proposal of the Chancellor of the Exchequer.

I am opposed to allowing officers or any other class of Government servants special exemptions. The proper thing to do is to pay them an adequate and sufficient salary, and then tax them like anybody else. The whole system of exemptions and privileges as an alternative to paying them a proper salary is wrong. I am really surprised that anybody, even in the interests of the officers, would put it forward as an alternative to paying them a sufficient wage for their services.

Question put, and negatived.

CLAUSE.—(Depreciation on Shipping.)

It shall be an instruction to the Commissioners of Inland Revenue that where a taxpayer can show he has purchased during the War a sailing vessel or steamer, at the time of purchase under a neutral I flag, and transferred said ship to the British flag, that he may, if he so desires, write off twenty per cent. depreciation for two consecutive years before the assessment of excess profits takes place.

Clause brought up, and read the first time.

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

The Committee know that during the War the value of steamship property has risen enormously. The result is that anyone buying a ship to-day knows that he-must make a very large proportion of the cost of the ship during the first two years, of its purchase, otherwise he will be landed with property which was purchased far above its market value. I think it reasonable that the Government should accept this Clause. It would be possible for an English shipwoner to-day to purchase a neutral steamer and bring it under the British flag, if he had the right to deduct at least 20 per cent. from the value of that boat during the first two years in which he owned it. Otherwise, with the present restrictions of the Inland Revenue authorities, he might be landed, two years hence, with a steamer which he had bought at a price far above the market value at which a competitor could build it. The point does not need much argument. I trust that my right hon. Friend has already considered it, and will see his way to accept the new Clause as a reasonable proposition to encourage the increase of tonnage brought under the British flag.

I am really afraid that I do not see any reason why preferential treatment should be secured for this particular class of property. Under Clause 36, Sub-section (3), there is an allowance to anyone who can prove exceptional obsolescence or depreciation in anything which he buys, owing to the War. That allowance is not limited to 20 per cent. It is in accordance with the equities of the case. It may be less and it may be more, and modification of the statutory rules governing the allowance may be made the subject of appeal to the Special Tribunal. That provision which, it was admitted, was good enough for all other cases, is good enough for shipping.

Question put, and negatived.

NEW CLAUSE.—(Amendment of Currency and Bank Notes Act, 1914.)

In accordance with Sub-section (4), Section 1, of the Currency and Bank Note Act, 1914, the further issue of currency notes shall be stopped, and all currency notes now outstanding shall be redeemed within a period of twelve months from the end of the War.

Clause (6) brought up, and road the first time.

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

I would remind hon. Members of the statement that finance is, perhaps, the most important means to enable us to bring this War to a satisfactory close. This particular Clause deals with the subject of American exchange and the position of our commitments, particularly in reference to the very grave state of our finance with regard to imports. I have altered the Clause as it stands on the Paper, striking out the words "passing of this Act," and substituting for them the words "end of the War." Having regard to the amount of currency notes issued, eighty and odd millions, to suggest to redeem them in twelve months from the passing of the Act and return to our metallic currency and to our former position, might appear drastic, and I have therefore made it within a period of twelve months from the end of the War. The Treasury recently issued an announcement asking the post offices and the general public to encourage the use of currency notes instead of gold, for the purpose of a gold reserve for exchange purposes. This continuous issue of Treasury notes is calculated to bring about the very scarcity of gold which it is sought to avoid; and when we find a continuous adverse ex- change, particularly in America there must be some cause which, so far, has not yet been touched upon, and which brings about this most unfavourable state of affairs.

I should like to read a quotation from Lord Goschen, who, after pointing out what an unerring mercantile and monetary barometer the foreign exchanges were, went on to say:— £314,000,000 for that period. I know that that does not include Government purchases of munitions, which may be put at £200,000,000, and which I think are set off by what we get in the way of interest on investments abroad. We may say, therefore, that the figure of £314,000,000 is the position which we have to finance.

I am not a pessimist with regard to our financial position. I believe we have enormous resources in this country, and that the German position is nothing in comparison with ours if it comes to a long war, a war of exhaustion; but even the richest country in the world, if its finances are mishandled by the lack of proper provision in the Treasury, however rich, is bound to suffer if a mistaken policy is pursued, as I believe this is a mistaken one at the Treasury to-day. It is not a question of the convertibility of these currency notes. It is a question of the continuous issue into currency, of this stream of paper money, which is having its effect on the exchanges and of driving gold out of the country at a rapidly increasing rate. When we consider the question of paper money we have to consider what is the position in France as our credit is bound up with that of France, I am astonished to find that while Germany is in a very parlous position with regard to paper money and suffering from big increases in prices, France has outdistanced Germany in this increase of paper money. Let me give some figures as to German and French paper money. It is a rather complicated question, and I think it is worthy of our attention. The paper money of the German Reichsbank increased by £128,000,000. Of course, there are other adjuncts. The French Government have borrowed £260,000,000 from the Bank of France since the War began, and the bank has, in the same period, issued something like £270,000,000 of new loan circulation. France has long since suspended gold payments, and does not allow gold to be paid out or exported. We are in quite a different position, because we still hold, and I hope will maintain our position, as the great monetary centre of the world, and we still ostensibly pay gold on demand. But the time must come, if this policy is pursued, and unless we can rectify the exchanges, when even our gold resources, however large they may be here, in Russia and in France will become exhausted, and the question may arise whether we are able to continue gold payments. I think it better to raise one's voice now before the period arrives than when it is too late. As long as you have this adverse exchange there is an actual profit in collecting bullion in the market-in London and exporting it abroad. Therefore anything that can be done to rectify this position is worth the attention of the Treasury and of this Committee. I believe that this is a contributory cause—it is not the only cause—which is within the control of the Treasury. What is to take its place? It might remain issued for a longer period, so that it could be gradually redeemed, and the further issue might be stopped. If necessary, as an alternative, the handing over of the control of this issue of paper money to the Bank of England would be preferable to leaving it to the Treasury.

It is not the function of the Treasury to carry on a banking business. The Bank of England and other joint stock banks in the City of London endeavour to raise the discount, to raise the rate of money, and to turn the exchange in our favour, but are unable to carry that out, because their competitor the Treasury is continually flooding the channels with emergency circulation and bringing down the rate of money. These are not merely my own opinions; they are supported by the great financial journals of the day. The "Statist," the "Economist," the "Nation," and other thoughtful journals have called the attention of the Treasury to its action in continually issuing paper money and to the effects which may be expected to flow from it. I have not been able to make much impression on the Treasury, although I have been accorded a courteous hearing and a courteous reply. The Financial Secretary to the Treasury told me that if I made a canvass of the banks in the City I should be met by a direct negative. All I can say is that I have already quoted men like Mr. Huth Jackson, the President of the Institute of Bankers, in a contrary sense. I think it will be readily seen that if the banks are supplied with a currency, perhaps the best in the world, drawn upon the United Kingdom, it gives them a liquid capital they are not adverse to have at the present time at the expense of the general body of taxpayers. But we have to consider other interests besides purely banking interests. We have to consider labour interests, the effect upon the working classes, and upon our commercial credit by the fact of the gradual undermining of our position and our policy of maintaining a gold standard in the future. I might quote some authorities in regard to what I said. I would quote the statement here by perhaps one of the leading economists of to-day, Professor Shield Nicholson, Professor of Political Economy in the University of Edinburgh. The most emphatic condemnation of Treasury notes is that of Professor Nicholson, who has denounced them in the columns of the "Scotsman" and in the pages of the "Quarterly Review." He says:— because of this contributing factor. The rise in prices is really like a depreciation, because it means that £l sterling cannot purchase to-day what it formerly could purchase. But that is not the point I am making. The point I am endeavouring to advance is the effect that this has upon the exchanges Depreciation will come later if the full drain of gold continues. My argument is that it is continued. All that I am concerned to prove is that the continuous issue of these notes is bringing about a scarcity of gold for exchange purposes. If the hon. Member, who shakes his head, is, as I have no doubt, well versed in currency and finance, he will know that the unlimited issue of paper currency in any country tends to drive out the gold.

But according to the hon. Member's argument the golden sovereign will be worth more than the £l note. I will give the hon. Member a sovereign for a £1 note.

All I can say is that what I am anxious to do is not to lock the stable after the horse is stolen. I do not suggest we have arrived at the period when you see a premium upon gold in London, but I suggest that the fact that gold is rapidly disappearing from circulation, that we have been faced for the past ten months with an unfavourable exchange, and that gold is rapidly leaving the country, should make us pause, and will, I hope, cause the Treasury and those in authority to consider the position before it is too late. I ask the hon. Member who has interrupted me if it is not a very significant fact that at the time of great prosperity, when the trade of this country was at its utmost limit, we had paper currency of the Bank of England of thirty odd millions, which has been increased now to thirty-five millions on a very much reduced rate of business, because we do not do much trade with the Continent, and our active trade has been very much decreased? The demand, therefore, has been very much reduced, but instead of the natural shrinkage which comes about in the ordinary course of trade, we have an increase in the paper circulation from thirty odd millions to thirty-five millions by the Bank, and eighty odd millions by the Treasury.

If you have this enormous paper circulation in the country you are bound to bring about a depreciation, as indicated by Lord Goschen, first, by the barometer of the foreign exchanges. This barometer now points to stormy weather, and it seems time to take in sail before the position to which the hon. Member has referred has come to pass. It is because I believe that that is the intention of the right hon. Gentleman that I hope he will give it his attention. It is a curious thing how history repeats itself. I have in my hands here a paper over a hundred years old, the "Kentish Gazette," which reports a Debate in this House at the time of the Napoleonic Wars, in which sentiments such as I have ventured to submit were expressed by Members in this House upon the same cause. There was the same inflation as now, and it is curious to find here, under the date "House of Commons, Friday, July 19th"—this ancient paper is dated "1811"—a Bank Note and Guinea Bill was under discussion. It is recorded that:—

I am sorry that I cannot read any more, but this is a case where history repeats itself, because 100 years ago we had a Debate on the same subject, and I thought it would be interesting to the House to prove that the same fault existed then, and it was not until they resumed metallic currency that they met the difficulty. I hope this matter will receive the consideration of the Financial Secretary to the Treasury.

When we are nearing the end of the Committee stage on this Bill, I think if I were to attempt to deal with the many questions raised by the hon. Member I might be guilty of some mysterious offence under the Defence of the Realm Act, and I am afraid I must forbear from following his economic argument. I hope the Committee will not respond to the hon. Member's precedent of trying to amend the recently passed Currency Act in the Finance Bill. Under that Act the Treasury may, subject to such conditions as to time, manner, and order as they think fit, call in any currency notes under this Act by the payment of their face value in gold. Now the hon. Member says, "I do not agree with those powers and I want the Treasury, in their discretion, to be fettered as to the date at which they may call in those currency notes." I think that would be highly dangerous, and if he went round the City he would find a very small backing for his suggestion amongst those conversant with these matters. The hon. Member seems to me to forget that the occasion upon which he speaks differs from most other occasions in that we are at war with Germany and Austria, and that makes all the difference in the conditions. The hon. Member has this currency note question uppermost in his mind, and he seems to distort the whole matter. He says the American exchange has gone wrong, but he does not allow at all for the prime cause—the adverse balance of trade and the enormous increase in our imports. I do not think any economist will disagree with his assertion that inflating currency is a bad thing, but I do not think that the degree of it is as bad here as he thinks, and it is nothing comparable to the inflation of credit or the currency inflation that has gone on in Germany. The increase in paper currency is largely due to the requirements of our soldiers and sailors at home and abroad; for example, these notes are current now in the Dardanelles. The hon. Member forgets that the people of this country with higher wages than in peace time have acquired the habit of going about with a greater amount of cash in their pockets; further, that in so far as these currency notes replace gold there is no increase in the currency, and he probably knows that large sums of gold have been withdrawn from the banks in exchange for these currency notes, and that this gold has been largely shipped to America with the very object of improving the conditions of exchange. Therefore, I would submit to him, firstly, that he has exaggerated such currency inflation as exists; secondly, that currency inflation during the War is inevitable; thirdly, that the currency inflation which there is is not by any means the most powerful of the causes which have led to the effects which he deplores; and, lastly, that the Treasury takes from day to day and from hour to hour the advice of those engaged in these matters in the City, and I am quite certain that the centre of the finance of the world of, this country would very much deplore a statutory provision which prescribed the time and place for reducing the amount of paper currency available.

I corroborate what the Financial Secretary to the Treasury has said about the general practical opinion in the City with regard to this matter. Of course, theoretically, currency in paper is bad, but I have talked to a great number of people in the banking world, and they all think that there is no depreciation in their paper currency at all, and at the same time it furnishes a great convenience for the very purpose for which the hon. Member said it was no use. It sets free a large amount of gold which is useful for the purpose of keeping steady the foreign exchanges. It is always a mistake to use an argument to prove something or other which can be proved sufficiently well by other causes. The adverse state of the American exchange is perfectly well explained by the fact of the enormous surplus of imports over exports. It does not want the small amount of this extra currency to account for that. It is superfluous altogether to look beyond the immense adverse balance of imports in order to explain the state of the American exchange. If this currency were a very large additional amount, there would be, no doubt, reason to doubt the wisdom of continuing it, but so far it has not been so, and there is no sign whatever of depreciation in the currency itself.

Question, "That the Clause be now read a second time," put, and negatived.

NEW CLAUSE.—(Rebate for Companies Sub-serving Purposes of Public Utility.)

A company incorporated in the United Kingdom whose capital is entirely or mainly employed in, and whose earnings are entirely or mainly obtained from operating railways, tramways, canals, or the supply of gas, water, electrical energy, or other similar public utilities in any British possession, shall be assessed to Income Tax in respect of its profits in the proportion of one-fourth only of the net annual value thereof: Provided that no allowance shall be given to any person resident in the United Kingdom in respect of the Income Tax on the interest or dividends on the securities of any such company held by him.

Clause brought up, and read the first time.

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

This Clause is addressed to a grievance which exists with regard to many concerns which, while managed in England, are mainly financed by capital held by residents in the Dominions. There are some very important companies which for the sake of the additional amount of brains available in England for special scientific and commercial purposes have found it so far more convenient to have them managed here, but under the great increase of Income Tax and the threat of still further Income Tax it has become a serious question with a great number of these companies whether they will be able to be continued to be managed in England, and whether it will not be better for them to transfer their whole establishments to the other side of the sea. This proposal is in the nature of a compromise, and I suggest to the Financial Secretary to the Treasury whether it might not be worth his while rather to take what he can get—I put it down at one-quarter of the net annual value—rather than lose the whole thing. It is simply a question of arithmetic— whether it is worth while losing the whole thing. There are several companies which at this time are waiting for the decision of the Treasury and considering whether they will not take their whole management away from the United Kingdom to India and the Colonies. It is not proposed that any shareholder in these concerns who is resident in this country should avoid paying his full Income Tax, but the contention is that the whole deduction from the income of those who live abroad should be to the extent of only one-fourth of the amount chargeable under the Income Tax system. I believe the Government of India takes a very favourable view of this Amendment, and I hope that the Treasury will consider it, or indicate some means of meeting the difficulty. Otherwise I am afraid a considerable amount of income will be lost to this country.

My hon. Friend has raised a very important topic, which I should have wished to have dealt with together with other topics almost immediately. But to venture to deal with it as an isolated proposition is rather dangerous. The principle of the Income Tax Acts has been that when a company is controlled in the United Kingdom, wherever its properties are, it should pay Income Tax on those properties, and be entitled to deduct the Income Tax from the dividends paid. But my hon. Friend takes a. particular class of concerns and suggests we should abandon that Income Tax principle for those particular concerns. I do not think he can stop there. I venture to think the arguments which would be set up by the passing of this new Clause would be such as to lead to claims for exemption from companies carrying on any sort of business outside the United Kingdom. I do think the question of the incidence of the tax on concerns in which profits are made outside the United Kingdom is one which ought to be debated in the House of Commons, and which should receive the attention of that long-waited-for Committee on Income Tax law which would now be sitting had it not been for the War, which entirely postponed that and many other projects for which we are waiting. Pending this inquiry, I would suggest we should not be right to-night in meeting this one simple case which does not seem to be sufficiently marked out from other cases. It may be that my hon. Friend has in view the. fact that these companies, although controlled in this country, have as their shareholders many persons who do not reside here. He estimates that probably three-fourths of these profits are made outside, and that one-fourth only would be attributable to the capital raised here, and therefore Income Tax ought only to be paid on that one-fourth, and only by persons resident in this country. I do not know on what he bases the calculations of three-fourths and one-fourth, whether it is a scientific calculation or only a rough estimate; but if that is the grievance which he wishes to redress in the matter of the principle of the Income Tax, I would urge him to wait until we can deal with the question as a whole, and not press upon us the consideration of the case of a very small fraction of the companies.

11.0 P.M.

The proportion of one-fourth, which I suggest in this Clause, is, of course, only a rough proportion. I am dealing with cases where the whole of the operations of the company are conducted and the whole profit of the company is made in the British Possession, and where no profit whatever, or practically none, is earned in this country. The question of where the shareholders are is not a matter of much importance. Of course, it would only be operative where the shareholders are mostly living in the other country. It might conceivably happen that all the shareholders would be in the other country, while, for the sake of the technical and commercial advice which they get, they find it preferable or desirable, as things have been so far, to have their management in London. But there comes a point when the Income Tax weight is so heavy that they might make up their minds to have a change, and that point is now being reached. As I told the Committee, I know of several cases where it is in immediate contemplation to withdraw the whole company from England and transfer it to the British Possession. If that happens the Treasury here will lose the whole of the Income Tax, except so much of it as comes from shareholders living in this country. I am afraid these concerns will not be satisfied with the promise of a possible Amendment of the law in future as a result of the Committee on Income Tax law, whose deliberations are not likely to be finished for years, when they have an immediate probability of having imposed upon them a very much heavier tax than has so far been imposed. I wish the right hon. Gentleman would, therefore, consider doing something for them.

Question, "That the Clause be read a second time," put, and negatived.

The next Clause has been disposed of. The new Clauses standing in the name of the hon. Member for Hertford (Sir J. Rolleston) [ Extension of relief in respect of children ] ought to come as an Amendment to Clause 23. The next five Amendments all deal with matters which have been disposed of. The New Clause in the name of the hon. Baronet the Member for the City of London (Sir F. Banbury) appears to me to involve a charge. Perhaps he will explain it.

[ who had given notice to move the following NEW CLAUSE ( Life Insurance Premiums )—The amount of the abatement allowed on account of life insurance premiums shall not exceed one-sixth of the total of the income at the time the insurance was made],

The Finance Act of two years ago said that insurance premiums might be deducted, provided they did not exceed one-sixth of the income. At the present moment incomes have depreciated, therefore a person who three years ago insured his life, his income being £3,000 a year, was entitled to deduct £500 a year for insurance premiums. At the present moment his income is reduced to £1,800 a year, therefore he is only entitled to deduct £300 a year for insurance premiums. I want to say that the same amount shall be deducted as before. The new Clause does not impose a charge; on the contrary, it has the effect of rather decreasing the charge. If that is so, I submit that I am in order.

Certainly, if that is the effect of the Clause the hon. Baronet is most decidedly in order, but I am not sure whether the wording does what he says.

On a point of Order. I quite appreciate the intention of the hon. Baronet, but I submit that his wording, which is what matters, does restrict the abatement and, therefore, does impose a charge. I do not think he has worded it as he intended.

I did not mean that. I do not think it does restrict the abatement. I presume the right hon. Gentleman means that if his income is increased. I am afraid that the present moment nobody's income is increased.

That is just the point that occurred to me. It might mean that to some people it would involve an increased charge as worded, although I do not think that is what the hon. Baronet intended. The hon. Baronet is entitled to bring it up in manuscript, and if I find it does not involve a charge I will take it from him

I have indicated what I mean. If you would allow it to be moved formally, if the right hon. Gentleman refuses to except it and gives good reasons for not accepting it, the matter would perhaps terminate. If you desire it I will endeavour to alter the wording.

I should much like to do it for the hon. Baronet, but I might get into trouble with other hon. Members if I allowed him to do something which was out of order.

If I altered the wording by saying the amount of the abatement allowed on account of life insurance shall not be less than one-sixth of the total income at the time the insurance was made—

The hon. Baronet had better put it in writing.

NEW CLAUSE.—(Exempting Executors, Trustees, Assignees, and Others from the Excess Profits Duty in Certain Cases.)

No excess profits duties shall be charged or levied upon any moneys which prior to the first day of July, nineteen hundred and fifteen, passed to beneficiaries under wills or became vested in executors or trustees under any will, or trustees, or assignees, or receivers under any settlement or deed of arrangement.

Clause brought up, and read the first time.

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

The Clause requires very little explanation. The object of it is simply to prevent this retrospective Excess Profits Duty from being imposed upon moneys which have been earned and which have passed to beneficiaries or vested in executors, trustees, etc. I formally move it,

( indistinctly heard ): The acceptance of this Clause would introduce into the Bill a principle which is quite out of accord with the general principle of the tax. It does not seek to discover to whom and how profits arising from the trade are distributed. I think if we allowed this there would be a good many claims for exemption. The general answer to all such claims which we can make, if we make no exception, lies in the fact that where profits remain high there is a new fund out of which the duty can be paid, while if the profits fall the duty becomes repayable. As regards the profits passing to executors under a will, the fact that the duty is charged on excess profits naturally suggests that after payment of the duty an abnormal balance will still remain in their hands. I would represent to the hon. Member that having gone so far in admitting the principles of the Bill, we cannot make any such exceptions.

I would point out that this Clause is expressly limited to moneys which, prior to the first day of July, 1915, passed to beneficiaries under wills, etc. Consequently, these moneys cannot have passed to the executors unless the person who had made the profits was dead. Therefore, there could be no further period of trading on which these profits are repayable.

Do I understand the right hon. Gentleman to suggest that where somebody died prior to the 1st day of July last who was absolutely ignorant at the time of his death that any such duty was going to be levied, and who, bonâ fide and in good faith, left that money to his wife or his children or other people, that the Treasury now proposes to go to the executor, who has probably distributed the money, and to say to him, "You must go to the people to whom you have given the money and collect from them all the money which was left to them by that dead man, bonâ fide and in good faith, and who died without any knowledge whatever that such a tax was going to be made." Am I correct in supposing that that is the intention of the right hon. Gentleman?

I will discuss it with the hon. Gentleman.

Question, "That the Clause be now read a second time," put, and negatived.

NEW CLAUSE.—(Equalisation of Tax on Colonial Investments.)

Where dividends are derived from money invested in companies registered under the Companies Acts and domiciled outside the United Kingdom but within the British Empire, Income Tax shall be collected upon such dividends from those shareholders who are resident within the United Kingdom at no higher rate than would be collected if the companies had been domiciled within the United Kingdom.— [ Mr. Stewart. ]

Clause brought up, and read the first time.

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

This Clause opens up a question of some importance. I can understand that the Inland Revenue Authorities, on reading this Clause, would say that the law now treats Colonial investments as well as it treats others. I am sure that that is what the Inland Revenue intends, but what affects us is not their intentions, but what they actually do. Companies registered in the London area, whether they work in the Colonies or abroad, get better terms as regards Income Tax than Colonial companies working in other parts of the Empire, who send their dividends direct to the owners of their shares in this country. Anyone who holds shares in a Colonial company outside London, but within the Empire, is debited on what he received in the year 1914 at 1s. 8d. in the £. It does not matter whether he received the dividend in January or February, when the rate was 1s. 2d., he is charged 1s. 8d., whereas if he had taken the precaution of bringing the dividend warrants home and cashing them over the counter of a London bank, he would be charged 1s. 2d. in the £. That being the case, the holder of stocks in Colonial companies is penalised compared with a London shareholder to the extent of 40 per cent on what he received in 1914.

I have received dividends from companies working in foreign places up to the end of 1914, the rate being 1s. 6½d. The Colonial investor is charged 1s. 8d I do not see why the company working in the foreign place-should have the benefit of the l½d. or 7 per cent. with regard to Income Tax. On the dividend of a Colonial railway paid in April the charge was 2s. 6d., and on American railways the charge was 2s. 6d. They are now levying Id. extra on the Colonial railway and nothing is levied on the American railways. Why should the holder of Colonial stock have more taken from him? In the case of the Canadian Pacific Railway dividend, paid in October, the London shareholder is charged 2s. 6d., and the shareholder, whose stock is registered in Montreal, is charged 3s. 6d. This difference cannot be because the dividend is received here after a certain date, because weeks after these dividends are paid, companies operating in South America pay dividends at rates varying from 2s. 1¾d. to 2s. 4d. You may say that in future some adjustment will be made, but we cannot tell how long the War is going to last. In this War persons die very quickly and shares may be sold. Therefore, there is the risk of never getting any adjustment. Considering what the Colonies have done for us, money invested in them should be treated as well as money invested in other places.

The case of India is worse still. The Indian investor, in addition to having to pay 1s. 8d. on dividends which come straight home to the individual, has to pay 6d. in India. Therefore, the shareholder in an Indian railway or cotton mill, whose shares are registered in India, is charged 2s. 2d. Income Tax up to October of last year. If he has those shares in Manchester he gets off with 1s. 2d. or 1s. 3d. If he has stocks and shares in Australia and New Zealand it is more glaring still. I was told the other day by a City of London man with large properties in Australia, that he is liable to pay 1s. 6d. Australian Income Tax, 6s. War Tax, 3s. 6d. Home Income Tax, and Super-tax at the rate of 3s. 6d. The Income Tax on his Australian investments works out at 14s. 6d. In New Zealand the tax is a little less, but the same principle prevails. When Parliament passed last year in two hours under the Closure, a tax of this character they did not foresee what was going to happen with regard to the investment of money in our Dominions, and if the taxes are to be collected in the way they are, then without doubt the result will be that money will be withdrawn from the British Empire and placed outside to escape the very high charges for Income Tax that at present exist. The action of the Treasury with regard to Colonial investments resembles very much the attitude of Joseph's brothers to Joseph. They put him in a very deep hole and he lived to help them later on. The Inland Revenue at present are putting the Colonial investor in the very deepest hole they can find, while our Colonial brothers are helping us to the fullest extent of their capacity in every quarter of the world.

I watched with the greatest interest and appreciation the skilful way in which the Chancellor of the Exchequer maintained his position against very heavy artillery, but I did notice, and was glad to see, that he made a favourable response to one appeal, and I hope he may favourably consider this one. I am a firm upholder of the doctrine of Colonial Preference, but I will not go into that. But I believe, as many of us believe, that the Inland Revenue is serving out very hard measure to the very people who are helping us, and who desire to keep their money within the family in readiness for the great commercial war which will come after this War, and so that the financial position of the British Empire shall be as strong as possible.

I hope my hon. Friend will forgive me if I say that he is under a misapprehension as to the law on the subject. His Amendment would do much more than he proposes to do. The inequality of which he complains does not apply only to Colonial investors, it applies also to many British. The distinction is not between us and the Colonial investors, but between the conditions under which the tax is conducted. The principle is that where a person is authorised to deduct and retain from the payment made on taxed profits, the rate of deduction is that at which the profits have been taxed, that is, the rate which was current at the time the profits were made. But where a person is required to deduct and pay, not to deduct and retain, time the liability arises. It is a difference the rate of deduction is that in force at the in principle, and not a difference between the locale of the company whether at home or abroad.

If you receive dividends from Colonial investments, and the money is paid into your banker and eventually comes to you the charge is 1s. 8d. in the £, but if you had taken the precaution of having the dividend warrant posted in England the tax would be 1s. 2d.

In the one case the tax has been deducted and retained by the person who had already paid the tax on the whole profits, and in the other case the person has deducted and paid over in respect of profits on which the tax has not already been paid. There is a clear distinction in principle between the two cases. If we were going to make a change it is quite clear we could not limit it to this case.

I have not found a single cases where the Colonial stock did not suffer worse than foreign investments.

Take the case of a railway company which pays Income Tax upon its profits. When the company pays dividends to its shareholders the company deducts the tax from the dividend and retains it, because it is in respect of profits upon which the taxes were then being paid. That is one principle. If the railway company did not pay the tax upon its profits, but distributed the whole of its profits in dividend and then deducted the tax from the dividend, that would be a deduction which the railway company would be obliged to pay for. In one case the railway would pay tax at the amount which was current when the liability accrued, that is to say, at the moment of paying over. My hon. Friend may be right, but I do not think we ought to make a change in the system, which would really be impracticable. You cannot tell in many cases when the profits were earned. We have to charge at the rate which was in existence at the time when the payment was made.

I can only ask my hon. Friend not to foresee a change which would operate very hardly instead of a law which in a long period of time does operate perfectly fairly between all classes of shareholders.

I am not sure that I appreciate the point, although I am sure the answer given by the Chancellor was quite lucid and well reasoned. At the same time the change which is advocated by my hon. Friend is an important one. It may be that the Clause is rather imperfect and goes too far, but still its main purpose is to try and see that Colonial investments are not differentiated against by our system of Income Tax. I think it is too big a change to ask for in this Finance Bill, but I hope the Chancellor will make a mental note of this matter, because it is clearly a subject which ought to be brought before the Commission. It ought to be looked into carefully, because there is certainly some belief that Colonial investments do suffer a little more severely than others. I hope whenever the Commission is sitting we may reconsider the principle on which the present Income Tax is collected.

Question, "That the Clause be read a second time," put, and negatived.

NEW CLAUSE.—(Provisions to Prevent Excess Profits Duty from Causing Hardship to Persons who have been Incapacitated or to the Dependants of Persons who have been Killed or have Died as the Result of Service with His Majesty's Forces.)

If it shall appear to the Commissioners that in certain cases payment of excess profits duty cannot be enforced without causing serious hardship, either to persons who have been incapacitated as a result of service with His Majesty's Forces, or (in the event of such persons having been killed or having died in such service) upon their dependants, the Commissioners shall notify the Treasury of the facts, and the Treasury shall have power to waive payment of such sums as they may consider will cause the infliction of serious hardsrip in any such case.—[ Mr. Pennefather. ]

Clause brought up, and read the first time.

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

This is a purely permissive Clause. I cannot imagine that it is the intention of the Treasury to inflict serious hardship upon people who have enlisted or taken commissions and gone to the War in absolute ignorance of the fact that this tax was going to be passed. We must remember that this is a retrospective tax, going back some twenty-five months. Many men now serving in the Army, or who have served and been incapacitated, enlisted in the full belief that they were able to leave behind them certain sums to support them in case they were incapacitated, or to support their wives and dependants in case they were killed. Now, months after, the Treasury says, "We are going to take away from you one-half of any portion of your nest-egg which comes under the technical definition of excess profits." In the case of a rich man it would not be a, hardship, but I am pleading for the poorer people. There are thousands who may be affected. Now that we are putting pressure upon business men and all classes to enlist, there must be from day to day and from week to week more men whose dependants might suffer this hardship? Therefore, it is increasingly important that we should give the matter some consideration, particularly in view of the fact that it is possible to collect sums under £50 by summary jurisdiction, and that there is a Clause under which people may be imprisoned and businesses broken up in the collection of the tax. These are all cases of very great hardship. I cannot for one moment imagine that the Treasury desires to include such cases. I do hope, therefore, that the Treasury will accept this purely permissive Amendment, which gives them the right, which apparently they do not now possess, to waive such payments if the hard facts are brought to their attention by the Commissioners, and if the Treasury think fit to exercise that right.

I very much doubt the expediency of giving to any Government, or any part of a Government, power to tax, for the power to limit taxation is practically the same as the power to tax. The hon. Member no doubt is aware of the enormous number of cases of personal hardship caused to the subject at the present time by the very severe taxation which of necessity the situation imposes. It would, I think, be most invidious to give to anyone a power of selection amongst the cases of hardship in respect of one particular tax, and that particular tax only in respect of 50 per cent. excess profits. How after that should I be able to turn a deaf ear to the innumerable other cases of real hardship that come before me in respect of the imposition of the ordinary Income Tax? I hope the hon. Gentleman will not press his Amendment.

May I ask the right hon. Gentleman not entirely to turn down this proposal, nor to neglect to consider the principle underlying this Clause because of his objection to a particular detail of it? Last year the House passed an Act with a very similar purpose—to exclude from the Death Duties the estates of persons killed in the War where they left less than £5,000, and claiming only a much smaller payment in the case of estates above that value.

That is exactly my point. I would ask the right hon. Gentleman whether between now and the Report stage he will consider putting a Clause in the Bill which will exclude entirely from the Excess Profits Tax persons who are incapacitated from wounds or otherwise through the War, who can never again earn any profits, and who it may be, when they either took a commission or enlisted, absolutely counted upon certain funds which they hoped to have at their disposal for the benefit of their families. I do not think it would operate in a very great number of cases. It is a very exceptional tax that is to be imposed. It certainly was never intended that it should be imposed upon people who would never have the opportunity of doing another year's effective business as long as they lived—an incapacitation entirely due to the War. I suggest that the right hon. Gentleman might consider the advisability of a Clause leaving no permissive powers at all to the Treasury, but absolutely excluding from the operations of the Excess Profits Tax the persons I have described, or their dependants, where death or incapacitation is due to the War.

I have had very little experience in drafting Amendments, and I do not for a moment press upon the Chancellor of the Exchequer that he should adopt the exact words that I have put forward. But I again ask him whether he would not take into his serious and sympathetic consideration the possibility of drafting a Clause with greater skill and wisdom which would meet the case, and which would meet the wishes of the great bulk of the nation. On the understanding that the right hon. Gentleman will between now and the Report stage see what he can do to solve the problem, I shall be quite satisfied to withdraw the Amendment.

Consideration, certainly.

Proposed Clause, by leave, withdrawn.

NEW CLAUSE.—(Exemption from Excess Profits Duty of Businesses Carried on Under the Court.)

In the case of any trade or business which by reason of its being unable to pay its debenture holders or creditors is being carried on by a liquidator, receiver, or trustee under the Court no Excess Profits Duty shall be levied or paid until provision has been made for payment of such unpaid debenture holders or creditors.—[ Mr. J. M. Henderson. ]

Clause brought up, and read the first time.

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

Of course, there are very few cases in which a company would come to a position which would bring it within this Amendment, but, in the event of it reaching the point, the Treasury would swoop down and take a large sum of what was really intended, and what ought to go, to pay the creditors or debenture holders who have a first call on the property.

My hon. Friend admits, I think, that he has given a case which would arise very rarely.

There may be a few cases, and I think, if I may say so with all respect, my hon. Friend has got hold of a good case which ought to be met, anyhow so far as a company that was being carried on by the liquidators prior to the liability arising. Perhaps he will allow me to consult the draftsmen as to the precise phraseology, and bring up an Amendment to carry out his intention on Report. I think it ought to come in Clause 40, Subsection (3), but the point raised shall be met.

Under these circumstances I withdraw the Clause. I do not mean, of course, that it should operate since the War. I am quite prepared to leave the phraseology to the draftsmen, because I know draftsmen always like their own words. Sometimes they are better, and sometimes not, but I am willing to leave it to them.

Motion and proposed Clause, by leave-withdrawn.

NEW CLAUSE.—(Life Insurance Premiums.)

The amount of the abatement allowed on account of life insurance premiums shall not be less than one-sixth of the total of the income at the time the insurance was made.

Clause brought up, and read the first time.

I beg to move, "That the Clause be read a second time." I have made an alteration in the new Clause I proposed a short time ago, which was out of order.

I may explain very shortly the object of the Clause. Suppose a man with an income of £3,000 a year has insured his life for a premium of £500 a year. At the present moment, unfortunately, the incomes of a very large number of people show a reduction, and this particular person's income may have fallen to £1,800 a year. When he arranged the insurance he was entitled to deduct the whole of the premium for Income Tax purposes, but now, at a time when his income has been seriously reduced, he will only be entitled to deduct £300 instead of his actual payment of £500. I think that is a very hard case, especially as it should be borne in mind that when insuring his life he made the arrangement on the supposition that the premium payments would be allowed for in his Income Tax assessment. I understand the Government are prepared to meet me to a certain extent. I am not tied to my own particular words, and if the right hon. Gentleman prefers any other drafting I shall be only too pleased to accept it.

I understand from the hon. Baronet that he did not want to propose anything like a permanent increase in the insurance premium relief. In my humble opinion that is a fit subject for the Income Tax Committee to consider. But I promise this particular grievance shall not be lost sight of. What is asked is that some relief should be given to a person whose income since insurance was entered into has been decreased, and I would suggest that the right thing to do would be that in 1914–15 and in future years while the War lasts, he should be allowed to deduct the actual amount of premium paid, as in the last completed year before the War. I have not had time to examine the words of the proposed new Clause, but I will undertake to introduce something of the kind on Report.

I have no doubt the words suggested by the right hon. Gentleman will meet the case, and under the circumstances I will not press my Clause.

Motion and proposed Clause, by leave, withdrawn.

NEW CLAUSE.—(Extension to Estate Duty of the Death Duties (Killed in War) Act, 1914)

Section two of the Death Duties (Killed in War) Act, 1914, shall apply to Succession and Legacy Duty as well as to Estate Duty.—[ Mr. Peto. ]

Clause brought up, and read the first time.

I desire to move, "That the Clause be read a second time," and I do so in order to ask the Chancellor of the Exchequer whether he is not prepared to make this small extension of the Death Duties (Killed in War) Act. It is a concession which, it appears to me, was only by inadvertence omitted when the matter was dealt with last year. I am informed that the amount of Legacy and Succession Duty is so small as to be almost negligible At any rate, it is trivial in amount by comparison. Still, the principle underlying the payment of Death Duties during the War is perfectly clear, and it was clearly enunciated by the Chancellor of the Exchequer when the Death Duties (Killed in War) Act was passed, that the Government had no desire to make a profit out of deaths occurring due to the War. This proposed new Clause is in accordance with the spirit of the Act, which ought certainly to be extended so as to include Legacy and Succession Duty. I would remind the right hon. Gentleman with respect to an estate of over £5,000, the Government are really still making a profit in that they only calculate the remission in accordance with the expectation of life on the 3 per cent. tables, and that the 3 per cent. does not represent the value of the money. I should be glad to know if the right hon. Gentleman is prepared to accept this new Clause.

I will consider the Clause between now and the Report stage. I have to see that there are certain safeguards, but I shall be glad to give the point as favourable consideration as possible.

I gladly accept the right hon. Gentleman's assurance, and ask leave to withdraw my Motion.

Motion and proposed Clause, by leave, withdrawn.

Committee report Progress; to sit again upon Monday next (22nd November).

The remaining Orders were read, and postponed.

It being after half-past Eleven of the clock, Mr. DEPUTY-SPEAKER adjourned the House, without Question put, pursuant to the Standing Order.

Adjourned accordingly at Eight minutes before Twelve o'clock.