House of Commons
Monday, July 16, 1917
Private Business
Bedwas and Machen Urban District Council Bill [ Lords ],
Read the third time, and passed, with Amendments.
Ashton-under-Lyne Corporation Bill [ Lords ],
North Cheshire Water Bill [ Lords ],
As amended, considered; to be read the third time.
Irish Land Commission
Copy presented of Return of Advances under the Irish Land Purchase Acts for the months of August, September, October, November and December, 1915 [by Command]; to lie upon the Table.
Marriages, Births, and Deaths (Ireland)
Copy presented of Fifty-third detailed Annual Report of the Registrar General of Marriages, Births, and Deaths in Ireland, 1916 [by Command]; to lie upon the Table.
Civil Services (Supplementary Estimate, 1917–18)
Estimate presented of further Sum required to be voted for the service of the year ending 31st March, 1918 [by Command]; referred to the Committee of Supply, and to be printed. [No. 110.]
Public Works Loans Bill
Copy ordered "of Statement of particulars of Loans of which the balances outstanding are proposed to be remitted or written off, in whole or part, from the assets of the Local Loans Fund."—[ Mr. Baldwin. ]
Oral Answers to Questions
War
Interned Belgians (Lubeck)
asked the Secretary of State for Foreign Affairs whether 500 of the 2,000 interned Belgians at Lübeck Camp have died during the last three months, owing to the lack of food; and, if so, is there any channel whereby proper representations can be made to the German Government about the matter?
I have received no reports in the sense indicated. If, however, my hon. Friend will let me know the source of his information I will bring the matter to the notice of the Belgian Government, who, if they have not already done so, will, no doubt, cause representations to be made to the German Government.
Lamport "V" Boats
asked the President of the Board of Trade if the Lamport "V" boats are running between the River Plate and the United Kingdom viâ New York, and that in consequence of these boats having been compelled to sail viâ New York it lengthens the round voyage by some five or six weeks; if he is aware that if they were allowed to run direct between the River Plate and Liverpool steamers could make about five voyages in a year, but in consequence of having to run viâ New York they are only able to make about three voyages a year; and if he can give any reason why the boats in question have to sail viâ New York?
My right hon. Friend has asked me to reply. My hon. Friend has overstated the increased length of the round voyage of these vessels viâ New York, which is only about three weeks, not five or six. Otherwise the facts are as stated in the question. If the boats were redirected as suggested by my hon. Friend the net cost of conveyance of the meat cargoes would be enormously increased owing to the special character of these boats, while the additional meat imports secured for the United Kingdom would be comparatively small. I may add, however, that the Shipping Controller is fully prepared to take the course suggested as soon as it is considered that the urgency of increased meat imports justifies a large monetary loss.
Does my hon. Friend think that the space of three weeks' time as against the suggested five or six weeks, includes demurrage for loading and unloading at New York?
Yes. As I am advised that is so.
Is not the hon. Gentleman aware that these boats are under Blue Book rates, consequently there can be no saving in freights so far as the shipowner is concerned, and, furthermore, he must know that the boat is not occupied from twelve to fourteen days in crossing and recrossing the Atlantic, apart from the time occupied in loading and unloading at New York?
I can only say, on the merits of the question generally, that only one consideration has actuated my right hon. Friend in directing these vessels as he has—that is the national interest. It depends not only on Blue Book rates, but on the economic use of the vessels. Owing to their peculiar character and the character of their cargo that can be carried, the facts are as stated by me in the answer I have given to my hon. Friend.
Is not the hon. Gentleman really aware that these are not correct answers, and that, as a matter of fact, this arrangement was made by the late President of the Board of Trade?
That is perfectly true, but the arrangements made by the late President of the Board of Trade have been reviewed very carefully indeed by the Shipping Controller, and, as my hon. Friend knows, he has had an opportunity of knowing how very carefully these arrangements have been considered.
May I request that this matter will be looked into again?
I can assure my hon. Friend that I personally have given the closest attention to the matter. I was at first inclined to take the view he takes, but on reconsideration I am quite convinced that this is a businesslike arrangement.
You are wrong.
Food Supplies
Australian Wheat
asked the President of the Board of Trade whether quantities of wheat purchased by his Department are now lying in Australia owing to the impossibility of obtaining freight; if so, what is the total quantity, when was it purchased, and what still remains to be shipped; whether this wheat is all paid for, and, if so, at what price; whether it is still in good condition; and if he anticipates that it will be fit for human food when ultimately brought to this country?
Purchases of 500,000 and 3,000,000 tons of Australian wheat were made on behalf of Great Britain, France and Italy, under contracts dated 3rd October, 1916, and 4th December, 1916, at the prices of 32s. and 38s. respectively, free on board.
The whole of the 500,000 tons has been paid for and shipped; of the 3,000,000 tons part only has been shipped, and, under the terms of the contract, full payment is not yet due for the whole amount.
The wheat is in good condition, and it is anticipated that it will be fit for human consumption on arrival in this country.
Can my hon. Friend say what proportion of the 3,000,000 tons have been shipped up to the present?
I do not think it would be advisable to state that.
Is any of this wheat being brought to this country by the ships that were recently purchased by the Australian Commonwealth, or is it all being sent to France?
I should like to have notice of that question.
Bread (Rope Disease)
asked the Parliamentary Secretary to the Ministry of Food (1) if, in view of the waste of bread made from 81 per cent. G. R. flour, owing to its absence of keeping qualities, he will consider the desirability of reverting to the 75 per cent. standard, which, in the experience of bakers, bears other ingredients and stands the test of age better than the present flour; (2) if, with a view to securing something like equality of standard in bread, he will consider the desirability of stopping sales of white flour to bakery firms and requiring the millers to provide a uniform mixture to all; (3) if he is aware that bread made from the present G. R. flour develops mould quickly, in addition to being subject to the rope disease; what steps are being taken to remedy this drawback; (4) if he is aware that the difficulties of bakers in making a satisfactory bread under the present Regulations are aggravated by the variations in the admixtures of maize, rye, rice, beans, and other substitutes, and the absence of information as to the nature and proportions of the ingredients; and will he endeavour to secure a nearer approach to uniformity?
In view of actual and prospective supplies, it is impossible to revert to any substantially lower degree of extraction than that now in force.
The tendency of bread to develop mould is attributed to the use of maize flour which has been imperfectly ground. This has already been remedied by improved machinery and more expert treatment. There is no evidence that admixtures increase the risk of "rope." The conditions leading to the fermentation, are warmth and excessive moisture.
As was stated in the House last Wednesday, it is impossible, owing to difficulties of transport, to obtain regular distribution throughout the country of the various grains used for purposes of admixture. It is, therefore, necessary, within prescribed limits, that each centre shall use such grains as can conveniently be supplied. It was further stated on Tuesday, 3rd July, that the supply of imported white flour is under the control of the Wheat Commission, and that its admixture with flour produced in this country has been regulated and defined.
I may add that, as the result of scientific investigation, combined with the co-operation of millers and bakers throughout the country, there seems an excellent prospect that the troubles complained of will not recur.
Is the hon. Gentleman aware that the charge is made against West End bakeries of obtaining the best white flour and mixing it with Government flour and supplying their West End customers with a better quality of bread than is supplied to people in the East End of London?
asked the Parliamentary Secretary to the Ministry of Food if he will state what ingredients are sanctioned for use in the G. R. flour now issued to bakers; whether he is aware that the quality has deteriorated very seriously recently so that it is impossible to bake wholesome bread from what is distributed in many places; whether he is aware that the keeping properties of this bread are extremely bad, so that the Regulation that it shall not be used for some time after baking greatly increases the difficulties of the baker and the danger to the consumer; and whether the quantity and quality of the wheat now in the country will enable him to improve the situation?
The permitted ingredients were stated in answer to a question by the hon. Member for Chertsey last Tuesday. As regards the quality of war bread, I cannot usefully add anything to the numerous answers already given.
Sugar
asked the Parliamentary Secretary to the Ministry of Food if he is aware that the inmates of the Abbeyleix Union Workhouse, numbering 116 people, have been without sugar for several weeks past; if he is aware that the contractor for the supply of sugar supplied during 1915 42cwts., and in 1916 34½cwts., and during the present year to 1st June 8½ cwts.; at present the amount received is only 7 lbs. weekly, and that under the Food Controller's Regulations the guardians would be entitled to receive an average of 58 lbs. weekly; and if he will immediately issue an Order so that the guardians may be enabled to receive the full amount to which they are entitled?
No complaint from the Abbeyleix Union Workhouse regarding their supplies of sugar can be traced either by the Royal Commission on the Sugar Supply or by the Ministry of Food. As, however, it would appear from the particulars given by the hon. Member that the guardians are not receiving from their wholesale suppliers the quantity of sugar to which they are entitled, inquiry will be made in the matter.
asked the Parliamentary Secretary to the Ministry of Food whether he can state how the bodies have been selected to distribute the sugar for jam making; is he aware that there is much dissatisfaction in many places with the way in which the sugar is being distributed; and can he say what check there will be of the distribution and also as to the use of the sugar for jam making?
The distribution of the special supplies of sugar for the preservation of home-grown fruit is being made through the ordinary trade channels. Some complaints have been received, chiefly from persons who did not comply with the specified conditions, but I am not aware that there is any real cause for dissatisfaction with the method of distribution. A record is kept of the names of the persons to whom the sugar is supplied and the quantity and dates of supply, and this record is open to the inspection of the responsible authorities. The use of this sugar for any purpose other than that for which it was issued is a penal offence.
Am I to understand that the sugar is being distributed through ordinary traders and not by ladies, who have been put on to do this work?
If the hon. Gentleman will kindly send me that question I will forward it to the Food Controller.
Do we understand the hon. Gentleman to say that though thousands of people complain that they complied with the terms of the advertisement and yet had no answer, that they are all mistaken, and will he state on what principle the distribution was made?
I have already admitted mistakes have been made and some complaints have been received, and what the Food Controller says is that he is not aware there is any real cause for general dissatisfaction with the method of distribution.
Is the hon. Gentleman aware that jam makers in the West of Ireland who applied have not got any sugar, and, in consequence, a quantity of fruit is going to waste and becoming rotten?
The same principle has been adopted in Ireland as in England.
Meat
asked the Parliamentary Secretary to the Ministry of Food whether it is the intention of the Food Controller, previous to fixing maximum meat prices, to consult meat traders in the retail business as well as breeders; and whether he can arrange controlled prices sooner than the 1st September?
Representatives of the retail trade have been and are being consulted with reference to the proposed fixing of meat prices. The answer to the second part of the question is in the negative.
Railway Season Tickets
asked the President of the Board of Trade if he is aware that season tickets are not issued from the New Cross (South-Eastern) Station to stations that side of Farringdon Street, although they can be obtained from the New Cross (Brighton line) Station; and whether he will communicate with the Railway Executive Committee with a view to the removal of this anomaly by the issuing of season tickets from the New Cross (South-Eastern) Station to any station on the Underground Railway?
I am aware of the facts mentioned, and I understand that, in view of the availability of South-Eastern and Chatham Railway season tickets to the City at Cannon Street Station, it would be contrary to usual practice for the managing committee of that line to issue such tickets to stations on the East London Railway. I propose, however, to confer with the Railway Executive Committee on the subject.
Horse Hides (Export Licences)
asked the President of the Board of Trade whether any licences for the export of horse hides have been issued since the 18th January, 1917; and, if so, on what dates were they issued?
I am informed by the War Trade Department that twelve licences have been issued for the export of horse hides since the 18th January, 1917, the first on 13th February and the last on 29th May.
Petrol
asked the President of the Board of Trade if he will insist that all persons making application for petrol shall be required to produce the registration of their cars and the receipt for the annual duty?
An applicant for a petrol licence is already required to state on a prescribed form the registration number of his car and the amount of tax he has paid.
asked the Parliamentary Secretary to the Board of Trade whether his attention has been directed to the application of the Dublin and Blessington Railway Company to the Petrol Supply Committee for an adequate supply of petrol for the purposes of the railway and to the refusal of the Committee to grant such supply or any supply except a supply less than half that which is necessary for the working of the line; and whether, in view of the fact that the Government has taken over the control of this line, the Board of Trade will intervene and ask that a sufficient supply shall be allowed?
I understand that the quantity of petrol licensed for the use of the Dublin and Blessington Railway Company was reduced on 1st June from 1,100 gallons per month to 734 gallons per month. This is a reduction of one-third, and all ordinary commercial users of petrol have, in view of the urgent need for further restriction of petrol consumption, been subjected to the same treatment. As a result, however, of representations made by and on behalf of the Dublin and Blessington Railway Company, their allowance was reconsidered and increased on the 4th July to 890 gallons of petrol per month.
asked the Parliamentary Secretary to the Board of Trade if he is aware that there are numbers of high-powered motor cars used for shopping in London and great numbers making joy rides to Brighton and elsewhere, and that other persons cannot get petrol in the least; and if he will insist that the instructions of the Petrol Committee be strictly carried out?
It is probable that there is still a certain amount of motoring for pleasure carried on by owners of cars who are using up stocks of petrol in respect of which licences have been issued in the past. There is no penalty for such motoring, but licences for petrol are now issued only to persons who use their cars for public or business purposes.
What is there to hinder my hon. Friend arranging for some patrol of the main roads of this country to hold up those cars which cannot give evidence that they are travelling for business reasons?
My hon. Friend will gather from the reply I nave given that our opinion is that if such cars are used for pleasure purposes they must be running on petrol secured prior to the restrictions being imposed. We are now controlling at the source. They have to make a declaration that the cars they are using are used exclusively for public or business purposes.
Cannot my hon. Friend or his Department arrange to check some of these journeys on some of the main roads?
I believe that is done. They are subject to very severe penalties if they are found to have made any false declaration.
In the interests of economy cannot arrangements be made prohibiting the use of large, high-power cars?
I do not know how far one could regulate that, if you restrict the amount of petrol that is sufficient.
Orkney Mails
asked the President of the Board of Trade if he is aware that, owing to pressure, the steamship "St. Ola," conveying mails between Orkney and the mainland, has been unable to be surveyed, and the public are threatened with loss of communication on the one hand and loss of life on the other; and if, under the circumstances, he will endeavour to obtain from the Shipping Control Board another vessel to take the place of the "St. Ola," so that she can be surveyed as required?
The survey of this vessel for a passenger steamer certificate has been completed, apart from survey in dry dock, and a passenger certificate was issued on the 11th July. On the 9th July the Board of Trade and Customs Officers concerned were informed by telegram that the vessel might be allowed to carry passengers pending the issue of the passenger certificate. In these circumstances the question of obtaining a replace vessel does not at present arise.
Merchant Service (Railway Fares)
asked the Parliamentary Secretary to the Board of Trade if the Board of Trade have concluded an agreement with the Railway Executive Committee by which British officers and men belonging to the Merchant Service will be able to obtain the same concession as that allowed to naval and military officers and men, by which the Merchant Service will be able to obtain railway fares on the basis of those in operation before the 50 per cent. increase?
The Board of Trade are in sympathy with the view that some concession should be made to officers and men of the Mercantile Marine in the matter of railway travelling and are in communication with the Railway Executive Committee on the subject. I hope a satisfactory arrangement will be reached, but the matter is one of some difficulty.
Will the hon. Gentleman take steps to have a conclusion reached promptly?
I will endeavour to expedite the matter.
Seeing that these men are performing national service cannot the hon. Gentleman arrange that they shall be put on the same terms as naval and military officers?
My hon. Friend will see from my answer that that is what we are endeavouring to do.
Peace Proposals
asked the Secretary of State for Foreign Affairs whether he is prepared to furnish a statement as to what territorial concessions it was proposed to make to Germany when Sir Edward Grey was Secretary of State for Foreign Affairs; what concessions it was suggested that Germany should make to the British Empire in exchange; and whether the proposal emanated from the British or the German Foreign Office?
I know nothing more about the informal conversations to which this question presumably refers than what I have already stated in answer to my hon. and gallant Friend's question of the 11th July.
Jena Glass
asked the First Commissioner of Works whether, as a result of research and experimental work which has been carried on by glass manufacturers, a glass has now been produced of as good quality as Jena glass; and, if so, whether he will give an undertaking that no more orders will be given by the Government to Messrs. Falck, Stadelmann and Company, a firm of German origin?
A special fire-resisting glass can now be made in this country, but as the firms who have facilities for its manufacture are engaged on more important work for War Departments, it is not practicable to place orders with them for this glass in chimney form. In the circumstances, effect cannot be given to the suggestion in the last part of the question without harm to the public service.
Has the Department given any intimation that it will do its best to avoid these contracts in future?
I will inform my right hon. Friend of what my hon. and gallant Friend says.
Munitions
Bonded Spirits
asked the Minister of Munitions whether arrangements have now been completed to make use of the existing stocks of bonded spirits for the manufacture of munitions so as to free the tonnage hitherto employed for the importation of molasses and spirits for that purpose and to release the grain and other food materials used in the production of alcohol for munitions and commercial purposes?
The answer to the question is in the negative, as the alcohol required for munitions and commercial purposes is for the present being obtained from the distilleries producing yeast, and from molasses, the importation of which does not occupy tonnage required for food materials.
Mahogany
asked the Minister of Munitions whether the Air Board made any large purchases of mahogany; if so, whether they have applied to the Controller of Shipping to afford shipping facilities for this timber; whether the application was refused; and, if so, for what reason?
Large purchases of mahogany have been made for aeronautical purposes. The Controller of Shipping continues to give every assistance in affording shipping facilities, and satisfactory quantities are imported.
Will the right hon. Gentleman say whether or not the Ministry of Munitions has stopped the Air Board from getting mahogany which is wanted, and, in view of the urgent need of the output of aeroplanes, will he give priority to the wood required for the building of them?
I have no knowledge of difficulty in obtaining mahogany. Mahogany is obtained by the Ministry of Munitions, and I have no information of any deficiency.
Night Work (Boys and Girls)
asked the Minister of Munitions how many boys of under sixteen years of age and how many girls of between sixteen and eighteen years of age are employed on night work at the present time in the national and controlled factories?
As a general rule boys and girls of this age are not employed Such employment may, however, be allowed subject in each case to the approval of the superintending inspector of factories, under the General Order issued by the Home Office. But every effort is made to confine night employment within the narrowest limits possible. Considerable labour will be involved in obtaining the figures for which my Noble Friend asks, but I will endeavour to obtain them.
Will the right hon. Gentleman explain why other firms working under exactly similar conditions can get on very well without night employment of boys and girls, and why it is allowed in the case of these other firms?
Perhaps it will be best to get a Return.
Lead Mines, County Dublin
asked the Parliamentary Secretary to the Ministry of Munitions whether his experts have made any examination or borings at the lead mines, Ballycorus, south county Dublin; and, if not, when is it expected to commence operations?
The mines were visited on behalf of the Ministry in May last. Active mining operations ceased about the year 1846. The mine was never a large producer, and the information before the Ministry does not lead us to think that reopening the mines would be justified.
Questions
Receiving Depot, Dublin
asked the Prime Minister if he is aware that the method of dealing with the whole question of the establishment of a receiving depot and pattern room in Ireland is unsatisfactory to Irish manufacturers and all interested in the question; and will he obtain a Report from the officer, Major Downie, whom he appointed, when he was Minister of Munitions, to co-operate with the All Ireland Committee in connection with munitions?
asked the Financial Secretary to the War Office what progress has been made regarding the acquisition of premises in Dublin to be temporarily utilised as an examining and receiving depot until a fully-equipped suitable building is provided; whether he will state when it will be commenced and where it is to be situated; and whether he is aware that resolutions were recently passed by divisional meetings in St. Patrick's, and a public protest against further delay has been summoned for next Wedenseday evening?
I am informed that this question was fully discussed last week by the Irish Command with the Lord Mayor of Dublin and a deputation representing the All Ireland Munitions and Government Supplies Committee. I am informed that it was agreed that the provision of a temporary receiving depot was considered unnecessary in view of present arrangements, but that the deputation pressed strongly for the immediate construction of a permanent receiving depot. I have referred in answer to previous questions to the difficulties of building under present conditions, but the matter is being further considered.
Am I to understand from the right hon. Gentleman that the work is to be commenced as soon as possible, and when may we expect that it will be begun?
I am afraid I cannot say, or whether it is possible to do it at all.
Does the right hon. Gentleman know that there is any amount of unemployment in Dublin, and plenty of material, and, in view of the huge taxation of Ireland for this War, are we not entitled in that country to get some of the money back?
I am very anxious that something should be done, but there are many drawbacks about this question.
The advantage is on the English side.
Why not follow the London example, and acquire hotels?
Naval College, Osborne
asked the First Lord of the Admiralty whether he is now in a position to make public the recommendations of the Committee appointed to inquire into the arrangements for securing the health of the cadets at Osborne; and can he state what steps the Admiralty are taking to give effect to those recommendations?
I am afraid I can add nothing to the answer to the unstarred question which my hon. Friend put on the 9th July, to the effect that a Report has been received, and that the recommendations of the Committee are under consideration.
Is there any prospect of the Report being issued shortly in view of the fact that many parents will be sending their boys to Osborne next term, and it is very urgent that they should know whether their health will be properly looked after?
I can make no statement as to the publication of the Report, but such action will be taken upon it as is approved by the Board.
When will these steps be made public so parents may know what steps are being taken?
I will bear in mind what the hon. Member says.
Admiralty (Local Surgeons and Agents)
asked the First Lord of the Admiralty whether he is aware that the local surgeons and agents of the Admiralty are receiving only 2s. 6d. per patient for professional attendance and supplying medicine to the Coastguards and men of the Royal Navy and 1s. per mile one way for locomotion expenses; whether applications have been received from any of these officers requesting an increase of these rates of pay; and whether, having regard to the increased cost of living and the cost of drugs and petrol, he will see his way to recommend an advance of fees and allowances so as to ensure that surgeons and agents may, without loss to themselves, do justice to their patients and receive fair remuneration for their services?
The rates of remuneration are, with a few exceptions in which higher rates are warranted by the circumstances of the case, 2s. 6d. per each visit to, or consultation with, each patient (and not, as the question may perhaps imply, 2s. 6d. per case), with mileage allowance as stated. Only one application for increased remuneration has been received during the past year, although there are some 580 surgeons and agents. In the circumstances, a case for a general increase of fees and allowances has not been established.
asked the First Lord of the Admiralty whether he is aware that surgeons' and agents' fees and advances for subsistence are always almost three months overdue before they are fully paid; and whether he will see that these officers are more promptly paid, and advances be made to surgeons and agents out of which to pay subsistence and quartering allowances to the men, as under the present system many surgeons and agents have to advance large sums out of their own pockets and are out of their money for an unreasonable time?
The suggestion that the surgeons' and agents' claims are always almost three months overdue before they are fully paid is not borne out by the facts. For instance, of 228 received in April and May for the period ended 31st March last, between 84 and 85 per cent. were finally paid in less than two months from date of receipt, 70 per cent. being settled in less than six weeks. Arrangements have, moreover, been in force since an early date in the War by which payments on account amounting to two-thirds of any claim exceeding £10 or thereabouts are made immediately upon their receipt.
Naval Writers
asked the First Lord of the Admiralty whether the reports received from His Majesty's ships in which warrant writers are borne and are doing duties which in the ordinary course of events would have been performed by assistant paymasters Royal Navy show these duties to be satisfactorily performed by warrant writers; whether it is proposed to promote a further number of warrant writers so as to release active service assistant paymasters for the purpose of filling important posts for which they are required, some of which are now filled by assistant paymasters Royal Naval Reserve, and which necessitate the appointment being held by active service officers of experience; whether, having in view the continued entry of assistant paymasters Royal Naval Reserve and Royal Naval Volunteer Reserve, a shortage of accountant officers Royal Navy still exists; and, if so, seeing that business experience on shore is of little value where naval clerical and accountant work is concerned and seeing that there are nearly 300 naval writers of experience and recommended waiting promotion, will he say if the shortage will be met by the promotion of writers?
The answer to the first part of the question is in the affirmative. As regards the remainder of the question, the requirements of accountant officers, both permanent and temporary, are considered from time to time, and the promotion of chief writers to warrant rank is decided with due regard to such requirements. The needs of the Naval Service, both as regards accountant officers Royal Navy and temporary assistant paymasters, are being met, and it is not anticipated that they will fail to be met in future. Should it be necessary to promote further writers to warrant rank, such promotions will undoubtedly be made. My hon. Friend will be interested to know that whereas at the beginning of the War there were on the list fifteen warrant writers, there are now five assistant paymasters promoted from commissioned writer and warrant writer, five commissioned writers and forty-two warrant writers.
H.M. Transport "Moose."
asked the Secretary to the Admiralty if an application has been made for leave for Stoker Whiteley, H.M. transport "Moose," on account of the dangerous illness of his child; if such application for leave has been refused; and whether, in view of the fact that this man has had no leave for three years, the application for special leave now will be reconsidered?
No application from this man can be traced at the Admiralty, but in the ordinary course the application would have been made to and dealt with by his commanding officer. It must be recognised that the grant of leave, especially to men abroad, is often quite impracticable. Endeavours are being made to relieve all men who have been abroad for long periods, but this can only be done gradually.
Seeing that the right hon. Gentleman says there is no trace of any application having been made, will he look into the matter again?
Have I been written to about it?
Yes.
They told me there was no letter. If they were wrong I am sorry, but I will look into it again.
Naval and Military Pensions and Grants
asked the Pensions Minister whether he is prepared to reconsider the Clause in the new Royal Warrant for pensions to officers and nurses which regulate the grants for the education of officers' children and to allow an education grant to the children of the widows of officers on the same scale as to the children of disabled officers; and if he will explain the reasons for the discrepancy between the two scales as embodied in the Warrant as it stands?
Officers' widows receive children's allowances, in most cases at the rate of £24 a year, as shown in the Second Schedule to the Draft Warrant, and may be granted education allowances in addition. There is, therefore, not the same reason for increasing in their favour the maximum limit of the education allowance, as is proposed in the case of the disabled officer.
Is it not the case that the subsistence allowance is something entirely different, and that the education allowance is something over and above that? Why should there be any difference between one case and the other?
That is quite true. There is a difference. In the case of an officer there is no subsistence allowance. In the case of widows there is. Therefore it was not considered necessary to increase the education allowance in the case of widows to the same extent as in the case of officers.
Is it not the case that in the first draft the allowance for education was made uniform and has since been cut down?
I cannot say anything about the first draft.
asked the Chancellor of the Exchequer whether he is aware of the hardship caused to dependants of soldiers in London by the delay in the investigation of their claims for separation allowance by the Board of Customs and Excise; whether he is aware that in hundreds of cases in London the delay extends to three or four months; whether the delay is due to the inadequate staff employed by the Board; and, if so, whether he will give instructions for the immediate appointment of additional women investigators?
My attention has been called to this matter. In many of these cases the investigation is necessarily prolonged, and the situation is complicated by the fluctuating nature of the work, and recently by an exceptional temporary increase in its volume. In normal times the special pressure would have been met by the diversion of staff from other duties, but this has become increasingly difficult owing to the reduction in the male staff of the Department and the difficulty of obtaining suitable female substitutes to deal with a temporary emergency. Arrangements have now been made which, it is hoped, will expedite the investigation of claims.
Has my right hon. Friend considered the advisability of the local pensions committees doing this work?
I am afraid that is not practicable. They have already all the work they can do.
Disabled Soldiers
asked the Pensions Minister whether he has invited a woman to sit on either the Committee appointed to deal with the institutional treatment of the disabled soldier or on the Committee appointed to deal with his training and employment?
There is no woman member on the Joint Institutional Committee, which deals only with the provision of institutions for disabled men, and acts on the advice of four medical experts. On the Training and Employment Section of the Special Disablement Sub-Committee of the Statutory Committee there are three women members.
Military Service
Shell Shock (Hospital Treatment)
asked how many officers have been invalided out of the Army during the last twelve months for neurasthenia or shell shock; what arrangements have been made for their medical treatment in institutions or otherwise; and whether all officers have the same statutory right to re-enter military hospitals as the discharged soldier?
I am unable to give the precise figures for officers who have been invalided out of the Army on account of neurasthenia or shell shock during the last twelve months. Since the commencement of the War, however, 222 Army officers and sixty Navy officers have been invalided for nervous diseases contracted through War service, and in these numbers shell shock and neurasthenia cases are included. Institutional treatment has not been provided by the Statutory Committee in these cases, but applications for assistance while resting in the country or undergoing treatment from their own doctors have been dealt with by the Committee. In this connection I would refer my Noble Friend to Article 6 of the Draft Warrant, in which specific provision is made for the treatment of disabled officers. Retired officers are, in the same way as soldiers, received for treatment in military hospitals when accommodation is available for them.
Is there any reason why officers should not have exactly the same right as a man who has been invalided out of the Army to go back to a military hospital?
They have the same right.
Not a Statutory right. It is only when there is room for them.
It is exactly the same with the men. The men can only be taken back into military hospitals when there is room for them.
Conscientious Objectors
asked whether the Scottish Board of Agriculture intervened in favour of a conscientious objector before the military tribunal; and, if so, on what grounds the board favoured a man who would not fight for his country or work for it except as he pleased?
I have ascertained that in the case of an applicant to an appeal tribunal the Board of Agriculture intervened to the extent of stating by letter that the Board attached importance to the applicant's work in organising camps in connection with forestry operations from the middle of July till the end of September. The Board at the time the letter was written had no knowledge that the applicant was a conscientious objector, and he is not, and never has been, in the employment of the Board.
asked what action has been taken about the assault which was committed upon a number of men employed under the Home Office scheme at Brockenhurst who, on the 9th instant, were attacked by New Zealand soldiers, stoned, beaten with sticks, kicked, thrown into the river, and some very seriously injured, their baggage being opened, the contents thrown into the river, and their money and watches stolen; whether any protection was provided by the Home Office and what action it is proposed to take to protect these men from further assaults; and whether any arrests have been made of the men who committed the assaults?
I have made inquiry into this matter, and find that a party of men proceeding to work under the Committee on Employment of Conscientious Objectors were attacked at Brockenhurst on the 9th July by a crowd, some of whom were New Zealand soldiers. The men were pelted with turf, and two of them were thrown into the river, but none seriously hurt. Some of their baggage, much of which was Government property, was thrown into the river, but the greater part has been recovered. I have no information that any property was stolen. I understand that military police were present, but were not in sufficient force to take effective action. Some officers from a military hospital intervened to quiet the crowd. It is not anticipated that further disturbances will occur, or that any special precautions will be necessary, but I am in communication with the police and military authorities in the matter. No arrests were made, and it is understood that the men attacked decline to give evidence in the matter, or to identify any of their assailants.
Government Employment
asked what is the total number of men of military age now employed in Government service?
I presume the question does not relate to men in the naval and military service of the Crown, or to men employed in a civilian capacity in dockyards, munition factories, and the like. As regards the Civil Service proper, the total numbers of men of military age cannot be given, but those in Great Britain, excluding Ireland, classified A and B 1, appear to be about 9,000, excluding certain Post Office telegraphists and engineering workmen and a certain number, about 7,000, who had not received a recent medical classification.
Bearing in mind the enormous number of applications for work by men who are too old to fight, will the right hon. Gentleman once more have inquiries made into the matter?
It was inquired into a few weeks ago by the Cabinet.
How many men of military age are in the Government?
I do not know that; nor do I know how many are Members of the House of Commons.
Air Services
Day-Flying Machines
asked the Parliamentary Representative of the Air Board whether only one airman was available to take part in resisting the recent air raid at a certain aerodrome; and, if so, will he give the reasons that made it necessary to denude this station of its effective personnel?
Of the three day-flying machines at the aerodrome which my hon. and gallant Friend has in mind, two went up. The other machines at this station are night-flying aeroplanes.
Can the hon. Gentleman say whether a complete change has been made since the last air raid in the defences of this country? Has it been reorganised?
I cannot say that a complete change has been made, but I can assure my hon. Friend that everything possible has been done to make the system of defence as perfect as possible.
Defence of London
asked the Home Secretary whether he will give information as to the system it is proposed to adopt to warn London of pending air raids; and whether, in the event of fire stations being employed, he will see that this allocation of extra work to the firemen in no way interferes with their being available for duty at fires which may originate owing to enemy raids?
Considerable progress has been made in this matter. What is required is, first, that we should have reliable information when enemy aircraft are actually approaching London, and, secondly, that we should have efficient means of warning the public of their approach. As to the first point, the military authorities have promised their co-operation, and machinery for obtaining the necessary information is therefore now available and will, I understand, be improved. As to the second point, certain sirens have been tested and others will be tried to-morrow. The local authorities have been asked to suggest sites for the sirens and otherwise to assist in the arrangements for the public warning. As soon as these arrangements are completed, a public announcement will be made describing the system adopted and containing instructions for securing the public safety in the event of a raid. In the meantime, the Commissioner of Police has made certain temporary arrangements, notice of which has been issued. Nothing will be done to interfere with the proper work of the fire brigade.
Can the right hon. Gentleman say whether the warning on Saturday was purely a rehearsal or a genuine air-raid warning, seeing that the warning was given at twenty-seven minutes past seven and the "all clear" warning one minute later?
No public warning should have been issued on Saturday. The usual preliminary notice of a possible air raid was received and circulated through the police stations as usual. At a few of the stations the officer in charge misunderstood his instructions, and, instead of waiting for the second or "take cover" warning, allowed the police at once to go out with the warning. There was no question of any rehearsal.
Is the right hon. Gentleman aware that the method at present employed gives warning to some but it does not give the "all clear" warning to others, because when people are in basements and other places they do not know whether all is clear or not?
Will the right hon. Gentleman consider the suggestion made in the newspapers that the engineers of the various generating stations should be made acquainted with the fact of an impending air raid, so that all lights in London can be switched on during the time of the anticipated raid and switched off when all the danger has gone by?
That suggestion has been made and is being considered, but there are certain objections. Such warning is hardly sufficient by itself, because all lights are not visible on a bright day, and, secondly, because that kind of warning does not reach the inside of a building.
Were there any enemy machines on the coast on Saturday?
I cannot say. That is for the War Department.
Is it not the fact that they were our own machines?
It is almost impossible to say.
Will the right hon. Gentleman see whether it is possible to give a fairer warning by sound than by sight, or vice versâ?
I will not pledge myself to do that. The whole matter is under consideration.
asked what percentage of the latest pattern aeroplanes are utilised amongst those machines employed in the defence of London?
Excluding night flying machines, 59 per cent. of the aeroplanes in possession of those Home Defence squadrons which can take part in the defence of London are first-class fighting machines.
Are we to understand from the hon. Gentleman's answer that our men were supplied with first-class fighting machines, and yet they did not bring down one German aeroplane? What was wrong?
Will instructions be given to the Departments concerned to retain these fighting machines for the protection of London, rather than send them across the water for exhibition purposes?
I do not know that that has been done. The whole question is being considered by a Committee of the War Cabinet, including my right hon. Friend the Prime Minister and General Smuts.
asked whether the anti-aircraft artillery employed in the defence of London is of the latest pattern; whether any of the gunners have had experience at the front; and how many opportunities really exist for effective practice in this country?
The reply to the first part of the question is in the affirmative. As the personnel are mainly home service men, they have had practically no experience at the front. All detachments have periodical practice firing.
Will the hon. Gentleman consider the advisability of drafting some of these gunners across for a few weeks' experience at the front and then bringing them back again?
Air Board
asked the Prime Minister whether the present Air Board will be abolished and an Air Ministry composed of new men be set up with the distinct object not only of supplying the needs of the Army and Navy, but of creating a separate striking arm capable of becoming a decisive factor in the War?
The Government, as at present advised, are not prepared to adopt the proposal contained in this question.
Will the right hon. Gentleman consider the appointment to the supreme command of the air defence of this country of one man who has both fighting and organising experience?
asked the Prime Minister whether he will undertake to give facilities for a full Debate in the House on our Air Service to take place before this House adjourns for the Autumn Recess?
The answer is in the negative. Several opportunities will arise in the ordinary course when this subject can be debated.
Will the right hon. Gentleman see that an opportunity is afforded for a full Debate on this subject, in view of the feeling of the country, and the fact that if the air raids continue there are no means of making their wishes known to the Government?
I have no means of insisting upon a particular subject being; discussed, but hon. Members will have opportunities for discussion.
Compensation for Injuries
asked the Prime Minister what Department any persons injured, or the relations of any persons-killed, by enemy air raids over this country are to apply for compensation or pension; and what form is such application to take?
Applications either for temporary or permanent assistance should be made to the local representative committees, which were instituted at the outbreak of war for the relief of distress caused by the War. Forms of application: can be obtained at the offices of each committee.
Does that apply to all cases since the outbreak of the War, whether the injury is from Zeppelins or aeroplanes?
It applies to the cases stated in the answer, and it will be; retrospective.
It will be retrospective?
Yes, retrospective.
Questions
Representation of the People Bill
asked the Secretary for Scotland whether, in view of the fact that failure to pay local rates disqualifies-for a municipal vote in Scotland, steps will be taken to remove that disqualification under the Representation of the People Bill, seeing that a number of soldiers will return maimed and unfitted for industrial life, and that they and a number of soldiers' wives who will be left widows will seek, on the ground of poverty, relief from paying rates; and whether a Clause will be inserted to the effect that no soldier or soldier's widow shall be deprived of a municipal vote because of failure to pay local rates?
The effect of the repealing provisions of the Bill is to remove the disqualification in question.
asked the Secretary of State for the Home Department whether he is aware that the Assistant Boundary Commissioner has refused to take evidence as to the necessity for allotting seventeen seats to Middlesex; and what steps he proposes to take to arrange that such evidence shall be taken?
I understand that the Assistant Boundary Commissioner did not refuse to take evidence on the point mentioned in the question, and accordingly no action on my part appears to be required.
Does the right hon. Gentleman suggest that the accredited representatives of Middlesex were entirely mistaken in the matter, and is he aware of the very strong feeling in the matter amongst the electors?
I do not think that any accredited representative of Middlesex would support the suggestion contained in this question.
Kelp and Coal Shipments (North Isles and Orkney)
asked (1) the Secretary for Scotland if he will have inquiry made as to the shipment of kelp for the manufacture of iodine from the North Isles and Orkney; and also as to what provision can be made for the supply of coal to the residents in view of the fact that there is no peat on the islands; (2) the Parliamentary Secretary to the Shipping Controller if his attention has been called to the fact that, owing to the scarcity of shipping, it has been found impossible to arrange for the shipping of kelp, a valuable product for the manufacture of iodine; that, owing to the same cause, the residents in several islands have little prospect of obtaining coal for the winter; and that, as there is no peat on the island, hardship is certain; and if he will confer with the Scottish Secretary how best the difficulty can be met?
My right hon. Friend has asked me to reply, and I will at the same time answer question No. 90. The attention of the Shipping Controller has been drawn to this matter, and special steps are now being taken to make tonnage available for the purposes mentioned.
Vivisection
asked the Secretary of State for the Home Department whether the Stock Farm, Porton, used by the War Office, is licensed for vivisection; if so, will he state the names of the vivi-sectors attached thereto, the nature of the experiments upon animals performed there, and whether these include gas-poisoning; and if he will allow a doctor of medicine who is also a justice of the peace to go over the whole of the premises on presentation of proper credentials and seethe work that is carried on there?
The War Department Experimental Ground at Porton, which I presume is the place referred to, has, at the request of the Ministry of Munitions, been registered as a place where experiments on animals may be performed. The persons authorised to perform experiments there are Mr. J. Bar-croft, F.R.S., and Lieutenant-Colonel A. W. Crossley, F.R.S. The experiments performed there are for the purpose of studying the effects of poisonous gases-and liquids. The work carried on in this place is regularly inspected by the inspectors of my Department, and I see no occasion for making any special arrangements as suggested in the question.
Brewing Order (Ireland)
asked the Parliamentary Secretary to the Ministry of Food whether he is aware that dissatisfaction exists on account of the new Order regulating brewing, distilling, and distribution; whether he is aware that a protest meeting is to be held in Phoenix Park; and whether meanwhile he will consider the advisability of modifying those Orders?
So far as I am aware, the new Order regulating brewing has been received with general satisfaction. I have learnt through the Press of the proposed meeting in Phoenix Park, but see no ground for modifying the Order.
May I ask the hon. Gentleman the source of his information that this new Order has given satisfaction in Ireland, because that statement is totally in opposition to the fact?
I am afraid I cannot say.
Is the hon. Gentleman aware that there was universal condemnation throughout Ireland owing to reducing the strength of the Beer Order of the Food Controller?
I have said that the Food Controller is under the impression that it had received general satisfaction.
Will the hon. Gentleman say on what grounds or for what reasons the Food Controller is under that impression?
I must have notice of that.
asked the Parliamentary Secretary to the Ministry of Food, if he is aware that the effect of the recent brewing Order, if adopted by Irish brewers, would be to destroy the distinctive quality and reputation of the Irish article and to adversely affect the Irish industry; if he is aware that the standard gravity of the Irish brew is 10.66 and that consequently the concession to brew 20 per cent. extra on condition that 50 per cent. of the total output is at a gravity of 10.36 is an absolute disadvantage instead of a concession as far as Irish interests are concerned; if he is aware that the adoption of the Order by Irish brewers would entail complete disorganisation of their business to comply with the terms of the Order; whether this Order has been designed for the benefit of English brewers and to fit in solely with English conditions; and whether, as there is only a short time left for brewers to express acquiescence in the Order, it is the intention of the Government to deal with the Irish case separately in accordance with the special position, requirements, and necessities of the Irish trade?
I am aware that the standard gravity of the stout brewed by Irish brewers is 10.66, so any such brewer availing himself of his rights under the new Order, would, in respect of a part of his output, be required materially to reduce the gravity of a part of his total output. At least half, however, of his output could remain at its former level, so that I do not think the results anticipated in the first part of this question would in any case occur. It is, of course, entirely free for any brewer who does not wish to avail himself of the additional facilities afforded by the new Order, to maintain his present standard of gravity on his present output. The new Order was made with a view to securing additional supplies of light beer for the needs of munition workers, at the smallest possible expenditure of foodstuffs. There is not, I think, any ground for altering the arrangements made.
Mesopotamia Commission
Lord Hardinge
asked the Prime Minister whether he is aware that Lord Hardinge received from the German Kaiser the grand cross of the German Order of the Red Eagle and has also received the grand cross of the Austrian Order of Leopold; whether Lord Hardinge ever received permission to wear these decorations; is he still entitled to wear them; and whether he will enlarge the scope of the Titles Deprivation Bill to prevent Civil servants from receiving or wearing decorations of foreign sovereigns?
The answer to the first and second parts of the question is in the affirmative. As regards the third part, as it is impossible for the Government to know whether the Noble Lord's name has or has not been struck off the Rolls of these Orders, I am not able to say whether he is entitled to wear them. No British subject is entitled to accept decorations from a foreign sovereign without the consent of His Majesty the King.
asked the Prime Minister whether he is aware that the practice and tradition of the Civil Service is that Peers, if Civil servants, should not take their seats in the House of Lords; that Earl Curzon of Kedleston in 1894 cited and approved this tradition in his Memorandum to a Select Committee of this House, and that this practice and tradition is recognised and the late Sir William Anson supports it in his Law of the Constitution; why this practice and tradition has been departed from in Lord Hardinge's case; and whether, the rule being once broken, Civil servants will be free to take their seats in either House of Parliament?
I have nothing to add to the answer which I gave to the hon. and learned Member for Donegal South on the 12th July.
As the right hon. Gentleman has stated that there were some precedents for Civil servants sitting in the House of Lords, can he give me one? If he can, then my reading is very different from his.
I certainly do not carry any of them in my head.
Nor are there any of them in existence.
Courts-Martial
asked the Prime Minister whether, in view of the need to avoid waste of public time and money and to prevent the removal of public servants from their posts to give evidence, and in order not to commence a lengthy series of inquiries, he will submit the following issue to the House, namely, whether it accepts generally the findings of the Commission it appointed to inquire into the Mesopotamia Expedition; and whether it resolves, while forbidding the further employment in high and independent office of the head of the Indian administration and of the head, under him, of the Indian military authorities, to leave the other military officers concerned to be tried by courts-martial at their own option or at that of their immediate superiors?
Statutory Commission
asked the Prime Minister whether an opportunity will be afforded the House to vote on the question of the proposed Commission in regard to Mesopotamia?
asked the Prime Minister what course the Government propose to take in reference to the Report of the Mesopotamia Commission; and if, as stated by the Leader of the House, they intend to set up a Statutory Commission, when the Bill will be introduced?
The Government' have found it impossible since the Debate to deal with this subject, as there are very urgent questions relating to the prosecution of the War which must be decided. If the question is put to me on Wednesday, I shall then be in a position to announce the decision of the Government.
Am I to understand that the position of the Government is exactly the same as it was on Friday as to the proposed Statutory Commission?
If the right hon. Gentleman will put a question down for Wednesday I will state what the decision of the Government is to be.
Are the Government going to decide without allowing the House of Commons any voice in the matter at all?
On Wednesday I shall state the course we propose to take, and it will not follow that Members will not have an opportunity of discussing it, if in disagreement.
Am I to understand that in the event of the Government deciding to do anything, the House of Commons is not to have an opportunity of discussing the course proposed to be followed?
I think the hon. Gentleman had better wait until I have made, my statement on Wednesday on the subject.
Secretary of State for India
( by Private Notice ) asked the Prime Minister if, in view of the fact that this House cannot delegate to any other body its function of judging the conduct of Ministers, he is prepared to advise His Majesty, in the interests of the Public Service, to decline to accept the resignation of the Secretary of State for India unless and until this House has impugned the conduct of that Minister?
The Prime Minister has not the right to refuse to accept the resignation of a colleague. If he had such a right he would have exercised it in this case with, I may add, the full approval of all his colleagues.
Near East (Political Policy)
asked whether there has been any change in political policy as distinct from military policy in connection with the Near East?
The answer is in the negative.
Questions
Corn Production Bill
asked the Prime Minister whether he has considered that the efficacy of the Corn Production Bill has to be determined by the approach of the season for ploughing and not by Parliamentary conversation; and will he consider the use of methods for the shortening of Debate which the Governments of the past decade were accustomed to avail themselves of?
The matters to which the hon. and gallant Member refers have received consideration.
Is it the intention of the Government to place the Corn Production Bill on the Statute Book before the end of August?
I hope to make a statement on this subject on Wednesday.
asked the Chancellor of the Exchequer whether he is aware that dissatisfaction exists in Ireland owing to the delay in setting up the Wages Board suggested in the Corn Production Bill; and whether he can now say when this provision will come before the House of Commons?
I shall say in the statement which I propose to make on Wednesday how far we intend to proceed with this Bill before the Adjournment.
Royal Prerogative (House of Lords)
asked whether, before the Government decided to summon a Conference to consider the future composition of the House of Lords and the relations between the two Houses and to report thereupon, the consent of the Sovereign was obtained to the proposed modification of his prerogative implied in the consideration of the future composition of the House of Lords, regard being add to the fact that the creation of peers is effected by the exercise of the Royal Prerogative; and whether, in the terms of reference to this Conference, which is to be an extra-Parliamentary body to be nominated by the responsible Ministers of the Crown to consider the composition of the House of Lords, there will be a formal notification of the consent of the Crown to permit the Conference to propose the elimination of the Royal Prerogative just as such formal notification by the Sovereign of his consent is essential by the practice of Parliament to any legislative proposal introduced in either House affecting the prerogatives of the Crown?
The proposed Conference will have no power except to-make recommendations, and the consideration referred to in the question will not, I think, arise till these recommendations come up for consideration.
Is this Conference— which is not being summoned at the suggestion of either House of Parliament—to come together with the sanction of the Constitution. They may make recommendations which the hon. Gentleman seems to think will have that effect.
No Conference appointed by the Government can possibly make "ducks and drakes" of the Constitution. 'They make recommendations which the hon. Gentleman seems to think will have that effect.
Civil Service (Successful Candidates)
asked the Prime Minister whether applicants for the Civil Service who qualified in the last second division examination, and who subsequently enlisted and have returned wounded and been discharged, can receive appointments before any further Civil Service vacancies are filled; and if he is aware that a number of such men are unable to undertake a long course of study but are perfectly well qualified to fulfil the duties required in Civil Service positions?
Candidates who were successful in the last second division examination (held in September, 1914) but enlisted before receiving appointment will be given appointments, subject to the usual inquiries-in regard to health, character, etc., at the-earliest opportunity after their discharge from military service.
Irish Convention
asked the Prime Minister whether he will give the names of the gentlemen who have been selected by the Government to serve on the Irish Commission?
I am not yet in a position to give the information asked for in this question
Is the right hon. Gentleman aware that at least five names have appeared in the Irish public Press as having received invitations and accepted them?
My hon. Friend will understand that before I can make a statement we must have acceptances from those to whom invitations have been given.
Before the final decision is arrived at, will he see that the hon. and gallant Member is one of those selected, as he represents more nonentities in Ireland than anybody else?
Disturbances in Dublin
asked the Prime Minister whether he has been able to read the charge addressed to the city grand jury by the Recorder of Dublin on the 10th instant, who, in the course of his observations, said that the turbulence of mobs going through the streets and attacking women and their houses because they were loyal was a state of affairs that could not be tolerated in any civilised country, and that those who were responsible for the government of the country had better take care and not allow it to go any further; and will he say what measures the War Cabinet have under consideration to enforce law and order and maintain the safety of the realm in Ireland?
I have been asked to reply to this question. The observations of the Recorder of Dublin to which the hon. and gallant Member refers were made in respect of three cases in the calendar of cases for trial at the Trinity Quarter Sessions, in which persons accused of acts of violence had been arrested and were brought to trial upon charges preferred by the police. The police in Dublin have authority, which I am satisfied they will exert whenever necessity arises, to pie-vent the assemblage of and, if need be, to disperse crowds which threaten the security of persons and property; and they will be supported by the Government in all necessary action for maintaining the public peace and protecting individuals from molestation. There has not been any recurrence since the cases referred to of incidents such as were in question before the Recorder.
India (Reforms in Government)
asked wherein the programme of the Home Rule for India League, for advocating which Mrs. Besant has been prohibited from speaking of writing and has been expelled from Madras, differs from the programme of Indian reforms suggested by the right hon. Member for Cambridgeshire in his speech on the 12th instant; and has this speech been prohibited from publication in India as a seditious utterance?
My right hon. Friend the Member for the Chesterton Division of Cambridgeshire expressly stated that he did not believe that there was any demand for complete Home Rule in India on a large scale, and that it was not possible. But, apart from the question of programme, as my right hon. Friend the late Secretary of State for India stated on the 2nd July, the action taken by the Indian authorities regarding Mrs. Besant has been rendered necessary by the methods by which she conducts her agitation.
Does the action of the Governor in Council give general satisfaction in this respect?
Is it the case that it is not a question of substance but only one of method?
I have not seen that part of the speech, but it appears to be a question of method rather than action.
Has the Report been received, and will hon. Members have an opportunity of seeing it?
Perhaps the hon. Member will put down a question.
Russia (Peace Aims)
asked the Prime Minister if the declaration made at Petrograd on the 7th instant by the right hon. Member for Barnard Castle that the War aims of British labour are a peace without annexations or indemnities, based on the right of nations to decide their own affairs, is to be regarded as representing the official policy of the British Government?
asked the Prime Minister whether the speech recently delivered in Petrograd by the right hon. Member for Barnard Castle represents the views of the War Cabinet?
The policy of the British Government in regard to war aims has already been set out in their reply to President Wilson's Note, and in the answer more recently returned to the Russian Government.
Is there any disparity between the statement of policy now read and the declaration in the speech of the right hon. Member for Barnard Castle, and may we assume that the Government do not identify themselves with that declaration of the right hon. Gentleman in his speech?
I do not think the right hon. Gentleman can make any assumption of that kind. I do not accept his assumption, as a matter of fact, though I do not happen to have read the speech.
Will the right hon. Gentleman prevent any further indiscreet declarations of British policy from being made until the Conference between the Allies for a revision of war aims has taken place?
That, in my opinion, would be the best opportunity to make a statement.
Are we to assume that the statement is identical with the Russian war aims—peace without any annexations or indemnities?
I do not think I can add anything to what I have stated.
As my right hon. Friend leads the House, would it not be well for him to read the speeches of the right hon. Member for Barnard Castle?
Would it not be well to defer these questions until the right hon. Member for Barnard Castle returns?
Summer Recess
asked the Prime Minister whether he can now say when the House will rise for the summer Recess?
asked the Prime Minister whether it is proposed that the House should adjourn for the autumn Recess?
I hope to make a statement on this subject on Wednesday.
Old Age Pensions
asked the Chancellor of the Exchequer if he has any announcement to make respecting the payment of 2s. 6d. per week extra to all old age pensioners who are not in receipt of wages as workers or in receipt of Army allotments or allowances?
Yes, Sir. The Government has decided that the additional allowance of 2s. 6d. per week shall be payable to old age pensioners who are entitled under the Old Age Pensions Act to pensions, whether at the 5s. or lower rate. It will not, however, be payable to pensioners who are not entitled under the Acts to any pension, but whose pensions remain untouched by reason of the administrative concessions.
Will this also apply to mothers in receipt of pensions and who are now receiving separation allowances?
I think so.
Is this to include all old age pensioners except such as are in receipt of allotments or allowances, or receiving wages exceeding 5s. a week?
If the right hon. Gentleman reads my reply he will see the answer to that question.
Under the circumstances will this addition be payable without separate individual inquiry in the future?
Oh, yes; that is implied in my answer.
Wages (Dublin)
asked the Minister of Labour whether he is aware of the low. wages paid to women in Dublin, especially, in certain lines of business, as stated at a meeting in the Trades Hall; and whether he will make inquiry and hasten the appointment of a Wages Board for Dublin City, where it is required?
I would refer the hon. Member to the full answer I gave to his question of the 11th July with regard to the inquiries that are being made in trades to which the extension of the Trade Boards Act has been suggested. The women's clothing trade is included among the trades in which inquiry is being made. As regards men's tailoring and shirt-making, minimum rates of wages have been fixed by the Irish Tailoring and Shirt-making Trade Boards respectively, and I am informed that these Boards are proposing to increase the minimum rates for their trades. Every effort is made to enforce the rates, and if any specific complaints are forwarded to the Department they will be dealt with as promptly as possible.
May I ask whether that will be brought into operation for the women's clothing trade very soon or immediately?
The inquiry is being proceeded with as rapidly as possible, and we are hopeful of introducing a measure to the House which will help to right matters very considerably.
Woods v. Crewe and Company (Privilege Claim)
asked the Minister of Labour whether the claim of privilege on the ground of State policy put forward by Sir David Shackleton, on 27th June, in the Divisional Court in the appeal of Woods v. Crewe and Company, was made with his authority and support; whether the effect of the claim of privilege was to prevent Judges Bray and Avory from examining U.I. Form 85 filled in by William Crewe on behalf of Crewe and Company, of Grays Inn Road, and addressed to George D. Fryer, manager of the Labour Exchange, Pentonville Road, N.; whether the form as filled in contained an allegation by William Crewe that his factory or workshop was a controlled establishment on 6th, 7th or 8th December, 1915, or a munition factory within the definitions of the Munitions of War Act; whether the president of the munitions tribunal for London found on 21st January, 1916, that this factory or workshop was not a controlled establishment or a munitions factory; whether the information was false, rendering William Crewe liable to a fine of £50 under Section 12 of the Munitions Court; and, seeing that this false information deprived John William Woods, the plaintiff in the action, of his unemployment benefit and of his employment for a period of eight weeks, whether he will direct that the said Form U.I. 85 shall be produced in Court on Crown Office subpoena without claim of privilege of State policy?
The claim to privilege in this case was made on my authority. I am informed that the appeal referred to was dismissed on grounds which had no reference to the production of the Form U. I. 85, but in any event I see no reason to reconsider the matter. For obvious reasons I cannot divulge the contents of the form, but I may say that it contained no statement with reference to the question whether the factory or workshop of Messrs. Crewe and Company was or was not a controlled establishment. I should add that the Form U.I. 85 is one on which an employer states the reasons why a workman who has claimed unemployment benefit lost his previous employment. Whilst I think that this form should not be produced as evidence in legal proceedings, the workman is not thereby prejudiced as regards his claim to unemployment benefit, inasmuch as the effect of the statement on the form is communicated to him and he can contest the facts there stated if he so desires before a Court of Referees.
Orders of the Day
Business of the House
Can the right hon. Gentleman say what will be the business for Wednesday and Thursday?
On Wednesday and Thursday we propose to proceed with the Committee stage of the Corn Production Bill.
Finance Bill
As amended, considered.
NEW CLAUSE.—(Additional Powers of Reference to Referees.)
Notwithstanding anything contained in Section forty-two of the principal Act (which provides for the reference to the Board of Referees of questions as to percentages, etc.) the Commissioners may, if they think fit, refer to the Board of Referees any application may under that Section as respects a class of trade or business, although the application may relate to matters already decided by that Board, and the Board may, if they think fit, on cause being shown by additional evidence or otherwise, reopen the case and make any order which they could have made on an application relating to matters not already decided by them, and may revise any order previously made by them affecting that class of trade or business; and any such order or revised order shall, as from the date such as may be specified therein, apply and have effect in lieu of any previous order relating to the same matter.—[ Mr. Baldwin. ]
Brought up, and read the first time.
I beg to move, "That the Clause be read a second time."
This Clause has been put down to fulfil a promise made by the Chancellor of the Exchequer with regard to the making of fresh applications to the Referees for reconsideration of cases. After the promise had been made it was pointed out that, within the strict letter of the law, the Referees having once given a decision, it was open to question whether a reconsidered decision would be valid in law. This Clause gives permission to reconsider the cases and at the same time makes the decision binding on the applicant. We hope that that will meet the case of the companies affected.
I desire, on behalf of the Rubber Growers' Association, to thank the right hon. Gentleman for the way in which he has met our difficulties in this matter. He has done his best to meet the position, and we are much obliged to him.
May I ask if the concession will be retrospective—since the beginning of the Act?
Yes.
I have not been able to hear this discussion; but I understand that another concession has been given away and that there will be reduced taxation in consequence. I am very glad to see the Chancellor of the Exchequer shake his head. I think we are entitled to point out that since this Finance Bill went into Committee there has already been given away more than half the increases.
dissented.
By the decision a very considerable amount of increased taxation has been given away. I want to assure the Chancellor of the Exchequer that there are a great number of Members of this House who do not want to see taxation reduced in this way. I hope the right hon. Gentleman will stand firm so far as he possibly can in other directions.
I should like to understand what we are doing. I hope the Chancellor of the Exchequer will get up and say, as I did not hear what was said. I noticed, however, following the Financial Secretary that the hon. and gallant Gentleman opposite got up and thanked the hon. Gentleman the Financial Secretary on behalf of a rubber company. I do not know any rubber companies which are represented in this House. I thought we all represented constituencies? I should like the right hon. Gentleman to explain exactly what concession has been made and to whom; whether to a rubber company, or whether on general principles as a result of a discussion in this House?
It is rather hard, if my hon. Friend will allow me to say so, to have to explain the matter again on Report. Probably my hon. Friend, not having been present during the discussion in Committee, did not—
I have been here all the time.
All this Clause does is to enable the Board of Referees, if they think fit, to reopen a case on specified grounds.
My hon. and gallant Friend opposite was perfectly justified in making the remarks he did on behalf of the rubber companies. There was a long discussion in this House in which the totally different positions of the rubber companies was pointed out, as they in so many cases came into bearing just when the Excess Profits Tax came into being. There really is no cause whatever for the remarks made by the hon. Member for East Edinburgh. The action of the Government will meet with the approval of all concerned, because it is based on justice.
Question put, and agreed to.
Clause read a second time, and added to the Bill.
NEW CLAUSE.—(Allowances in Determination of Profits.)
Clause three of Part I. of the Fourth Schedule to the Finance (No. 2) Act of 1915 shall be repealed and the following Clause shall be substituted therefor:
(3) Deductions for wear and tear, depreciation, obsolescence of all assets, buildings, machinery, and plant employed in the trade or business, and expenditure of a capital nature for renewals or for the development of the trade or business shall be allowed to such amount as appears to the Commissioners of Inland Revenue to be the amount which would be deducted by the reasons or purposes aforesaid by a prudent owner desirous of maintaining his trade or business in a high state of efficiency, and to be reasonably and properly attributable to the year or accounting period in question, whether or not such deductions might be allowed under the Income Tax Acts.—[ Mr. G. Terrell. ]
Brought up, and read the first time.
Motion made, and Question proposed, "That the Clause be read a second time."
The Clause which I beg to move is one which relates to the depreciation of assets. I would remind the House that this Clause was set down for the Committee stage, as was also the next new Clause relating to the valuation of stocks. They were postponed by arrangement with the Government until this stage, in order that the House might have the opportunity of considering the White Paper which the Government have now issued. This Clause is put forward on behalf of a number of associations of manufacturers, most of which have come into existence since the commencement of the War. To show the importance of these organisations, let me say that it is estimated that they employ collectively in their businesses over £2,000,000,000 of capital. I wish to say that this Clause is not put forward with the idea of shirking or in any way evading the full rate of tax which the Government have considered it necessary to impose on the manufacturing or trading interests of the country. The Clauses have been carefully considered, and the object is to protect the manufacturer in this way: that when a tax is levied on profit it is real net profits which are taxed—that under cover of taxing profits you do not tax something more than profits. In the days when the Income Tax was 9d. in the £, the depreciation did not very much matter. It was common knowledge that the allowance which the Treasury made under the old law was wholly insufficient. Every firm of repute made it a practice to provide in its accounts a very much larger sum, sometimes double, and even occasionally treble, the amount which the Income Tax Commissioners allowed. Now the Income Tax is 5s. in the £, on the top of which in an Excess Profits Tax of 80 per cent., it is of vital consequence to see that it is really net profits which are taxed, and that every proper allowance has been made.
4.0 P.M.
The law as it stands to-day is the Inland Revenue Act of 1878, under which the Commissioners are required to allow such deduction as they may think just and reasonable for diminished value by reason of wear and tear of plant and machinery. It is limited to wear and tear, and it is also limited to plant and machinery. The amount which they have allowed in the past has been wholly insufficient. Wear and tear does not cover depreciation, though, of course, the term depreciation includes wear and tear. Let me give the House an illustration. A firm buys a machine for £50. The Commissioners allow anything from 2½ per cent. to 7½ per cent. for wear and tear. Two years hence the machine becomes of less value owing to some newer machine being put on the market which is capable of doing the work more effectually. The old machine is at once depreciated, not 2½ per cent. or 7½ per cent., but it may be anything from 50 per cent. to 75 per cent., yet the Commissioners make no allowance whatever for depreciation of this character. The view which they take, and which, as I understand, has always been upheld, is that it must be what they call "physical deterioration." It is only reasonable, when we are considering reconstruction of trade after the War, that employers should be encouraged to equip their factories with modern up-to-date machinery, and not carry on, as I fear they have in the past, with obsolete machinery which puts them at a disadvantage with foreign competitors. Again, the Commissioners make no allowance for depreciation of buildings. You are allowed to charge for their repair. As everyone knows, works buildings depreciate very rapidly. This is an expenditure on the business that I think should be allowed for. No depreciation is allowed in respect of patents and goodwill. That is all-important now, as in consequence of the War patents are no longer being worked, and they are running out. Goodwill in many cases has been seriously damaged. Old-established businesses, with valuable goodwill, have been diverted to war work —perhaps it was a matter of national convenience that they should be—but for present purposes, on the Income Tax accounts, no allowances are made for losses of this kind. There is another expense which should be provided for; it is a very important matter. Machines are to-day being worked by inexperienced hands. So far as I am aware there is no provision in any legislation under which a special claim can be made for losses under this head. There is a general complaint of confusion and the lack of method or system in the manner of assessment. In one place you are allowed a certain rate of depreciation; in another district you are allowed a different rate of depreciation. In fact, some cases came under my notice some little time ago where a works in the country found it convenient and profitable to move their registered office so as to be assessed in a, different district. Then I was told that as a result of changing their district assessment they got into a more favourable district, and they made a very large saving in the amount of their assessment. The law as it stands is the Statute of 1878—nearly forty years old. Enormous changes have taken place in manufacture in that period. Automatic and semi-automatic machines have been introduced, high speed steel has been introduced, works have been speeded up to an extent which forty years ago would have seemed impossible; yet we go on writing off allowances for wear and tear for Income Tax purposes without any real regard to what those expenses really amount to. It is not open to me on this Clause to discuss the merits or demerits of the Excess-Profits Tax. Manufacturers are willing to accept it. But to make my point clear in regard to the Clause, it is necessary to say that it is a very vicious form of tax which can only be justified as war legislation. It tells oppressively on some firms, and it is capable of evasion. In my opinion, the great evil of the tax is that it has tended to force up prices of manufacturers. No one imagines that: the £200,000,000 which the Chancellor of the Exchequer gets from this Tax cornea out of profits. A little, of course, comes out of profits, but the great bulk of it, sooner or later, finds its way on to the articles produced, and the more unreasonable, the more uncertain you are in your methods of levying, the higher the prices are sure to go. I should have thought the Treasury would have regarded it as a matter of sound business; to see that no sense of injustice was created in the minds of manufacturers, because if you create a sense of injustice you create opposition to the tax and a widespread desire to evade it. I should have thought my right hon. Friend would have looked on the people who are paying this tax as his best clients, and, instead of taxing them in a spirit of antagonism, would have done everything in his power to make the tax as pleasant as possible, and would grant to manufacturers every reasonable and proper allowance.
To show how the tax operates, a manufacturer told me the other day that the best thing which could happen to him would be for his factory to be burnt to the ground. He owns a factory engaged on munition work. I confess I did not understand him at first, but I afterwards found that in the first six months of his financial year he had earned a sum which was equal to his standard profit, and consequently he would have all the worry, vexation and anxiety, and the risk of running the business for the remainder of the year with practically little or no profit. I think the House will realise that if this manufacturer earned his standard profit in the first six months of the year, in the second six months of the year the State would get four-fifths of -the profit, and the manufacturer would be left with one-fifth, out of which he would have to pay and make provision for the risks incidental to his trade, and for the excess depreciation which is not allowed under the Treasury Regulations as they are enforced. I think myself that that is anything but a desirable state of affairs. We want munitions; we want the maximum possible output from every works in the country, and if you take the whole of the excess profits, then I think we should give the manufacturer credit for it. The House has denounced the Trade Unions for the restrictions which they imposed on output, yet by this legislation, as far as manufacturers are concerned, you discourage output.
That is not a desirable state of affairs, and this Clause has been most carefully framed to require the Treasury to grant to all manufacturers the depreciation which a prudent owner would consider necessary in his business. It is to meet an old-standing grievance, which has rankled in the employer's mind for years, and the demand for its consideration, as the result of the present high-level of taxation, has become acute. I raised this question in the House when the Munitions Bill was under consideration in 1915. I put an Amendment down to the Munitions Bill asking that the profits of controlled establishments should be ascertained, after making full allowance for all wearing out and wasting assets, bad debts and contingencies, and I based my Amendment on the fact that the Commissioners of Inland Revenue did not allow depreciation as the basis of arriving at profits. The Prime Minister, who was then Minister of Munitions, in the course of his answer to my Amendment, made this remark: some question has been raised as to the propriety of using the word "prudent" in an Act of Parliament, but I am also told that it is a term which in recent years has been used in connection with the Trustee Acts. It is frequently used by judges in their judgments. I think, for the reasons which I have given, that that term is easily understandable, and what we ask is that every man's rights should be clearly defined in the Act under which he is taxed. We, therefore, press the new Clause.
I beg to second the Motion.
I am one of those who have supported on nearly every occasion any addition of tax for the business of the War, and I in no sense support this Clause, so temperately advocated by the hon. Member, because I am in any way deflected from that view; but I think there is a great deal to be said, while one may be strongly in favour of taxation, that that taxation should be fair and just, and that we should have some regard to the future in the proposals which we are asked to adopt. I think the hon. Member, in his very able speech, pointed out that those who support this proposal are not arguing that there is in any sense of the word discontent with regard to the particular form of taxation. It is more in regard to the future and the possibility of peace, and those manufacturers who have to take a valuation on a very highly inflated basis will be faced with a very large depletion of reserves when they have transferred their businesses on a peace footing. They will have to consider the possibility of again retransferring their businesses on this basis. They will be faced with the fact that a great deal of their machinery and assets will be no use for peace manufactures as against war manufactures. Many of them have in the interests of the State and from patriotic motives, as well as from motives of gain, put their factories at the disposal of the State, and they have lost a very valuable goodwill. Many manufacturers have seen their businesses slip away, and they have justly felt that they have lost something which cannot be very easily put into figures, but which is a very valuable asset in a goodwill. Attention has been drawn to a statement in the White Paper by the accountants, and on this the Government have founded their case.
The hon. Member is dealing now with another Department.
The two are really bound together. [HON. MEMBERS: "No!"] I think there should be some consideration of the value of the stock. The depreciation should be such as a prudent trader or a prudent manufacturer would make if his factory was engaged, say, in a cutlery business or some other peace manufacture which had been converted to a shell factory afterwards, to be transferred to a peace manufacture, and there should be regard paid to what he has suffered from a large depreciation in his asset. We ask that such allowance should be made to such men "as appears to the Commissioners of Inland Revenue to be the amount which would be deducted for the reasons or purposes aforesaid by a prudent owner desirous of maintaining his trade or business in a high state of efficiency and to be reasonably and properly attributable to the year or accounting period in question whether or not such deductions might be allowed under the Income Tax Acts."
I submit that such manufacturer or owner would naturally be prudent and would be justified in saying that he should have some allowance for depreciation, because in the nature of things his plant and assets must very considerably depreciate when he has to return to peace manufactures. That question is very closely bound up with the next Clause, and we cannot very well dissociate one from the other. Many of these traders have converted their businesses from a peace footing to a war footing, and having regard to that fact, and to the very probable and natural possibility that they will have again to re-transfer from war footing to a peace footing, I think a proper depreciation should be allowed in accordance with what a prudent owner would regard as fair and just depreciation.
I will try and deal with my hon. Friend's argument as temperately and straightforwardly as he made his original statement in defence of his proposition. I would, however, like to find fault with him for one phrase in which he spoke of the White Paper as being more intended to mislead than to help. I am quite sure that in the cold light of the morning he will recognise that as a rhetorical exuberance for which he will be sorry. I should like for a moment before I pass on to the gravamen of this charge, to refer to one or two of the points in the Clause which he has moved, which words alone, I think, would condemn it from the point of view of putting it on to the Statute Book. It has already struck my hon. Friend that the phrase "prudent trader" might not recommend itself to the taxing authorities, and I am quite sure, speaking as a layman, that the mere insertion of the word "prudent" would open not only a window but a door through which the whole of the excess profits might gallop away into space. Imagine the word "prudent" as applied to taxes in some other spheres, and this might, perhaps, bring it home to my hon. Friend. Suppose we said that no more Income Tax should be paid than a prudent Income Tax-payer would pay. A prudent Income Tax-payer would not pay 5s. in the £, and a prudent business man would take care to write down all his assets to such a figure that he would have no excess profits at all. I do not think I need take up the time of the House at any length in explaining what I am quite sure my hon. Friend the Member for Coventry (Mr. Mason) had overlooked.
My hon. Friend spoke with a good deal of feeling about the inadequate allowances, in his opinion, that are made for depreciation and obsolescence. I am quite sure that he did not realise how much is covered by the third Sub-section of the 40th Section of the Finance Act (No. 2), 1915, especially as interpreted by the Inland Revenue in the White Paper we have recently published. Take the case of assets constructed or acquired during the War and therefore constructed or acquired presumably at prices considerably in excess of those ruling before the War. That is a point which my hon. Friend the Member for Chippenham laid some stress upon. May I point out that there is full relief given in these cases for the writing down of such assets from their cost value to their post-war value, and if they have to be scrapped, credit can be given for the writing down from the value at which they stand in the books to the scrap value, and in the same way where it is impossible at the present moment to ascertain on any basis that can be agreed upon what the post-war value will be, provisional allowances are sanctioned to meet that case.
With regard to controlled firms, I think I have some personal knowledge, and I have never heard it suggested that the allowances which have been arranged with the controlled firms by the Ministry of Munitions for depreciation and obsolescence, have been deemed inadequate. I know there was a fear expressed that those terms would be considerably modified and revised by the action of the Inland Revenue. What authority there may have been for that fear I have no idea, but I know that the rates of depreciation that have been already definitely agreed upon will be accepted and will be continued, so that there is no hardship of the nature which has been alluded to in the change of administration in that respect. Where you get cases of depreciation and obsolescence in which the allowance by the taxpayer is deemed to be insufficient, there is a right of appeal to a tribunal which has been set up for that purpose.
With regard to wear and tear, the House must remember that an appeal lies to the district Commissioners or the special Commissioners. Once more where you have a case of deferred renewals, which is one of not infrequent occurrence, you have the power to make arrangements for writing down to meet them also. I have myself studied very carefully this White Paper with regard to depreciation. It is a subject I have been interested in for a long time, and while I am quite at one with the hon. Member for Chippenham that there may be cause for re-examining the whole basis of depreciation allowances in connection with the Income Tax, I think that is a matter which may well be investigated in common with many other matters by the Income Tax Commission which has to be set up. For the purpose of dealing with depreciation and obsolescence, so far as the Excess Profits Tax goes, I am perfectly convinced, as one who has had as large a practical experience, I think, as any hon. Member who has addressed me, that the provision we have made in this White Paper will meet every reasonable complaint that may be made by the parties interested.
I am very much disappointed with the last few sentences of the Financial Secretary. We are all very much concerned with our great obligations to make industry effective after the War. We have to deal with the period of reconstruction, and I submit that the ordinary Income Tax standard of 5 per cent. or thereabouts for depreciation is altogether out of place. Industrial conditions have changed very much, and unless the laws of the country provide for the manufacturer scrapping machinery which has become useless and out of date, it is quite impossible for the trade of this country to be placed on a sound and proper footing. I believe the Government are considering this question, not in connection with a reform of the Income Tax laws, but as a subject for investigation by a Sub-committee of the Reconstruction Committee, and I feel confident that any Committee which considers it will recommend the Government to alter the basis quickly and not to wait for any revision of the Income Tax laws in general. It is absolutely necessary, if you want to promote industrial efficiency and to enable the industries of this country to stand American and German competition, that a change should be made, because you cannot provide for wear and tear and obsolescence at anything like 5 per cent. If you are going to hold your place in the industrial world, such as it is going to be, it is absolutely safe to prophesy that you must allow 10 per cent. on the value of your plant in order to keep it up-to-date. That is a sound proposition, and the announcement made by the Government is very disappointing. For goodness sake do not wait for a revision of the Income Tax, but put your industry now on a sound footing and give facilities for scraping. I have not the slightest doubt that the provisions of the Bill are altogether insufficient to make the industry of this country absolutely first-class.
I was a little bit astonished to hear the Financial Secretary state that he was not aware of any case among the controlled establishments in which the question of depreciation was in dispute. The Chancellor of the Exchequer will remember that in the Debate on shipping it was stated that shipping and manufacturers, particularly controlled establishments, paid very liberally towards the Exchequer because this question of depreciation under the Munitions Act had not been settled. Of nearly 4,000 controlled establishments, the greater number are still in dispute, not with Somerset House so much as with the Munitions Department, regarding this question of depreciation. There is a great difference between the amount which the controlled establishments have shown to be necessary and the amount which so far the Munitions Committee have allowed. Now that the Munitions Committee and Somerset House have combined, I hope that they will take a more reasonable view of things and will settle this question, so that manufacturers and controlled establishments can pay up, as they are ready and desirous of doing. I must confess that I differ a little from my hon. Friend opposite, because I think this White Paper is an enormous advance on anything the House has ever seen in connection with these allowances for depreciation and obsolescence and other big questions which affect trade. I trust it is going to be carried out in a generous spirit. There are still great difficulties to be dealt with, and I hope they will be disposed of satisfactorily.
There are two questions in this White Paper; the question of the Income Tax and the question of the Munitions Duty. With regard to Income Tax there is this to be said, that the allowance for wear and tear, which is fixed by the Income Tax Commissioners, is not limited by statute to any specific amount or rate, and it is therefore quite open to Somerset House and to the Chancellor of the Exchequer to give a hint or a suggestion— I will not go so far as to say a direction— to the surveyors of taxes and to the Commissioners to deal with the question on a liberal principle. In our interviews at Somerset House we got the impression that would be done. I should like it confirmed by the Chancellor of the Exchequer and to have it stated by him that a suggestion will be given to deal with this matter on a generous scale. I should like to acknowledge my indebtedness to Somerset House for the way in which they have dealt with the matter. In the old days, when sitting on the other side of the House, I have often asked the Chancellor of the Exchequer to make adequate allowance for depreciation, but the invariable answer I received was that Sir Henry Primrose said that if you interfered with the question of wear and tear in connection with the Income Tax the whole fabric would fall to the ground. We always thought that an absurd proposition, and I am glad to say that Somerset House has now got beyond it. They have gone into this question of depreciation, and this White Paper is an advance on Sir Henry Primrose's statement and on all statements of every previous Chancellor of the Exchequer, and, whether it comes from the Chancellor of the Exchequer or Somerset House, I should like to express my indebtedness. At the same time I hope the right hon. Gentleman, in view of the present condition of things and the heavy cost of replacements, will intimate that a suggestion will be conveyed to the surveyors to deal with this matter on a liberal basis.
Is it quite clear that allowances for depreciation and obsolescence under Section 40 of the Act of 1915 will be so spread as to fall wholly within the period of control, and not to extend beyond that period, after which the Excess Profits Duty will cease to be levied? The matter is referred to in the White Paper, and I hope that it is all right, but it talks about some exceptional cases. These exceptional cases, I understand, are only at the option of the taxpayer. Will the allowances in the ordinary case be spread out so that they will terminate on the date when the Excess Profits Duty ceases to be levied? Otherwise, an obvious injustice will arise. I have put down a Clause dealing with this point, but if the Chancellor of the Exchequer can clear it up now, I do not think it will be necessary for me to move it.
I do not think there would have been much difficulty with regard to this matter, if Subsection (3) of Section 40 of the original Act had been carried out. That Subsection gives power to any man to go before the Commissioners and call attention to any other special circumstance specified in Regulations made by the Treasury. Those Regulations have never been made by the Treasury, except in one case where I got them to make a special Regulation with regard to patents. Last year's Act, dealing with controlled establishments, contained a Clause making the Income Tax allowance the same as the depreciation allowance in the Munitions Levy. It did not apply, however, to ordinary excess profits. Now that the Munitions Levy and the Excess Profits Duty are amalgamated, I hope that my right hon. Friend will be able to say that the same principle will apply, and that be will make it clear that Schedule B will allow the same for excess profits as the Section of last year's Act allowed for controlled establishments. If he will do that, I think there need be no difficulty in the matter.
I do not think the House will for a moment imagine that anyone in the responsible position of Chancellor of the Exchequer could leave out of account the importance of industry after the War, and hon. Members may assume that before making any arrangement or any proposal we gave every consideration to that aspect of the case. The point has been raised as to the extent to which discretion is exercised by our officials. I am sure my right hon. Friend opposite (Mr. McKenna) will bear me out that taxes of this exceptional kind must be dealt with generously by those acting for the Government. Of course, I have taken the same course, and as regards giving a hint, the very point about Income Tax is alluded to in this White Paper. Attention is called to it, and it will, of course, be taken into consideration by those responsible. I anticipate more discussion on the next Amendment, but I do not think we need occupy much time on this Amendment I do not think there is any case whatever for the Clause put down. I wish the House to realise what the actual facts are. My hon. Friend, who moved the Amendment in a very reasonable speech, showed, if he will allow me to say so, that he was not quite thoroughly acquainted with the facts. He gave an example of a machine which becomes obsolete, and he said that the Inland Revenue did not allow it to be written down. That does not happen. If a machine becomes so obsolete that it has to be replaced and another put in, the Inland Revenue allow that to be written down to its actual scrap value when another is put in.
As to excess profits, I would like to point out that when I proposed to raise the levy to 80 per cent. I realised how much that increased the seriousness of the case, and how necessary it was that fair play should be given to the manufacturers. I met several deputations, some before we had committed ourselves to this taxation, and I arranged that they should go to our authorities at Somerset House to thrash out with them completely the subject. As regards depreciation, they went there. Our views were put before them, in substance, exactly as they are in the White Paper, and we asked them if they had any observations to make on that to communicate with us again. We have not heard from them, and therefore I am surprised that this Clause is moved at all. In addition, I do ask the House to realise what is the protection a firm has now with regard to depreciation. They can go in every case with a direct appeal to the Referee if they consider themselves aggrieved. The effect of that is that the result of anything connected with the War is to be taken into account in assessing depreciation. Let the House see how far that goes. It means this, and it is being, acted upon: that if a machine or anything else is bought now which will probably only be of use, or partly of use, during the War, that is taken completely into account, and they are only charged on what will be its value when peace conditions come back. If there is any disagreement the case can at once be referred to the Referee. My hon. Friend, who has great knowledge of this subject, was quite wrong in the reason he gave for the delay in the levying of the Munitions Levy. I have made special inquiry, and it is not due to that cause at all. The delay, of course, is due to the complicated character of the calculations for output and so on arising out of the Munitions Levy. That is the cause of the delay, and it is a fact that so far there has been almost complete agreement between firms as to depreciation. They have made a bargain which satisfies both parties, and I think there has been hardly a single case where there has been any appeal to the Referees, who are there for the express purpose of seeing that firms are dealt with justly, if there is any doubt on the point.
I assure the House, so far as this particular Clause is concerned, that there is in my opinion not the smallest justification for it, and if it is worth while to repeat what the Joint Financial Secretary to the Treasury has said, I would say that if we were to adopt it it would be the end of Excess Profits Duty, so far as manufacturers are concerned. Let the House see what it means, or, rather, what it says. It says that these deductions for wear and tear, depreciation, obsolescence of all assets, buildings, machinery and plant employed in the trade or business and expenditure of a capital nature for renewals or for the development of the trade or business shall be allowed to such amount as appears to the Commissioners of Inland Revenue to be reasonable. If any provision of that kind were inserted, is there any doubt that a prudent business man would say that the State was: to get 50, 60, and now 80 per cent. of the profits, and what he had now to do was to employ his whole profit in developing his business and increasing his plant? That would mean that the Excess Profits Duty would go altogether. The hon. Gentleman gave an illustration of hard usage on behalf of these firms. Someone had said to him, "In six months we can make our standard; what is the use of working any further?" Let the House see what that means. It shows how enormous profits are. If in six months you can make the average, all the rest are excess profits. On that amount they had in the first period 50 per cent., in the second 40 per cent., and are now going to get 20 per cent. Therefore, at the worst, they are going to make in hard cash profits of a far larger amount than was possible in ordinary peace time. I do not think that is a subject for grievance. As regards the points raised by the hon. Member for Lincoln (Mr. C. Roberts), it is exactly as he quoted.
Question, "That the Clause be read a second time," put, and negatived.
NEW CLAUSE.—(Valuation of Stocks)
At the end of each and every accounting period the stock then on hand shall be brought into the accounts for such period as to any quantity not exceeding that brought into account at the commencement of the first accounting period (hereinafter referred to as "normal stock") at the same prices as those at which the latter was so brought into account and as to any quantity in excess of the normal stock at the prices at which the same was acquired or at the market value thereof, whichever the lower; provided that, if at the end of the last accounting period the stock in hand be less or more than the normal stock, the deficiency, if any, may be made good, and in such case shall be deemed to have been acquired during the last accounting period and be chargeable accordingly, and for any excess a period shall be allowed in which to ascertain by actual realisation the value thereof, and the same shall be brought into account at the prices so realised.—[ Sir J. Harmood-Banner. ]
Clause brought up, and read the first time.
I beg to move, "That the Clause be read a second time."
The point raised in it is of very great importance to the traders of this country. The question has been discussed, as was stated by the Chancellor of the Exchequer, together with the question of depreciation, and the White Paper has been issued, which is probably in the hands of the Members of the House. If I may put it shortly, the effect of my Amendment is to safeguard the basis of values of the stocks during the period of excess profits. I think we should all admit that in a manufacturing business it is absolutely necessary for an amount of stock to be kept for purposes of preparing goods which are not ready for sale, and also for having them when they are ready for sale. There are extra-prudent men and prudent men, and there are others who keep their accounts in a particular way. The extra-prudent man starts with a basis of price for his basis of stock at considerably below cost or market value. The prudent man probably takes cost or market value, and another man may take his cost in a different way, and make it sufficient for the way he takes it. Throughout the whole country there is an enormous amount of stock held by the manufacturers, which represents the basis of stock which they require for the purpose of their business. We all know there is a big rise in the value of stock. I have here an extract from the "Statist" of Saturday, showing the difference of price of commodities in 1914, 1915, and 1917, and those prices show in many cases below 10 per cent., in other cases 10 per cent., and in very many cases far above that figure. It appears to have occurred to someone who was looking at this question to say, Here is a fine opportunity for making a large sum of money for the Chancellor of the Exchequer. All firms require these stocks, and they have their stocks in the books at their particular basis value of market price or cost price. With this rise we will send out instructions that all stocks must be taken at cost or market price, the result being that when you take £4 for a billet of steel, worth £7, and now worth £12, or when you take the cost price of pig-iron, which is worth £6 10s., and is now worth £13 15s., and then tell manufacturers in their books to raise their prices to these figures you establish an enormous book entry profit, which is not cash, but is apparently the profit in the books of the various concerns. Then the Government comes along and says, Here is this very fine big profit. Take the difference between your basis, or your quite early part of the year's stock, and the present cost of the stock, and we want 50, 60, or 80 per cent. of it.
I think I ought to say in justice to the fact that the question has been raised that this has not been done because the tax is 80 per cent. The matter has been in dispute, and has been considered from the time the first Excess Profits Tax was started by the late Chancellor of the Exchequer, when it stood at 50 per cent., and. it has been in dispute whilst the tax has been 50 and 60 per cent., just as much as when it has been at a higher figure. It does not lie with the Chancellor of the Exchequer, therefore, and I am sure he would not do it, to say that I would never have raised this question until Excess Profits Duty reached 80 per cent. The fact that you take a big value and double it in the books, and then ask Excess Profits Tax on it is regarded by the manufacturers of the country, and I am sure rightly, as being a straining of finance which is most illegitimate. For instance, a manufacturer has 20,000 tons of stock in his works required for his regular course of business. At £5 a ton that is £100,000. The rise that has gone on now during the last few years increases the value to £10 a ton, as a book value. Ten pounds a ton on 20,000 tons is £200,000—a mere book entry. But the Chancellor of the Exchequer promptly comes and says, "I want 80 per cent. of the £100,000, the book entry value which you have now as the result of carrying out my instructions." That is, shortly, the point of my Amendment. I should say that the question is being considered, and in issuing the White Paper it is only partly dealt with by Somerset House because it deals with a small part of the stock and does not deal with the whole part of the manufacturer's stock, which he is bound continuously to carry, because-without having these stocks his business must of necessity cease. The question also arises in the case of a merchant. A merchant must carry large quantities of stock. The prudent merchant will keep his stock down in his books considerably below either cost price or market price. He will keep it on a basis price, so that if there was any subsequent fall in the price of the stock his position is secure. When the merchant is asked to take his stock at the market value he creates this altogether paper credit out of which the Chancellor of the Exchequer desires to exact Excess Profits Duty, and whilst it is quite possible that arrangements may be made in one way or another—in fact, arrangements are attempted in the White Paper, but are not fully carried out—to give some protection in respect to the realisation of the profits, yet they are not wholly covered. As regards the basis accepted in the White Paper—that is to say, the Government suggest that there should be a basis stock for perishable raw materials or semi-manufactured goods—that is all very well. I should say, because I am a large manufacturer—one of the largest in the House—that that largely meets my case, being an iron manufacturer, in the way that I keep my books, but I think I am a little exceptional, and it certainly does not meet the general needs of the community.
5.0 P.M.
The White Paper deals with this question of basis stocks by saying that they must be the minimum. What I would venture to say is that where a manufacturer has to keep his stocks for a year or two in order to carry on his business there is no question of a minimum. It might be quite right, however, to have an average for the accounting period. It might happen that during the accounting period the stock may have been unduly depleted, and, therefore, to take the minimum stock necessary to carry on the business would be, I suggest, hardly fair. I would recommend to the Chancellor of the Exchequer that instead of a minimum it should be an average amount—the average quantity of stock during the accounting period. There is also the question of what is meant by "perishable raw material and semi-manufactured goods." We are ready to accept the position here as correct, and I am thankful to the Chancellor of the Exchequer for having put it forward. But why not apply the same basis principle as for stocks? If it represents iron, does it also represent leather, wool, or cotton? Are they included in perishable raw material or semi-manufactured stocks? What I suggest is that the words "perishable raw" should go out and that all stocks should be covered and should be dealt with on the basis principle, so that there may be none of that which may be called gerrymandering finance, by saying that £5 in the pocket must be taken to be £20. We want the Chancellor of the Exchequer to apply the fairer principle in dealing with this matter, and not to apply this excessive squeeze to the manufacturer.
Take the case of manufacturers who have stocks based on cost or market value. Because of the great increase in the value of the stocks a man who has carried stock to the amount £200,000 will, in consequence of the rise in prices, be carrying stock to the amount of £400,000 so that he may continuously carry on his business. If the Chancellor of the Exchequer is to take 80 per cent. of that increase he will reduce the manufacturer's ability to keep up his stock, and the manufacturer will be denuded of both stock and cash. Such a thing, I suggest, is neither politic nor just. I hope the Chancellor of the Exchequer will adopt a method of dealing with this which will be both fair and just. It is not fair, and it cannot be right or in the interests of good trade. To pay this heavy taxation upon excess prices of stock would be ruinous, and the proposal is considered by the manufacturers of the country as most unjust. They have no objection to paying on profits made; they have no objection to paying on what the Financial Secretary called cash profits which they have realised out of their business, but they do object most strongly to pay on paper profits. I have the opinion of two sets of accountants in my hands, but as they differ I do not propose to quote them to-day, although the opinions come from men I most highly respect, men than whom there are none I would more readily go to for advice. I do not know where this suggestion emanated, whether it came from those who act for the Treasury or from the advisers of the Munitions Department. It was a very clever suggestion that the revaluation of stocks would enable the Exchequer to get 80 per cent. of the increase. But, clever though it was, it was a most unjust proposal, and I hope the Chancellor of the Exchequer will see his way to drop it. He may have it in his mind to say, "I might just as well tear up the Excess Profits Tax." If a tax is unjust it ought to be dropped, whatever the result. But I do not think the granting of this concession for which we ask will by any means deprive the right hon. Gentleman of the money he requires. If he adjusts stocks on a proper basis he will at once bring a large sum of money into the Exchequer, and he will be acting the part of a considerate Chancellor of the Exchequer rather than that of an oppressive Pasha exacting money from the Turks.
In seconding the Motion of my hon. Friend, I should like to impress this on the House, that the manufacturers of this country entertain very deep feelings on this question. Some may think—perhaps my right hon. Friend may hold that view—that there has been rather too much of sending telegrams and letters to Members. I will not express an opinion about that. There may have been, but if there has been it only shows the intense feeling in the country over this question, due to the belief that injustice is being done. To prove my point, I should like to quote one or two passages from letters which I hold in my hand. The first is from Mr. Hichens, the chairman of the Controlled Firms Association. In it he says,
The two points in the White Paper which I think are of importance, and to which my hon. Friend has already alluded, are, first, the concession for one-year. What the business world say is-that when the War is over the prices of a great many things will keep up, that it is not known how long they will keep-up, and that the fall in prices will probably take place in the period after the first year. Therefore one thing we ask the right hon. Gentleman to do is to consider whether he cannot extend that one year. I will not say for how long. We suggest one more year, or, perhaps, if he will not go to that extent, six months;: but let him do something to meet the anxiety in the minds of the gentlemen to whom I have alluded. The second point is as to base stocks. Here, again, the Chancellor of the Exchequer has recognised that manufacturers must keep stocks which are called base stocks—that is, raw material or semi-manufactured material, which, during the period, will not alter in character and is imperishable. In the White Paper that period is put down as the period of the War, but, unfortunately, it is con fined to stocks "at a constant quantity and at a constant price." I am told that that practically rules out every trade except perhaps one or two. So far as the concession of base stock goes, if the-words "constant quantity and constant price" are left in, the concession is practically worth nothing. There was a large muster of Members of Parliament in the-Chancellor of the Exchequer's room on Friday afternoon. The right hon. Gentleman received us very graciously, and promised to do his best to consider these- matters before to-day. We suggested, in order to meet the point of base stocks, that these words might be substituted: is only a paper profit out of a man's profit, which he cannot get afterwards owing to the price of the stock going down?
I should like to support the New Clause which has just been moved. Unless the provisions which were foreshadowed are altered in the direction of this proposal, there is a probability of considerable injustice being done in many cases. It is quite possible that this paper excess which has been referred to may be due entirely to the valuation put upon the stocks and that the capital of the company will be bled by this 80 per cent. being taken from it. I should like to emphasise a point which has been made to me by all the firms in my constituency who had dealt with this matter, namely, that it is not the 80 per cent. to which they object. What they object to is the method of valuation, which they think will put them into an entirely false position. In defending the Government's position, the Committee of Consulting Accountants has put forward two objections to the proposals which have been made by those who are supporting this new Clause. They say, allows twelve months for the adjustment to take place. I agree with my hon. Friend opposite (Sir S. Roberts) that it is not likely that blocks will reach a stable position of value or a value where fluctuations are likely to be so small as to be relatively negligible in reference to the tax within a period of twelve months. Personally, I do not think that an extra six months would be likely to settle the question. I do not think we can now say what period of time it would be necessary to allow for a trade to get into a reason-ably stable condition as to values. I suggest that if you take 80 per cent. of the excess caused by the increase In value you are practically taking this 80 per cent. out of stock. I do not know how some of the firms are to provide the money to pay the tax unless they sell and thereby deplete their stocks. Suppose a firm has £100,000 of stock and that was increased to £200,000. Leaving out of account the small allowance and taking round figures, you take 80 per cent. of the £100,000, which leaves £120,000, therefore the firm is left with 60 per cent. of its stock. Taking the value of the stock means practically taking the stock. Unless they are supposed to be able to find the money elsewhere how are manufacturers to find the money? What they have is sunk in stock which has risen in value. If you take 80 per cent. of the rise, you are thereby practically taking it from the stock. A manufacturer has either to sell the stock or borrow the money or obtain it in some way of which I am not aware.
With a continuing tax there is a rough equalisation. In the case of the Income Tax there is a rough equalisation. The tax is paid as the stocks rise and the tax is avoided when profits are decreased as the stocks fall. If the excess is taxed only in a period of rising prices, it is equal to a tax on capital, and it will not he adjusted if you stop the tax at a particular year before the decrease in the value of stocks has taken place. I would suggest that the Chancellor of the Exchequer should ask himself how this would apply to farmers. Suppose a farmer has a hundred head of cattle, valued, say, at £20 a head. If the price of cattle goes up to £40, would the right hon. Gentleman consider it reasonable to tax the farmer on the additional £20 per head which the cattle are worth? Farmers appear to be rather the favourites of fate in the present circumstances. I am afraid that if the same practice were applied to them as is being applied to manufacturers in reference to their stock, there would be a very great outcry. The same Committee suggests that manufacturers are making an increasingly large reserve during each year of rising prices. I really suggest that manufacturers are not making a reserve at all. Because their stocks which they have to carry are being increasingly costly they are not making a reserve. If they are able to sell them and make a profit then you get, and rightly get, Excess Profits Tax coming in. I think in making these proposals the Government has not fully taken into account the effect of the temporary continuance of the Excess Profits Duty. Compare it with the Income Tax. Suppose a man has an average profit of £l,000 a year. Owing to increase of stocks that goes up to £1,500. The next year stocks go down. He hot merely does not have to pay on £1,500, nor on £1,000, but he can deduct £500. He would pay on only £500, and on the level justice would be done.
I should also like to make this suggestion for assessing the real incidence of this: What would be said in the Bankruptcy Court if a firm had acted on this basis and paid a dividend with this money which is now going to be taken as a tax? I think some very severe remarks would be made by the learned judge if the firm had disposed of its capital assets in this way. I think our point is accepted to a certain extent in one of the Clauses of this opinion of the Committee, but they suggest that when the Excess Profits Duty comes to an end in a period of not less than twelve months these difficulties will have adjusted themselves. Really, are we not being taxed on a prophecy? It appears to me that the Government to a certain extent is insisting on us engaging in a gamble and taxing every man as though he were a sure winner. I feel sure that under present circumstances he is more likely to be a sure loser. I wish to emphasise that there is no objection to the Excess Profits Tax. It, of course, has its weak points. All taxes have. They take money out of someone's pockets. It is felt very generally that those who have real excess profits which have been realised in money ought to be the most willing of all the nation to pay this money, but this hypothetical excess may be an engine of oppression and possibly of ruin.
This question of stocks is an exceedingly difficult one, very complicated, and one which is not very widely understood, although amongst those who are discussing it this afternoon there is, of course, a great deal of expert knowledge. But the mere fact that it is a subject of such complication and so technical makes it the more difficult to speak on. I will allude to one or two points which have been mentioned, and then criticise the Clause which hon. Members have put down to represent their interests. I always thought I was a kind of doorkeeper of the Treasury, but I find I have no power to open or close the door. That will rest with my right hon. Friend when he speaks later. I think the speech of my hon. Friend (Sir J. Harmood-Banner) would give a wrong impression to anyone who was listening to him, and who started with no knowledge of the subject at all. He spoke as if all the stocks of all the businesses in the country to-day were standing at pre-war values, and were all going to be raised enormously, and that by that there was going to be a very great injustice perpetrated. But surely what has been happening in by far the greater part of the businesses of the country is that prices have been raised year by year, and in very few instances I should imagine could it be said that any stocks, unless it were certain base stocks, of which we have heard something to-day, stand at pre-war values or at anything like them. If we were to adopt the methods that is desired in this Clause, it would mean writing back in countless cases values which had already been increased. I think my hon. Friend, too, was in error in his interpretation of one of the passages in the White Paper when he spoke of only a minimum quantity of base stock being allowed. That minimum quantity is applicable, if I understand it aright, to an individual who stood up against the usual practice of an industry where that usual practice consists in carrying the base stock at low prices, and he is admitted by grace and favour into that class by this White Paper. We say, then, we will take for his case a minimum quantity of stock. The man who has been practising the usual course in the valuation of his base stock gets the benefit of that base stock that he had in either of his last three stocktakings before the War.
The hon. Gentleman (Sir G. Toulmin) spoke about the equalisation of the incidence of the tax over a term of years, referring to the Income Tax. I agree with that, and I also agree that where you get a tax, like the Excess Profits Tax, that lasts for a short time, it is a practical impossibility to get anything like the same equality of incidence that you can get when it lasts for a long period, and, of course, one of the difficulties that we are up against, as I have no doubt the right hon. Gentleman (Mr. McKenna) must have seen when he put this tax on, if he contemplated the War lasting as long as-it has lasted, was that where you apply a tax of this nature to the thousand and one diversified industries of the country, you must have inequality of incidence, but where that inequality of incidence may be-felt at 50 per cent. or 60 per cent. and may be endured and tolerated for a year or two years, by the time you get to 80 per cent. and by the time you get to the fourth year of the War, the weight of that incidence becomes almost greater than people can, bear; and thus it is that when the opportunity arises, as it has arisen to-day, for the trade of the country to lift its voice against one aspect of the tax which it does not like, it is naturally very vocal and very unanimous.
To return to the hon. Gentleman (Sir G. Toulmin), I gather that what he really finds fault with is having to replace stock at what he considers to be an abnormally high price, because I agree with him it does not matter what the price of your stock is provided you are able to sell it at the price of the day as the made-up goods. It is what you are left over with at a high price—what you have not got rid of as the manufactured article. That is where we believe that we are meeting him and his friends by proposing a period of twelve months in which to wind up these raw stocks. But he says "No." He says a year is no good. It is a gamble in which the Government is going to get the best of it. I do not think it is at all. I think it is a gamble, but a gamble in which we stand to lose, because we say, "At the end of twelve months, if your stock has fallen in value, if you have lost money by it, you will get that back. It can be repaid." If, after the War, prices rise, as I understand it, the manufacturer puts the excess profits in his pocket and we get none of it. So if it is a gamble, as I admit that it is a gamble, surely the chance my hon. Friend has of making money is a great deal better than that of my right hon. Friend in securing any.
I de not make any money out of the excess profits that I pay at all.
What I was referring to was the realisation of stocks, as we propose in the White Paper, by which the manufacturer will not be left stranded with stocks because we propose to value them at the end of twelve months. I agree with every Member who has spoken that it is perfectly impossible to say now what the course of prices is going to be after the War. In the early days of this tax manufacturers used to speak, in discussing this matter one with another, as though a slump in prices would come immediately after the conclusion of the War. Of course, in the light of our knowledge of the last year or two no one would say that. But what final period can we put? We say here a year. We think that fair not only for the reason I have given, but also because a year will see the stocks in most businesses cleared up, converted into finished goods, and sold. When that conversion is completed and the finished goods are sold the manufacturer will have to replenish his stock. It does not matter at what price he replenishes his stock because he will be buying those stocks against the contracts he has made for some of his finished goods, which will be at the corresponding market price, and that will probably leave him a profit. Even if you get a long spell of falling prices it does not follow at all, from my experience in business, that you are bound to lose money on the realisation of your stock, because you may find that the price of the finished goods does not fall in the same relation that the price of stocks falls, and you may be left with a margin in your own favour. But I must not indulge in prophecy. I was rather tempted to do so.
I should like to add one more word on that subject. I have said that we have offered one year in which to realise. Some of my hon. Friends want two years, but two years may not give us any greater security of arriving at a final point than one. You may want three, four, or five years. It is quite impossible to say at what place, if at any, the fall in prices is going to come. There are good judges of trade after the War who think that none of us may see pre-war prices again in this country. For several years to come you will be faced in many industries with scarcity of raw material when you have stocks very low. You will have a shortage of tonnage throughout the world which cannot be made up for some years, and you will have all over the world an inflated currency, which may have an effect on prices which none of us can foresee. I think my hon. Friends are really agitating their minds in this matter a great deal more than there is any cause to do. I believe the protection given by the suggestions in this White Paper will meet the urgency of the case. I would ask my hon. Friends this, speaking, if I may, not officially but as one business man to another, are they wise, having made their protest and having been met to a certain extent by the Government, to press this matter much further? We must remember that on the very hypothesis of excess profits these matters do not have to be considered except by businesses which are making for themselves as great an income to-day as they made before the War, except for the incidence of Income Tax. In that they are in the same boat with everybody else in the country. They have been allowed to keep half their excess profits, and then two-fifths of their excess profits, and now, even with the hardship of 80 per cent., they are allowed to keep one-fifth. In regard to controlled works, of which I know most, they have their compensation. The controlled works have had an opportunity during this War of modernising their plant and equipping their works in such a manner that they will be able to meet the competition of the world when the War is over. They have been met fairly by the Ministry of Munitions, and while they have very properly thrown themselves into the work for the good of their country, I do not think that they will suffer by it. I would repeat once more that I do think, having regard to the great part that the manufacturers in this country have played, the way in which the productive power of the country has been maintained by the manufacturers and the working men, the way in which the munitions of the country have been produced, and the way in which they have up till now carried out all the demands of the-Government, whether in making better and more effective their works or in paying their taxes, it would be a great pity if now, in what we all hope and believe is the last year of this War, and under the stress of this very heavy Excess Profits Tax, they should press too hardly in this House for what amounts to a remission of taxation, which even many of their own friends do not think they are entitled to, beyond what has been offered from the Government, and which might create a very unfortunate and unhappy impression throughout the country.
My hon. Friend has made, as we all admit, a very powerful speech in defence of the Bill as it stands. For my part, I am bound to say that I am quite convinced that the general lines upon which the Government propose to deal with this question are sound lines. I cannot help thinking, however, that one or two points that have been put forward in defence of the new Clause have not been fully appreciated. My hon. Friend concluded his speech by reminding us that we are only dealing with excess profits, and that every firm that pays these excess profits will have been assured during the War of the same amount of profit which it made in peace. He concludes from that that there can be no real substance in the present grievance. I think he is mistaken in that view. If the case put forward by the manufacturers should really in practice arise, they would lose not only their excess profits, but even their ordinary profits. I can very well imagine a case of a firm which carries on business with a very heavy amount of stock and a very small profit on the turnover. In such a case as that the loss on the depreciation of stock might be so great— always remembering that 80 per cent. of the Excess Profits Duty had been paid on the profit made on the appreciation, while no allowance is made on the depreciation —that the difference to the manufacturer or the merchant might be so great as to reduce his profits far below the level of what he made in peace time. I fully appreciate the force of the manufacturer's argument form that point of view. There are conceivable circumstances in which this tax would prove a veritable tax upon the manufacturer's capital, and not merely a tax upon his profits. Having said so much, might I say that, although not finally and conclusively, the present proposals of the Government in the White Paper very largely meet the case. I say "not finally and conclusively" because there are certain conditions under which they would not meet the case at all. It is conceivable—I put it as an argument only—that prices remain high for a year after the War, and it is conceivable that in the second year alter the War prices drop, if not quite down to the pre-war level, at any rate somewhat neat the pre-war level. If that were actually to happen, then the manufacturers who had paid 80 per cent. excess profits by the appreciated value of the stock would be enormously hit. If they are to carry on their business after the War for the first and second years they will have to go on-replacing their stock as their goods are sold, and they will have to pay 80 per cent. by the appreciated value of the stock. They will not get that back, and then when the stocks go down they will be very heavily hit. Is it a conceivable proposition that prices will remain high for a year after the War and suddenly thereafter drop? If that did happen I am sure my right hon. Friend would be willing to say, as I am sure anybody else at that box would be willing to say, that exceptional circumstances of that kind would be circumstances which would have to be met when the case arose. What we have to look at now are the probabilities,, and no Chancellor of the Exchequer can go beyond that. Already my right hon. Friend on another occasion in this Bill has recognised that the great rise in the price of all commodities renders a tax which was fair two years ago unfair in its operation to-day, and if hereafter it should be found that what are possibilities now arise, it will obviously be the duty of any Chancellor of the Exchequer at that time to meet those possibilities as they arise. I think, therefore, that what was in the mind of the hon. Member for Sheffield (Sir S. Roberts) when he asked the Government not to have a closed mind on the subject was a very reasonable appeal to make. If that appeal is accepted it appears to me that there is no present ground of grievance except one upon which I am also quite sure the Chancellor of the Exchequer will hold m open mind.
There is not only the difficulty in these circumstances of the amount of payment not being recouped to the manufacturer but the loss occurring hereafter, and there is also the difficulty of finding the money. As the hon. Member for Liverpool said, this appreciation of stock is really only a book entry. There is no cash against it. The manufacturer or merchant has no-greater liquid assets, no greater amount of money, which he has in his pocket or in his bank with which to pay this tax. Therefore, I am sure my right hon. Friend will be easy in demanding payment of this tax where any considerable proportion of it arises from the appreciation of stocks. If the Chancellor of the Exchequer does treat the taxpayer with a light hand in that way. I believe that in justice and in equity we shall have a very fair settlement. It is quite obvious that it would not be fair to the Exchequer to accept this. If stocks never hereafter went down to the pre-war level it is quite clear that manufacturers and merchants will not escape the tax to which everybody else is liable, but it is equally clear that if they go down after the War is over the manufacturers and merchants would pay a heavier tax than anybody else is liable to pay. In these circumstances the best course to take is to accept the Government's present proposal and make an appeal to the Chancellor of the Exchequer to hold an open mind to deal with the questions as they arise.
6.0 P.M.
I do not wish to prevent other Members speaking, but I think the Debate has reached a stage when I ought to try, if not to make clear, at any rate to emphasise the view which was put by my hon. Friend (Mr. Baldwin) and by my right hon. Friend (Mr. McKenna). I wish the House to realise in the first place that every consideration as to treating these people fairly which is in the mind of any Member of this House was within my mind also when I came to deal with the subject. Therefore, if I have taken this course it is after doing everything in my power to find out what is fair in the circumstances. I wish to point out first of all to the House two considerations. First, what is the purpose of this proposed Clause; and, secondly, what is the effect of it. As regards the purpose, anyone listening to the speeches who happens not to be familiar with the subject would have derived an entirely wrong impression of the meaning of the Clause. I said in the Committee stage that this was a question as difficult to deal with by the ordinary man as higher mathematics, and I am sure the speech to which we have just listened has convinced the House that it is extremely complicated. I do believe it is possible, if a person takes the necessary trouble and the necessary time, to understand it, but I am not sure that it is possible for me to explain what I understand to other people. However, I am going to try. One would suppose that this Clause had an entirely different purpose from the real purpose. After listening to the speeches one would have thought it was simply a question of a fair method of assessing profits now as against another method not so fair. That is not so at all. The purpose of this Clause is not to adopt a method of making out a profit and loss account, but to give to manufacturers a secret reserve which will enable them (either or both) to meet losses which they fear after the War is over or to have a working capital, which we all hope they will have, for developing their business when the War is over. One hon. Member said, "We cannot go on keeping accountants to tell us how to manage our business." I agree entirely. But even accountants have their uses, and I should have said that the one thing on which you ought to take the opinion of accountants is as to the proper method of making a profit and loss account. That it what these accountants did. When I saw deputations from these firms—I have seen many of them: I certainly have not spared myself from that point of view—I was not content merely with trusting to my advisers in the Inland Revenue. I arranged that a report on the matter should be made to us by the accountants who were helping us in the Ministry of Munitions. I do not know that it is necessary to give a list of the firms consulted, but they are certainly some of the best known and would be taken by anybody as representing the best accountants in the country, though I do not say that there are not others who are as good. They examined this proposal, and unanimously they gave it as their opinion that the proposal of the manufacturers was utterly inadmissible.
I had their opinion to go on, and we have acted upon their advice except in one respect, and in that respect we have given more to the manufacturers, a great deal more, than the accountants thought we ought to give. I do think not only that there was some little ambiguity in the speeches of those who have addressed us in favour of this Clause, but that there was an entirely mistaken view as to the way stocks come into account in a profit and loss account. Hon. Members have spoken of a paper profit. The idea in their minds seems to be that stocks are taken in a profit and loss account at something like their present prices, and the profit is taken on the stocks themselves before they are manufactured and not on the finished articles. Of course, if anyone has that idea it would indeed be a paper profit, and it would be utterly ridiculous for any Government to tax on such a basis. But that is not what is done at all. The object of making up a profit and loss account in a manufacturing business is to take the raw material plus the cost of manufacturing on the one side and put the selling price on the other. The difference between the two is to be the profit. Obviously you cannot do that completely because your stocks never represent precisely what you have made and sold in a given year. Then what happens is this, that stocks are taken nominally at cost price, but prudent manufacturers have always adopted the principle that if the market price happens to be lower than the cost price, it is prudent to put them at the lower of these two prices, and the Government allow that. Then where can your loss come in? There is no profit attributed to stocks as stocks in a profit and loss account. The loss can only arise if the stocks, which in to-day's profit and loss account appear at one price are later on sold at another, and a much lower price. That is the only possible loss. I shall show the House that we have met that case completely, in my opinion.
I would ask the House to consider the effect of this proposal. My hon. Friend the Member for Liverpool said that the putting forward of this Clause is not due to the increase of the Excess Profits duty to 80 per cent. I did not share that view. I thought that this movement on the part of the manufacturers was due to that increase in the Excess Profits Duty, but I realised that this was a very interesting point, and I sent a question to the Department asking them this very question:
I have in my hand a long statement on this point from a very eminent firm, written two years ago.
I can only give the answer that was given by the Department. I do not say that there may not have been a particular case. The answer of the Department is quite definite, that it has not been the cause of the holding up of settlements with controlled firms. That is important for this reason: There was no reason why this discussion should not have been raised last year, just as much as this year. If I were to accept this Amendment, or anything like it, it would mean that it would have been far better for me as Chancellor of the Exchequer and for the Treasury, to take a nominal duty of 50 per cent. or 60 per cent. rather than call it 80 per cent. and adopt this method of making the profit and loss account. I have consulted my advisers and they tell me that if this method were adopted it would mean a loss of Revenue of anything up to £100,000,000, and it would mean this also that manufacturers, while nominally paying 80 per cent. taxation, and while everybody else was paying 80 per cent., would really be paying far less than 50 per cent. Excess Profit Tax. That I think is impossible at the present time. There is another point. If this Amendment by any possibility were adopted it would make it necessary to recast our whole Finance Bill. In view of the increased expenses of the country I do not think that anybody could be a Chancellor of the Exchequer without attempting to get in the increased Revenue which we require to get out of the Excess Profits Tax. If that is taken away from us, then we must get it in some other way.
There is another consideration also in reference to the Munitions Levy. That was not done so much with the purpose of getting Revenue; it was done for this other purpose, that we were asking trade unionists to give up many of the customs to which they attached the greatest value. We were told "you cannot ask that of the trade unionists while, the firms are getting all this money for themselves," and at that time it was generally understood that this Munitions Levy meant something like an 80 per cent. Excess Profits Tax. If we were now to make an arrangement which means much less than that, it would be impossible to justify ourselves in the eyes of those with whom that bargain was made. I may remind the House that this is precisely what this Amendment means. I do not think that hon. Members have realised this from the speeches to which we have just listened. It is a demand for three perfectly distinct things. It is a demand first that we should take as what is called the base stock, and take it at its pre-war price, the average amount of stock held by manufacturers in every industry at the outbreak of war. I have asked my advisers to make an estimate of that, and they tell me that that would mean a loss of Revenue of something like £50,000,000 in itself. The second thing is that any surplus stock over and above this which may be held at the end of the War is to be realised at its real value; and the third demand which is contained in this Amendment is one which has been hardly referred to, and which is by far the most striking of all. It is that where there is a shortage of stocks at the end of the War manufacturers should be allowed to fill up their stocks to pre-war level at the pre-war prices at the expense of the State. That is what it means.
I will deal with all these three points. There is one point as to which I think manufacturers are absolutely entitled to consideration. I say at once that if you are making your profit and loss accounts to-day, and you are to take the stocks either at cost or at the present value, and you find out later on when they are realised that they are at a far lower level, that it was a paper profit, and you have no right to ask manufacturers to pay on it. We have tried to meet that by saying that there would be a year in which this can be realised, and any losses which manufacturers suffer over and above the prices at which the stocks are valued will be made good. We undertake, if the stocks go down in price, to allow for the losses. But he would be a very rash man who would prophesy that there was no chance of much higher prices in cases of that kind. This is what my right hon. Friend did not understand, I think. If a person says, "It is not fair to let me run the risk of having to sell these goods at a much lower price. You must guard me against that," then I would say, "Very well. But, on the other hand, if high prices are realised and you get a great deal more, then we should be entitled to charge on that."
When the War started the stocks were at these low prices. As they rose, it is quite true the manufacturer made a profit. He has got to pay 80 per cent. of that profit to the Govern- ment. He has made a profit on that portion of the stocks. After the War, if the stock goes down again, he will get the loss on the fall in the value of the stock.
He will not get the loss.
If the Government make it up, he will not, but unless they do he will get the loss. That is the reason why after the War the Government ought to make it up. On the other hand, I think if, after the War, the stocks go up, these men should not be under Excess Profits Duty more than any other man.
My right hon. Friend's interruption only emphasises how complicated this matter is. He is generally so clear in these matters that I am a little slow to think that I am right, but I think that I am. I am going to make another effort to show that I am. Excess Profits Duty is only to continue during the War. All that they have a right to ask is, not for special allowance in respect of the loss which may come in the ordinary way of business after the War, but that they should not to-day be charged on profits when there are not these profits. I say that that is all right. Suppose that my right hon. Friend is a manufacturer, and he came to me and said, "It is not fair. These stocks may be sold at a lower price, and I will lose all that value." I would say, "Very well. There is something in that, but you are afraid that the price may go down. I do not think that it will. You ask me to recoup you if it does. If I am to do that it is not altogether unfair that you should give me part of the profit if it goes up." That is only by the way. The essential thing is that we should not treat them unfairly in the realisation, and if we give them long enough tune to realise the stocks, and they realise them at the actual cost, there is no loss to recover, then we are dealing fairly with them. The only question is whether a year is long enough. I would point out to the House that so far as they are dealing directly with the Government, the question hardly arises at all Stocks are supplied by the Government Departments, because they have got control of nearly all the essential stocks. I believe, as a matter of fact, that a year is long enough time to turn over the whole of the stocks, but if the stocks are not cleared at the end of the year, then they will be valued at the price they had reached at the end of the year, and I think. that will meet the case. After all, that is not in itself a very important thing. If I thought that two years would make it perfectly safe, I would not hesitate to make it two years.
Is there not the danger that if the period were extended to two years, buyers in that period might force down the value?
I do not think that is a thing that will be very easily done, but at any rate the period could be extended just as well at a later stage as now, either next year or the year following. I now come to the real object of this Amendment. They want to take a base stock as the average of stock before the War. Let us see what that really means. These stocks at the end of the War would be base stocks. We should realise that after the War raw material will be wanted all over the world. Germany has no stocks now, and will be competing with us, and I think it is extremely unlikely that prices will fall below the present level for some time, and there is a real danger that they will be higher, for the reason that many of the materials we are dealing with now are under controlled prices, and are kept down by the action of the Government. If that action is taken away it is very likely the prices will go up. If pre-war stocks remained in the accounts at pre-war prices it would mean that the manufacturer would get a profit between the pre-war price and the price at the end of the War, and that means the difference between the pre-war price and the price at which the goods are actually sold. While getting so much off the excess profits they have really created an enormous capital which will come back to them. A certain amount of the raw material remains there always, and the Government was recommended by the accountants not to allow that practice to continue. We have not adopted that advice, and we have allowed the base stock to continue in every industry where it was the business practice before the War. We are giving it to individual persons connected with trades where it was the practice even if those persons themselves had not adopted it, so the White Paper shows that we are going still further. We say that the fair question to consider is what base stocks ought to be given, and we think we have gone as far as we are justified in going. Now we come to the real object of this Amendment. At the end of the War stocks will be tremendously decreased, and they ask us to be allowed to bring in at the expense of the Government at pre-war prices the average stocks held before. Let us consider what that means. It does, not mean that they will manufacture goods on the basis of pre-war prices. Nothing of the kind. It would mean that they would get a price which is a market price, and the Government thereby will be simply handing to the manufacturer a very large sum of money which would not come to the consumer. Of course there is that danger; I do not deny that. I have said many times in this House that war taxation on the scale on which it is now imposed and war expenditure on its present scale must be bad for the industry of the country as a whole. Nobody doubts that.
I should have been very glad if our manufacturing firms could, on the profits they are making now, put aside a big reserve, to enable us to compete on an equality with other countries after the War. But we have got to get revenue, and, as I have said before in this House, the only alternative before me is to have either an increased Excess Profits Duty or a higher Income Tax. Our competitors in every other part of the world are in precisely the same position of being short of stocks. But do not let the House run away with the idea that because the market may fall therefore manufacturers would lose on their goods, even though they do sell in a falling market. That is a position which has arisen over and over again in the course of my own trade; a boom comes and prices rush up and then begin to fall; they have risen in a month perhaps or two months, and the fall is spread over six months or a year. But what happens? The manufacturers in making their own contracts take into account the price at which they had to buy raw materials, and they give them to the people to whom they sell at an equivalent of the price which they themselves had to pay. It does not in the least follow that if the markets are falling that the manufacturers will not make a profit in those falling markets. I know of no reason why they should not. Of course, it is very much more difficult to make a profit, but I doubt whether anybody will say that in the case of a falling market manufacturers cannot make a profit out of what they sell. But you have something else to consider. You must begin by realising that if these present profits are calculated—they are not paper profits at all—our manufacturers must be doing at least as well as in ordinary pre-war times or they could not pay this duty at all. I have taken the trouble to look at, the accounts of a considerable number of manufacturing firms, and, having examined them, I think I am justified in saying that even in cases where the Excess Profits Duty has been taken the profits. have been so unusually large that they have really made much larger profits than at any previous time, and, in spite of making them pay the Excess Profits Duty, the result is that a very considerable reserve is now built up for carrying on that trade after the War.
I very much dislike to seem not to understand or appreciate the importance of our manufacturing industries; I do thoroughly appreciate them. But I want the House to consider what is our manufacturing position. In the first place, taking it all over, our plant is enormously better and more up to date than it ever was before. That improved plant has been got in by the manufacturers paying certain prices for it, and in every case where this new plant was put in for war purposes and will not be of use after the War they have not to pay any duty on it. With all this plant we shall be in a much better position after the War. In the case of Germany it is quite true that they have not had an Excess Profits Duty like ours, but they have had to put every penny of their money into the War, and therefore German manufactures will have to depend upon the credit of the Government of that country against the credit of this country. When the War is over there will be a tremendous demand for manufactures of all kinds, and it will depend mainly upon the amount of credit available to enable it to be met. That credit will largely depend on our ability to see this country through, and people can judge of that to a considerable extent by the way in which we have endeavoured to meet our expenditure out of taxation. That must be taken into account. My hon. Friend behind me is afraid that I would close the door. The last thing I should do would be to close the door; as a matter of fact, the point could have been raised last year as well as this year, and it could be raised next year just as well as it could be raised this year. I say at. once that if the conditions were such as the manufacturers seem to fear, then no Government would be so utterly foolish as not to do something to meet those conditions. There has been a great deal of feeling about this, both inside the House and out of it. I think part of that feeling outside is due to a misapprehension as to the way in which it is done. It is apparently thought that we really do take as profits the value of stocks based on the rise in prices, while we do nothing of the kind. The House pf Commons finds it very difficult to judge a question of this kind. They must more or less be influenced by their own experience or by discussions such as that which has taken place to-day. All that I can say to the House, and I say it with absolute sincerity, is that, with the aid of my advisers—and by my advisers in this case I do not mean merely Treasury and Somerset House officials, for I have consulted business men—I have done my best to decide whether or not what I am doing is fair, and whether I am meeting the manufacturers to the best of my ability. I think I have, and I hope the House will agree that I have.
The Chancellor of the Exchequer says that no Government in two years' time, which will be the earliest time at which this question can arise again, could afford to disregard a question of this character. I should like to remind hon. Members interested in this question that certain pledges were given on this matter two years ago. Those pledges no doubt have been kept, but I think it would be a very great mistake if Members interested in the matter were not to insist upon getting an understanding at the present moment and put into the Bill. I do not believe in statements as to what Governments are going to do in two years' time. We do not know who will be Chancellor in two years' time. It might be the hon. Member for Blackburn, who would take an entirely different view from that expressed by the right hon. Gentleman. The Chancellor said this was an extremely difficult question. I quite agree with him. I have to admit I was one of the Members who thought that the method of accounting and of taking the valuation was the method which the Chancellor has just told us is not the method. He has endeavoured to show that it is not the paper value, because it is not the value of the stock which is taken, but the value of the manufactured article. As I understand it, the manufacturer has to keep a certain amount of stock in hand. That stock is valued at the end of the year. That stock has to be replaced, and therefore if your value is made at a very high price, and if the profit is taken as the difference between the price and the high valuation—that is, a paper valuation—that has never been realised, and which may never put a single shilling into the man's pocket or which may disappear altogether—
The right hon. Baronet entirely misunderstood my point. It is not a case of valuing stocks at all. What we get in the profit and loss account is the difference between the price paid for the stock (plus the cost of manufacture) and the price obtained for the manufactured article. Loss on valuation of stocks can only arise if the stocks are bought at a higher and are sold at a lower price. That is dealt with by giving longer time.
I do not think there is any difference between us. I am not a manufacturer, but I happen to have dealings in cattle, and so may put my point this way. I happen to have 200 head of cattle which I bought at, say, £15 per head and sell at £30. I have not made a profit of £15, because I have got to replace those cattle which are my normal stock. Until I dispose of my farm and until there is a sale of the assets, that realisation of the capital, because it is capital, does not come into effect. That is where I think the difference of opinion between the Chancellor and myself arises. As I understand the matter, these stocks are capital and nothing else. There must be always a certain amount of stocks held if the business is to go on. If that is so, the mere fact that the stocks were bought at a certain price on a certain day, and that at the end of the year, if they were realised, which they were not going to be, they would stand at a higher price, is merely a fictitious book entry and an increase in capital and not profit, and therefore as the tax is an Excess Profits Tax it ought not to be levied in that case. That is the point in so far as I understand it. There must always be fluctuations in the price, and no one can tell whether he will be able to replenish his stock after the War, but in all human probability there will not be a very great change or variation in prices during the next two or three years. The Chancellor in his own statement thinks that normal prices will not occur in the year after the War, and that very likely prices will be higher for some time. Possibly they may, but after that I believe they will be lower. Therefore there ought to be a readjustment period extended for five or six years instead of one year. It would be very much better to come to such an agreement or arrangement as is in the Clause because it would avoid all these complications and all these arrangements with the Inland Revenue officials. Personally, if I was a manufacturer, I should dislike always having discussions and disputes with Inland Revenue officials as to the exact method of calculating the sum on which I am to be taxed. It would be far and away better to express it in an Act of Parliament so that both sides will know where they are. With regard to the point which the Chancellor explained, and with which I certainly do not agree, namely, that he ought to get a return of the profit, if, on the following year, the year after the War, there was a rise in prices. Let me explain. He has had excess profits on the complete years, 1915, 1916 and 1917. Let us assume that the War ends in 1917; the. Excess Profits Tax, therefore, is finished. But in 1918 it turns out that in 1917 the Chancellor of the Exchequer had what he was not entitled to because the valuation was not a correct one, and therefore all he is doing is giving back something to which he was not entitled. Therefore he cannot under any circumstances ask, in consideration of giving back something to which he never was entitled, that he should receive something from the manufacturer when the Excess Profits Tax is over.
This is a very important question. It means no doubt preserving to the manufacturer a certain amount of spare capital. I think it really does mean that. That is a very important thing, and though the Chancellor said, and I cannot dispute it, that the loss would be so enormous that he would have to meet it by increasing, the Income Tax, may I suggest as I did before in the case of these enormous taxes that it is not advisable to go on increasing them thus taking away what is the life-blood of the industry of this country. A far better way would be to borrow the money you require than to raise it in this way. Therefore I do not think there will be any necessity to increase the Income Tax if the Chancellor accepted this particular Clause. But even if that were so, justice is really the thing we have to consider. We have to consider whether or not it is correct, notwithstanding the explanation of the Chancellor, to put a tax on capital, which I maintain this method of valuation does. The Chancellor can either accept this Clause or put it in another form if he thinks that would be better. I do hope hon. Members interested will not be fobbed off by the statement that something will be done possibly by another Chancellor in two years' time, but that they will insist on having something to meet their point put into this particular Bill.
The right hon. Baronet has just suggested to the supporters of the Amendment not to be fobbed off and to press this matter to a Division. I am certainly going to submit reasons which in my judgment would show that nothing from the standpoint of the public outside would be more disastrous than the statement we have heard to-day. The right hon. Gentleman the ex-Chancellor has proved the case from both standpoints. He made an excellent case for supporting the Amendment and a magnificent case for the Government, and I suppose that was his intention. At all events the Chancellor of the Excheqeur has already shown that there was an agreement with labour in the controlled establishments. The object of that agreement was to persuade labour to give up certain rights and privileges, the result of years and years of sacrifice. I am not now going to argue whether they were good things or bad. It is sufficient to say they were important to labour and that labour looked upon them as its right and indeed its goodwill. The Government came along and said, "We want you in the interests of the country to abandon those rights and to recognise that so far as the successful prosecution of the War is concerned, we cannot hope to succeed unless you will give those privileges and rights away." Labour immediately said to the Government, "Is it fair to ask us to give up those rights merely for the purpose of putting more profit into the pockets of the manufacturers?" The Government said, "No, so far as we are concerned we will control the establishments, and that is something that the manufacturers are asked to give up." The result was that the bargain was made. Labour has kept its side of the bargain, and what will happen after the statement of the Chancellor, which for the first time so far as. labour is concerned has revealed the fact that for the purposes of profit any manufacturer, any factories, can replenish with new machinery old and obsolete machinery which can be put out of the factory, and then they are able to go to the Inland Revenue and say, that so far as profit is concerned those will not be taxed.
That is not the case at all.
I have pointed out what the Chancellor has said.
"No, no!"
I did not go so far as that. What I said was that this point could be taken into account by the Inland Revenue authorities if it could be shown that the provision of the machinery was owing to the War or for War purposes.
It would be possible for a factory to be replenished with absolutely new machinery. [HON. MEMBERS; "No, no!"] I just pointed out that that was the effect of the Chancellor's statement, and the Chancellor has just said so. What I am desirous of emphasising is this: that we are here dealing with excess profits. I agree entirely it would be fatal for this country if our manufacturers are handicapped in competition after the war. I fully recognise that. But I do desire to emphasise the fact that we are here dealing with excess profits. So far as the great mass of the people are concerned they are making sacrifices for the War. The cost of living has gone up. They are not compensated by increased wages. Will it not create a tremendously bad impression in the country, when we are dealing with purely excess profits, if the manufacturers come along and say, "The Government to-day by our pressure is handing over to us another hundred millions, made directly as the result of the sacrifices of the country." I do submit that that would be the view taken outside. In my judgment it would be disastrous to the best interests of the country.
I shall not go over the whole of the ground travelled this afternoon, so very clearly put by the hon. Member for Liverpool, and emphasised by other speakers. I shall only deal with one point, and I hope I shall not be looked upon as a person to whom might, apply the dictum that—
"Fools rush in where angels fear to tread"—
as the Chancellor of the Exchequer and the late Chancellor of the Exchequer both argued the point at considerable length. The point I want to make is this: It is extremely dangerous to take action which might lead manufacturers to deplete their reserve stocks. What they ask is that they shall not be charged the Excess Profits Tax on the present increased value of the reserve stock they hold. The whole of the manufacturers of the country hold that point very strongly indeed. What I want to point out to the Chancellor of the Exchequer, and to the House, is that if you do not take care you will leave it a great temptation to the owner or manufacturer at the end of the War to reduce his reserve stock in order to avoid loss. The object of a reserve stock is that you may be able to carry on your work continuously without the check which might be caused by the works not being able to obtain the material to finish their contracts. For instance, I saw to-day the member of a firm which holds 400 tons reserve stock of copper. The Chancellor of the Exchequer says that if, at the end of the War, there was likely to be the danger of a firm not being able to get their stocks, that they would be replaced by the Government. I maintain that in many cases it would be impossible for the Government to supply the firm with what they will require immediately if they have depleted their reserve stock. What will it mean? It will mean that you will have spasmodic instead of continuous employment, and spasmodic manufacture. The firm not having the reserve stock will have to leave off work for a certain period. If they cannot get the cotton they require at a certain date they will have to stop their manufacture until they do get it. If the firm cannot carry on its manufacture over a certain period it must employ labour spasmodically. Labour, I am sure, will say that that is very bad. It will also handicap our manufacturers very seriously in their competition with Germany, who will be making every effort to secure our trade. Therefore, I say that just at the moment it is most important that our firms should be able to produce the greatest possible output, for the sake of themselves, for the sake of the country, for the sake of labour, and in view of future competition with Germany. You will run a risk if you reduce your reserve stocks, for you will be running short just at the very time you ought not to be. I desire to put that very clearly before the Chancellor of the Exchequer, and I trust that it will have his careful attention.
I am sorry to see the hon. Member for Derby has left his place after speaking. What he said just now may do a considerable amount of harm in the country. He pointed out that the object of those of us who were trying to persuade the Chancellor of the Exchequer to give us some further concession to-day was to increase the excess profits of the manufacturer. That is not our object at all. Our object is that when the Chancellor of the Exchequer assesses excess profits he shall do so fairly to the manufacturers, so as not to endanger their businesses seriously for expansion and for trade after the War; in fact, to assess fairly and only charge excess profits on what is excess profit, and not on something which is not profit at all, but which may hitherto have resulted in a loss. Reference has been made to the rise and fall in the market. The Government Auditor's Report in the White Paper, page 4, third paragraph, at the bottom of page 4, says: accountant, that a period of one year or so should be given to recoup any possible loss of stock. But we do not think that it is at all a question of time. It is not a question of fixing a period of one or two years. The difficulty is that while the market has been rising for several years—it may be for many years—these manufacturers have been making a profit on a rising market. They have started with their raw material, possibly at £5 per ton. It has risen to £12 a ton. It has not risen at one jump, but over a long period of time, slowly and steadily, from £5 to £12. While that rising curve has been drawn the manufacturers have been making a profit. The Government has stepped in and taken a very large portion of that profit by way of Excess Profits Tax. The curve begins to go down-hill. We do not know how long it may take. It may be many years after the War before it gets back to the normal value of £5 per ton. On that falling curve the Government is not going to recoup the manufacturer for his loss. We then say: Is it fair, that while the curve is going up the Excess Profits Tax should apply and the excess be taken away, while, when the curve goes down, which may last for a long time, the manufacturer should be left to bear the entire loss? Not only is it unfair, but we ask whether it is wise in the interest of trade after the War?
If the Chancellor of the Exchequer cannot see his way to accept this new Clause. I should like to throw out the suggestion as to whether he could not meet the manufacturer on that point—the rise and fall in profits. Could he not allow some reserve fund out of the Excess Profits Tax which the manufacturer would be able to keep in order to meet this loss which is inevitable after the War? It has been suggested to me, and I believe it is so, that a prudent manufacturer if he is working on a rising market, always puts an extra amount into the reserve fund out of the profits which he makes on that rising market. He puts that extra reserve to one side with a view to meeting the loss which must inevitably come when the market starts to fall again, and he has to sell on the falling market. If that is the ordinary practice, or business, of the prudent manufacturer in this country, surely the Chancellor of the Exchequer might meet that prudent manufacturer—to some extent, at any rate—by giving him the opportunity now of making an arrangement whereby he should have a percentage of his excess profits, say, 10 per cent.—which I believe is the figure mentioned by some of the leading manufacturers of this country—10 per cent. from the excess profit as a reserve to meet the inevitable loss when the market falls after the War. I throw out the suggestion to the right hon. Gentleman. One other word. On the question of the minimum amount held for any stocktaking in the three pre-war years, it seems to me that the hon. Member for Liverpool made a most important point which has been entirely ignored. Why should the stock held be the minimum amount? I do hope the Financial Secretary will look into that point and consider whether the suggestion of the hon. Member for Liverpool cannot be adopted, to leave out the word "minimum" and replace it by the word "average" for the three pre-war years.
7.0 P.M.
I represent one of the largest manufacturing centres in the country. From my own knowledge, the manufacturing community of this country feel that they have a very considerable grievance. I received this afternoon a deputation of between fifty and a hundred manufacturers from Birmingham, and they have stated to me what appears to be a very distinct grievance. They do not object to pay the Excess Profits Tax nor do they object to the increase in that tax, but they do say that it ought to be estimated on a fair basis. They further say that it is not a fair basis for the appreciation in the value of their stocks to be treated before they are realised as profits. Let me mention one or two articles, the increased value of which they gave me this afternoon, to show exactly what is meant. Copper, before the War, was £60 a ton; it is now £140. Spelter was £25 per ton; it is now £58. Steel booms were £20; they are now £40, and so on. The appreciation in value is, I presume, to be put into the balance-sheets of these manufacturers. Does the Chancellor of the Exchequer shake his head? Then does the Chancellor of the Exchequer mean to say that until that higher price has been realised it is not taken as profit, because, if so, I admit the whole case falls to the ground?
I really think it is pretty plain. Copper would appear in the balance sheet of the firm at the price paid for it or at the market price, whichever was lower. If that copper is manufactured into sulphate and sold at a much lower level, then the manufacturer would lose; but if, on the other hand, an arrangement is made by which long enough time is given to find out at what price it is actually sold, he does not make any loss.
Then he is not charged on any excess profits he has not actually received?
He will not be when the thing is ended.
Yes; but what is he to do in the meantime? Supposing he is charged on a sort of paper profit—I mean, if a thing has risen in value, and is treated as profit in the balance sheet, and he has to pay 80 per cent. to the Treasury? It is very hard on him, and I do not know how he is to find the money unless it is out of capital. I hope the Chancellor is right, but the manufacturers whom I have seen this afternoon—and I am bound to say there are a good many, not only from Birmingham but from all over the country, who think the same thing; the Lobby was full this afternoon of manufacturers from every large city in the Kingdom who came up to see their Members, thinking they were suffering under this grievance. Now the Chancellor says they do not suffer this grievance and are not to be charged any profits they do not receive. On that I am bound to sit down. I do not think there is anything more to say.
If I understood the Chancellor of the Exchequer correctly, I gather he is prepared to extend from one year to two years the period for which the Exchequer will indemnify the manufacturer in case he makes any loss on stocks at the end of the accounting period. I may say I came here this afternoon with the idea of being in full sympathy with the claims of manufacturers, but if I am right in the view I have taken of what the Chancellor of the Exchequer put before the House, then I think he has met the situation, I will not say entirely, but in a fair way and to a great extent. I look upon it in this way: Say at the end of the accounting period the manufacturer makes a loss on his copper, then during the next succeeding years the Exchequer will make it up to him. [An HON. MEMBER: "One year!"] I think the right hon. Gentleman has said he would favourably consider two years. On the other hand, if there is a profit and copper rises in value, the manufacturer will get the entire profit. If he makes a loss he is indemnified; if he makes a profit he gets it for himself.
He pays a tax upon a profit which it turns out he has not made, and that tax is returned to him because he never ought to have been charged it.
He is indemnified if he makes a loss, and there is no call made upon him if he makes a further profit. I believe it is impossible for the Chancellor of the Exchequer to accept the Amendment in full. I do not believe the country would be with him if he did so, and therefore I would ask the hon. Member for Liverpool whether he does not think the situation would be met if the Chancellor of the Exchequer extended the period to two years!
I do not propose in the slightest degree to follow the arguments that have been adduced by so many Members, and to some extent answered by the Chancellor of the Exchequer. I desire only to put to him one point. The Chancellor of the Exchequer has admitted that if a loss is. shown it will be recouped. I speak on behalf of the smaller men with small financial resources, to whom the payment of the money in the first instance will be practically an impossibility. Now a man who is strongly situated financially can pay the tax and get it recouped, but the fact that it is recouped shows that it ought not to have been charged in the first instance. It will not hurt him if he can pay it and get it back. But how about the man who has not the means to pay it and is ruined in the meantime? We all appreciate that the Chancellor of the Exchequer is trying to meet hard cases. This is a hard case which ought in some way to be met. I have many such eases in the district from which I come. I think this will come very hardly on the large manufacturers, but it will not be merely hard on the small manufacturers but may prove disastrous to them, because they have not the money to pay for the tax which the Government will try to extract from them, and if they cannot pay they will be ruined, and in that case it is no use talking about recouping. That is the difficulty I put to the Chancellor of the Exchequer, and I trust in some way that may be fairly met.
This new Clause has been supported in many great manufacturing centres, and I hope I may be allowed to support it from my own Constituency, one of the largest manufacturing centres in the Midlands. They are quite prepared there to pay Excess Profits Tax—even this higher Excess Profits Tax. They only want to be quite sure they are paying on bonâ fide profits, and that they are getting a fair valuation of their stock. They do think this question, unlike Mesopotamian muddles and past episodes of the War, is a proper subject on which the time and the pains of the House should be expended. I would abstain very carefully from doing that which in others vexes my soul — I mean the repetition of arguments which have already been sufficiently well brought before the House, but there is not one firm, I think, of any importance in Nottingham that has not urged me to support this Amendment. I do not think they misunderstand the matter or the relation of stock to the computation of profits, such as I think was imputed to them by the Chancellor of the Exchequer; neither do I think they are out to get the Excess Profits Tax reduced to 50 per cent. practically, as I think he also imputed to them. They are anxious that this tax should be in no sense a tax on capital, and that they should have a proper valuation of their stock. The hon. Member for Bewdley, in his extremely clear speech, said what a chance manufacturers have now of getting new plant! They are able to renew their plant under these favourable circumstances, and will be able to use it after the War. But that plant will not be suitable for their business after the War. Many firms of which I am speaking have had to convert their plant, I do not say completely. I do not mean to say a great deal of it will not be useful, or that it cannot be reconverted after the War to the purpose it served before the War, but I do say it cannot be done except at considerable expense, and I do not think the hon. Member sufficiently took that into account in making his otherwise admirable speech.
Then I am not quite clear whether the case has been argued in the House equally for controlled and uncontrolled firms. I understood my hon. Friends to refer equally to both classes of firms. Certainly I am speaking as regards both equally. Nevertheless, I think that controlled firms are certainly more hit by the present pro- posal than the uncontrolled firms. May I take a concrete case? Take a firm which by the end of the financial year next month will have made between £200,000 and £400,000 in excess profits, the largest part of which is made by contracts with the English Government and some of it by contracts with other Governments. When the War ends the English contracts will cease and work of the same character which is now being done for the Allies will also cease. If the Bill passes without this new Clause, those firms will be landed with big stocks at low prices which the Government will take at high prices, and the firm in this position claims that it should be given the credit for a similar amount of stock at the close of the War at the same prices at which they got it when the War began. I do not think that case is altogether met by what the Chancellor of the Exchequer has said. I understood him to agree to two years instead of one year. Some doubt has been thrown on that subsequently. Perhaps the Chancellor of the Exchequer will say whether that was a firm offer on his side, or whether he is merely considering it, but even if we get the two years I do not think that would meet the whole case. Although I, personally, hope the Chancellor of the Exchequer will be in office not merely till the end of the War but for ever, we know that circumstances are likely to render that not altogether certain, and no understandings and no engagements made now can be counted upon at the end of the War. Therefore, we want the new Clause, or an alteration in the Clause in the Bill. I have endeavoured to show how seriously firms will be affected, particularly controlled firms, under the arrangements they are making at present as partners with the Government. Therefore, I hope the Chancellor of the Exchequer, taking these circumstances into account, will see his way to give some further concession on the lines of the Amendment of my hon. Friend the Member for Liverpool.
I understand that the Chancellor of the Exchequer did make a concession in reference to the period. I think he said that such stocks as were not sold within the period of the year might be valued at the price ruling at the end of the year. That is a modification of the White Paper, and I hope it will appear in the paper.
Certainly, whatever we arrange will.
As the right hon. Gentleman seems disposed to make the period two years, I may say that I think it would be an advantage, not because in that period you would necessarily get down to the normal basis of ordinary times, but simply because there are some trades which have been brought to my notice which are not in the habit of clearing off their stocks in a single year. In other trades doubtless the stocks may be cleared out within a single year. I think it would be manifestly unfair not to give all trades the same treatment. If the right hon. Gentleman could make the period two years it would be a concession which would be appreciated, arid it might induce my hon. Friend to withdraw his motion. I want to refer also to paragraph (2) of the White Paper as to base stocks. I think that concession is well worth having, and I think in this matter the Chancellor of the Exchequer has really tried to meet the case. I wish to point out, however, that it only deals with some special trades, and it is only given to the industry as a whole. I think if an individual trader has adopted this practice in an industry where he can make a clear claim for a concession, he ought not to have to prove that it applies to the whole of the industry.
I said so.
Then may I ask that paragraph (2) of the White Paper may be modified, beause, as I read it, the proposal only applies to the case of a trade as a whole, and not to individuals. I may have misapprehended the meaning of the White Paper, but I do not see anything in it which deals with the case of individual employers. It only deals with trades and classes of trades as a whole. With regard to this new Clause I could not vote for it after the Chancellor's appeal. But if the right hon. Gentleman could make these modifications in the White Paper, I think we should all feel that the Chancellor of the Exchequer has gone a good way, and has endeavoured to make a real attempt to meet this case. I would like him to go still further, and if he does I think we might accept his further advances and, under the circumstances, I think this Clause might be withdrawn.
I understand that the Chancellor of the Exchequer is willing to make the period of one year in. Clause 1 of the White Paper two years, to date from the day when the War ends. Under these circumstances, I hope this Amendment will not be pressed to a Division. Another point I wish to raise is in regard to the case of the man who is called on to pay the Excess Profits Duty in cash upon stocks which he ex hypothesi has not realised, and which he cannot realise. I have had many representations on this point in my own Constituency, where it is causing very serious hardships, and I hope the Chancellor of the Exchequer will be able to meet us on that point. If that case could be met I, for one, feel that the Chancellor of the Exchequer would have met the commercial classes and the manufacturers of the country very fairly.
One argument which has been used might give a wrong impression, because it tried to make us believe that anybody could replace all his plant during the War out of Excess Profits, and therefore the cost would be nothing. That is not so at all. Any of us who have had dealings as controlled firms with the Munitions Department know that that is not so at all. Moreover, if we want now to put up fresh plant the answer we get is, "We will allow you to have 33 per cent. out of the excess profits towards the cost. "When those expenses are something like 75 per cent. more than pre-war rates, then you have absolutely to pay more for the plant and you get no benefit whatever out of it. [An HON. MEMBER: "Then why do you do it?"] Another point which ought to be cleared up is about the balance sheet. I cannot understand how you are going to get an assessment for Income Tax and for excess profits if you do not make a balance sheet. If you make a balance sheet this year you have to take credit for the value of the stock. The right hon. Gentleman said you have not to do that, but I cannot understand how you can make a balance sheet without doing it. We have been told that it will be made all right at the end of the last accounting period, but how long do we expect this War to go on? It might last two or three years, and if you have to go on paying more than you ought to pay every year on account of the inflated value of the stock which is only a paper value, you may very well be ruined long before the end of the last accounting period. I do not think the right hon. Gentleman has covered that point at all.
Then there is the case of the man who has pre-war contracts, and in order to carry out those contracts he has bought stocks of the material he is going to manufacture at pre-war rates, which are lower. He cannot carry out those contracts because the Munitions Department have stepped in and controlled his establishment and forced him to make things for them; therefore those contracts are deferred until after the War, and the material which was going to be used to carry them out is used in making munitions for the Munitions Department. Therefore the Government, through the Munitions Department, benefit very considerably from the low price at which those stocks were bought. I take it that this manufacturer at the end of the War, being an honourable man, would like to complete the contracts which he made before the War. He has got to buy over again the materials to carry out those contracts, but he cannot buy them at anything like the price he bought the original material, and he buys at a much higher price. The consequence is that he cannot turn the manufactured article out at any sort of a profit, but probably at a loss, because of the difference in the price of the material. I do not think the White Paper allows for those cases at all, and I should like to know how the right hon. Gentleman is going to safeguard the interests of the honest manufacturer who wants to keep his contracts.
Then take the case of a man who has a pre-war stock and keeps it intact, keeping the actual articles right throughout the War. Of course they were bought at a certain price, and you cannot raise the price of those articles in your valuation. That man is all right, but take another man who has the same sort of stock who uses some of it and replaces it again when the audit takes place for his balance sheet on which he has calculated the excess profits. He is not assessed at the higher level. Why should one man in such a case be treated differently to the other? I think the Chancellor of the Exchequer really ought to explain that matter of making the balance sheet, because a great many of us are not satisfied with his explanation.
I have no right to speak again without permission of the House, but I would appeal to hon. Members that we should now come to a decision. First of all, as regards the point raised about stocks not being valued for profits. I was so astonished at this statement that I sent a note in writing to the experts of the Treasury, and I asked whether the statement I made was absolutely correct. They tell me my statement was absolutely correct, and there can be no doubt about that. That statement means that stocks are not included in profits merely as stocks, and they only come in as manufactured articles. I thank hon. Members for their recognition of my desire to meet them. As regards the two years' period, although I said I did not think it was very important, I am willing to put two years into the White Paper. As to the hardship to which firms are liable by being called upon at inconvenient times to pay this levy, we have already shown the widest latitude in cases of that kind, and even before this Debate I impressed that upon the Government officials as something which is absolutely necessary, and I assure the House that it is being done.
I ask leave to withdraw my Motion.
Motion and Clause, by leave, withdrawn.
NEW CLAUSE.—(Rebate in Respect of Sums Payable under S. 10.)
A rebate in respect of Income Tax to the extent of five per cent. of the amount payable under Section ten hereof shall be allowed in respect of any income derived from an investment in any undertaking established within the United Kingdom: or within any dominion, dependency, possession, or protectorate of the Crown beyond the seas.—[ Mr. Wilson-Fox. ]
Brought up, and read the first time.
I beg to move, "That the Clause be read a second time."
It has been said that the effect of this new Clause will be to reduce the revenue accruing to the Chancellor of the Exchequer under this Bill. I need hardly say that that was not my intention, and if the Chancellor of the Exchequer sees his way to accept the principle which is embodied in the Clause as drawn I should be ready to accept it. Instead of giving a rebate in respect of investments within the Empire, I should be satisfied if the right hon. Gentleman would maintain his proposals with regard to them as they are, but I would like him to add a slightly additional tax upon investments made outside the Empire. In support of this Clause, I wish to emphasise strongly the view which I believe to be incontrovertible—that primâ facie money successfully invested within the Empire is of far greater benefit to the State than money invested outside. Money invested within the Empire fertilises our Empire and promotes that production upon which our strength depends, and which we must promote if we are to maintain our supremacy in the world. Money invested outside the Empire brings, it is true, a share of the production which it promotes in the form of dividends to the capitalists who have invested it, but a far larger share of the production accrues to the labourers and to the merchants in those foreign countries. Therefore, if in these days, when capital is short and when the needs of the Empire cannot be fully met without great difficulty, we can take any step which will foster and promote the investment of capital within the Empire, it is our bounden duty to give any inducement that may be necessary for the purpose, and the more so when additional revenue may accrue to the Chancellor of the Exchequer by taking that course.
This is not only a financial and an economic problem, but it is a matter which affects national security and the whole question of man-power within the Empire. We have learned from this War what enormous assistance the Empire derives from those vigorous daughter nations which have sprung from this great parent stock; and it is almost melancholy to reflect what would have been our position had those streams of capital which have flowed from London and been as fertilisers to the Argentine and Chili been directed mainly to Canada and Australia and other Dominions of the Crown which are suitable for the raising of a great white race. Indeed, if the policy of this country during the last fifty years had been directed to developing our own Dominion territories in preference to foreign countries I believe there would have been no war. I hope that for this principle which I am advocating I shall have the support of the representatives of Labour in this House, because everything which tends to promote development and production within this country and within the Empire must inevitably help the position of Labour throughout the Empire. The Chancellor of the Exchequer has on several occasions recently drawn the attention of the House to the difficulties which will no doubt accrue at the conclusion of the War by reason of the general shortage of capital throughout the world. That being so, it is especially necessary that we should as far as possible conserve all our supplies or capital for use within the Empire, and have regard to the interests of white labour throughout the Empire. If this policy is acted upon, it will assist vitally the position of manufacturers and traders in this country. It is true that as the result of our investments abroad large contracts and much trade have accrued to our manufacturers and traders, but those who emphasise that fact must also remember that had the capital flowed to our own territories there is no reason to suppose that our manufacturers and traders would not have had at least an equal share of the manufactures and trade which that capital promoted. It is almost self-evident that if English capital is employed in British territories it will command a larger share of orders and of trade than if that capital is employed in foreign countries. The growing figures of trade with our own Colonies have of late years been remarkable, and the percentage of the total trade which is carried on by our Colonies with this country is also very remarkable. If we wish to promote manufacture and trade, therefore, the best thing that we can possibly do is to promote the investment of our own capital in our own territories. We shall thus make sure of immediate orders, and we shall make sure of permanent trade. We shall not be merely used temporarily for the purposes of foreign countries and then cast aside, like an old shoe, as of no use.
It has been argued that the adoption of any such policy as I am suggesting might have the effect of preventing London from being the money centre of the world. There are worse things than conditions which might result in London not being the money centre of the world, because the advantage of being the money centre of the world entirely depends upon the production of the Empire upon which that pre-eminent position with regard to money is based. If the production of the Empire falls away, it will be of little avail to us to remain the money centre of the world. I have known gentlemen of great financial experience and skill who, if you placed them in the centre of the ocean on a bare rock with a few huts and ledgers, would perhaps convert themselves into the money centre of the world. They would own wealth in every country but their own, but they would be the prey to the first raider who came along. That is not a position which we want to build up in this country. Our first thought must be for that production which maintains and strengthens the position of the teeming millions of our race. We do not wish to maintain conditions which merely support the efforts of a few clever financiers. Therefore, the argument as to the money centre of the world may quite safely and fairly be disregarded in comparison with the weight of the arguments which I have laid before the House. It has been said that it is wrong to impose a penalty upon people who wish to invest their money outside the Empire, and that people should be free to do what they will with their own. These doctrines of perfect liberty have of late been somewhat shattered. I would not suggest that it should in any sense be regarded as a penal measure to take a step of this character. My suggestion is that if it be admitted, as I feel sure it must, that it is in the national interest that a man should invest his capital either at home or in overseas territories of the Empire, then, if he chooses to do that which is not beneficial to his own territory and Empire, he should pay compensation to his own people by making some small contribution to the national exchequer. That is a perfectly fair view, and I press it upon the Chancellor of the Exchequer for his consideration. The duty of every citizen is to do the best for his own country, and if to invest outside the Empire is not the best for his own country then I submit some small tax should be imposed upon him so as to give him the inducement to take what was from the first the right course.
There is a precedent for what I am suggesting in the small tax which was recently imposed in respect of people who did not choose to make a loan of their securities to the State when they were asked to do so. It does not take a very large difference in these matters to influence very large sums of money, and if it be desired to do so—my own feeling is that it would undoubtedly be desirable— it would be perfectly possible to discriminate between investments in foreign countries, and whilst a very small tax might be imposed upon investments in the countries of our Allies, a larger tax might be imposed upon people who after the War wished to invest their money in countries which are at present at war with us. That would be part of such a general policy. This is a most favourable moment to institute a movement of this kind, for the reason that stocks of foreign securities held in this country have been greatly depleted. Therefore, if it were decided to adopt a policy of this character very few people would be hit by it. It may be said that it is a great advantage to this country at a time of war for the purpose of regulating the foreign exchanges to have these large masses of foreign securities in this country. That is no doubt true. At the same time I have sufficient confidence in our monetary position and strength to believe that machinery for exchange will be provided and will always be available if the wealth which this country possesses is sufficient, because where both parties wish to trade it is certain that in the end, in some way or another, the exchange will be effected, if transports are available, without having recourse to the shipment of foreign securities. Those are the considerations which I wish to put before the House and to press upon the Chancellor of the Exchequer, and I hope, if not on this occasion, that at some early date the Government will seriously consider what I regard as an important matter and will take steps to induce investors to keep their capital within the Empire for the benefit of Empire production and labour.
I beg to second the Motion. The hon. Member is an Empire builder and developer by profession, and many hon. Members no doubt have read an admirable series of articles on Reconstruction after the War, which he has contributed to the "Times," the policy of which this Clause to some extent carries out. It is also very much in the spirit of another Clause against the double Income Tax, which I supported. In point of fact, it has an Imperial aspect, and is intended to carry out that policy of enlightened selfishness, which I have always thought the best possible, as international altruism is the worst possible, policy. The War has thrown very great light on the creed which I have always held and which I hope is now more popular than it used to be. It hardly needs any arguments of mine to prove that money invested within the Empire is far more useful to the Empire than money invested outside the Empire. That is a self-evident proposition. If all the money that has been invested in absolutely making foreign countries had been invested within this Empire, we should long ago have been totally self-supporting. Of course, there is one argument of his which I feel is a rather two-edged one. He said that to spend our money in the Empire would be a safeguard against war. I am not so sure that to spend our money in a foreign country may not to some extent be a safeguard against making war with that country. There was an amiable enthusiast—I should have called him by a different name—who argued that war had already become impossible because British capital was spread all over the world. It was abject nonsense, and we know it.
Who said that?
The hon. Member knows that I refer to Mr. Norman Angell.
He has never said that!
He said that war was practically impossible, and it would become quite impossible if his advice were taken. This Clause has a financial, economic, and political aspect. Its political aspect is even more important, I think, than its economic aspect, but its economic aspect is very important, and it becomes me to refer to the very important effect this Clause would have in India. There you have a great continent which is hardly more developed for our Empire than, shall I say, Siberia is for the Russian Empire. There is immense scope for capital, communications, and mines, and every kind of investment in India. A preference here could not but conduce to the investment of capital in that country, where hitherto it has been rather shy of investment. Of course, there are very great industries, such as the tea industries and others, which have been developed in that country by British capital. I should like to see them have a preference. Hon. Gentlemen opposite, when I was speaking on another occasion, seemed to think that there was something improper in having an interest in tea. I should have expected that they would have thought it more proper than haying an interest in drink. At any rate, I own up to say that I am interested in the development of India in every way, from a public as well as from a private point of view, and I should like to see the investment of capital in British possessions, and particularly in India, encouraged by the passing of such a Clause as is now proposed. As regards what my hon. Friend said with reference to the employment of white labour, I wish to point out that any investment of capital that increases the employment of non-white labour increases in that degree the employment of white labour, which is always necessary for the supervision and conduct of the non-white labour. There is, therefore, nothing in this Clause which should scare the hon. Gentleman who leads the Labour party (Mr. Wardle). There is no antagonism whatever, and I hope that, at any rate, the spirit of it will be accepted by the Joint Financial Secretary to the Treasury. Anything that contributes to make us a self-supporting nation, to foster intensive development, and to kill that odious internationalism which has been the curse of this country, cannot be anything but a great benefit to it.
We have had two very interesting speeches, but it seems to me that my duty here is not to consider them in their bearing on the future, but to consider this new Clause as it affects this Bill for the year that ends in the early spring of 1918. Viewing it solely from that point of view, I very much regret that it is quite impossible to accept it. What would be the practical results of the Clause at it stands? My hon. Friend who moved it (Mr. Wilson-Fox) speaks of income derived from an investment in any undertaking. What does he mean by that? Does he include Government securities in that? I will assume, for the purposes of his argument, that he does, because he will hardly wish to leave them out. That leaves out all income on property and professional income, and gives the preference to a man who puts his money into limited companies with certain restrictions.
It is in the form in which it has to be submitted to the House.
Therefore, for this and other purposes of getting revenue, it is no good to me. The practical result would be to cut down the Income Tax we hope to get in the bulk from 5s. to 4s. 9d. I admit that this is a perfectly legitimate question to raise and discuss in happier times, when we can deal with it from a point of view which is not possible now.
Question "That the Clause be read a second time" put, and negatived.
NEW CLAUSE.—(Repeal of Duties on Table Waters.)
Section four of the Finance (New Duties) Act, 1916, is hereby repealed. [ Mr. Glyn-Jones. ]
Brought up, and read the first time.
I beg to move, "That the Clause be read a second time."
I do not think it will be necessary for me to detain the House many minutes in moving this new Clause. Its effect would be to repeal the duties upon table-waters which the House imposed in that Act last year. At the time that the duties were being discussed in the House a number of difficulties were pointed out, difficulties as to the collection of that duty, and also, what was perhaps more important, the unsuitability of this particular article for the purposes of raising revenue. At that time, and in consequence of that Debate, a Committee of the trade was formed, and the Chancellor at that time was good enough to give an undertaking that he would consider representations which they would make to him. He appointed a Committee, and that Committee very carefully did consider the proposals of the trade committee and the arguments which that committee put before the Departmental Committee as to the desirability, indeed, of ceasing to impose this particular tax. That Committee reported, and the trade committee was received at the Treasury by the Financial Secretary, who listened, as we thought— I had the honour to be present at that deputation — very sympathetically, to these representations. Apparently, however, the Chancellor of the Exchequer has not seen his way to meet the case. Quite shortly, the arguments for the removal of this duty are that they are excessive, because both the raw material and the finished article are heavily taxed, and in consequence the cost to the consumer has become prohibitive. The sales have been reduced beyond anything which we believe the Government expected, and the best -evidence of that is that returns were made by the Committee of which I have spoken which showed that in all parts of the country there were such enormous decreases as 50 per cent., 40 per cent., 50 per cent., 47 per cent., 55 per cent., 45 per cent., up to 60 per cent. The reason largely for that is that the bulk of the revenue is collected on drinks which are sold at a very cheap rate, consumed largely by the industrial population and particularly by children. Many of them were sold at the sum of one penny per bottle.
In many instances to raise the selling price from one penny to twopence does not matter very much. It would not matter to Members of this House, but for that particular class of trade it makes the whole difference. If you once raise the price from one penny to twopence it becomes prohibitive; the child has one penny and has not twopence, and you might make the price five shillings so far as that particular trade is concerned. I think it is important to point out that the Government expected when they imposed this tax to raise a sum of £2,000,000. It is not much compared with the hundreds of millions we have been talking about just now, but the yield only came to £1,200,000, and this year all they are bud getting for is £1,400,000. That is the yield of the tax. Apparently the Treasury admit that the £2,000,000 which they estimated for is too high, and the trade say they have made that mistake because they did not calculate for so large a reduction in the consumption. I said that the article was at present paying duty twice over. I think it is a striking fact; take some of these drinks, such as lemonade. When you consider the duty on the sugar and the duty on the finished article that amounts relatively to £50 a ton calculated in that way. The other point about which the Government were warned at the time was that the number of substitutes for these drinks, which could not be taxed, were so large that the effect of the taxation would simply be to convert a trade in one article which was taxable into a trade in another article which was not taxable. I would like to call the attention of the Chancellor of the Exchequer to a striking instance of what we prophesied at the time. A letter was sent from the Army Canteen Committee to the various canteens. It was dated the 13th of June, and this is what it said:
It is a little hard on the trade to impose a duty on their lemonade and then to have a Government Department issuing to the canteens a statement that they should use crystals, which would make lemonade that would not be taxable, and which could be sold at the cost of ½d. per half-pint glass. What the Army canteens are doing the public are doing, with the result that you have seriously interfered with a legitimate trade, and have simply converted a demand for that beverage into a demand for a beverage which is not taxable. This is due to the artificial definition in the Clause, which I am asking the House to repeal, of table waters, for it applies only to the beverage if bottled. Lemonade and other things can, therefore, escape duty altogether. I am quite sure that it cannot be in the interests of the revenue that at a time like this, with the object of raising £1,400,000— although the Treasury have only received £1,200,000 last year, after an estimate of £2,000,000—to ruin an industry, and I can assure my hon. Friend from my own personal knowledge—I have had to give a good deal of attention to the matter during the year— that numbers of these firms have actually been ruined, and have had to give up because the output has been so reduced as to make it impossible for their particular businesses to be carried on. I know there is a great deal of sentiment about the matter. I would suggest that you should consider the tax on sugar. No Government would have thought of taxing lemonade but for the cry that you must tax the temperance drinks if you tax alcoholic drinks. The position now is this, that a number of the table-water drinks—such as lemonade and ginger beer—are to-day paying a higher duty. They are paying 4d. a gallon when low-gravity beers are only paying 2½d. a gallon. That, perhaps, is a minor point, but I would appeal to the Chancellor to give this matter his consideration. I know I am making a difficult request to ask that, in time of war, the Chancellor should release £1,200,000 in taxation; but if he cannot do this, I would ask him if he can give an undertaking that he will see how he can protect the legitimate trade from this competition, and if he can give the consumer as well as the manufacturer of these articles some hope that when the exigencies of the War and the special needs of this small amount passes away, the matter shall not remain as a permanent form of taxation upon a legitimate trade?
I beg to second the Motion, not that I have any wish that the teetotaler should not be taxed or that the great mineral water manufacturers should not be taxed as well. Schweppes' ginger ale and soda water, sold in eight- or six-ounce bottles or whatever it is—I do not want the Chancellor of the Exchequer to remove the tax from these people for a moment. But the people in whom I am interested are the small people, who make the cheaper classes of beverages. My hon. Friend has stated the case as regards the ordinary mineral water, what is called the ordinary ginger beer and lemonade, which is sold in the bottle; but I am going to plead with the Chancellor of the Exchequer on behalf of those who make what are called herb beers or herb beverages which are the principal drinks of the industrial operatives of the Midlands and the North. Those who work in hot atmospheres drink these things, buying them by the gallon. I want to draw the Chancellor of the Exchequer's attention particularly to the fact that these herb beers are not sold in bottles; there is not, for every six ounces of liquid, a bottle and a cork and silver paper, and an expensive label and so on, the whole thing being got up to look like a bottle of champagne. I am speaking on behalf of the operative who buys his drink in a gallon jar, and the cost of that is 1s. The ginger beer, which is sold in the gallon jar by the herb people at 1s., is charged at 6s. a gallon by the people who sell it in bottles, because it is got up in an attractive manner, and is supposed to be, and probably is somewhat superior in its flavour. The same tax is put upon both—that is to say, 4d. a gallon is put upon the 6s. table waters, and 2d. is put upon the 1s. table waters. That, of course, is a very wide disparity, and it hits the poor man and makes it very expensive for the operative.
The late Chancellor of the Exchequer, when I made this appeal to him at the time the tax was imposed, reduced the tax from 4d. to 2d. When he did that he meant that it should apply to all the herb beverages, and not merely the one or two which could be distinctively separated from the rest. But, unfortunately, the Customs and Excise had to define what was herb beer, and in defining herb beer they excluded altogether herb beverages, that is, the one beverage which is sold in much larger quantities than all the rest, namely, herb ginger beer; they put that in the ordinary category of table water, and charged the full duty of 1s. a gallon. Thus ginger beer made by herb brewers is taxed 4d. a gallon, although the sale price is 1s. per gallon, whilst ginger beer sold in bottles by Messrs. Schweppes and others at 6s. a gallon, pays the same duty of 4d. That is a disparity which ought to be removed, and which, in fact, has proved disastrous. I once heard Lord Devonport say, in a Committee room upstairs, when giving a reason why he did not shut up, on account of the shortage of sugar, the small sweet shops all over the country and prevent sweets being sold, that he could not find it in his heart to ruin 87,000 small trades people. But the late Chancellor of the Exchequer has ruined more than 50 per cent., I believe—I am told 75 per cent., but I will put it at 50 per cent.—of these small tradesmen who brew this herb beer. He has ruined them; their businesses have gone. It is because of the disastrous effect that this tax has had that I am now appealing to the Chancellor of the Exchequer to see if he can remedy this state of affairs, and save the few remaining businesses, and perhaps let the old ones be restarted. For he gets no revenue from it. If the right hon. Gentleman will look into the paper—not now, of course, but later on—to find out what is the revenue derived from the herb beverages, or would have been derived before these people had lost their businesses, and what is derived now, I think he will find that the amount is too insignificant compared with the consequence it produces. I would ask him, therefore, if possible, to exclude herb beverages from this tax. The way to do this would be to alter the definition. He can alter the definition and allow herb ginger beer to become one of the herb beverages, and then he will to a great extent have relieved this industry.
There is an alternative method. Let the Chancellor of the Exchequer take a percentage of the total receipts—a reasonable percentage, the same percentage on the small herb beer industries as on Messrs. Schweppes and Company's ginger ale and soda waters. If he would take the same percentage on both, the trade could bear it and survive; otherwise, I am sure that by the end of this financial year there will be very few herb beverage businesses surviving, because they have to pay not only this heavy tax but the heavy tax on the sugar which they have to use. I ask the right hon. Gentleman whether, looking at the very small amount of tax which he gets, he does not think, with Lord Devonport, that it is a pity that these small tradesmen should be ruined, not because he does not wish to relieve them from it, but because of the difficulty of excluding from the definition all people who make table waters?
I have no desire whatever to exclude from taxation in war-time any of the luxuries of the teetotaler, nor have I the least desire to encourage the use of sugar, of which we have such a limited supply, even for nonalcoholic beverages, when that sugar would apparently be much more usefully employed for food or for making jam. But I confess that the speech of the hon. Member for Stepney led me to think that there was far more to be said for this Clause than I had supposed. I had not really thought there was much to be said for it, but when I heard my hon. Friend say that under the proposals of the Government ginger beer is to be taxed more heavily than what is called light beer, I began to think that really there was something wrong. I should like to have a little information with regard to this. Is it a fact that ginger beer is paying a duty of 4d. per gallon, and that it has, in addition, to pay the duty on the sugar which is used in manufacturing it, whilst against that light beer is only paying a tax of 2½d. a gallon, including everything?
With the exception of sugar.
Then the proper comparison is between 4d. on ginger beer and is to be called light beer? If that is so, I think it is really a most unfair proportion. I should like to know, incidentally, what is meant exactly by light beer. Am I not right in thinking that any beer which has not more than 2 per cent. of alcohol is to be called light beer? If that is so, that is twice the strength of ginger beer, which is not allowed to contain more than 2 per cent. of proof spirit, and that is only 1 per cent. of alcohol. As I said before, I do not think that any of us teetotalers have the slightest desire to see teetotal luxuries escape taxation at this time, or to encourage the use of sugar for any but the most serious and necessaries of the country; but otherwise I should certainly protest against the taxation of 4d. upon ginger beer and only 2½d. upon ordinary brewer's beer of twice the strength. Unless some explanation, which I do not at present see, is forthcoming, I shall certainly hold myself at liberty to vote in favour of the Clause.
I am afraid I am not in a position to answer the details of the point which has been made by my hon. Friend, but there are two considerations which I should like to put, especially to those who have moved, seconded, and supported this Amendment. The trouble that has been done to these small traders is, to a certain extent, done. They have got themselves accustomed to the new conditions. That applies to all taxation in this country. The other consideration is with regard to what was said by the Mover. I cannot very well do without this revenue, and it would require some very strong reason to make us go back upon it. If I promised to treat this thing differently, I am sure the moment I did so I should be met with demands to meet deputations from other people who make other kinds of beer. I feel that there is some injustice in their being placed in a different position from the other people, and I can promise my hon. Friend that I will look into that question and see whether or not it is possible to deal with it. As regards sugar, this beverage, I think, is quite the same as the other much more objectionable beverage in the eyes of my hon. Friend. Here it pays the tax. Under these circumstances I would ask my hon. Friend not to press the Clause.
Will the right hon. Gentleman make some statement as to the 4d. and 2½d. per cent.—that is where the real injustice comes?
It is very difficult to deal with matters of this kind without notice. If it had been raised in Committee it would have been possible to have dealt with it now. I hope my hon. Friend will be content to leave it where it is.
In the hope that the right hon. Gentleman will give it a favourable consideration next year, I ask leave to withdraw the Clause.
Motion and Clause, by leave, withdrawn.
NEW CLAUSE.—(Exemption from Excess Profits Duty.)
There shall be added to the exceptions specified in Section thirty-nine of the Finance (No. 2) Act, 1915, the following:
( d ) Societies registered under the Industrial and Provident Societies Acts.—[ Mr. Wardle. ]
Brought up, and read the first time.
I beg to move, "That the Clause be read a second time."
I make this Motion for the purpose of asking the Chancellor of the Exchequer a question. I see that he has put on the Paper a new Clause dealing with the question of co-operative societies and the Excess Profits Duty. My Clause proposes that all Excess Profits Duty, so far as cooperative societies are concerned, should be withdrawn. I agree that the matter is one of considerable controversy. The statement was made by the ex-Chancellor of the Exchequer that the co-operative societies had agreed to the tax when it was first imposed. That statement was repeated by the present Chancellor of the Exchequer. I am not going into the controversy, which is considerable, as to whether the facts are as stated by the two right hon. Gentlemen. While we are prepared to accept the new Clause which the Chancellor of the Exchequer has placed on the Paper, and which, I suppose, he will move later on, we must point out that the meaning of it is complicated, as its language is somewhat technical. I am not quite sure whether it meets our points. If it does not, we shall have to raise the matter again next year, if the Excess Profits Duty still forms a part of the policy of the Budget for that year.
I beg to second the Motion.
I hope that my hon. Friends will not do more than formally move and second this proposal. They will see that after the discussion the other day I have tried to meet this case. I think that, on the whole, we have met it fairly; therefore I hope this proposal will not be pressed.
Do I understand that under the new Clause which the right hon. Gentleman has on the Paper he merely taxes the excess profits on trade done in connection with outside business and not trade done with persons who are members of the societies?
If my hon. Friend does not mind, I would rather he should wait until we come to my New Clause. I intended to make the arrangement precisely what my predecessor thought it was at the time the arrangement was made.
I think there is a general disposition to accept the right hon. Gentleman's Clause as it stands. I under- stand it will not be opposed. Notwithstanding that, I hope he will give us an explanation of it.
Yes, I will.
Question, "That the Clause be read a second time," put, and negatived.
The next New Clause on the Paper [ Power of Commissioners of Inland Revenue to Refer Application to Board of Referees ] has been dealt with already. The New Clause standing in the name of the hon. and gallant Member for Rutland (Colonel Gretton) [ Extension of Provisions of Section 45 of Finance (1909–10) Act, 1910] should come as an Amendment to Clause 8.
NEW CLAUSE.—(Reduction of Duty on Sugar.)
On and after the first day of August, nineteen hundred and seventeen, the duty on sugar shall be reduced to one halfpenny per pound.—[ Mr. Lough. ]
Brought up, and read the first time.
I beg to move, "That the Clause be read a second time."
I make this proposal in order to indicate some of the great difficulties with which the sugar consumers of the country are faced. I should like to ask the Chancellor of the Exchequer to give us a little information about the question of sugar. He knows that the tax on sugar is one of the heaviest burdens the country has to bear, certainly in direct taxation, at the present time. It amounts to £21,000,000. I raised the same point about tea on the Committee stage of the Bill, and I had the same object in view then that I have now. The Government will to-morrow, if not to-day, have to give the question of the great burdens on food and the high prices of food very careful attention. The tax on sugar is at present l½d. Sugar is almost the first necessity of life. It comes second only to wheat itself. If you put a tax of 6d. or a 4-lb. loaf, which is what the Sugar Tax amounts to, there would be a revolution in the country. There is no tax like the Sugar Tax imposed in any belligerent country. Therefore the matter ought to have careful attention from the right hon. Gentleman, even in the hard circumstances in which, I admit, he is placed with regard to revenue. The answer given when I raised the question of tea will be fresh in the mind of this House. It certainly impressed the House very much. It was that a very small proportion of indirect taxation was levied in comparison with direct taxation. When the national expenditure has swollen to such a gigantic figure that it has now, it is not reasonable that any reliance should be placed on that argument. The sole ground I put before the right hon. Gentleman is that a great deal of discontent exists with regard to sugar. It is an article entirely in the hands of the Government. If he cannot give relief in one way he ought to give it in another. For three years the Government have taken the most drastic action in regard to sugar. The House received no information about it at all. The Government are therefore responsible for all the suffering and disorder, if disorder should arise, in regard to this heavy burden. We have hardly ever got any information with regard to this matter. This year we have a slightly different experience, because a little information has been given to the House. It is of a very startling character.
I have been listening to the Debate for the last hour and a half, and everybody has alluded to the fact that sugar is so scarce. It appears to be scarce owing to the high price and the difficulty of getting it. In January of this year there was issued the third Report of the Departmental Committee on Prices, which dealt with sugar prices. It contained a table showing the quantity of sugar available for distribution in 1916. That quantity was only 16 per cent. less than the quantity available in 1913, the year before the War. That is a Very remarkable fact. It seems to throw a great deal of doubt on the stories we hear about the scarcity of sugar, unless there is some other explanation of it. It surely increases the seriousness with which we should look at the heavy burden that is placed on sugar consumers. I will refer the right hon. Gentleman to paragraph (6), page 20, of that Report. It shows that in 1916 there was only a shortage of 16 per cent. of sugar, yet nobody throughout the country can get 50 per cent. of what they obtained before the War. I believe that the brewers are only getting from 15 to 20 per cent., and that the chocolate makers are only getting about 25 per cent. Where is it going to?
The bottom of the sea.
Those losses are not included in the returns.
There have been losses since January.
I am speaking of the year 1916. There were losses then, too. The hon. Member ought not to be so impatient with a serious argument. He evidently thinks that this Report contains a statement of the amount of sugar that has gone to the bottom of the sea. I am surprised that he should make such a mistake. I am giving the actual sugar that landed here last year, and if the right hon. Gentleman will give me the same figures for this year I shall be very glad. The point I particularly want to draw his attention to is in the next Clause. The Government states that it is making a secret profit out of sugar under three heads. The Clause is a very remarkable one, and we are entitled to ask the Chancellor of the Exchequer, if he will not give it us in meal, to let us have it in malt. If he must have his secret profit on sugar which this House knows nothing about and the amount of which we cannot ascertain, let him give us a farthing or a halfpenny off the tax. This is the explanation that the Sugar Commission gives:
I would ask the House to look for a moment at the three heads of these burdens which are being placed on sugar without its consent. My theory, which may not be accepted to-day but will be to-morrow, is that there should be no burden on any vital necessities of the people except that which this House imposes. The first head is insurance and working expenses. That is perfectly illegitimate. The Customs does not charge anything for working expenses. That principle of a little additional charge used to exist in this country on both tea and sugar, but Mr. Gladstone, our greatest financier, abolished it and said let your tax be a clean tax, so much on tea and so much on sugar, but let the people know what the tax is and do not put any niggling additions of this kind to it. Therefore, there should be no addition to the tax for this purpose. The next head is to establish uniformity of price. That was stated by the Sugar Commission in January. For that we are going to pay an additional burden on sugar, but they have not maintained uniformity of price. There is the difficulty about this vicious proceeding. Whenever you depart from the right way you begin to give excuses which are really hardly truthful, although I do not wish to charge the Government with stating what they do not believe to be true. The price of sugar was raised ½d. a lb. by March or April, and it is ¾d. dearer than it was in December, so that although they established this fund to enable them to preserve uniformity, yet they do not do it. The third head is the worst of all—to provide a balance in hand for the losses they may have in the sugar stock at the end of the War. How can the Chancellor of the Exchequer after this afternoon seriously put forward that argument? Business men have been asking him to allow them to build up a little balance that they may have against loss of stocks at the end of the War. He would not hear of it. Surely he ought to mete out the same measure to himself as to his unhappy friends. To establish a secret profit on sugar, unknown to this House, for these three purposes is a most questionable proceeding which I do not think the House ought to sanction.
I should like to ask the right hon. Gentleman this question: Will he tell me what profit he is getting out of sugar secretly in addition to the 1½d. per lb.? If he cannot tell me exactly, but if he knows he is getting something respectable which he ought not to get, I ask him to give me ¼d. or ½d. off the tax. I will not press him unduly, remembering how difficult the circumstances are, but the discontent throughout the country ought to be recognised. Then I would put this point to him. He must remember that he is the sugar merchant. He is responsible for it. I do not know anyone else in the House who is responsible for it. He is charging not only this huge tax of 1½d. a lb., which is equal to 6d. on the 4-lb. loaf, for these secret profits, but the treatment of the jam distribution of sugar lately has been really discreditable to the Government. If he will not give us something off the tax he ought to promise us some improvement in the smooth working of the distribution of sugar. That is a matter which requires attention. I can remember the good days years ago when there was a separate Clause in the Budget dealing with every one of these matters. Every Budget until two or three years ago commenced with the first Clause about tea— tea, the lb., 8d.; sugar whatever it was. Everything that was taxed had its Clause in the Budget, and we had a statement about it from the Government. Now we find the country seething with discontent and not satisfied with the treatment it receives in these great matters; and when I raised the question of tea the right hon. Gentleman almost brushed me aside contemptuously. I hope the right hon. Gentleman and the House will not feel that a few minutes like this on a great subject like sugar, which is creating great discontent and giving a great deal of trouble throughout the country, is wasted.
The right hon. Gentleman talks about being brushed aside contemptuously. When I am tired —and I feel a little that way now—if it was not for the desire to get on with the Bill, I could listen for hours to his soothing speeches. He says we have hearts of stone. We have heard this speech— I do not mean the exact words or arguments, but something on this line—pretty often, and it is not very easy to give a different answer, but perhaps I might point out one or two considerations in relation to the speech which he has just delivered. He talks about "departing from the right way" and "vicious principles." Really, the whole of his speech, it seems to me, has reference rather to the Sugar Commission than to the Exchequer. We departed from the right way, unfortunately, when other people forced us into the War. All these evils have come, not as the result of taxation, but from the fact that we had, or thought we had, to control sugar, and that we ourselves came to be dealers in sugar. If he dislikes that, I do not see that there is any help for it. One point he made was that last year there was only 16 per cent. less sugar than before.
And only 50 per cent. of it came to the consumer!
The right hon. Gentleman made out certain charges against us. One was that the Sugar Commission made a charge upon the sugar for working expenses. I would point out to him that that is not as a tax collector, but as a Government Department dealing with sugar. How in the world they are to arrive at the price at which to sell the sugar without including the working expenses is a mystery I cannot solve, and I do not think my right hon. Friend's business experience would enable him to solve it. He told us one of the reasons for charging a slightly higher price was aiming at uniformity of price, and that we had not been able to get uniformity of price. That is perfectly true. What is the reason we did not get uniformity of price? It was because the cost of bringing the sugar to this country prevented us from selling at the old price without a loss. However, the net result was that uniformity of price was kept longer than would have been possible otherwise. He said it is a crime to try and lay aside a small balance so as to be able to equalise the lower price that will come at the end of the War.
I did not say small.
He also said that I presented a heart of stone to another Amendment to-day. It may have been very difficult to understand me, but I gave the full concession which was involved in allowing them to sell stock on which the balance sheet had been made out. The real point at issue is that we have found it necessary practically to take control of sugar. The complaint is not so much about the price, but about the difficulty of getting the sugar. That difficulty is not due mainly to the shortage of sugar. It is due to the same difficulty which meets us everywhere, and that is the difficulty of securing tonnage. My hon. Friend opposite is perfectly right when he said that a large part of the sugar is at the bottom of the sea. That is one of the difficulties we have got to face, and I do not think the position would be any better even if it were possible for me to reward my right hon. Friend's persistence by agreeing to the reduction he proposes. We really cannot afford to do it, and I hope he will not press the Amendment.
Question, "That the Clause be read a second time," put, and negatived.
CLAUSE 3.—(Increase of Entertainments Duty.)
(1) On and after the first day of October, nineteen hundred and seventeen, Section one of the Finance (New Duties) Act, 1916, shall have effect as if the follow- ing scale of rates of Entertainments Duty were substituted for the scale set forth in that Section—
Where the payment, excluding the amount of the duty—
Does not exceed 2d. ½d. Exceeds 2d. and does not exceed 4d. 1d. Exceeds 4d.and does not exceed 6d. 2d. Exceeds 6d. and does not exceed 1s. 3d. Exceeds 2s.and does not exceed 2s. 4d. Exceeds 2s. and does not exceed 3s. 6d. Exceeds 3s. and does not exceed 4s. 9d. Exceeds 5s. and does not exceed 7s. 6d. 1s. Exceeds 7s. 6d. and does not exceed 10s. 6d. 1s. 6d. Exceeds 10s. 6d. and does not exceed 15s. 2s. Exceeds 15s.—2s. for the first 15s. and 6d. for for every 5s. or part of 5s. over 15s.
(2) On any after the first day of October, nineteen hundred and seventeen, where a person (not being a member of any of His Majesty's naval or military forces in uniform, or a nurse in uniform in attendance on sick or wounded sailors or soldiers in uniform) is admitted to, or to any part of, a place of entertainment without payment or on the payment of a less amount than that charged to the general public for such admission, Entertainments Duty shall be charged, levied, and paid as though that person had paid on admission the same amount as members of the general public, and this provision shall have effect as if it were included in the Finance (New Duties) Act, 1916.
I beg to move to leave out Clause 3.
In moving this Amendment I wish to call attention to what I hope to be able to persuade the Chancellor of the Exchequer are certain unfairnesses which still exist in the scale upon which he made some concessions in Committee. He will remember that he made those concessions on the very cheap seats and on the expensive seats. I want to draw his attention to one or two suggested Amendments in the scale, which I think would make it a great deal fairer from the point of view of theatrical managers, and I do not think these Amendments would have the defect of losing very much revenue to the Exchequer. There is the tax on the 6d. admission, which originally stood at 1d. and is now 2d., which is a serious burden on provincial theatres. There is also the tax of 9d. on seats exceeding 3s. and not exceeding 5s. I shall address most of my remarks to these two par- ticular taxes. It may seem a very small matter to the Chancellor of the Exchequer the difference between 1d. and 2d. on the 6d. tickets, but I want to point out to him a real practical reason why the tax of 2d. on the 6d. ticket is a very serious tax for provincial theatre managers. Taking the ordinary big provincial theatre—I am speaking about what we call the legitimate theatre and opera—the gallery is very large and they charge 6d. admission, and much profit is obtained by what is known as the system of early doors. In the 6d. gallery in the big towns there would be probably an extra charge of 3d. for early doors for those who come earlier and get better seats. Although the person who would go to the early door might be prepared to continue to go if the Government duty remained at 1d., but it is very unlikely that the people who have been in the habit of going to the early doors would go and pay not only 6d. for admission and 3d. extra for their early door ticket, but also a further tax to the Government of 2d. You are raising what has been a 9d. seat to 11d., and the result will most certainly be that the whole of that extra tax will fall upon the theatre and not upon the public. That, I understand, is not what the right hon. Gentleman wishes to do. The effect of putting that tax upon the cheap seats will really mean that people will give up going to the early doors, and one of the chief sources of regular revenue to the big provincial theatres will be entirely abolished. People finding that there is this heavy-extra tax will cease to go to the early doors, and the management will lose on these big galleries which you find in Birmingham, Liverpool, and Manchester. Therefore, a serious loss will fall upon the manager. I suggest that if the Chancellor of the Exchequer could possibly see his way to do it, it would be a very great relief if he could say that the tax should be 1d. up to 6d., which leaves the gallery and the early doors again at the disposal of the management of these theatres. They have got accustomed to the tax of 1d., which I believe has done a certain amount of injury to the early door business, and if you put on 2d. it will kill the early door business altogether, and the very thing you say you do not want to do you will be doing, namely, faxing the-theatre management.
With regard to the higher priced seats, you have put up the tax on the 2s. 6d seats by 200 per cent. You have also put up the tax on the 4s. and 5s. by 200 per cent., because the tax on the 2s. 6d. seats was 2d. and it is now 6d. The tax upon the 4s. seat is now 9d. compared with the former tax of 3d., and the same with the 5s. seat. I suggest to the Chancellor of the Exchequer that the 9d. tax is a thoroughly bad tax. The 9d. tax will have this effect, that the man going for a 4s. ticket and having to pay a tax of 9d. will find himself having to pay 4s. 9d. Inevitably, instead of buying a 4s. ticket, and paying 4s. 9d., which is so near 5s., he will take a cheaper 3s. ticket. So with the 5s. seat. If you are going to make the price 5s. 9d., the probability is that a large number of people who would otherwise be getting 5s. tickets will take 4s. tickets, and the whole tax will fall upon the management. I know that the Chancellor of the Exchequer cannot give up the whole tax, but I do suggest that it would be much fairer if he made the tax on seats costing between 3s. and 5s., 6d. instead of 9d. A great many people finding the tax making the price so near the second shilling would take the seats costing 1s. less. The Chancellor of the Exchequer knows that many of the provincial theatres have seats at all prices of the different shillings, and the whole of the tax might fall upon the management. I have received a letter from a well-known theatre manager, who is also, I think, one of the right hon. Gentleman's constituents, and who is doing very good work with his theatre, drawing attention to the two taxes which press most severely upon provincial managers. He tells me that the proposed tax as affecting the early doors would be a very serious loss, and the increase of the 6d. tax to 9d. would also injure very much the genuine provincial manager.
This is a man who last year ran opera for sixteen weeks at a very small profit. This year he is running it for twenty-two weeks. He is trying to do a very good public work at a very small profit to himself, and if you run opera at prices varying from 6d. onwards you must practically play to full houses. This is one of the houses from which the Government are getting a large amount of their tax. I would suggest that it would be much better to make it a 6d. tax for seats between 2s. 6d. and 5s., and you would lose very little indeed. We were told the last time that a great deal of the tax came from these cheap seats, and if it would be possible to reconsider the tax up to 6d. it would be a real boon to provincial managers for whom I wish particularly to speak to-day. A very great burden has been put upon theatrical managers in. this country at present, and while one wants to do everything possible we should see that the burden does not fall altogether upon them. One thing which has been a perfectly legitimate source of profit, both in London and in the provinces is what is known as the revenue from the bars. It does not mean that altogether, because it also includes the programmes and so forth. In the old days managers were practically accustomed to set the receipts from that source against the very heavy charge for rates, but owing to the regulations as to the closing of bars, and so forth, there is very great loss in this direction, while rates have shown no tendency to go down. If the right hon. Gentleman could make the concession with reference to seats from 9d. to 6d., and also the cheaper seats, as to which I have an Amendment down, seats up to 6d., which are most important, he would be conferring a very great benefit. As regards the second Subsection, I understand that the Chancellor will be willing to accept my Motion to leave out the second part of the Clause, and, if that is so, I will not waste any further time upon that, though I had some arguments to urge upon it.
indicated assent.
In seconding the Amendment of the hon. and learned Gentleman, I would like to point out that I have certain Amendments down. I hope that the Chancellor may see his way to make the concessions asked for by the hon. and learned Gentleman. I had an opportunity of glancing at twenty-two balance sheets of theatres belonging to a syndicate, and in five of them loss had" been written off. The Chancellor of the Exchequer is getting considerable tax from theatres that are not paying their way as far as the proprietors are concerned. I hope that he will take that into consideration. I am not speaking from a personal standpoint. I do not go to a theatre half a dozen times in a year. Therefore, it does not affect me. But I would like to point out that the cheaper and nastier the company which the theatre proprietor engages the more profit he gets, because the higher the salary he pays the company the smaller the amount left for himself. I do suggest, in connection with people who bring good companies into a town, that they ought to be encouraged to do so, and draw big audiences, because the bigger the audience the greater the income for the Exchequer. If they have to get poor companies and small audiences, then the Exchequer is going to suffer, while the theatre is suffering as well, and everybody is suffering. What is going to happen if these taxes diminish the attendance at the theatre? Not only is the Chancellor of the Exchequer going to get very little revenue, but he is also going to ruin the proprietors of these places. I believe that the percentage of the income produced by the tax which is expended in collecting the tax is extremely heavy. I do not know whether the right hon. Gentleman can give us the percentage. Some of the theatre proprietors have written to me to say that they would like very much to know what it is. I believe also that the system of collection employed by the Government is a bad one, and that stamps are used several times by some unscrupulous proprietors of theatres, as I suppose you will find some unscrupulous people among theatre proprietors as in other classes. I appeal for further consideration on this matter. I certainly think that you ought to make the tax upon 6d. seats not more than a 1d., including the 6d., and you ought to go further than that and reduce the tax on tickets of different prices up to at least 3s. I do not think that is a proper tax at all, or that it is a tax that really pays to collect, and if the right hon. Gentleman cannot do anything now, I hope that he will try to amend it in another place.
I think we all recognise that on this question when it was raised in Committee the right hon. Gentleman the Chancellor of the Exchequer tried to meet the objections which were put forward. We were grateful for the concessions he made, but I am convinced, from representations which came to me at that time, that the real gist of the grievance had not been entirely removed. I associate myself with my hon. and learned Friend opposite (Mr. Hemmerde) and my hon. Friend (Mr. Tyson Wilson) in what they have said, and I believe that this tax will cause a real injustice, that my right hon. Friend will not get the results which he expects, and that, though he does not intend it, the tax will be practically the financial ruin of a great many throughout the country. I wish the right hon. Gentleman had appointed a small Committee of those Members of the House to have a meeting with the entertainment providers, and that he had said to them, "I require so much money in addition to what I had before, and I want you to suggest a scheme by which I can achieve that result without doing an injustice." I think that if my hon. Friend hand done that the whole entertainment industry, theatres, cinemas, and all other interests associated with them, would have given him the money he required, without any feeling of injustice. I believe that the inquiry which was held before this additional tax was proposed was not adequate. I am sure that is the feeling of the various organisations concerned with the entertainments industry. It is not limited to theatre providers and managers, but musicians throughout the country, and other kindred associations, are all up in arms against this proposal, and I hope my hon. Friend will endeavour to meet them in a way which will remove any feeling of injustice.
I am sure he does not share the feeling that all kinds of amusements, while the War is on, ought to be limited. On the contrary, I think that it is the very last thing he intends to do, namely, to limit or remove the opportunities for occasional entertainment on the part of the public, who are harrassed and anxious about the great War in which we are engaged. I am sure, positively sure, that such a thought never entered his mind, and I am certain the House would agree with what I say. Still, if I did not feel what I said will be the result of this proposal, I should not be speaking here to-night, and I hope the Chancellor of the Exchequer, at this stage, will see his way to meet the objections put forward. If he cannot, I am sorry, for I think it will cause disappointment throughout the country. I would ask him if he does not feel any inclination to meet the criticisms which have been offered—which I should regret, for I am convinced that if the tax is levied as now proposed it will mean the financial ruin of a great many people now being taxed in many different ways—if my right hon. Friend cannot meet the views of my hon. and learned Friend opposite, then, failing that, will he give us an assurance that he will watch the working of this tax with very great care to see whether it will give him the results he expects by October next, or at the earliest possible moment?
9.0 P.M.
My right hon. Friend is correct in thinking that I do not want to interfere with the amusements of the people or to injure those concerned in providing the amusements. This additional amusements tax was put on after inquiry. It was thought that when people pay money for entry they could also afford to pay this extra tax. I had to get money, and, that being so, I took the view that there was no more suitable source of revenue than by taxation on amusements. That is my view. I and my hon. Friend (Mr. Baldwin) have received a large number of deputations on this matter, and we have tried to get at the bottom of what would be the effect of the additional tax, but when you impose a tax upon a section of the people it is not unusual for them to think that they are being treated more unfairly than other people. I am sorry not to have been able to meet the points which have been put forward by my hon. Friend behind me as to the reduction on the 6d. seat. If I made that reduction there might be an application for a reduction on the 2s. 6d. tickets or the 5s., for those who pay for the higher-priced seats would point out that something had been taken off the 6d. seats, and if that were to be the result, I might as well drop the tax altogether. I think it would be much better to go on the principle we have adopted. The House will remember that I made concessions which were appreciated, and I had thought that this question had been left by the House. Our arrangements are all made in respect of these proposals, and I hope they will be allowed to pass, and that hon. Members will not press the matter. I can assure my right hon. Friend, however, that the tax is one which I will watch with the very greatest care, in order to see how it works. It is said that many of these amusement providers have been ruined; but my hon. Friend who called attention to that part of the subject must know that the shifting of the population accounts largely for those cases to which he referred. In some instances, the population in one part disappears and goes to swell the growth of the population in other parts—especially in war-time—where the amusement provider gets the benefit of their presence, and where the contrary effect is experienced. I hope the House will not press the Amendment, and I definitely promise to give careful consideration to the working of this tax as time goes on.
The right hon. Gentleman said he could not deal with the sixpenny seats because of the difficulty in regard to the dearer seats. I have received a telegram from a provincial manager, who points out that the right hon. Gentleman has given relief in respect of the cheap seats and the high-priced seats, thus relieving the very poor and the very rich, while the overtaxed middle class are to pay the most. But what I pointed out was that the matter was not so much one for the taxpayers as for the managers and entertainment providers, who really are being called upon to pay,, because, in consequence of the tax, the person who goes to the entertainment takes a lower-priced seat, a ninepenny seat instead of a shilling seat, or a four-shilling seat instead of a five-shilling seat, and so on, with the result that it is the entertainment provider who loses by the tax. The whole of my argument was, not in respect of the people who go to the entertainments—for they cannot complain if they attend entertainments in war-time and are taxed—my remarks were made in behalf of the theatrical managers or entertainment providers, who are the persons to suffer. As the right hon. Gentleman has gone so far as to accept the second part of the Clause, however, I ask leave to withdraw my Amendment.
Amendment, by leave, withdrawn.
I beg to move, in Sub-section (1), to leave out "4d.," and to insert instead thereof "6d."
I think this Amendment should be made in common justice to those people who attend cricket matches in summer and football matches in winter, and that they ought not to be called on to pay more than 1d. tax on a 6d. ticket. The argument applies equally in the case of entertainments. For the reasons already given I make the proposal. I think the tax is bad in principle, and the money obtained by it does not justify the harassing of the people who go to theatres and other places of entertainment and the employés and proprietors of those places. If experiments in the imposition of this tax result in the destruction of any of those places of entertainment, it will be impossible to restore the position which existed before the tax went on. Where there is any doubt as to whether a tax will injure any calling or industry, I submit that the Government ought to be extremely careful before they take any step in that direction.
I beg to second the Amendment.
I can only repeat what I said on the previous Amendment. I would point out that I made what I believed to be a great concession by the postponement of the time of the coming into operation of the tax to October, and I cannot do more now.
Amendment negatived.
Amendment made: Leave out Sub-.section (2).—[ Mr. Hemmerde. ]
CLAUSE 4.—(Continuance of Additional Duties on Tobacco at Double Rate.)
(1) The additional duties of Customs payable under Part I. of the Finance (No. 2) Act, 1915, on tobacco imported into Great Britain or Ireland, shall, as from the third day of May, nineteen hundred and seventeen, be doubled, and shall continue to be charged levied and paid at the double rate until the sixteenth day of July, nineteen hundred and seventeen, and as from the last-mentioned date the said additional duties instead of being charged at the double rate shall be increased by 50 per cent. and shall continue to be charged levied and paid at that increased rate until the last day of August, nineteen hundred and eighteen.
(2) The additional duties of Excise pay-able under Part I. of the Finance (No. 2) Act, 1915, on tobacco grown in Great Britain or Ireland, shall, as from the third day of May, nineteen hundred and seventeen, be doubled, and shall continue to be charged levied and paid at the double rate until the sixteenth day of July, nineteen hundred and seventeen, and as from the last-mentioned date the said additional duties instead of being charged at the double rate shall be increased by 50 per cent. and shall continue to be charged levied and paid at that increased rate until the first day of August, nineteen hundred and eighteen.
(3) Sub-section (3) of Section eighty-three of the Finance (1909–10) Act, 1910, and any other enactment relating to draw- back on tobacco, shall have effect as if the rates set out in Part I. and Part II. of the First Schedule to this Act were respectively submitted for the rates set out in Part III. of the Second Schedule to the Finance (No. 2) Act, 1915, in cases where it is shown that additional duty has been paid at the double rate imposed by this Section or the increased rate imposed by this Section, as the case may be.
I beg to move to leave out Sub-section (2).
I do so in order to raise the question of tobacco grown in Ireland. I had not the opportunity on the Committee Stage, and I desire to ask the Chancellor to consider this point. In the present year we have put over 700,000 acres under additional tillage in Ireland for food production. This Amendment seeks to give relief in the case of 172 acres at present under tobacco cultivation. I very much fear if the Chancellor does not see his way to make some concession to those who have been endeavouring for some years past to carry on this industry that it is in great danger of coming to an end. Up to now these 172 acres have produced a certain kind of tobacco and good tobacco. Should that come to an end Sir Nugent Everard, Lord Dunraven, and the other gentlemen who were most patriotically identified with this effort for years past will suffer the loss of all they have put into it. In addition, the small cultivators joined in a scheme in connection with this production, and they have now gained a considerable amount of skill, and have learned how the thing can be done. That also will be lost. The recent Report of the Department of Agriculture of Ireland states that those 172 acres are distributed over county Limerick, King's County and county Meath, which shows the extent of the tobacco-growing experiment. It may be said that these growers of tobacco have been getting huge profits. That is not so, as the undertaking has been little more than in the experimental stage. The prices which were given for the 1915 crop show that the return was very small indeed. In that year the price to the people who grew the tobacco for pipe tobacco was from 4½d. per 1b. to 8½d. per lb., or an average of less than 7d.
This experiment has proved that the climate and soil of Ireland are excellently suited for the production of tobacco. My late colleague, Major Willie Redmond, always displayed the greatest interest in the production of tobacco in Ireland. For years past, year after year, he has raised this question, and if he were here to-night he would be making his speech which I at a long distance am endeavouring to do. The Chancellor may be inclined to say that it would be better to have these 172 acres turned over to food production, but I hope that he will have a sense of proportion in this matter and remember that we have got over 700,000 acres extra under tillage. -Surely it is an advantage that the experiment of growing tobacco should be continued, extending, as it does, only over 172 acres. I trust the right hon. Gentleman will see his way to make a concession in this matter, and even if he cannot agree to the deletion of the whole Subsection, that he will give us an indication that next year he will make an arrangement satisfactory to us.
I beg to second the Amendment.
The hon. Member who moved gave himself an argument against dealing with this matter now, and that is that tobacco is not so necessary as food. He is quite right in claiming a sense of proportion, and that therefore we ought to aim at continuing an experimental stage. I entirely agree with him, but the food position is against any additional facilities beyond those given before being granted. I remember debates in which I took part myself on this subject and my recollection is that encouragement was given in this kind of way, but some hon. Members had the idea that it was an improper method of encouraging it, and one which savoured too much of Protection. Unless my memory is at fault, I thought at the time to which I refer that that was carrying the theory, or whatever it was, a little too far. If you wanted to help an industry, the best way, in my judgment, was to help it in the most effective way. My sympathies are with the hon. Members opposite. I should be very sorry to see this industry which has been started in Ireland, and, at all events, has produced tobacco which people can smoke, come to an end; but I am sure my hon. Friend himself would not think that I could bring about an alteration this year under the present circumstances. I hope, therefore, he will not press his Amendment.
I would remind the right hon. Gentleman that we have 700,000 acres extra devoted to food production, and, although tobacco is not a food, yet it is more or less of a necessity, and I take it that the Government's aim is, as far as possible, to ensure the cultivation of land in order to prevent the importation of articles of food or consumption which we can produce at home. That being so, I take it that tobacco would come under that head as one of those things which are recognised as a necessity. I think I heard the right hon. Gentleman not long ago in a Debate of this kind say that he had smoked Irish tobacco?
No.
I thought it was right hon. Gentlemen on the Front Bench who had smoked Irish tobacco. If they had, it possibly would have made them in the right humour to deal not only with this subject, but with other things. Seriously, however, why should we not support the production of things in our country which at present have to be imported? The tradition is that long ago tobacco was first planted by Raleigh at Castle Youghal. Ever since then Irish tobacco has been more or less cultivated. I trust the right hon. Gentleman will modify the attitude that he has taken to this proposal, and give the needed help to Irish tobacco production; because we are putting forward the matter on fairly reasonable and commercial grounds and outside the question of Protection altogether. It touches the whole business of producing within the confines of the country what can be produced here.
Amendment negatived.
CLAUSE 8.—(Relief from Duty on Liquor Licences where Business Cannot be Carried on.)
(1) Where the holder of any wholesale dealer's or retailer's licence taken out under Part II. of the Finance (1909–10) Act, 1910, satisfies the Commissioners of Customs and Excise that by reason of the licensed premises having been destroyed or seriously damaged, or by reason of any prohibition or restriction imposed by or under the authority of any enactment or Regulation in connection with the present War, the business for the purpose of which or in connection with which the licence was granted has been discontinued, he shall, on making application to the Commissioners within one month after the discontinuance or within such longer period as the Commissioners may in any special case allow, be entitled to obtain repayment, or, so far as the duty has not been paid, remission, of such part of the duty for the year as bears to the full amount of that duty the same proportion as the period during which the business is not carried on, or the part thereof falling within the year, bears to a whole year.
(2) In any such case as aforesaid (but as respects any case to which Section 8 of the Dublin Reconstruction (Emergency Provision) Act, 1916, applies without prejudice to the rights under that Section), the Excise licence, and any justices' licence on the authority of which the Excise licence was granted, shall be deemed to be suspended as from the commencement of the period aforesaid; but at the expiration of that period any such justices' licence shall revive, and have effect as if it had been granted for the then current licensing year, and, if the revival takes place between the date of the general annual licensing meeting in any licensing year and the end of the year, as if it had been granted for that year and the next licensing year, or, in the case of a licence granted for a term, as if the term were extended by a period equal to the period of suspension, and the holder of an Excise licence which has been so treated as suspended shall be entitled to take out an Excise licence on payment of such an amount in respect of Excise duty as would have been payable by him had he been a new beginner at the expiration of that period:
Provided that if during the period for which any licence is so treated as suspended a contingency occurs upon which a transfer of the licence might have been granted, but for the suspension, a transfer may be granted either—
( a ) at the time at which, and to a person to whom, a transfer might have been granted had the licence not been suspended; or
( b ) after the expiration of the period to any person to whom a transfer might have been granted had the contingency occurred immediately after the expiration of the period:
Provided also that if during the period for which any licence is so treated as suspended a person desires to make an objection on the ground of misconduct to the revival of the licence he may make such an objection in the same manner as he may make an objection to the renewal of a justices' licence, and if on any such objection being made the justices certify that had the licence not been suspended they would have refused the renewal thereof the licence shall not revive.
(3) In the application of this Section to Scotland references to a justices' licence shall be construed as references to a certificate as denned in Part VII. of the Licensing (Scotland) Act, 1903.
(4) In the application of this Section to Ireland references to a justices' licence shall be construed as referencs to a justices' certificate, and references to the general annual licensing meeting shall be construed as references to the annual licensing sessions.
I beg to move, at the end of Sub-section (1), to insert the words:
"And in any such case such licence holder or registered owner shall also be entitled to obtain repayment or remission of a similar proportion of the charge (if any) payable by him under Section twenty-one of the Licensing (Consolidation) Act, 1910."
This Amendment is a highly technical one. To put it into plain understandable language, its purpose is to ensure that a person who is a licensed holder or a registered owner of licensed property shall not be liable to pay compensation levy during the period when the licence may be suspended under this Clause. That does not appear to have been contemplated, but it really cannot be intended to charge licences with compensation levy if such levy is being raised in the area where the licence is constituted during a time that the licence may be suspended owing to the exigencies of the War, and other circumstances set out in this Clause. Clearly it is somewhat ambiguous, and the Clause might be raised no doubt in such a way as would entail a resort to the law Courts in order to settle whether this payment should or should not be made. I contend, therefore, that words should be here inserted so that the licensees during the period of suspension should not only be relieved of Licence Duty, but also of the compensation levy. That is the whole meaning of the rather mysterious words here proposed in my name.
Before the Financial Secretary replies—[HON. MEMBERS: "Speak up!"]—I venture to submit that the Government have already in this Bill been quite sufficiently generous I can quite-understand—
We are not going to accept the Amendment.
If that be so, then I need not argue the matter.
This is a matter to which the special attention of our advisers has been directed, and it has been very carefully considered. As the hon. Gentleman opposite says, it is an extremely technical subject, and I confess that my authority is perfectly worthless, and therefore I have had to take counsel upon it. I am advised that it is administratively and financially quite impossible to make any repayment of the sums payable, because in many cases they have been distributed. We could not on that account accept the Amendment. In regard to the future, I am advised that the compensation charge cannot be collected if no Excise licence is taken out, so no more compensation charge will be collected unless and until the trade think it worth while to resume business. I think that should answer my hon. Friend's contention, and I hope he will not press the matter any further.
By leave of the House, may I say that in these matters a declaration by the Exchequer carries very great weight; therefore, I am quite willing to accept the declaration and not to press the Amendment.
Amendment, by leave, withdrawn.
I beg to move, at the end of Sub-section (2), to insert the words,
"Provided also that before any such licence shall be suspended under the provisions of this Section notice shall be given to the licence holder and to the registered owner of the licensed premises, both of whom shall be given by the said Commissioners an opportunity of being heard."
This refers to a different Sub-section, where it is set out that objection may be made to the renewal of a justices' licence after the period of suspension arising out of the circumstances of the War. Clearly the persons connected with the licence, whether as licence holders or owners of the premises to which the licence is attached, ought at any rate to have an opportunity of stating whatever arguments they may have to advance if they should desire that the licence should be renewed. Clearly it would not be light that the justices should, without hearing any objections whatsoever, make a declaration that they suspend the licence. That would not be tin accordance, I think, with the intentions of anyone in the House. I do not think this is a very large request. It is in accordance with the principles of fair play and justice that at any rate both sides of a case should be heard before the justices take a decision. It is well known that some benches of magistrates in this country who sit on licence cases have a strong impulse on every occasion, and sometimes even stretch the meaning of the law, to carry out their purpose to suspend licences, so as to reduce the number—a policy which they have adopted to its extreme conclusion. At any rate, the livelihood of the persons affected by the action of any such bench of magistrates ought to be entitled to be heard if they desire that the licence should continue. The whole purpose of this Clause is to suspend licences during the period of the War and to give the owners or licence holders the right to the revival of the licence at the end of the War, when normal conditions presumably will be restored.
I beg to second the Amendment.
I rather think that it is necessary, owing to the form of words in which the proviso is couched. The proviso gives the right, which no doubt ought to be given, that in case of misconduct the person who desires to make an objection to a licence should have an opportunity of pressing his point and preventing the revival of the licence. In other words, it says that where a licence is suspended it shall not be safeguarded from the dangers of possible withdrawal where there exists good grounds for the objection to be made. Unfortunately, the subsequent words of the proviso, after that safeguard has been given to the objector, seem to prevent a proper hearing. It seems really to be intended that the certificate of the justices, certifying that they would refuse the renewal, would be given, after they had heard the case. On the other hand, from the cryptic way in which the proviso is drawn, it would seem that where this objection had been taken by the objector, a mere certificate of the justices saying that they would have refused, is sufficient, and therefore the licence is not to revive. What my hon. Friend desires to do by his Amendment is to give a right to both sides to be properly heard. The objector has a right to object to a licence even though it is suspended. On the other hand, the holder of a licence ought to have an opportunity of saying whether or not he could remove the ground of misconduct, and give an answer to the objection which is taken. It is quite obvious that on that issue being brought to the Court both parties ought to be heard. If the justices merely certify what would have been done, then it is without their having been heard, and it seems it is not much more to import into the Clause what really must have been intended, namely, that there must be an opportunity for the justices to hear before certifying. Therefore I submit these words are essential. If I had had my way I should have put them in a different part of the Clause near the words "and if on any such objection being made." It makes little difference. If you put the proviso in you secure the right of both parties to be heard on the issue.
Might I ask if the Government really think these words are necessary? Surely the proviso as it stands suggests that the objector can only make such an objection in the same manner as he may make an objection to the renewal of a justices' licence. If an objector makes an objection to the renewal of a licence he has to serve notice on the licence holder, and then on what is called the issue between the parties, though there are really no parties, the case of the licence holder is properly heard. Under the circumstances the words seem quite unnecessary, and will only mean a confusion. If the objection is to be served in the same manner as is usual, and is provided under Clause 16 of the Act, you have all the security that the justices cannot proceed and cannot certify unless the licence holder is present, and therefore it seems to me quite unnecessary, so far as that is concerned, that any further provision should be made in this Section. The only advantage I can see would be that the registered owner would have to be notified. I do not know whether there is any great objection to that, but it is rather a novel principle in the Licensing Acts, because the Licensing Acts have hitherto proceeded on the lines, not that the registered owner should be responsible to the justices, but the licence holder himself, and I think we ought to retain that principle. It is of some importance, and it would prevent the tendency which is visible in the trade to treat the licence holder in a tied house as a negligible person, whereas I think the justices have always laid stress on the fact that he is the person who is responsible to them. Therefore I rather deprecate, although I do not attach much importance to it, the introduction of the registered owner, who is not in the ordinary normal procedure; but I would submit that the procedure is provided for in the Clause as it stands, and therefore there is no necessity for this Amendment.
If the procedure is already provided for there is a doubt, because my hon. and gallant Friend behind me (Colonel Gretton) says it is not. But even if it is, why not put it in again and make it certain? I am all for putting in words that make a thing certain, and why not put these words in? With regard to the other questions about a registered owner, I really do not see why he should not be notified, because he is the chief person in the matter, and great changes have taken place in the administration of the licensing laws lately. If those laws have been altered in the direction which commends itself to my right hon. Friend, why not now alter them in a direction which commends itself to my hon. and gallant Friend behind me?
So far as I read the Clause, it safeguards the rights of the objector, but there is no explicit safeguarding of the rights of the licence holder. It may be that that power is deemed to be implicit in the Clause, but it is clear from the Debate that legal judgments may differ on that point. I think it will commend itself to the House generally that if the preservation of the right of objection be maintained there should be the preservation of the right of defence. I hope we shall have an explicit declaration as to whether the right of defence is explicitly covered in the Clause, and that the Government will not hesitate to insert words to safeguard that right.
I agree that there is a point here which ought to be made clear. I do not, however, think the words which are proposed are necessary, but I agree that the point should be dealt with. What is really desirable would be sufficiently met if these words are inserted:
"The licence holder, before making an application under Sub-section (1) of this Section, shall give notice of his intention to the registered owner of the premises."
I think that will meet the point of substance- with regard to the registered owner, for then he will know of the application which is about to be made. If that meets the sense of the House, I shall be prepared to insert those words.
This is a highly technical point. We want to ensure that both the licence holder and the owner of the premises shall be aware of what is going on, and what is proposed to be done with the property. I think what the Solicitor-General has suggested will meet this point. The Sub-section sets out that the persons who desire to object to the licence being renewed may appear and state their objections before the justices. The next point is that the persons interested in the licence holder or owner of the premises should be allowed to state their case to the justices before they arrive at a decision. It is an elementary principle of justice that both sides should be heard. The Clause provides for one side being heard, and the Amendment I have suggested provides for the other side being heard. This is a highly technical point, but in these matters they are technicalities which may land the unfortunate licence holder into the loss of his property which might be saved if he was able to state his case before the justices before a decision is taken. I hope the Solicitor-General will see that the words of the Clause provide what I desire, and if they do not, I hope he will put words in to ensure what I have suggested being carried out.
My hon. and gallant Friend and I are at one on this point. He is no doubt aware that the term "registered owner," as employed an the Licensing Act of 1910, includes any person possessing an estate or interest in the premises whether as owner, lessee, or mortgagee. This Clause provides that the licence holder may, in the proper circumstances, make a certain application, and the words which I have suggested provide that the licence holder shall give notice to the registered owner of the premises. It will then be open to the registered owner to make representations to the Commissioners, and if the matter should have to go to the licencing justices it will be pos- sible for every person interested to be there with his witnesses and to make his representations known.
I ask leave to withdraw my Amendment.
Amendment, by leave, withdrawn.
Amendment made: In Sub-section (2), at the end, insert the words, "The licence holder before making an application under Sub-section (1) of this Section shall give notice of his intention to the registered owner of the premises."—[ Sir. G. Hewart. ]
I beg to move, after the words last inserted, to add the words,
"(3) Where any licence is suspended under the provisions of this Section upon the grant of which the licence holder or any other person was ordered under Section fourteen of The Licensing (Consolidation) Act, 1910, to make any payment in respect of monopoly, value, such payment, if collected periodically, shall not be collected during that period."
This, again, is a very technical matter. The House will recollect that in the Licensing Act provision was made for the enforcement of payment of monoply value in certain cases. Licences are renewed for a period of years, it may be five, seven, fourteen years or even longer, on payment of a monopoly value, and payment in such cases may either be made in one lump sum, or be spread in annual payments over a period of years. There are not very many such cases. There are not very many occasions on which to charge monopoly value, but clearly, where the licence has been suspended for the period of the War, payment of monopoly value should not be continued during that period. The House as licensed premises, is not earning any contribution towards this periodical payment of monopoly value, and clearly, therefore, it should be relieved of that payment during the period of suspension. I do not think the Government or the House will disagree with that view, but the case does not appear to have been contemplated, and in order to remove an injustice which may probably occur I ask the Government to accept these words. If they can express the intention in better words, I shall be only too happy to accept anything they may offer me in order to cover this point.
I need hardly say that so far as this Amendment is concerned I am entirely in sympathy with my hon. Friend, but I assure him that in order to secure the relief that he desires it is not necessary to insert these words. This relief is already secured under the Licensing Act. The payment to which he refers is one which is to be collected in the same manner with the duties upon local taxation licences, and in practice, as I think my hon. Friend is well aware, those payments are collected at the same time with the duty on Excise licences, and there are no means of enforcing payment except by refusing to grant the Excise licences. Therefore, it follows that so long as a trader does not take out an Excise licence, he cannot be, and will not be, called upon to pay any instalments of a monopoly value payment, and for that reason these words are not necessary to be inserted in the Bill.
Does it mean that an instalment due is postponed, or that it entirely lapses? I understand that the hon. Member (Colonel Gretton) only asks that the instalment should be postponed, but if the collecting of these duties has been spread over a period, and part of that period is this time during which the licence is suspended, does it mean that the instalment is blotted out, or that it is merely collected later on?
I shall be glad to give such explanation as I can. I should have thought that for the period during which the licence was suspended the appropriate proportion was not to be collected at all, but if it were to be collected that would be a question of fact upon the circumstances of the particular case. I should have thought that during the period for which the licence is non-existent the monopoly value payment was not to be made then or at any later time.
May I remind my right hon. Friend that as a matter of fact the monopoly value and the licence value are now mixed up, and we could not do away with the one without doing away with the other? Monopoly is to be repaid in so far as it is exceeded by the annual licence value. If the one is suspended and ceases for any particular year, then ipso facto the other must also cease.
I quite accept the statement and explanation of the learned Solicitor-General, and beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
I beg to move at the end of Sub-section (3), to insert the words,
"References to the date of the general annual licensing meeting shall be construed as references to the last date for lodging applications for certificates to be granted at the April half-yearly meeting of the licensing Court, and references to the justices shall be construed as references to the licensing Court."
This is purely a formal matter, and applies to Scotland, Sub-section (2) of Clause 8 of the Bill.
Amendment agreed to.
CLAUSE 13.—(Relief from Income Tax in Respect of Adopted Children.)
(1) If any individual who has been assessed or charged to Income Tax or has paid Income Tax either by deduction or otherwise, claims and proves in manner prescribed by the Income Tax Acts that his total income from all sources, although exceeding one hundred and thirty pounds does not exceed seven hundred pounds, and that for the year for which the Income Tax is charged he has the custody of and maintains at his own expense a child or children living and under the age of sixteen years at the commencement of that year, and that neither he nor any other individual is entitled to relief from Income Tax in respect of the same child or children by virtue of Section sixty-eight of the Finance (1909–10) Act, 1910, as amended by any subsequent enactment, or if any other individual is entitled to such relief that that other individual has relinquished his claim thereto, he shall be entitled to respect of every such child to relief from Income Tax equal to the amount of the Income Tax upon twenty-five pounds.
The provisions of Sub-sections (2) and (3) of Section sixty-eight of the Finance (1909–10) Act, 1910, as amended by any subsequent enactment, shall apply to the relief given under this Section, to the manner of claiming such relief, and to the proof to be given with respect thereto as if they were herein re-enacted and in terms made applicable to this Section.
I beg to move to leave out the words "living and" ["a child or children living and under the age of sixteen years"]. This is a drafting Amendment.
Yes; that seems all right.
Amendment agreed to.
I beg to move, in Subsection (1) to leave out the word "sixteen" ["under the age of sixteen years".] and to insert instead thereof the word "eighteen."
This is an Amendment of more substance, and I ought to explain that it is part of a series of three Amendments which has for its purpose to modify and extend the relief given by the Acts of 1909–10 and 1914 to the heads of families who have children dependent upon them. As these three Amendments are all designed to carry out the same object I had better say what I have to say in support of them on this first Amendment. In the Act of 1910, I think, the principle was first introduced, a principle which in my opinion is one of the greatest improvements made in recent years in the Income Tax, of taking some consideration of the difference between Income Tax payers who are unmarried, or who are married and have no children, and those who have families dependent upon them. That principle was only introduced for the first time, so far as I can recollect, in 1910. It was extended by the Act of 1914, which increased the allowance from, I think, £10 to £20 for each child under sixteen. There are two grounds on which, I think, I can claim the support of, I hope, the majority of the House for the proposal I now make. If there is one lesson more than another taught by the horrors of this frightful War in which we are involved it is that the nation which for any moment discourages the large family is doomed to destruction. We have seen some horrible proof of that in the War which is now going on.
10.0 P.M.
One of the great causes of the terrible power of Germany is that the increase of population in that country was so vastly greater than the increase in France. Germany had increased her population in the interval between the war of 1870 and the present time by 20,000,000. Of course, but for that the danger with which we are now faced would not have existed. Unfortunately, the pressure of modern conditions of life has a growing tendency to check the growth of the population and to discourage families. There is another aspect of this matter which, I think, ought to recommend this proposal to the Government. In the course of the greatly increased taxation, the terribly heavy taxation, which this War has imposed, there is no section of the population, and I speak with absolute confidence, which has suffered more cruelly than the people—and they are very numerous—who have fixed incomes of £150 up to £300 a year, and who have families dependent upon them. I have had myself some most touching and moving letters from men in that position. The working man of this country gets a very much larger income than the working man in my country, and the great hardships on those men entailed by the increased cost of living has been mitigated to some extent by a large increase in wages. There is, however, a large class of people in this country who are absolutely compelled to maintain a standard of life more expensive than that of the working people, but who have had no increase in their salaries. They are a very large class, and are a people who, when they have considerable families, are reduced to absolute scarcity of food. I had a letter the other day from a highly educated man, who described his condition and that of his family. He has, I think, five children, and he was able to maintain them in fairly decent comfort until this enormous increase in the prices of the food, which amount, as we know, certainly to double, and more than double, what they were. The result is, this gentleman tells me—I think he was a teacher —that he has had to put his wife and children on half-rations. It is, I think, one of the most supreme interests of this and every European nation who is with us at the present time that we should encourage not only the growth of families but the nurture and proper feeding of children. Of course, there is a large section of the population of the country who come from the very class of whom I am now speaking, and I think, therefore, there is a strong claim on the Chancellor of the Exchequer that this extremely just and reasonable provision which has been introduced into the system of the Income Tax laws of this country should be extended, in view of the enormous and extraordinary increase in the price of food. That is all I have to say on the subject, and I really do recommend this Amendment to the Chancellor of the Exchequer as an Amendment calculated to benefit not only the individuals for whom I am speaking, but the Nation as a whole.
I beg to second the Amendment.
It appears to anticipate, in part at least, the Amendment which stands in the name of the hon. Baronet opposite (Colonel Sir C. Seely) in so far as it will deal to some extent with the children who are at secondary schools, and to a large extent with mentally and physically defective children as well. I ask the Chancellor of the Exchequer, if his mind is made up as to the latter Amendment, whether he could not meet us to the extent of accepting the Amendment which my hon. Friend (Mr. Dillon) has just moved? May I comment on the point to which he did not refer at any great length—that of the expense which is involved for persons with small incomes who are endeavouring to give an extended education to their children? Take such cases as those to which my hon. Friend has referred, persons with small fixed incomes, many of whom are very keen about doing very well for their boys and girls. It is well understood that the age at which children should leave secondary schools is advancing, and there is every effort being made, by way of additional Grants from the Board of Education, that the children shall stay longer at school, and that their secondary school education shall terminate at the time when they are about to enter the university—that is to say, about the age of eighteen. I hope that from that point of view the Chancellor of the Exchequer will endeavour to accept the Amendment. To the person with the small fixed income, paying fees at a secondary school up to, say, £20, £30, or more pounds, this would be a considerable concession which would be highly appreciated, and, in view of the changes which have come to our secondary school system, there is reason why the Amendment should be regarded from that point of view; Then it does seem to me that the age of sixteen is now perhaps less appropriate as an age which should be taken as a dividing line than ever before. A word or two as regards children of people with modest means, who cannot, through their defects, bring in any addition to the family income. It is unfortunate, and I doubt whether there is any Member in the House who has not had brought to his notice cases of such unfortunate children. In the cases of families with a very restricted and diminished income, when the children get to the age of from fourteen to sixteen, the heads of the family begin to look for some return for their expenditure on them. How hardly hit is the family which has unfortunate members with physical or mental defects! So, in the cases of these children, an attempt should be made now to fix the age higher than at present.
I fear that it is not possible to accept this Amendment. I am not sure that my hon. Friend quite appreciates the extent to which concessions in this matter have gone. At present the limit of income which a man may have, and upon which he will obtain this relief, has been raised from £500 to £700. In regard to children, there has been a series of successive increases. The first concession in regard to children was £10. Then it became £20, and now it has become £25, and the age for children was sixteen years. Now, for the first time in the history of this legislation, the adopted child has been brought in on the same footing with the own child of the parents. I have no doubt that at a later stage my hon. Friend intends to bring in the own child upon the same footing with the adopted child. I do not know if that Amendment will be necessary, because the words of the Section are "has the custody of and maintains at his own expense." a child. But, however that may be, I am sure my hon. Friend would never have desired to suggest that the adopted child should be placed on a better footing in this respect than the own child.
No.
So I gathered, and therefore I am dealing with this Amendment on the footing that it relates to all children, whether they are adopted by the parent or not. But I do say, on this part of the matter, that concession cannot at present further go. It has gone very far. I will not reiterate what I have said, but at present it is impossible to raise the age from sixteen to eighteen years.
I hope that the last word has not been said by the Solicitor-General. Whilst we have heard what he has very clearly stated, that efforts have been made to meet this difficulty, the fact remains that the Amendment now under discussion is a proposition which meets a real and genuine hardship. I know of two cases, and the men are engine drivers in each instance. One case was of a child whom I knew when it was three years old. He is a young man of twenty-two at the present moment, and is in a most unfortunate position. He has been a drag on his parents from that day to this. There is no possible hope, so far as that young man is concerned, of his ever earning his living. Surely, in those circumstances, we are entitled to say that there ought to be an abatement because of the charge which that child is on his father's income. I submit that the concession which the Government has given, in extending the income from £500 to £700, does not meet a case of that kind. I do not know whether the Chancellor of the Exchequer can meet special circumstances such as that, but I am quite sure there are many hard cases similar to that which I have mentioned, which, in my judgment, ought to be met.
I gather that it would be more convenient if, instead of taking my Amendment, we had a discussion on this one. Might I very strongly urge the Chancellor of the Exchequer to give further consideration to this question? I think that the objection which the Treasury have to it is rather unnecessarily strong. I think they have the impression that it would lead to a very large amount of deduction, much larger than would really be the case. There are really two questions. There is the question of the children, which my hon. Friend the Member for Derby has raised, who are mentally deficient; and there is also the question of making an exception in cases of children who are sent to secondary schools and universities. In both cases I think it would be found that the actual loss to the Exchequer would be far less than they anticipate. With regard to the first, as I have said before, I personally do not like any of these exemptions to the Income Tax. I think the old-fashioned, simple Income Tax was really wiser, in dealing with all these cases and with all questions of allowances in a different way. I do not like a graduated Income Tax, but you have it as a permanent graduated tax; very high in the larger amounts, and of a considerable amount in all the smaller incomes, and applying to all sorts of people, to working men and to everybody, which is quite different from the old-fashioned Income Tax, which was supposed to be a war tax, the great value and virtue of which was that, although it may have had its faults, it produced a very large sum of money. What it seems to me that you want to do now is to make this tax, as a graduated tax, a really good one, and really consonant with the necessities of the case; and that you should try to meet all the difficulties which occur, and should be kind, so far as any tax can be kind, to those who are in special difficulties. I can add nothing more to what has been said by the hon. Member for Derby as to the difficulties which occur to those people who have children who are mentally deficient. The whole point of this exception is to provide for the case of a man whose children, instead of being an addition to his income, as children are when they go to work, continue to be an expense to him after the period at which the strong, active, capable child leaves an elementary school and goes into work. That is the case of the mentally deficient.
May I say a word or two on the case of the children who are sent to secondary schools. It is of the greatest importance to this country at the present time that you should have an increase in the general number of children who get an advanced and an increased education. We are losing every day the men who have had the better educations. When the War is over we shall have numbers of old men who have had good educations, and we shall have a very great deficiency of the middle-aged men who have had good educations. It would be one of the best things that could be done, not only in the actual fact of the gain to the people who do it, but also in the example and incentive which it will afford to people if you did something which showed that the Government thought that at the present time it was of enormous value that children should, so far as possible, and wherever their parents could do it, continue their education for another few years. There will be very many special cases of people who have suffered by this War, as everyone has suffered in great convulsions in the past. There are children whose fathers had a good education who, having lost their father or their relations who would naturally have ensured such an education for them, whose mothers or those who have to support them will have great difficulty in finding the money to keep these young children up to the standard of education which their, forefathers had before them.
My Amendment covers the whole question, and is the proper way of dealing with it, but I shall be quite willing to accept the Amendment limiting the age to eighteen. I still stand to my opinion that there ought to be no limitation, but as a concession I should be glad to take the Amendment limiting the age to eighteen. I appeal to the Chancellor of the Exchequer to consider whether he could not give us something dealing with the cases of children who are unable to assist their parents, and with what I feel sure is going to be one of the real tragedies of this War, namely, the children who ought to continue their education and go to secondary schools, and the universities, but who will not be able to do so because of the fact that the incomes of those who are responsible for them have been diminished by the War. It is said that it is a matter for charity. That does not meet the case. There is no avoiding the fact that all scholarships and things of that kind go to the specially clever children. I am appealing today, not for the specially clever child, but for the ordinary child who has no chance of winning a scholarship, and who will suffer in consequence of this War. I would ask hon. Members to remember what a Scotsman once said to me with regard to a child who was rather backward in his youth and very quiet, namely, that he would grow up slowly and would always think slowly. Those people win no scholarships, but will be none the worse for that, because many of the most capable and clever men do not develop very early. If you select those who go to secondary schools by means of a system of scholarships, you are selecting those who develop early, while very often it is those who develop late who are the best of the lot.
Everyone must have a great deal of sympathy with Amendments of this kind. In the main it is the same subject we discussed in Committee, and I can only repeat the reasons I then gave for not being able to accept the Amendment. I agree that the Amendment as moved by the hon. Member for East Mayo (Mr. Dillon) is in a slightly different form, but its object is very much the same. I would point out to the House that all the advances, if I may call them advances, in this direction—I have a sufficient amount of sympathy with them to look at them in that way—have been gradual. The House ought to take into account the way we are dealing with the matter, and the fact that we have made an enormous concession—I understood it was the concession most desired—in bringing adopted children within the scope of this provision. I saw a very large deputation before the Budget was introduced, and that was the point they impressed upon me. Although the difficulties were great, we decided to do it. One point the House ought to consider in regard to this particular period of time is this: I have listened with a great deal of sympathy to what was said by the Mover of the Amendment about the need of doing everything we can to make the best of the young men who are growing up now in order that they may take the place of the men who have gone. But there is another consideration also in regard to the present time, namely, that labour is very urgently needed. That is a reason for making us careful before taking any steps to take away men who can be of assistance in carrying on the War at the present time, even for such purposes as those indicated by my hon. Friend. But there is something else to remember in regard to this education. If you give help-in this way it is help. to a very small class. It is not to those who do not pay Income Tax, and the fact that you are going to help in this way will make it less easy to give help in a more generous way to the children and working men.
I should like to express the very strong hope that what we have heard from the Chancellor of the Exchequer and from the Solicitor-General does not bear out some concessions on the lines of an Amendment which is about to be moved. In some respects, of course, the Amendment we are discussing is larger than the one that is about to be moved. In other respects it is less.
It is not going to be moved.
I was not aware of that, but there is a later Amendment which one may allude to limiting the relief asked for to cases of those incapable of performing any work as well as those who are attending as fulltime scholars at secondary schools. In my experience as an employer of labour it is really pitiful to see the number of children deprived of further education, not of middle class people of £300 or £400 a year, but working men who are now liable for Income Tax, because there is a far larger proportion of working men now liable for Income Tax than before the War. The depreciation in the value of money makes the figure of £130 include a larger number of Income Tax-payers whose real income has not risen in proportion to the actual figure, so that the actual figure of £130 really applies to a very much less paid class of workpeople than formerly. In this class of workpeople there are many who have fair-sized families, and it is a political consideration of greater importance than ever that we should do nothing to discourage people from having larger families. The relief given in respect of children is one of the very best things that has ever been introduced into our system of taxation. Men of all parties and classes will agree with that. It is only a little extension of that that I would very strongly press for. Children who are a burden on their parents, children who are paralysed, blind, not mentally capable, or deaf mutes might surely be included so long as they can be called by law children up to twenty-one. I do not think it would cost the Government very much to make a concession on that point. Surely that might be done. I would also ask the Government if they cannot see their way to make a concession for the sake of education, which point has been put so ably by the hon. Member (Sir C. Seely). If they cannot make it now, will they take it into serious consideration next year? The Chancellor of the Exchequer tells us that labour is very much wanted. That is one of the reasons I was going to give for a concession in this direction. The great demand for labour at the present time is an inducement and a temptation to parents to send their clever children to work instead of keeping them at school. The cases of this kind are pitiful. One case came under my notice in my own business only to-day, when I had before me three or four boys applying for the position of office boy. My personal secretary and the cashier examined them. One of these boys was cleverer than the others. He had got a scholarship at the grammar school by his own diligence. The grammar school master sent a very good report about him. That is the very boy we want, but the grammar school master said that he ought to go another two years to school. It would pay the nation for that boy to go to school for another two years. We shall want that type of boy more and more. We did not wish to prevent that boy going longer to school. I felt it would be almost a crime to engage a boy of that kind before he has completed his studies; but if we do not engage him somebody else will. His-father is perhaps earning £3 a week, and is of the better class working-man with several children. How can you blame the parents? As the Chancellor of the Exchequer says, there is great demand for these children. It is to the interests of the nation that we should allow these children to go to school as long; as the parents can afford to send them, and not tax the parents by way of Income Tax to such an extent as to prevent them from keeping their children at school. It will pay the nation in cash, as well as in other ways, to have these children better educated. I have been sitting on a Committee on the textile trades appointed by the Board of Trade. We have taken evidence from over 200 witnesses from the textile trades of the country, and over and over again we find that the bright children are taken away from school by their parents because they cannot afford to let them go to school a few years longer. I press this upon the Government. I particularly plead the case of cripples and children who are not capable of earning; wages, and I maintain that so long as they are children by law their parents should have relief in regard to them.
I should like to make a still further appeal to the Government on this Amendment. I hope before it is disposed of that we may hear from the Financial Secretary to the Treasury some words which would give to the House an idea of the cost of making this concession. So far, we have had no word on this subject. We have been told by the Solicitor-General and the Chancellor of the Exchequer that very great concessions have already been made in this matter, and we very gratefully recognise the value of those concessions; but I should like to hear what would be the money cost of the concession which is now asked for. I would like to support the concession very strongly on three grounds. First, on the ground that you are really dealing in this matter with a class which is more hard hit by circumstances to-day than any other class in the community. We have been told by the Chancellor of the Exchequer that these people are Income Tax payers. Precisely on that account they are hit.
They are peculiarly hard hit—the clerks, small professional men, clergymen, doctors in a small way, and teachers. On that ground I beg the Government to reconsider the matter, if not this year, at least before next year comes round. In the second place I urge it upon the ground which has been so strongly put by my hon. Friend—the ground of humanity—with regard to those children who are either physically or mentally deficient. But the particular ground on which I would like this matter to be reconsidered is the broad one put by the hon. Member for Sunder-land and others—the educational value which will result from the acceptance of the Amendment. We have heard a great deal of late about the interdependence of administration between Department and Department. We are going to have—or, at least we all hope that before long we are going to have—details of a great scheme of educational reform by the President of the Board of Education. Is it reasonable or logical that when he asks for a large extension in the age of school children, and makes an appeal to the patriotism of parents to keep their children at school this House should refuse the comparatively small concession which is asked for by the hon. Member for Mayo? One final word on the subject of labour. The Chancellor of the Exchequer told us that labour was going to be in great demand. But the quality of the labour surely is as important as the quantity. It is perfectly true that the acceptance of this Amendment would in a small degree cut down the supply in the quantity of labour, but I would urge that you would get far greater recompense in the improvement in the quality of labour than you would lose by the diminution in its quantity.
I do not know whether the Chancellor of the Exchequer has worked out the figures for this proposal. The Income Tax for incomes up to £500 is only 2s. 3d., and it would only mean that the amount for each child would be £2 16s., which would not be a very large amount to grant.
Question put, "That the word 'sixteen' stand part of the Bill."
The House divided: Ayes, 80; Noes, 44.
Division No. 71.] AYES. [10.35 p.m. Agg-Gardenr, Sir James Tynte Haddock, Major George Bahr Roberts, George H. (Norwich) Astor, Hon. Waldorf Hanson, Charles Augustin Roberts, Sir J. H. (Denbighs) Baird, John Lawrence Hardy, Rt. Hon. Laurence Robertson. Rt. Hon. J. M. (Tyneside) Baldwin, Stanley Haslam Lewis Rowlands, James Banbury, Rt. Hon. sir Frederick G. Henderson. John M. (Aberdeen, W.) Rutherford, Watson (L'pool, W. Derby) Barnett, Capt. R. W. Hewart, Sir Gorden Salter, Arthur Clavell Barrie, H. T. Hinds, John Samuel, Samuel (Wandsworth) Beck, Arthur Cecil Hodge, Rt. Hon. John Sanders, Col. Robert Arthur Benn, Arthur Shirley (Plymouth) Howard, Hon. Geoffrey Scott, A. MacCallum (Glas., Bridgeton) Boyton, James Jones, J. Towyn (Carmarthen, East) Sherwell, Arthur James Brace, Rt. Hon. William Jones, William S. Glyn-(Stepney) Smith, Rt. Hon Sir F. E. (Walton) Bridgeman, William Clive Law, Rt. Hon. A. Bonar (Bootle) Stanley, Rt. Hon. Sir A. Churchill, Rt. Hon. Winston S. Layland-Barratt, Sir F. Stewart, Gershom Clough, William Levy, Sir Maurice Strauss, Edward A. (Southwark, West) Coates, Major Sir Edward Feetham Lewis, Rt. Hon. John Herbert Talbot, Lord Edmund Cochrane, Cecil Algernon Mason, David M. (Coventry) Tennant, Rt. Hon. Harold John Cornwall, Sir Edwin A. Middlemore, John Throgmorton Tootill, Robert Craig, Colonel James (Down, E.) Morgan, George Hay Turton, Edmund Russborough Davies, David (Montgomery G.) Morison, Thomas B. (Inverness) Walsh, Stephen (Lanes., Ince) Davies, Timothy (Lincs., Louth) Munro, Rt. Hon. Robert Williams, Col. Sir Robert (Dorset, W.) Davies, Sir W. Howell (Bristol, S.) Needham, Christopher T. Williams, T. J. (Swansea) Denniss, E. R. B. Paget, Almeric Hugh Wilson, Rt. Hon. J. W. (Worcs., N.) Duke, Rt. Hon. Henry Edward Parker, James (Halifax) Wilson-Fox, Henry Edge, Captain William Pease, Rt. Hon. Herbert Pike (Darlingt'n) Wing, Thomas Edward Fell, Arthur Parkins, Walter Frank Wood, John (Stalybridge) Flannery, Sir J. Fortescue Peto, Basil Edward Gibbs, Colonel George Abraham Pryce-Jones, Colonel E. TELLERS FOR THE AYES.—Captain Greig, Colonel James William Roberts, Charles H. (Lincoln) F. Guest and Mr. J. Hope.
NOES. Anderson, W. C. Devlin, Joseph Gwynn, Stephen Lucius (Galway) Baker, Joseph Allen (Finsbury, E.) Doris, William Hackett, John Bliss, Joseph Ferens, Rt. Hon. Thomas Robinson Hancock, John George Boland, John Plus Finney, Samuel Harris, Percy A. (Leicester, S.) Bowerman, Rt. Hon. C. W. Flavin, Michael Joseph Harvey, T. E. (Leeds, West) Bryce, J. Annan Gelder, Sir W. A. Hogge, James Myles Chancellor, Henry George Goldstone, Frank Jones, Henry Haydn (Merioneth) Jowett, Frederick William Millar, James Duncan Thomas, Rt. Hon. James Henry Keating, Matthew Molloy, Michael Thorne, G. R. (Wolverhampton) Kenyon, Barnet Nolan, Joseph Toulmin, Sir George Lambert, Richard (Cricklade) Nuttall, Harry Williams, Aneurin (Durham, N. W.) M'Callum, Sir John M. O'Leary, Daniel Wilson, W. T. (Westhoughton) Macdonald, J. Ramsay (Leicester) Parrott, Sir James Edward M'Kean, John Raffan, Peter Wilson TELLERS FOR THE NOES.—Mr. Maden, Sir John Henry Scanlan, Thomas Dillon and Colonel Sir Charles Mallalieu, Frederick William Taylor, Theodore C. (Radcliffe) Seely.
I beg to move, in Subsection (1), to leave out the words "twenty-five," and to insert instead thereof the words "thirty-five."
I do not propose to repeat the arguments I have already urged on this question, and I only wish to emphasise the fact that this will, of course, only apply to children who are dependent on their parents, and would act as a counter influence against the enormous pressure which exists to-day to send children out into the world. That applies even to children under sixteen years of age. The pressure and the temptation to take children from school and send them out to work at an early age is enormously greater now than it was at any previous time in our history. In order to mitigate that we are bound in my judgment, in the interests of the nation, to accept this principle of relieving the burden of the people. Having obtained a considerable measure of support on the last Amendment, I am now endeavouring to extend relief given in respect of children of sixteen from £25 to £35.
I beg to second the Amendment
The hon. Member has very frankly explained his motive, and in doing so has given my answer to his Amendment. It is the same thing in another way that the House has just -decided. I do not think it is necessary for me to point out again the objections which I practically pointed out in the last Amendment. I do put it to the House that this kind of Amendment must meet with the sympathy of every hon. Member. Still, we must exercise some discretion, or there is practically no limit to where our sympathies may not carry us. I appeal to the hon. Member and to the House. We have in these matters made great concessions even during the War, and even this year; and I ask hon. Members not to press the willing horse beyond reasonable limits. I hope, at all events, that the House will not take up much time in coming to a decision.
I would ask the right hon. Gentleman to consider the case of the business or professional man who is trying, on an income of £500 or £600 a year, to bring up a family of four, five, or six children, to feed, clothe, and educate them under present war conditions with increased prices for everything. I can speak myself from my personal experience; I know the difficulties of the situation.
In view of the appeal made by the right hon. Gentleman, and of the fact that I would get probably the same support as before, I do not think I need put the House to the trouble of a Division.
Amendment, by leave, withdrawn.
CLAUSE 14.—(Relief from Income Tax un Respect of Income Accumulated Under Trusts.)
(1) Where in pursuance of the provisions of any will or settlement any income arising from any fund is accumulated for the benefit of any person contingently on his attaining some specified age or marrying and the aggregate amount in any Income Tax year of that income and the income from any other fund subject to the like trusts for accumulation and of the total income of that person from all sources (hereinafter referred to as "the aggregate yearly income") is of such an amount only as would entitle an individual either to total exemption from Income Tax or to relief from Income Tax, that person shall, on making a claim for the purpose within three years after the end of the Income Tax year in which the contingency happens, be entitled, on proof of the claim in manner prescribed by the Income Tax Acts, to have repaid to him on account of the Income Tax which has been paid in respect of the income during the period of accumulation a sum equal to the aggregate amount of relief to which he would have been entitled" if his total income from all sources for each of the several years of the said period had been equal to the aggregate yearly income for that year; but in calculating that sum a deduction shall be made in respect of any relief already received:
(2) All the provisions of the Income Tax Acts which relate to claims for exemption, relief, or abatement, or the proof to be given with respect to those claims shall apply to claims for relief under this Section, and the proof to be given with respect to those claims.
I beg to move, in Subsection (1), after the word "settlement" ["will or settlement"], to insert the words "whether there be any direction to accumulate or not."
On the Committee stage this matter came up very late at night, and the Government's Clause was put down in substitution of various Amendments. The Chancellor of the Exchequer said between the Committee stage and the present he would look into it and see whether the Government Clause covered the whole of the points of these Amendments. I do not propose to argue the matter further than merely to move in order to obtain from the Solicitor-General his opinion as to whether the point is covered by the words of the Government's Clause or whether they require the amending words I have put down.
I beg to second the Amendment. I trust the matter will be made clear by what the spokesman of the Government may say.
On the question of substance, there is no difference whatever between the view of my hon. Friend and the view of the Government. As was said at an earlier stage, if it were necessary to insert any further words in order to make the meaning clearer, those further words would be inserted, but in the view of the Government these words, or similar words, are quite unnecessary I do not know whether my hon. Friend is content with that observation. I assure him these words are quite unnecessary. If any words were to be inserted I do not think they would be quite the words, but something like these, "whether or not the will or settlement contains any specific direction."
Does my hon. and learned Friend propose to insert those words?
No; I am not proposing to do that. I assure my hon. Friend they are unnecessary.
Amendment negatived.
CLAUSE 19.—(Returns as to Interest, etc., Paid Without Deduction of Income Tax.)
(1) Where interest on any securities issued in connection with any Government loan raised for the purposes of the present War is paid without deduction of Income Tax, any person by whom such interest is paid, and any person who receives on behalf of any other person any interest so paid without deduction of Income Tax, and any person who has acted as intermediary in the purchase of any securities on which the interest is payable without deduction of Income Tax, shall, on being so required by the Commissioners of Inland Revenue, furnish to them:
( a ) the names and addresses of the persons to whom such interest has been paid or on whose behalf such interest has been received, or on whose behalf such securities have been purchased;
( b ) the amount of the interest so paid or received, or the amount of the securities so purchased.
(2) The foregoing provisions of this Section shall apply to profits on discounts in respect of any Government securities and to the securities in respect of which such profits arise in like manner as they apply to the interest and securities mentioned in those provisions.
I beg to move in Sub-section (1), after the word "person" ["on behalf of any other person any interest"] to insert the words "being a registered or inscribed holder of any such security."
It is merely a drafting Amendment, because it only arises in cases where the stock is registered or inscribed.
Amendment agreed to.
I beg to move to leave out Sub-section (2).
This Sub-section is not workable. I understand the Government propose to accept the Amendment.
Amendment agreed to.
CLAUSE 21.—(Increase of Sate of Excess Mineral Rights Duty.)
Section forty-three of the principal Act (which relates to Excess Mineral Eights Duty) shall have effect as if 80 per cent. of the excess were substituted as the rate of duty for 60 per cent. for any accounting year commencing on or after the first day of January, nineteen hundred and seventeen, or, in the case of an accounting year which commenced before that date but ends after that date, as if 80 per cent. were substituted for 60 per cent. as respects so much of the excess as may be apportioned under this Act to the part commencing on that date, and any additional duty may be recovered accordingly.
I beg to move, at the end of the Clause, to insert the words:
"Provided that where it is shown to the satisfaction of the Commissioners that the amount payable as rent under any lease or agreement for a lease for any accounting year in respect of which or any part of which Excess Mineral Eights Duty is payable at the rate of eighty per cent. is not greater than the average amount payable as rent for the two pre-war years, the prices in which are selected by the taxpayer for the purpose of determining the pre-war rent values of the rent for the accounting year, or would be reduced below that amount by the payment of Excess Mineral Rights Duty, no Excess Mineral Rights Duty or, as the case may be, such an amount of Excess Mineral Eights Duty only as will reduce the amount payable as rent for the accounting year to the said average amount, shall be paid for that accounting year."
This proviso is to fulfil the undertaking of the Chancellor of the Exchequer. The question was raised on the Committee stage of this Bill, and it was shown to us that under the working of this Excess Mineral Rights Duty it is possible for an individual to have a reduced income arising from the mineral rights and yet to pay an Excess Profits Duty. The Chancellor of the Exchequer agreed, unless further cause could be shown to the contrary, that he would meet the case, and we propose to meet it by this proviso.
I am glad that my hon. Friend has practically accepted the Clause in my name. It is true that my Clause is retrospective and the Government Clause is not, but I realise the difficulty of carrying out a matter like this retrospectively. I wish to call attention to the strong language used in the Court of Session. One of the judges, referring to some of the words in the original Act, said that in his opinion they were absolute nonsense. Another judge in the Supreme Court of Scotland, with reference to one of the definitions, said that if it were to be construed grammatically it had no effect at all. Another of the judges stated on this subject that if any question of expense is raised the Crown are not entitled to any, as the difficulty has arisen owing to the way in which these Sections are expressed. This was a test case to determine points of general importance. Some time ago the party in Scotland raising this case inquired whether some concession was to be made, and if this Clause had been made known the difficulty would not have arisen. Not only are the Crown to be refused their expenses, but they should consider whether the litigant in this case should not receive his expenses as between agent and client, and I hope that the right hon. Gentleman will take this point into consideration.
Amendment agreed to.
CLAUSE 24.—(Further Provisions with Respect to Munitions Exchequer Payments.)
(2) Munitions Exchequer payments arising on or before the thirty-first day of December, nineteen hundred and sixteen, or apportioned under this Act to the period down to and including that date shall, after the passing of this Act, be assessed and collected, or, if already assessed but not collected, collected, by the Commissioners and shall be computed by them in accordance with the provisions of that Act and the rules made there-under, and the Commissioners shall for those purposes have all the powers of the Minister of Munitions, including the power of making rules.
For the purposes of such assessment and collection, the provisions for the time being in force with respect to the assessment and collection of Excess Profits Duty (including provisions as to returns and penalties, but excluding provisions imposing any charge of duty or as to the computation of duty) shall apply, and rules may be made by the Commissioners accordingly, and the provisions of Section forty-eight of the Finance Act, 1916, relating to the adjustment of Excess Profits Duty and munitions exchequer payment, shall apply subject to such modifications as may be necessary in consequence of the transfer of powers affected by this Subsection.
Any rules made by the Commissioners may specify matters which may be referred to the Minister, or to a referee or board of referees appointed by him, and prescribe the manner in which such cases are to be referred.
The Amendment I desire to move is to add at the end of Sub-section (2) the words:
"But the provisions of this Act shall not be applied so as to reduce any payments or allowances agreed by the Ministry of Munitions before the passing of this Act to be made to any controlled firm for the purpose of erecting new buildings or new plant for the manufacture of munitions of war."
During the early stages of the War and since it has been the custom of the Ministry of Munitions to request manufacturing firms to erect new buildings and to purchase new plant for the purpose of increasing their output of munitions and to encourage them. The Ministry of Munitions have advanced money to the controlled firms necessary for these new buildings and new plant. They have advanced it, but they have not given it. They have made provision by which the controlled firms so enlarging their plant may be assisted to repay the advance for purchasing it. That provision was that in the case of payments of munitions levy the controlled firm might be allowed to deduct from the payments of the munitions levy administered by the Ministry of Munitions proportions which would ultimately recoup them for the outlay on plant desired by the Ministry of Munitions. This Bill wipes away altogether or absorbs the munitions levy, and nothing remains in that regard but the Excess Profits Duty.
We recognise that the point that the hon. Member is raising must be met, but all this business is done by rules under the provision of the Finance Act, and we give him the assurance that a rule will be issued to cover the point.
I understand that the new rule will substantially cover the same ground as the Amendment.
I thought it would, but I have consulted the officials, and they tell me that the rule covers it absolutely.
CLAUSE 25.—(Amendments of Law as respects Accounting Periods ending after December 31st, 1916.)
In the application of Part III. of the principal Act to Excess Profits Duty for any accounting period ending after the thirty-first day of December, nineteen hundred and sixteen, the following provisions shall have effect:—
(1) In ascertaining the deduction to be made from the profits of the accounting period in respect of increased capital, or the pre-war standard of profits in cases where there has not been one pre-war trade year, three per cent. shall be added to the statutory percentage per annum; and, accordingly, in Sub-section (1) of Section forty-one of, and Rule 4 of Part II. of the Fourth Schedule to, the principal Act,. the expression "statutory percentage" shall be taken to mean the statutory percentage as so increased:
(2) The statutory percentage shall, in the case of a trade or business not carried on or owned by a company or other body corporate, be taken to-be eight per cent. instead of seven per cent.; and, accordingly, Sub-section (2) of Section forty of the principal Act shall have effect as though eight per cent. were substituted for seven percent.:
Provided that nothing in this provision shall affect the amount of the statutory percentage for the purposes of Sub-section (2) of Section forty-one of the principal Act:
(3) Any increase of the statutory percentage under this Section shall be in addition to any increase of the statutory percentage which has, before the passing of this Act, been made under Section forty-two of the principal Act:
(4) Where the pre-war standard of profits of any trade or business does not exceed five hundred pounds, and the profits of the accounting period, after any adjustment in respect of increased or decreased capital, are less than two thousand pounds, Sub-section (1) of Section thirty-eight of the principal Act shall have effect as though for two hundred pounds there were substituted two hundred pounds with the addition of one-fifth of the amount by which the profits of the accounting period are less than two, thousand pounds; so, however, that if there has been a loss in the accounting period, then for the purpose of ascertaining the amount of any repayment or set-off under the principal Act the addition allowed shall be such as if there had been neither loss nor profit, and that where the accounting period is a period of less than a year, this provision shall have effect as if there were substituted for two thousand pounds and two hundred pounds respectively a proportionately reduced amount:
The foregoing provision shall apply where the pre-war standard of profits exceeds five hundred pounds subject to this qualification, that the amount of the addition shall be reduced by the amount by which the pre-war standard exceeds five hundred pounds:
(5) Where the Commissioners are satisfied—
( a ) that in connection with any trade or business two or more distinct and independent industries are carried on in separate establishments, and with books kept in such a manner that the profits in respect of each industry can be readily ascertained; and
( b ) that in any year by reference to which the pre-war stardard of profits is calculated a loss has been sustained in respect of any one or more of such industries;
the Commissioners may, if they think fit, in computing the profits standard, disregard that loss:
(6) Where the Commissioners are satisfied that during the last six prewar trade years, owing to trading losses—
( a ) any former assets of any trade or business have ceased to form part of the assets of that trade or business; or
( b ) the money borrowed in respect of the trade or business or the debts of the trade or business have increased,
the Commissioners shall, for the purpose of ascertaining the capital of the trade or business in any case where the percentage standard is adopted compute the capital as though there had been no such loss of assets or increase of borrowed money or debts:
(7) Six years shall be substituted for three years in Sub-section (4) of Section forty-one of the principal Act (which provides for the adjustment of Excess Profits Duty in respect of unremunerative capital).
Amendment made: At the end of the Clause, add the following new Subsection:
"8. The Excess Profits Duty of a society registered under the Industrial and Provident Societies Acts may, if the Society so requires, instead of being computed as provided for by paragraph ten of Part I. of the First Schedule to the principal Act, be computed as follows:
The amount of excess profits (if any). arising on commercial transactions with non-members shall be separately ascertained in accordance with the general principles of the principal Act, and there shall be added thereto the amount (if any) by which the profit or surplus arising from transactions with members per pound sterling of turnover in the accounting period exceeds the like profit or surplus in the pre-war trade year or average of years taken as the basis of computation for the purpose of the pre-war standard of profits in respect of such commercial transactions as aforesaid, multiplied by the number of pounds sterling of turnover in the accounting period; and Excess Profits Duty shall be charged on the sum of those amounts.
Provided that the method of computation hereby laid down shall not be adopted for ascertaining the amount of any deficiency or loss for the purposes of Sub-section (3) of Section thirty-eight. of the principal Act, nor shall any duty computed under this provision be repaid or remitted by reason of a deficiency or loss in any other accounting period computed as provided for by the said paragraph (10).
Regulations made by the Commissioners for the purpose of carrying the foregoing provision into effect may provide for defining and ascertaining turnover and the profit or surplus per pound sterling thereof, and for the application of that provision to new societies, and for extending, subject to such modifications as may be prescribed, to cases where duty is computed under that provision of the general principles of the principal Act as to relief from duty."—[ Mr. Bonar Law. ]
CLAUSE 34.—(Power of Trustees, etc., to Borrow and Invest in War Securities.)
(1) It shall be lawful and shall be deemed always to have been lawful for a trustee to borrow for the purpose of subscribing to, or investing in any securities which have been, or may be, issued in connection with any Government loan raised for the purpose of the present war, and a trustee shall not be liable for any loss resulting from any borrowing so authorised or from any subscription to or investment in such securities or the sale of any securities for the purpose of such subscription or investment, or from the exercise of any option to convert any securities into securities so issued, whether such borrowing, subscription, investment or sale, or the exercise of such option was before or after the passing of this Act; and trustees and other persons acting in any fiduciary character are hereby expressly authorised to exercise without the consent of any other person, such powers of borrowing, subscription, investment, sale, or conversion, notwithstanding anything in any instrument creating the trust:
Provided that the power of borrowing for the purpose of investing in any such securities shall not be exercisable after the expiration of twelve months from the termination of the present war.
I had given notice to move to omit the Clause, but I do not propose to do so, as I understand my subsequent Amendments will be accepted by the Government, possibly in a somewhat different form. If that is so, I do not move.
Amendment made: In Sub-section (1), leave out the words "the power of borrowing for the purpose of investing in any such securities shall not be exercisable after the expiration of twelve months from the termination of the present War," and insert instead thereof the words,
That covers the following Amendments of the right hon. Gentleman (Sir F. Banbury).
Second Schedule
Excise Liquor Licences Entitled to Relief
Wholesale dealers' licences for spirits, beer, or wine.
Retailers' on-licences for spirits, beer, or wine.
Retailers' off-licences for spirits, beer, or wine.
Passenger vessel licences taken out annually.
Amendment made: After the word "Relief" insert the words "the following licences specified in the First Schedule to the Finance (1909–10) Act, 1910."—[ Mr. Bonar Law. ]
Bill to be read the third time to-morrow (Tuesday).
Wesleyan Methodists (Appointments During the War) Bill
Read a second time.
Resolved, "That this House will immediately resolve itself into Committee on the Bill."—[ Mr. Hope. ]
Bill accordingly considered in Committee, and reported, without Amendment; read the third time, and passed.
The remaining Orders were read, and postponed.
Whereupon Mr. SPEAKER, pursuant to the Order of the House of the 12th February, proposed the Question, "That this House do now adjourn."
In view of the fact that the Report stage of the Finance Bill has been finished to-day, may I ask the Joint Parliamentary Secretary to the Treasury what business will be taken to-morrow?
We propose to take to-morrow the Third Beading of the Finance Bill; followed by the Naval and Military War Pensions, etc. (Transfer of Powers) Bill; the Local Government (Allotments and Land Cultivation—Ireland) Bill; the Public Health (Prevention and Treatment of Disease—Ireland) Bill; the Naval Discipline Bill; the Titles Deprivation Bill; and the Public Works Loans Bill.
Question put, and agreed to.
Adjourned accordingly at Eight minutes after Eleven o'clock.